When Private Equity Gets Stuck in Pharma

Private equity is built for speed. Buy with borrowed money, improve EBITDA, exit in 3–5 years. The IRR clock is always ticking.

Pharma runs on a different clock.

Regulatory approvals can take a decade. Market access negotiations can drag for years. Patent cliffs and R&D cycles are measured in lifetimes, not quarters.

When these timelines collide:

-       Debt keeps draining cash; interest payments quietly erode margins.

-       IRR math collapses: even a solid price after 7 years looks weak on paper.

-       Value levers run dry; cost cuts, price hikes, and “efficiency” moves have limits in a regulated industry.

-       Capex containment turns into real risk.

-       Macro and market risk creep in; policy changes, new competition, shifting science.

That’s when PE often pivots to financial engineering mode: dividend recaps, secondary buyouts, asset spin-offs.

These can protect the fund’s returns but rarely strengthen the company’s long-term position or improve patient access.

In pharma, the product cycle can outlast the fund cycle. PE investors who import the quick-flip mindset risk playing the wrong game.

To win here, the playbook must shift from speed to stewardship, taking a longer-term perspective.