The pharmaceutical industry’s appetite for acquisitions shows no signs of slowing, with Novartis announcing its fourth major purchase this year, a $12 billion deal to acquire U.S.-based Avidity Biosciences. The move underscores the sector’s relentless pursuit of innovation to offset looming patent expirations and intensifying competition, but it comes with significant risks, as highlighted in a NZZ commentary by Dominik Feldges.
Pharmaceutical companies, often seen as financial powerhouses, rely on blockbuster drugs generating over $1 billion annually to sustain their profitability. Rising global life expectancy and demand for advanced treatments make the industry lucrative, yet developing new drugs remains a challenge. With medical research advancing rapidly, companies face the constant threat of their products being outpaced by more effective therapies. Acquisitions offer a faster route to innovation than in-house development, but the outcomes are far from guaranteed.
Novartis’s latest acquisition targets Avidity Biosciences, gaining access to three promising drugs with a projected annual revenue of $3 billion. However, these drugs await regulatory approval, and their market success remains uncertain. Past acquisitions by Novartis, including the $8.7 billion purchase of Avexis in 2018 and the $9.7 billion acquisition of The Medicines Company in 2020, have yielded mixed results, with key products like a gene therapy for muscular dystrophy and a cholesterol-lowering drug underperforming expectations. Similarly, Basel-based rival Roche has faced costly setbacks with its own high-stakes U.S. acquisitions.
Both companies are driven by the need to replenish their pipelines as patents on major drugs near expiration. Novartis is already grappling with revenue losses from generic competition for its top-selling drug, while Roche faces potential losses of over $30 billion in annual revenue by 2030. Industry-wide, experts estimate patent expirations could jeopardize more than $300 billion in revenue, fueling an accelerating wave of acquisitions.
The surge in demand for biotech firms is a boon for the sector, which faced financing challenges until recent interest rate cuts eased access to capital. However, the high premiums paid in these deals—Novartis offered nearly 50% above Avidity’s market value—raise concerns about overpayment. Novartis’s stock dipped by nearly 1% following the announcement, reflecting market skepticism about the deal’s value.
As pharmaceutical giants navigate this high-stakes landscape, the pressure to secure innovative therapies while managing financial risks continues to shape the industry’s future. The acquisition frenzy, already gaining momentum in 2025, is likely to intensify as companies race to stay ahead of the patent cliff and maintain their market dominance.
