The pharmaceutical industry is entering what analysts are calling a "once-in-a-generation" investment opportunity, as the looming expiration of patents on some of the world's most profitable drugs forces major drugmakers into an unprecedented race to acquire new assets.

The $170 Billion Cliff

Between 2025 and 2030, the global pharmaceutical industry faces a staggering $236 billion in lost revenue as nearly 70 blockbuster drugs lose patent protection. The immediate pressure comes from three of the industry's biggest sellers: Merck's Keytruda, Bristol Myers Squibb's Eliquis, and Novo Nordisk's Ozempic.

Industry analysts have described this patent cliff as being "of tectonic magnitude"—and the tremors are already being felt across boardrooms in New York, Basel, and Cambridge.

"We see 2026 as providing one of the best investing opportunities we have seen in decades, driven by the clearing of U.S. healthcare policy overhangs and additional rate cuts spurring more speculative investing."

— PitchBook Analysts

The Blockbusters at Risk

Keytruda (Merck) — $29 Billion in Annual Sales

Merck's crown jewel faces patent expiration in 2028, putting at risk the company's single largest revenue source. Keytruda has revolutionized cancer treatment as an immunotherapy drug, but its patent cliff looms large over Merck's long-term outlook.

In response, Merck recently gained approval for a subcutaneous version of Keytruda, hoping to extend its market dominance before generic competition arrives. The company is also aggressively diversifying beyond oncology, targeting cardiometabolic and immunology assets.

Eliquis (Bristol Myers Squibb/Pfizer) — $13.3 Billion in Combined Sales

The blood thinner Eliquis faces patent expiration in 2026, representing a major revenue cliff for Bristol Myers Squibb. Making matters worse, Eliquis is among the first drugs subject to Medicare price negotiations under the Inflation Reduction Act, with its list price dropping to $231 per month.

According to William Blair analysts, Bristol Myers Squibb remains "unprepared for the cliffs it's facing." Instead of pursuing aggressive M&A, the company has opted for cost-cutting measures, including 2,200 layoffs and a target of $3.5 billion in savings through 2027.

Ozempic (Novo Nordisk) — The GLP-1 Goldmine

While Novo Nordisk's Ozempic faces its own eventual patent expiration, the company has positioned itself at the center of the GLP-1 revolution in weight loss and diabetes treatment. More than 120 metabolic assets are currently in development across 60 companies, creating a deep pool of potential acquisition targets.

The M&A Frenzy Begins

The patent pressure is already driving record deal activity. In the past month alone:

  • BioMarin announced a $4.8 billion acquisition of Amicus Therapeutics to strengthen its rare disease portfolio
  • Amgen committed $840 million to acquire Dark Blue Therapeutics for its protein degrader platform
  • Multiple mid-size biotechs have received acquisition inquiries from larger players

According to Moody's, Bristol Myers Squibb, Pfizer, and Merck all have the financial flexibility to strike transformational deals. The question is whether attractive targets remain available at reasonable valuations.

The Biotech Opportunity

For investors, the patent cliff creates a dual opportunity. Large-cap pharmaceutical stocks face near-term headwinds as revenue from legacy drugs declines, but the sector is poised for a wave of premium-priced acquisitions.

The Nasdaq Biotechnology Index rose 33.1% in 2025, driven in part by M&A speculation and investor interest in AI-driven drug discovery. The Sector SPDR Biotech ETF (XBI) has surged 55% since June, propelled by hopes that smaller biotechs will become acquisition targets.

Stocks to Watch

William Blair's top five biotech recommendations for 2026 include:

  • Krystal Biotech — Gene therapy specialist
  • ARS Pharmaceuticals — Maker of nasal allergy spray Neffy
  • Xenon Pharmaceuticals — Clinical-stage neurology company
  • Terns Pharmaceuticals — Metabolic disease focus
  • Evommune — Dermatology and immunology pipeline

Policy Tailwinds

The Trump administration has recently signed agreements with major pharmaceutical companies including Gilead, Amgen, Merck, and Novartis to lower prescription drug prices. While this creates some pricing pressure, it also provides regulatory clarity that has been lacking in recent years.

Federal Reserve rate cuts are adding to the bullish sentiment, making it easier for large pharmaceutical companies to finance acquisitions and encouraging investors to take on more speculative positions in clinical-stage biotechs.

The Bottom Line

The pharmaceutical industry's patent cliff represents both a challenge and an opportunity. For investors willing to navigate the complexity, 2026 could offer generational entry points into healthcare stocks.

The key is selectivity: focus on biotechs with late-stage assets that address unmet medical needs, and on large-cap pharma companies with the balance sheet strength to make transformational acquisitions. The companies that successfully navigate this transition will emerge stronger; those that fail to adapt may face years of declining relevance.