Big Pharma needs innovation – will innovative Biotech be able to cater for these needs under the current conditions?
By Anders Månsson, Senior Advisor at Ventures Accelerated
Aug 20, 2025
Anders Månsson
As the pharmaceutical industry stands on the verge of a historic patent cliff, the next five years are possibly set to be characterized by an aggressive surge in mergers and acquisitions (M&A), a trend that would impact across the Biotech sector and reshape the drug innovation landscape. With over $300 billion in revenue at risk from expiring patents by 2028, and significant financial “firepower” among the top Big Pharma companies, the stage is arguably set for a new era of pipeline-driven dealmaking1.
The looming expiration of patents on nearly 190 drugs, including blockbusters like Merck’s Keytruda, AbbVie’s Humira, and J&J’s Stelara, threatens to erode revenue streams and destabilize market positions for the industry’s giants. Internal R&D pipelines are generally predicted not to be capable of fully compensating for these losses, making external innovation via M&A not just attractive, but essential to maintain growth trajectories.
Big Pharma’s response needs to be clear: diversify, rejuvenate, and expand. Already in 2025, the industry has seen examples of a sharp uptick in dealmaking, with Johnson & Johnson’s $14.6 billion acquisition of Intra-Cellular Therapies and Eli Lilly’s $2.5 billion purchase of Scorpion Therapeutics signaling a renewed appetite for large, strategic, acquisitions. Industry analysts predict that aggregate M&A deal values could reach a staggering level of $70–90 billion in 2025 alone, with the potential for even higher volumes as the patent cliff accelerates1.
To counter the patent cliff, Big Pharma is pursuing two primary strategies:
Therapeutic Diversification: Companies are targeting innovative Biotech firms in high-growth areas such as oncology, neuroscience, immunology, and cardio-metabolic diseases2. The rationale is twofold: these fields offer significant unmet medical needs and the potential for high-value, first-in-class therapies.
Technology Expansion: Beyond therapeutics, there’s a continued interest in platforms intersecting with artificial intelligence, cell and gene therapy, and precision medicine, sectors where Biotech startups often lead.
As stated, the first months of 2025 have already seen major deals in these “hot” fields. Johnson & Johnson’s move into neuroscience, GSK’s push into precision oncology, and Eli Lilly’s expansion in targeted cancer therapies are examples of this trend. Meanwhile, the involvement of private equity and the rise of AI-driven drug discovery are amplifying M&A activity.
While the M&A surge presents a lifeline for innovative Biotech companies, it also underscores a deeper challenge: the persistent difficulty of accessing capital. Over the past two years, many Biotech companies have struggled to raise funds amid rising interest rates, volatile markets, and cautious investors. This has led to a wave of down-rounds, layoffs, and even bankruptcies among early-stage companies.
For these firms, being acquired by a cash-rich Big Pharma may be the only viable path forward. However, the injection of capital into the Biotech sector via a few M&A deals, even if they increase in numbers, does not necessarily translate into a broader, more sustainable, innovative Biotech ecosystem. There is of course a risk is that only the most “de-risked” assets, those with late-stage clinical data, will attract buyers, leaving early-stage innovation underfunded and potentially juts pushing the problem further into the future by stifling the next generation of breakthroughs, essentially kicking the proverbial can down the road.
It is also important to note that an anticipated resurgence of Big Pharma M&A is taking place against a backdrop of political uncertainty, particularly in the United States. The new US administration has brought with it the threat of new tariffs, general ones but also tariffs that would be specific to prescription drugs, which of course introduces a new layer of commercial risk, and possibly complicates supply chains.
The next five years could be transformative for both the pharmaceutical and Biotech sectors. For Big Pharma, the imperative seems clear. They must utilize M&A to bridge the innovation gap, diversify portfolios, and secure future growth as the patent cliff approaches. For Biotech, the wave of acquisitions in the current economic environment offers both opportunity and risk, providing much-needed capital and validation for some, but potentially narrowing the field for early-stage innovators.
Ultimately, the industry’s ability to sustain innovation will depend on whether the capital unleashed by M&A also finds its way to the next generation of breakthrough science, or whether it simply consolidates existing de-risked assets. The answer will shape the future of drug discovery, patient care, and the global life sciences ecosystem for years to come.
It is clear that Big Pharma needs innovation, and that it is willing to pay. The question is whether innovative Biotech companies will be able to supply it sustainably under the current conditions? It is at any rate obvious that Biotech companies must maximize their chances of getting noticed in this environment, through intelligent and well-targeted partnering!