It would depend on the project's margins and/or sunk costs. A project that had very little invested in it or is a breakout success might we able to weather a 50% cut in exclusivity period, but a marginal product might not. Most of the already developed drugs are probably going to be fine, assuming that the financing for them was already secured.

>or would they keep trying?

For the projects at the margins? most certainly. That is not to say all private drug development would, stop. If some sort of unpatented-but-super-cheap-to-perfect-but-still-not-patented drug showed up it might still be developed, but in aggregate I'd expect drug development to drop significantly.