By Sougato Das, President and COO, LSN
We have all heard about the recent 100% pharma tariff announcement, applicable mainly to manufacturers or marketed drugs unless they are in the process of building manufacturing facilities in the US. We know that early stage biotechs are generally not counting on investment to take them through manufacturing, for which they will seek a pharma partner. Nevertheless, these tariffs may still have an effect on early-stage biotech investments. Investment in early-stage (seed, Series A/B) biotech is likely to face increased headwinds under a 100 % pharmaceutical tariff regime. The tariff risk exacerbates existing structural challenges in biotech investing.
Overall Expected Effect (Short to Medium Term)
- Slower fundraising pace
The number of deals may decline, particularly in the earlier stages. Biotech investors will likely become more selective, preferring de-risked assets, strong data, or compelling platforms with clear strategies to mitigate tariff exposure.
- Higher effective cost of capital
Investors will demand more upside or stricter protections (e.g. liquidation preferences, anti-dilution) to compensate for the added risk.
- Greater emphasis on capital efficiency / leaner burn models
Startups may need to conserve cash more, focus earlier on key inflection points, outsource less, and plan fallback strategies for supply chain risk.
- Longer timelines / delayed exits
Because of the risk, uncertainty, and possible delays, the time to IPO, acquisition, or commercialization may stretch, further compressing IRR for investors.
- Capital flow shift toward infrastructure and enabling technologies
Some portion of venture capital may redirect toward bioprocessing, domestic manufacturing, synthetic biology for local API production, supply-chain tools — companies that can help others evade tariff impact.
- Public market investment in pharma may slow, leading to less IPOs
The tariffs could serve to further erode the attractiveness of the biopharma sector for public market investors, reducing the room for IPOs, and pressuring investment taking place more upstream.
In summary, while the recent 100% pharma tariffs certainly don’t have a direct effect on early-stage biotech investing, their dampening effects will nonetheless be felt.
Next Phase Newsletter 
Leave a comment