Ipsen's billion-dollar drug Somatoline is maintaining strong sales despite facing generic competition since 2021. The drug is extremely difficult to manufacture, which has prevented generic players from ramping up production. This "manufacturing moat" serves as a powerful, often overlooked, defense against revenue erosion after a patent cliff.

The nature of biopharma M&A changed dramatically in a year. After a period with no deals over $5 billion, there are now seven or eight such transactions, reflecting a pivot by large pharma to acquire de-risked assets with large market potential to offset looming patent expirations.

Adderall's success proves a core chemical patent isn't essential for market dominance. A strong brand that becomes synonymous with a condition, combined with secondary patents on novel delivery mechanisms (like Adderall XR's capsule), can create a durable, highly profitable business moat.

Astellas isn't resting on its first-to-market Claudin 18.2 antibody. It's proactively developing next-generation therapies—a CD3 bispecific to reach more patients and an in-licensed ADC for a potential chemo-free regimen. This multi-asset strategy aims to create an enduring leadership position in this specific cancer target.

By reformulating existing oncology drugs, Nenology uses the streamlined 505(b)(2) regulatory pathway, de-risking and accelerating development. Simultaneously, their composition-of-matter patents provide strong intellectual property protection typically associated with entirely new chemical entities, creating a unique strategic advantage.

While patents are important, a pharmaceutical giant's most durable competitive advantage is its ability to navigate complex global regulatory systems. This 'regulatory know-how' is a massive barrier to entry that startups cannot easily replicate, forcing them into acquisition by incumbents.

Astellas' R&D isn't defined by therapeutic area or technology. Instead, their "focus area approach" creates a "triangle" of core biology, the best modality, and the right patient population. This model is designed to generate multiple follow-on programs, like their KRAS degraders, by pivoting any corner of this triangle.

Instead of solely relying on replicating internal R&D success, a proven biotech can create value by acquiring passive assets. This involves buying royalty streams on promising external products, leveraging the company's evaluation and deal-making expertise in a new way.

With patent cliffs looming and mature assets acquired, large pharmaceutical companies are increasingly paying billion-dollar prices for early-stage and even preclinical companies. This marks a significant strategic shift in M&A towards accepting higher risk for earlier innovation.