Small vs Large Molecules

The Inflation Reduction Act (IRA) has introduced a transformative policy allowing Medicare to negotiate drug prices—starting nine years after approval for small-molecule drugs and 13 years for biologics. This change is aimed at reducing costs and increasing accessibility for Medicare beneficiaries.

However, concerns have been raised about how this might influence investment in small-molecule drug development. Interestingly, data from 2024 (YTD) tells a different story: nearly half of M&A deals by volume and value still involve small molecules. Why? Their relatively lower discovery and development costs, coupled with an easier discovery process and the ability to target both intracellular and extracellular targets, make small molecules an attractive option. This is especially true in resource-constrained environments, where they offer companies opportunities for favorable returns on investment.

Personally, I love small molecules: more challenging, more clinical pharmacology.

Here’s a quick recap of high-level differences between small and large molecules: