As Big Pharma faces a 'patent cliff', China’s biotech boom is emerging as the industry’s most critical lifeline

For pharmaceutical firms, watching lucrative patents on their top-selling drugs expire has long been part of the business cycle. There’s enormous pressure to find ways of covering the shortfall. For the first time, China has something to offer.

Its prolific biotech companies are in the mix as a potent remedy for the upcoming so-called ‘patent cliff’ facing the industry.A new blockbuster drug can generate tens of billions of dollars a year when it first goes to market. Each therapy typically gets two decades of patent protection. However, when that period is over, competitors are allowed to release generic or biosimilar medicines.

It’s great news for patients. But the loss of exclusivity can decimate revenue. Over the next five years, about $314 billion in sales are expected to be affected.

The expected losses will peak in 2028, the year that Merck’s patent expires on its top-selling cancer drug Keytruda. Drugmakers learnt painful lessons from the last revenue cliff , which began around 2010 and lasted about four years. Driven by the loss of patent protection for a number of branded anti-depressants, anti-psychotics, and painkillers, it resulted in a period of muted sales growth.To avoid a similar fate, Big Pharma has been going after promising targets to replenish pipelines.

There is so much revenue to replace that the shopping spree has extended to a phenomenon not seen during the last patent-cliff cycle: A surge in licensing agreements with Chinese companies to take their experimental therapies worldwide. The dealmaking has been frenzied, with seven of the top 10 biggest agreements since 2020 happening this year.Cancer research and licensing has traditionally been an area of dominance. However, over the past two years,