Patent Cliff

Definition

The sharp decline in revenue experienced by a pharmaceutical or technology company when patent protection expires on a key product, exposing it to generic or competitive alternatives. Patent cliffs are a critical consideration in the valuation of patent-dependent businesses, as revenue can decline 70-90% within 12-24 months of patent expiry in the pharmaceutical sector. Strategies to mitigate patent cliffs include lifecycle management, reformulation, patent extension filings, and pipeline diversification.