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BMS, Pfizer and Merck face steep patent cliffs but all have the financial flexibility for M&A: Moody’s

Bristol Myers Squibb, Pfizer and Merck will face extreme patent cliff exposure later in this decade. But those companies also have the financial flexibility to perform mergers and acquisitions to overcome the anticipated losses.

Those were just some of the findings from analysts at Moody’s Investors Service, who recently ranked the industry’s top 19 companies by their patent cliff exposure from 2026 to 2029 and their ability to adjust with M&A.

On the flip side, which companies face the least exposure during that period? It’s AbbVie and Sanofi, according to the Moody’s analysis.

The team selected the 2026 to 2029 window because the period is critical for many companies that are losing exclusivity for their current top blockbusters.

While the companies may see a hit to future revenues from patent lapses, Moody’s says “high cash levels, strong cash flow and moderate debt,” enable many of the companies to strike M&A deals in the meantime.  Among the 19 companies the analysts examined, combined cash holdings were $222 billion at the start of this year.

Looking at some of the companies individually, this is what the Moody’s team had to say:

Bristol Myers Squibb: The company faces big challenges with the loss of exclusivity of multiple myeloma med Revlimid, cancer stalwart Opdivo and blood thinner Eliquis. Much of the erosion will come to a head during the 2026 to 29 period. But the company is well positioned with “high cash levels and strong free cash flow,” Moody’s said. Bristol’s $74 billion acquisition of Celgene was, of course, a giant leap in expanding its portfolio. But the company has the capacity to do more. Of the top 19 companies, BMS’s cash holdings of $17.2 billion at the start of this year ranked fourth.

Pfizer: Because they are easier to copy, traditional oral products are more prone to rapid erosion once patents expire. Moody’s cites Pfizer’s Ibrance, Vyndaqel/Vyndamax, Xeljanz and Xtandi all falling into this category at the end of this decade, in addition to Eliquis, which Pfizer partners on with BMS. Excluding COVID products, these drugs generated 40% of the company’s revenue in 2021. To compensate for these losses, Pfizer has been active with acquisitions of Arena for $6.7 billion and Biohaven for $11.6 billion. The company has capacity to do more as its $31.6 billion in cash holdings (before those M&A deals) tied it with Johnson & Johnson for the most in the industry.

Merck: As a biologic product that will be tougher to duplicate, the erosion for Merck’s Keytruda will not be “precipitous,” Moody’s says. But as that is happening late this decade, the company will also lose its exclusivity on oral drugs such as Lynparrza and Lenvima. Merck has made its business development ambitions clear, recently bolstering its portfolio with an $11.5 billion purchase of Acceleron.

AbbVie: While recognizing that the company will face immediate revenue pressure next year when biosimilars will challenge Humira in the United States, Moddy’s expects the company’s revenue to rebound in 2024 and 2025 behind immunology twins Skyrizi and Rinvoq, which are patent protected into the 2030s.

AstraZeneca: While the company will lose exclusivity on blockbusters Farxiga, Lynparza and Soliris, Moody’s says that AZ’s diverse revenue base will help compensate for the losses. For AZ, it’s also a plus that these drugs are spread across therapeutic areas and that Soliris’ sales drop will be offset by the uptake of its successor Ultomiris, Moody’s points out.

As for other top players Johnson & Johnson and Novartis, their high cash holdings give them flexibility, but there are caveats, Moody’s says. J&J had $31.6 billion in cash at the start of the year, but its opioid and talc litigation may hamper some of its dealmaking flexibility. As for Novartis’ $28.1 billion in cash, a large portion in proceeds from the sale of its stake in Roche will be returned to shareholders in a buyback program.

Lastly, the analysts noted that Sanofi’s hemophilia drugs Alprolix and Eloctate lose patent protection late in the decade, But because of their “extremely complex production processes,” biosimilar manufacturers will not be lining up to challenge those meds.