With many high-margin blockbusters going off patent and a lack of replacement products, pharma seems headed for some choppy years. That was the consensus of executives attending a Bernstein Research conference that explored three potential solutions to the patent cliff: business diversification, M&A and managing costs like sales and marketing. The upshot, according to Bernstein analyst Tim Anderson, MD: despite all the maneuvering, there are no sure fixes.

Of the 20 biggest drugs in the world, 18 will lose patent protection in the next five years, according to an earlier Bernstein report. As these revenue sources dry up, companies are looking hard for alternate ones. Diversification is one strategy companies have pursued to address the R&D productivity problem. Adding new business lines can help decrease dependence on branded prescription drugs, or so the thinking goes.

But let’s be realistic, said Anderson. It took Johnson & Johnson, Abbott Laboratories and Novartis years to become the well-diversified businesses they are. “Diversification is easy to talk about, but actually achieving diversification effectively is another matter,” he commented in a research note summarizing the conference.

Companies like Pfizer, which wants to make more headway in generics, have “a long way to go” to compete with the likes of established generic names Teva or Mylan. Similarly, firms like Sanofi-Aventis, which “tip-toed” into consumer products with its acquisition of Chattem, have “many lessons to learn” before they can take share from CPG giant Procter & Gamble. An easier path might be geographic diversity, which is why many firms are investing in emerging markets these days. Clearly these markets can yield higher rates of return, but European-based firms have the upper hand.

Another path to navigating the cliff has been M&A. As revenue from high-margin products dries up, instead of trimming R&D, companies can use their balance sheets to “buy” P&L. This is what Pfizer did with its $68-billion purchase of Wyeth last year.

That’s just another case of wishful thinking, said Anderson. Big mega-mergers in the pharma sector have generally not yielded stronger companies and have even been “downright disruptive” for certain critical business functions like R&D. Yet panelists thought one or two more big deals are a possibility, perhaps a “merger of equals” among those with the biggest cliffs ahead—Astra Zeneca and Eli Lilly. “While not fixing the revenue problem, cost cutting would offset the bottom line impact from generication,” Anderson noted.

And there are still plenty of small- to mid-size target companies around, especially family-controlled businesses in Europe and Japan. Panelists viewed it “highly likely” that these firms will continue to disappear.

In terms of cost-cutting, much of the low-hanging fruit has been picked. But consensus among executives at the conference was that there is still “substantially more” cost-cutting potential. A consultant (the conference included speakers from McKinsey & Co. and ZSAssociates) noted that only two or three companies are exploiting “differential resourcing,” which refers to tailoring sales force intensity by small geographic regions (vs. taking a one-size fits all approach).

Whether any of these strategies helps soften the impact of the patent cliff, time will tell. Anderson thinks a period of contraction, tied to patent expiries, is inevitable, and that it could lead to a new and smaller base for achieving growth. While for many companies that period is several years off, Anderson predicted, “only a few lucky ones appear able to achieve organic growth.”