Patent Cliff Pressures to Drive Big Pharma M&A

The approaching patent cliff—projected to expose as much as $300 billion in annual drug sales to loss of exclusivity by 2032—is expected to keep pharmaceutical M&A activity active in 2026, but not necessarily drive a dramatic year-over-year spike in deal volume or size. According to Dan Chancellor, Norstella’s vice president of thought leadership, the impact of deals being signed today should be viewed through a longer-term lens, as most acquisitions influence company performance three to five years out, rather than immediately.

He emphasized that the patent cliff is neither sudden nor unexpected. Large pharma companies have been aware of the risk for years and have already incorporated it into their portfolio strategies. As a result, current and near-term deal activity reflects forward-looking pipeline and revenue needs, rather than a reactive response to exclusivity losses.

While 2025 was characterized as a strong year for M&A, 2024 had been relatively quiet, despite widespread discussion about the coming patent cliff. That contrast suggests deal flow is shaped less by urgency alone and more by the availability and quality of viable assets. Pharma companies generally have ample cash and transaction capacity, but remain selective—prioritizing first-in-class or best-in-class assets that strategically fit their portfolios. If those criteria are not met, deals are unlikely to proceed.

Beyond patent expirations, companies are also confronting broader growth gaps driven by maturing portfolios and insufficient late-stage pipeline output. Analysis of the top 12 pharma companies shows that most are projected to grow below the broader market average of about 7%, with only a few exceptions. Collectively, large manufacturers face an estimated $100 billion revenue shortfall relative to desired growth targets by the end of the decade.

M&A remains one of the most direct tools to address that gap, alongside lifecycle management and internal R&D investment. As a result, 2026 is expected to bring continued, steady dealmaking—similar to 2025 levels—rather than a sharp surge, as companies keep using acquisitions to reinforce future growth.

Chancellor also comments on the specific market indicators that suggest whether 2026 is likely to exceed last year’s pharma deal value, and much more.

A transcript of his conversation with PC can be found below.

PC: Are there any specific companies flying under the radar that you anticipate making a splash in the near future?

Chancellor: It's hard to say whether any company can really fly under the radar. We published an analysis of top 12 pharmas, and these companies are so big they can't fly under the radar. But if you look, the analysis was basically a company's exposure to the patent cliff versus their growth gap in revenues—the two kind of go hand-in-hand.

Generally, if you're more exposed to a patent cliff, you're going to have a bigger growth gap. Five of the six largest deals that were signed last year were done by companies that had the most exposure to patent cliff and the biggest growth gap. That’s a really strong indicator of the type of companies which are going to be more active when it comes to M&A.

Just bringing this back up again, J&J, Pfizer, Merck, these were three prominent dealmakers. The single biggest company that has the greatest patent cliff exposure and the greatest growth gap is Bristol Myers Squibb, and interestingly, BMS didn't sign any deal of note last year. I think the expectation, or what we'd be looking for, certainly, BMS needs to transform its portfolio is significant. I think that this will be one company that I'm sure is—not necessarily more on the lookout than anyone else—but the need to execute is greater than anyone else.