# Tariff Deadline Spares Big Pharma and Exposes the Small Biotechs It Wants to Buy - The Biotech Patent Cliff & M&A - Week of September 25, 2026 > The Biotech Patent Cliff & M&A newsletter for the week of September 25, 2026. The U.S. is set to start tariffs of up to 100% on patented drugs on September 29 with 13 companies exempt and small biotechs exposed, a UBS analyst names the obesity takeover shortlist, and Merck gets two answers to the Keytruda question. ## The Biotech Patent Cliff & M&A ### Week of September 25, 2026: Tariff Deadline Spares Big Pharma and Exposes the Small Biotechs It Wants to Buy --- On Monday, September 29, the U.S. is set to put tariffs of up to 100% on patented medicines made abroad. Four days out, nobody can say which drugs will be hit, which will be exempt, or how anyone applies for an exemption. The biggest drugmakers have mostly already bought their way out. The companies left exposed are the small and mid-sized biotechs, and those are the same companies Big Pharma needs to buy to get past its patent cliff. STAT's podcast said outright that biotech buyouts have "taken a little bit of a breather." What came through instead: a UBS analyst listing specific obesity-drug takeover candidates, a firsthand report from Shanghai describing a "gold rush" for Chinese drug molecules, and two pieces of good news for Merck as it tries to replace Keytruda. A note on who's talking. The tariff and China reporting comes from trade journalists at BioCentury and STAT. The takeover names come from a sell-side analyst, meaning a bank analyst who publishes research for investors. The one real insider voice was Blackstone's life-sciences chief, a dealmaker. --- ## TL;DR - **The tariff deadline favors the giants.** Tariffs of up to 100% on patented drugs are due to start September 29. Thirteen companies are exempt through pricing and U.S.-manufacturing deals with the government. Small biotechs that make their drugs in China or India are exposed, and the rules still haven't been published. - **Obesity is the live hunting ground for takeovers.** UBS's Michael Yee called Novo Nordisk a "value trap" and named *Structure Therapeutics (GPCR)*, *Viking (VKTX)* and newer entrants as candidates for "tuck-in" deals, meaning smaller add-on acquisitions. - **The China pipeline keeps growing, and deal structures are adapting.** About a third of the world's drug pipeline now comes from China. Investors in Shanghai described bidding wars, plus a workaround: park Chinese molecules in U.S.-run shell companies so they're easier to sell to American pharma. --- ## What's new ### 1. The tariff deadline could hit the very companies Big Pharma wants to buy The most useful segment of the week came from [BioCentury This Week](https://app.matterfact.com/podcasts/69a9625c6592ac8e42556bd696b48748804aa8fc0f650d2f5e053520d7ef9ed6?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "Ep. 388 - Biotech IPOs, CAR T safety & pharma tariffs." Steve Usdin, BioCentury's Washington editor and a journalist, recorded on the afternoon of September 21. He was blunt: "Yeah, it's a mess. Look, the government is on track to impose tariffs of up to 100% on patented pharmaceuticals and their ingredients... starting on September 29th. That's what's supposed to happen. But nobody knows which products are going to be affected, which companies are exempt, which products are exempt, or how the process is going to work." What is known so far: - **Thirteen companies are exempt.** These are "companies that have done MFN agreements and on-shoring agreements with HHS." MFN stands for "most favored nation," deals where a drugmaker agrees to charge Americans no more than it charges other rich countries. On-shoring means promising to build factories in the U.S. - **Generics and biosimilars are exempt "for now."** Biosimilars are cheaper near-copies of biologic drugs that launch once the original loses patent protection. - **Some countries face a 15% rate, some 20%,** and the rest the 100% default. - **The administration says whole categories will be exempt:** orphan drugs (for rare diseases), nuclear medicines, plasma therapies, fertility treatments, cell and gene therapies, and antibody-drug conjugates. But Usdin said the proclamation attaches "conditions and ambiguities," and lawyers disagree on whether those categories are exempt automatically or only if they meet vague extra tests. One test is "an urgent U.S. health need," which the administration hasn't defined. The point for the patent cliff is who ends up carrying the cost. Usdin relayed a letter from BIO (the biotech industry's trade group) CEO John Crowley to the Commerce Department warning that the tariffs "are