The Impact of the Inflation Reduction Act on Early-Stage Biomedical Investment Decisions
When assessing the viability of an investment, investors attempt to calculate the business’s or product’s net-present value (NPV). The NPV combines a project’s likelihood of success with an estimate of the money it may make over time to determine its present value to investors. The price-setting provisions of the IRA reduce the NPV of any drug candidate at launch by 40%. If investors aren’t confident they will earn a return on their investment, they won’t invest in new drug candidates, and most ideas will never leave the laboratory.
NEW LETTER: Investors and executives urge the Congressional Budget Office to adopt changes to its modeling
CBO’s ability to correctly model investor decision-making is vital to our country’s ability to establish policies that achieve lasting biomedical affordability and continued innovation. In support of CBO’s efforts to improve its model, this letter emphasizes a number of economic and financial first principles, notably that investment is incentivized by expected returns based on discounted profits, not revenue, and adjusted for expected dilution from financings.
The Investor’s Paradox
Drug development is costly. Who takes the risk and funds the hope of new medicines? Investors do. How do they know which ones will work? They often don't.
Sign-on letter: Why Fixing the IRA Matters to all of us
Under the drug pricing provisions of the Inflation Reduction Act, small molecule treatments will face Medicare “negotiation” (price setting) that makes brand medicines functionally generic just 9 years after FDA approval. This policy will unwisely skew investment towards harder to manufacture biologics and away from small molecule treatments for diseases of aging. Without both kinds of medicines, we will all be worse off.
An investor analysis of the Inflation Reduction Act: What the bill will mean for future cures
33 investors whose funds manage $86B in capital detail the ways in which the imbalanced price setting provisions in the Inflation Reduction Act will warp investment in research and development and lead to fewer new cures.
How We Cured Hepatitis C: 15 Years of Ingenuity, Investment, Risk, Failure, and Perseverance
This slide deck contains a powerful visual illustration of the biotech industry’s race to find a cure for Hepatitis C. Run through the slide deck quickly to appreciate the sheer level of hustle that won the world a cure, and then more slowly to appreciate every move in the chess game of mergers & acquisitions.