Prices, pipelines and patent cliffs: Inside pharma’s big reset

This earnings season, Europe’s largest pharmaceutical companies reported results ranging from 7% hits to 3% misses, but no one really cared.

Instead, drugmakers have looked forward, with 2026 expected to be a critical year after the dramatic 2025, and a year in which the impact of last year’s developments is set to take hold.

“2025 was about sort of understanding the rules of the future of the game… and what we still have to see [2026] “It’s how these companies actually implement what they agreed to, particularly in the deals you’ve seen with the Trump administration,” Greg Greaves, a senior partner at McKinsey, told CNBC.

In addition to political dealings, companies face so-called… “patent shelf” In the coming years, some of the world’s best-selling drugs will lose their exclusivity in key markets, exposing them to competition from much cheaper generic drugs.

While drug makers always to some extent Promote their pipelinesNow, they’re showcasing it even more as they seek to reassure investors that their pipeline holds enough promise to offset upcoming patent expirations.

“With the scale of patent losses that are going to happen over the next few years, you may hear more emphasis on optimism for the future, rather than near-term delivery,” Greaves said.

Novartis CEO Vas Narasimhan, for example, On CNBC’s “Squawk Box Europe.” Last week, his company was on the verge of losing $4 billion in sales and nearly that in profits just in the first half of this year, representing “the largest set of franchise losses in Novartis’ history.”

At the same time, he highlighted that due to their “significant growth engines” and “strong pipeline,” they can still grow.

AstraZeneca It appears to be equally confident in its product pipeline, as it can boast 25 successful new drugs by 2030, while also hoping to achieve revenues of $80 billion, compared to $59 billion in 2025.

Many companies are also emphasizing the importance of their business development strategies as they increasingly look to mergers and acquisitions to help them find the next blockbuster drug.

“Strategic fit” and “deal buy-ins” have become the go-to phrases for CEOs.

While some companies are targeting smaller acquisitions and early-stage assets, others are open to larger, late-stage deals to fill the gap. Camilla Oxhammer, portfolio manager at Rhenman & Partners, told CNBC.

While companies can fill this revenue gap by developing drugs internally, going on a shopping spree often leads to faster results.

Sanofi CEO Paul Hudson learned the hard way as his tenure as CEO came to an abrupt end on Thursday, ending a six-year reign at the French company, during which his focus on research and development failed to deliver quick results. Sanofi has not yet responded to CNBC’s request for comment on Hudson’s departure.

Belén Garrijo, currently CEO of Merck KGaAHe will replace Hudson with a mandate to “enhance the productivity, governance and innovation capacity of R&D.” Sanofi said in a statement.

Sanofi has been clear-eyed about the need to offset patent expirations on its popular asthma drug Dupixent, which currently accounts for more than a third of sales and will lose key patents by the early 2030s.

With mergers and acquisitions becoming a bigger focus for companies looking to revamp their pipelines, China has emerged as the most interesting place right now. It has become an important source of innovation, with several companies announcing recent announcements Dealing with Chinese companies To secure access to assets being developed in the world’s second largest economy.

Oxhammer noted that ten years ago, deals with Chinese companies were extremely rare, but today they happen all the time.

“It’s very much about the end market — the end market today is primarily the United States, Europe second,” she said. “Many see the end market 10 years from now as likely to be the United States and China.”

Over the past year, the discussion has moved from talking about China as a market, to a source of innovation, Greaves said.

“What you’ve heard, especially since the beginning of this year [and] At the end of last year, there was a real concerted effort in China to get the innovation from there and also get the right presence in the market.”

Companies are starting to look at it as a way to de-risk assets, using China “as a platform to understand how a drug works in a very rapid way, knowing that they do their clinical development or discovery development life cycles much faster than we do in Europe or the US.”

While the immediate threat from President Donald Trump’s so-called Pricing of most favored nation medicinesor MFN, is no longer as hot as it was sometime last year, it’s still a big topic.

Now the market wants to know how companies will actually play this.

Will companies postpone launching their products in Europe to avoid being locked into European prices in the larger US market? Or will they adopt the single-price model, even if it means less access to some markets?

“These are questions that we don’t know how they’ll be answered, but I think I can tell you that every company I’ve worked with, there’s a lot of thought that goes into it.” [those options]” Graves said.

“The real key, going forward, as we launch many of these new drugs, is what is the right pricing strategy, and we have to think about that,” AstraZeneca CFO Aradhana Sarin said. He told CNBC last week.

Another unknown, especially for obese players, is how price sensitive customers are in the direct-to-consumer market.

No one quite knows what happens to volumes if the price of a drug is reduced, Simon Baker, a Rothschild & Co. Redburn analyst, told CNBC. “This doesn’t usually happen in pharmacy, [if] “You reduce the price of lung cancer medicine, you don’t sell more of it, you just reduce sales.”

It has become more than a Consumer market Direct-to-consumer exposure relative to other pharmaceutical companies remains very limited so far, Oxhamre said.

That may change Novo Nordisk and Eli LillyThe two dominant players are likely to face increasing competition as other companies develop competing drugs.

AstraZeneca is moving its GLP-1 pill Elecoglipron into late-stage trials Rosh Aim to become Top three obese playerwith several treatments under development.

In the United States, Pfizer I entered the race with Acquisition of Mitsira Last year, and Amgen She is developing a once-a-monthly injection, MariTide, which she hopes will help her Take advantage of the market to maintain weight.

As the space becomes more crowded, companies are trying harder to differentiate their drugs.

Weight maintenance is a big topic, with studies showing that most people stop taking weight-loss medications eventually Weight regain.

Convenience is another differentiating factor that drives the sector to target cereals e.g Novo’s newly launched Wegovy pills, Unlike injections. The oral option is said to be preferred by consumers and can also help companies with distribution, as it does not need to be stored cold. More long-acting molecules could also play a role.

GLP-1 often has side effects, the most common being gastrointestinal, and improving tolerability is another key differentiator that companies are looking for with amylin therapies that target another hormone in the gut, along with treating related conditions.