going to disproportionately affect small and mid-sized companies, which are precisely the ones that are least able to figure these kinds of things out." His summary: "The big companies have gotten themselves exempt through the MFN and onshoring deals." Put that next to the M&A story and it's uncomfortable. Big Pharma buys small biotechs to refill pipelines emptied by expiring patents. If a tariff makes those targets' foreign-made drugs more expensive or harder to launch, it could squeeze their valuations. That might make them cheaper to buy, or it might simply make them harder to fund until someone does. Usdin also flagged two wildcards: whether a planned visit to Washington by China's President Xi changes anything, and whether the start date slips because guidance still isn't out. ### 2. A UBS analyst names the obesity takeover shortlist On CNBC's [Fast Money](https://app.matterfact.com/podcasts/177c2c048cad57825945592745ca5885496d0cc94e53a05f2139673c9fc00c48?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "Meta Surges As Muse Optimism Grows… And Novo's Growth Plans Disappoint 9/21/26," Michael Yee, UBS senior pharma and biotech analyst and global head of biotech equity research (sell-side), was asked about Novo Nordisk after its shares fell 8% on a disappointing investor day. His answer was clear: "We've been very consistent on this. We think it's a value trap. We think one of the issues is that you have an incumbent GLP-1 obesity player that's facing significant headwinds and declining market share." A "value trap" is a stock that looks cheap but stays cheap because the business is getting worse. One of the Fast Money panelists put numbers on the gap: "Lilly at 32 times forward, Novo at 11 and a half times forward," meaning investors pay about three times as much for each dollar of Lilly's expected earnings. The M&A angle came next. Yee expects Lilly to "dominate with 65% of that market over the next five or seven years," but said that still leaves room for deals: "We do think there still remains a place for tuck-in acquisitions and strategic BD. We do think that GPCR remains a company that's still on the radar screen of a lot of players." "BD" means business development: licensing, partnerships and acquisitions. Yee went through the candidates one by one: - **Structure Therapeutics (GPCR):** "still on the radar screen of a lot of players." He also said its amylin drug (amylin is a hormone that works alongside GLP-1 to curb appetite) "is going to be one of those assets that we need to wait and see." - **Viking Therapeutics (VKTX):** "remains a question mark for a lot of people, given that it's still just a peptide, still going to do peptide manufacturing and still a concern." Put simply, Viking's drug is an injectable protein-based molecule like the first-generation drugs, and the market increasingly rewards newer mechanisms and pills. - **"NBX and some of these other players"** that "have been coming out with newer and better things." He framed the market this way: in five to seven years "we're not going to be talking about the first generation drugs. We're going to be talking about the latest and greatest." For a patent-cliff buyer, obesity is still one of the few markets big enough to matter to the largest drugmakers. Yee's advice is to buy the next generation, not the current one. ### 3. Merck got two answers to "what replaces Keytruda?" in one week Last week's issue was about the China-tested challenger to Keytruda, Merck's roughly $31-billion-a-year cancer drug, which loses U.S. patent protection in 2028. This week the news went Merck's way. The weekly roundup podcast [Telltales](https://app.matterfact.com/podcasts/8383b78316f15d5f26539d41cbea7eb5e66915588a0ad5a4828333903abaae8c?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "Weekend Update - W2638," summarized it (a commentary show, so treat it as a pundit's read): "Merck and Moderna's Phase III melanoma trial, a personalized cancer vaccine given alongside Keytruda, hit both its primary and key secondary endpoints in patients whose melanoma had been fully resected. Same week, the FDA expanded the label on Merck's WinRivere in pulmonary arterial hypertension... For a company that has spent three years being asked what replaces Keytruda when the patents run out, that's two answers inside seven days." Two things to note. The vaccine is given alongside Keytruda, so it extends the franchise rather than replacing it. And Winrevair is a lung-disease drug Merck got through its 2021 Acceleron acquisition, which is exactly the kind of buy-before-the-cliff deal this newsletter tracks. Blackstone's Nick Galakatos, head of Blackstone Life Sciences (a dealmaker, so insider mechanics), added a third leg on [The BioCentury Show](https://app.matterfact.com/podcasts/9e9ecb958515463a472d2db214395efee902e0dffe1bf7df8867aecad29bc8c3?