(Don't Fear) The LOE: Timing Is Everything

Research evidence excerpt

(Don't Fear) The LOE: Timing Is Everything

TD SECURITIES (USA) LLC SECTOR NOTE

May 26, 2026

■Pharmaceuticals/Major (Don't Fear) The LOE: Timing Is Everything

Steve Scala, R.Ph., CFA THE TD COWEN INSIGHT

617 946 3923

Our 3rd update of company valuation around the largest Pharma LOEs now spans the last 25

stephen.scala@tdsecurities.com

yrs. On average, forward P/E compresses ~20% starting ~6 yrs before a large LOE & troughs

Michael Nedelcovych, Ph.D. ~2 yrs prior. 11 companies are now in that 6-yr period ahead of LOE for 21 big products. P/E

617 946 3744 trends roughly tracing historical average so far. Timing (and context) is everything, but LOEs

michael.nedelcovych@tdsecurities.com

can present buying opportunities.

Chris LoBianco

617 946 3734 Blue Oyster Cult released (Don't Fear) The Reaper exactly 50 years ago, and the band is

chris.lobianco@tdsecurities.com still on tour. Lead singer Eric Jay Bloom is 81 years old. Unlike Blue Oyster Cult, patents on

Paul Kuhn, Ph.D. pharmaceuticals don't go on for half a century, but lapse well before that, and the innovator's

646 562 1328 stock tends to suffer accordingly. To assess this impact, the TD Cowen Pharma team is

paul.kuhn@tdsecurities.com releasing the 3rd update to its analysis of composite company performance before, during,

and after major patent expirations (Note 1, Note 2). The current analysis extends over the

past quarter century to provide a base case for understanding Pharma valuation surrounding

large individual loss of exclusivity (LOE) events. Included in our historical LOE set are 23 drugs

that contributed an outsized proportion of revenue to a company's topline. These patent

expirations are the kinds of events that can capture investor imagination and weigh heavily

on sentiment.