Presentation (CTI)

OBJECTIVES: To assess how later-stage, buy-side investors (investment banks, public market investors, and strategic buyers) are responding to the incentives of the IRA and its implications for asset valuation, therapeutic area prioritization, and deal structuring.
METHODS: A mixed-methods study was conducted targeting 12 interviews with individuals responsible for valuing assets and performing diligence on pharmaceutical transactions. The interviews used a structured interview guide and covered the IRA's impact on valuation methodologies, therapeutic area prioritization, deal structuring, and company positioning.
RESULTS: 15 individuals were interviewed for an overall response rate of 25.4%. Two-thirds of interviewees reported that the IRA was a consideration in a specific transaction. 92.9% reported that the uncertainty from the implementation of the law had negatively influenced the industry. All but one interviewee reported that valuation methods have changed as a result of the IRA. The majority (61.5%) reported they apply a 10-20% assumed discount from IRA negotiations. An additional 30.8% reported that they use a 20-30% discount from negotiations. The remainder apply a discount greater than 30%. All respondents reported that the IRA reduced the number of indications being pursued per drug and the valuation of small-molecule drugs. Additionally, 60% of respondents now include specific provisions (deal riders) related to IRA to help mitigate financial risk.
CONCLUSIONS: The IRA has shifted the pharmaceutical investment landscape, transitioning from theoretical impact to tangible changes in buy-side behavior. Policy uncertainty has broadly eroded industry confidence, resulting in consistently lower valuations for small-molecule drugs and a narrowing of development focus. These effects may be formalized through the adoption of new valuation methodologies and the widespread inclusion of IRA-specific deal riders, signaling the law's impact on investment behaviors and decisions.