Biosimilars and the Slow Unwinding of Biologic Exclusivity

Not a Single Cliff, a Cluster of Them

Merck’s Keytruda patent cliff, covered elsewhere in this issue, is the largest single event of its kind the industry has ever faced, but it is not an isolated one. Merck alone is navigating a cluster of major expirations across barely a five-year window — Lenvima in 2025, Januvia and Janumet in 2026, Lynparza in 2027, and Gardasil alongside Keytruda itself in 2028. Other originators face their own versions of the same calendar, a coincidence of timing driven largely by the fact that the biologics boom of the mid-2010s produced a cluster of major approvals that are now, on the standard patent-life clock, reaching their expiration dates in roughly the same window.

For an investor trying to build a durable view of oncology and specialty-pharma value creation through the end of the decade, understanding how a patent cliff actually plays out in practice — not in theory — is not optional homework. It is close to the central variable, and it is a variable that gets treated far too simplistically in most generalist investment commentary, which tends to model a patent cliff as a single overnight revenue cliff rather than the multi-year, region-by-region unwinding it actually is.

The Adoption Curve, Region by Region

The theoretical model is reasonably well established from prior biologic cliffs: biosimilar adoption follows an S-curve, slow at first while physicians and payers build confidence in comparability data, then accelerating once a critical mass of prescribers and formularies switch. The slow start is not irrational caution — a biosimilar, by regulatory definition, does not have to be chemically identical to the reference product, only “highly similar” with no clinically meaningful differences, and oncologists in particular have historically wanted to see genuine real-world outcomes data accumulate before switching patients on an active, working regimen to a new manufacturer’s version of the same molecule.

The curve’s shape differs sharply by region. Europe’s tender-driven procurement systems reward the lowest bidder quickly and mechanically — a national or regional health system runs a competitive tender, and the lowest-priced qualified biosimilar frequently wins the entire contract for that region, producing price erosion of 15 to 30 percent in the first year after loss of exclusivity, deepening to 45 to 60 percent by the third year as more biosimilar entrants compete for subsequent tender cycles. The United States moves more slowly, constrained by rebate structures and pharmacy-benefit-manager contracting that create genuine friction even after a biosimilar is approved and priced competitively; net price declines there have tended to run a shallower 10 to 25 percent over a comparable window, largely because the US system’s rebate architecture allows an originator to negotiate formulary placement in ways a simple tender system does not.

Who Is Actually Building the Biosimilars

The entrants preparing to compete for Keytruda specifically are instructive of where this category is headed structurally. Samsung Bioepis and Amgen — established biosimilar players with deep regulatory and manufacturing track records built over more than a decade of prior biosimilar launches across other therapeutic categories — are running development programs alongside a cluster of Indian manufacturers, several of which are expected to file regulatory submissions as early as 2026 or 2027, timed so that FDA review can complete before the 2028 exclusivity loss actually arrives.

That timing detail matters: it means the first wave of pembrolizumab biosimilars could be ready to launch essentially on day one of the cliff, rather than trickling onto the market over the following several years the way earlier biologic cliffs often played out, when regulatory submission timing was less deliberately coordinated with the exclusivity calendar. A biosimilar developer that files early enough to have its approval sitting ready on the exact day exclusivity lapses captures meaningfully more of the available market than one that files reactively after the cliff has already begun, since the earliest movers tend to lock in the tender contracts and formulary placements that later entrants then have to compete against.

India’s Structural Shift: From Fast-Follower to First Mover

India’s specific position in that wave deserves its own attention, because it is a genuine shift in the country’s role in the global biologics supply chain, not simply a continuation of its existing generics business into a new category. Indian manufacturers have spent the past decade building large-scale bioreactor and monoclonal antibody manufacturing capacity — Aurigene’s 70,000-square-foot facility in Hyderabad’s Genome Valley is one visible example among many — while simultaneously upgrading quality systems under CDSCO’s Schedule M reforms to align with US FDA and EMA expectations, a regulatory-modernization effort covered in more depth elsewhere in this issue.

The combination positions Indian companies to move from fast-follower status, entering biosimilar markets years after the original loss of exclusivity, toward first-to-file status on some of the largest biologic cliffs still to come. That is a structurally different, and considerably more valuable, position in the global value chain: a fast-follower biosimilar manufacturer competes purely on price after the market has already been established by earlier entrants, while a first-to-file manufacturer captures the more favorable early-adoption tender contracts and, in some regulatory regimes, a period of enhanced exclusivity relative to later biosimilar entrants.

Two Readings of the Same Event

The payer-side story matters at least as much as the manufacturing-side story in the specific markets OceansGled operates in. In India, Kenya, and the wider East African corridor, biosimilar entry is frequently not simply a mechanism for compressing an originator’s revenue — it is the mechanism by which a therapy becomes accessible to a national health scheme at all. Universal coverage programs and public tender systems across these markets are far more price-elastic than US commercial insurance; a molecule priced beyond a national formulary’s reach at originator pricing can become genuinely accessible to millions of additional patients once a validated, quality-assured biosimilar exists at a fraction of the cost.

That reframing — patent cliff as access unlock rather than purely as revenue threat — is not a rhetorical softening of the originator’s loss; it is simply the other, equally real side of the same event, and it happens to be the side that matters most in the geographies where this fund spends most of its time. A useful way to hold both readings at once: the same 2028 event that will show up as a line-item revenue risk in Merck’s own investor materials will, in a Kenyan or Indian national formulary review roughly the same year, show up as a line-item access opportunity, and both documents will be describing the identical underlying fact.

The Originator’s Countermove

Originators, for their part, are not standing still, and the defensive playbook is worth understanding in its own right rather than assuming biosimilar competition simply overwhelms an originator passively. Subcutaneous reformulations, fixed-dose combinations bundled with a second active ingredient, and expanded label indications each extend commercially meaningful exclusivity well past the core molecule patent — the specific mechanics of Merck’s own Keytruda defense, detailed elsewhere in this issue, apply in some form across nearly every major biologic franchise approaching its own cliff over the coming five years, and a biosimilar manufacturer evaluating which molecules to pursue has to factor in not just the core patent expiration date but the originator’s demonstrated appetite and track record for exactly this kind of lifecycle-extension strategy.

Portfolio Construction Implications

For portfolio construction, biosimilar manufacturing and the analytical-comparability testing services that support it represent a genuinely distinct asset class from originator biotech — lower margin, but backed by a demand curve that is close to certain rather than contingent on a binary clinical trial outcome. A biosimilar manufacturer’s central risk is regulatory and manufacturing execution risk, not the scientific risk of whether a novel mechanism will actually work in patients, which is a fundamentally different and, in most cases, more manageable risk profile for a venture investor to underwrite.

In a concentrated portfolio of twenty-five positions, where every check has to earn its place against genuine conviction rather than diversification for its own sake, an asset class with structurally lower variance deserves real consideration alongside the higher-risk, higher-return biology bets that dominate most healthcare venture portfolios — not as the majority of the portfolio, but as a genuine, deliberate counterweight to the binary clinical-trial risk that otherwise concentrates across most of a healthcare fund’s remaining positions.

Reading Every Cliff Twice

Patent cliffs get covered, almost by convention, as a threat to the company losing exclusivity. For a fund with genuine footing in both the frontier of biologic innovation and the practical realities of emerging-market healthcare access, the more useful habit is to read every cliff twice — once as an originator’s problem, once as a population’s opportunity — because both readings are correct at the same time, and the investable ideas tend to live in the space between them, in the manufacturing, testing, and distribution infrastructure that makes the second reading possible at all.