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "Ep. 119 - Blackstone's Galakatos on funding biotech's hardest mile." Blackstone co-funds development of sac-TMT, the drug Merck is pairing with Keytruda: "Merck has a great franchise in oncology with Keytruda. They are seeking a successor to Keytruda. One of these molecules is a drug conjugate called SAC-TMT. And that was invented in China by the Chinese biotechnology company. So they brought that into Merck for the rest of the world." Galakatos explained why Blackstone gets exposure to China this way: "access Chinese innovation through our global pharmaceutical partners." That keeps the benefit while limiting what he called "tremendous geopolitical risk." ### 4. China: "basically a gold rush," and a workaround for politics STAT's [The Readout Loud](https://app.matterfact.com/podcasts/4508aeb91c89f487224010476f1c3d68aa6720248c6835463218ea9ee87bed07?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "The FDA's Overton era, and dispatches from Shanghai," sent reporter Jason Mast (a journalist) to a major biotech investment conference in Shanghai. The hosts set the scale: "approximately one-third of the world's drug development pipeline is now coming from China," and companies including Pfizer, Merck, AstraZeneca and Eli Lilly "have spent approximately $50 billion to acquire and license medicines developed by Chinese scientists." Mast's report from the conference: "The competition for molecules here is as high as it's ever been, and people are actively bidding against each other and bidding against other investors, bidding against pharma companies. It's basically a gold rush out here." The more useful detail for dealmakers was a new structure. As U.S.–China tension grows, "Chinese biotechs license their assets or their early-stage molecules to a new company that is set up by U.S. investors mostly," taking equity in return. The reason: "it's easier to then sell to a U.S. pharma company because there isn't that same level of geopolitical tension." One investor called the political risk "the 100-pound gorilla in the room," but Mast said it "hasn't dragged down the industry." An operator put a sharper number on it. On the [Grow Everything Biotech Podcast](https://app.matterfact.com/podcasts/311edf364b3b35969bbd47cb9e75d7fe5577f67d1957a412e634f4cae20ad6bb?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "200. That's One Cell of a Machine," Ginkgo Bioworks CEO Jason Kelly (who admitted he was "talking my book," since Ginkgo sells lab automation) said the share of acquired new drug assets coming from China went from "effectively 0%... and less than $2 billion worth" five years ago to "130 billion and 48%" last year. He called it a "crazy shift" and backed a proposal, which he called "BINSA," to add biotech to U.S. outbound-investment screening rules that already cover AI and quantum computing. ### 5. Mid-size deals are still happening, just not headline ones A few completed deals came up this week, useful as reference points for prices: - **AbbVie–Apogee, $10.9 billion.** On The BioCentury Show, Galakatos said Blackstone had financed Apogee's eczema drug so the company could launch on its own, since it "needed between $1 and $1.5 billion." Then "several pharmaceutical companies are very interested in them at the same time," and "it was 27 days, actually, after our transaction" that AbbVie agreed to buy it. BioCentury editor-in-chief Simone Fishburn: "the takeout by AbbVie was a $10.9 billion takeout. So this was not chump change." Galakatos's takeaway: "we try to... offer them an independent path. And in this situation, they went the other way." This is AbbVie's post-Humira approach in practice: add immunology drugs as Humira sales fade. - **Telix–ITM, about $1.65 billion upfront.** On The Readout Loud, STAT's Allison DeAngelis (journalist) described Telix buying out ITM's equity in radiopharmaceuticals, cancer drugs that deliver radioactive isotopes straight to tumor cells. She said it "creates a new entity that could be a big competitor for Novartis," the current leader, though "Telix investors [are] a little wary of the deal." - **Psychedelics as a new M&A category.