A significant portion of current Pharma revenue comes from drugs with medium-term LOE risk (i.e. by 2028)

Some takeaways as we head into JPM:

Overall, >$150B of global annual sales is at risk from patent cliffs through 2028, with an equivalent amount at-risk from 2029-2033

On average, each Pharma has ~$25B in revenue at LOE risk over the next 10 years, with J&J, Merck, BMS, AstraZeneca and Amgen the most exposed

The natural assumption is that Pharma will use their significant cash ($150B+ in aggregate) to offset these losses with splashy acquisitions

And while the $XBI doesn't have much to show for it, Pharma has been active on the M&A front with 42 deals cumulatively since 2023

Should Pharma accelerate BD in 2025, it's not a guarantee that it'll be traditional US-based biotechs. A recent Stifel report noted that ~1/3 of in-licensing deals are now from China

That's billions of dollars not going to US-based biotechs - truly global competition

Given the scale of upcoming LOEs, it's likely we see multiple life cycle management strategies converge:

• M&A for de-risked late-stage assets that can contribute near-term revenue
• BD to play emerging modalities w/ specific know-how (as we saw with protein degraders & ADCs)
• Try to extend patent life of winners (Pharma has had more success here recently)
• Double down on internal development where you have expertise

M&A will prioritize 'feeding' existing commercial engines with additional assets as this capitalizes on relationships / sunk costs