** On [Citeline Podcasts](https://app.matterfact.com/podcasts/f4bd17be2bdff03e19e6c540694e92556acdf4a4fcdde6dfa483fa2b7c52dd53?utm_source=newsletter&utm_medium=llm&utm_campaign=2026-09-25-biotech-tariff-day-small-biotech-exposed), "Assessing the current dealmaking environment for psychedelic medicine," Scrip deals writer Joe Haas (journalist) recapped Lilly's *$2.8 billion upfront* purchase of Atai Beckley (up to *$3.8 billion* with milestones), Otsuka's $700 million Transcend buyout, and AbbVie's up-to-$1.2 billion Gilgamesh option deal. The template is J&J's Spravato, a nasal-spray depression drug that "passed the $1 billion sales threshold in 2024," with some predicting $2 billion this year. Datamonitor analyst Emma Willey said the Lilly deal "signals confidence." --- ## The debate **The pressure-to-buy case was implied, not argued.** The evidence was indirect: Yee's tuck-in shortlist, the Shanghai bidding wars, and AbbVie paying $10.9 billion for an eczema drug within a month of its target lining up funding to stay independent. **The risk case moved to Washington.** The worry wasn't the FTC blocking deals. It was trade and pricing policy changing what targets are worth. The tariff setup favors companies that signed pricing deals with the government, and pressures smaller companies that make drugs abroad. A second policy thread, discussion of outbound-investment screening for China biotech, could eventually narrow the most active source of new molecules. BioCentury's Usdin also noted that White House advisor Calley Means, who calls drug companies "corrupt," is scheduled to speak about "reforming FDA" at a September 29 summit, the same day the tariffs start. ## The names in play - **Structure Therapeutics (GPCR)**: UBS's Yee said it is "still on the radar screen of a lot of players." Its amylin asset is a "wait and see." - **Viking Therapeutics (VKTX)**: a "question mark" in Yee's view because it's "still just a peptide." - **Novo Nordisk (NVO)**: "value trap," down 8% on its investor day, trading at 11.5x forward earnings versus Lilly's 32x. Its weakness is the reason Yee sees room for tuck-in obesity deals. - **Eli Lilly (LLY)**: still the most active buyer, from psychedelics (Atai Beckley) to a newly stated push into bone health and osteoporosis, per STAT. - **Merck (MRK)**: a better week. The melanoma vaccine win with Moderna, the Winrevair label expansion, and the China-sourced sac-TMT combination are all building the post-Keytruda bridge. - **AbbVie (ABBV)**: the $10.9 billion Apogee deal is the clearest post-Humira move discussed this week. ## Read-throughs - **Biosimilars get a relative tailwind from the tariffs.** Generics and biosimilars are exempt from the September 29 tariffs "for now," per BioCentury. Patented imports face up to 100%. That favors copycat-drug makers against branded competitors. - **Small and mid-cap biotech: two opposite pressures.** Tariffs threaten small companies with foreign manufacturing, while buyers keep paying up for high-quality assets (Apogee at $10.9 billion, Lilly's psychedelic deal). The takeaway is that the gap between the best assets and the rest is likely to widen. - **Private capital plays both sides.** Blackstone's Apogee story shows that financing meant to keep a company independent can also end up raising its sale price. Bankers and financiers get paid either way, but that's an observation, not a stock idea. --- ## What changed **The worry shifted from China competition to the tariff deadline.** Last week was about China as both Big Pharma's pipeline and Keytruda's threat, alongside a euphoric 70% XBI rally. This week, pricing and trade policy came back. The September 29 tariff start went from a date on the calendar to a concrete problem with no rules published, and the podcasts were clear that small biotechs, not big pharma, carry the risk. **Merck's story improved.** Last week it was on defense against a China-tested rival. This week it had a positive late-stage cancer vaccine result and an expanded label on its lung-disease drug. **The China thread turned from money to mechanics.** Last week gave the dollar figures ($15.2 billion Bristol-Myers, $10.5 billion Pfizer). This week, from Shanghai, showed how deals are being restructured, with U.S.-run shell companies holding Chinese molecules to get past political friction. **A correction.** Last week this newsletter called Apogee a "poster child" for biotechs choosing Blackstone financing over a sale. That was wrong. In the same podcast, Galakatos said AbbVie agreed to buy Apogee for $10.9 billion just 27 days after Blackstone's financing. The "stay independent" example lasted less than a month, which is a useful reminder of how hard it is for a good asset to stay unsold right now. --- ## Get the full transcripts on Matterfact This briefing was produced with Matterfact, which indexes the complete, full-text transcripts of 120M+ podcast episodes alongside SEC filings, earnings calls, and financial datasets. 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