The Resilience of Pharma R&D in the Face of Rising Most-Favored Nation (MFN) Pricing Pressures

The U.S. pharmaceutical landscape is undergoing a seismic shift as the Most-Favored Nation (MFN) pricing policy, coupled with the Inflation Reduction Act (IRA), reshapes the financial incentives for drug innovation. By tethering U.S. drug prices to the lowest prices paid in other high-income countries, MFN has sparked concerns about reduced profitability and a potential slowdown in R&D spending, particularly for small molecule and rare disease therapies Harvard Law School report. However, amid these headwinds, a subset of undervalued biotech firms is demonstrating remarkable resilience through innovative R&D strategies, diversified revenue streams, and strategic partnerships. This analysis identifies three such firms-CRISPR Therapeutics, Illumina, and Regeneron-and evaluates their capacity to thrive in a post-MFN environment.

The MFN Challenge: A Double-Edged Sword for Pharma Innovation

MFN pricing has introduced significant uncertainty for pharmaceutical companies. A PharmExec analysis notes the policy risks deterring investment in high-cost, high-risk R&D projects, particularly for therapies targeting rare diseases or complex conditions like oncology PharmExec analysis. A CSIS analysis cites Congressional Budget Office estimates that such price controls could reduce R&D investments by 45% over time, as companies face shrinking margins in the U.S., the world's most lucrative drug market CSIS analysis. Additionally, critics argue that MFN violates World Trade Organization (WTO) agreements by coercively importing international price controls without aligning with the broader healthcare systems that sustain them, according to a RealClearPolicy article RealClearPolicy article.

Yet, the industry is adapting. Companies are exploring alternative revenue models, such as direct-to-consumer (DTC) distribution and value-based pricing tied to real-world outcomes, as discussed in an AJMC review AJMC review. These strategies, while not a panacea, highlight the sector's agility in navigating a rapidly evolving regulatory environment.

Undervalued Biotech Firms: Resilience Through Innovation and Financial Discipline

CRISPR Therapeutics (CRSP): Gene Editing at the Forefront

CRISPR Therapeutics, a pioneer in gene-editing therapies, has positioned itself as a standout in the post-MFN era. Despite reporting a net loss of $366 million in 2024, the company's R&D efficiency has improved, with expenses dropping to $262.4 million from $330.1 million in 2023, as detailed in a CRISPR Therapeutics update CRISPR Therapeutics update. Its $1.9 billion in cash reserves as of December 2024 provides a buffer for ongoing trials, including next-generation CAR T candidates (CTX112, CTX131) and in vivo gene editing programs targeting cardiovascular diseases, according to a SECsense analysis SECsense analysis.

Strategic collaborations, such as its partnership with Nkure Therapeutics for CTX112 commercialization in India, underscore CRISPR's global expansion strategy, as noted in a TS2 stock update TS2 stock update. Moreover, its SyNTase platform has shown over 95% correction of genetic mutations in preclinical models, signaling long-term potential in treating conditions like alpha-1 antitrypsin deficiency (as reported in the company update). While profitability remains elusive, CRISPR's focus on high-impact, patent-protected therapies aligns with the industry's shift toward biologics and rare disease treatments, a trend highlighted in a Securities.io list of undervalued companies Securities.io list.

Illumina (ILMN): Genomics as a Growth Engine

Illumina, a leader in next-generation sequencing, has demonstrated resilience through its dominance in genomic tools. Despite a 2% decline in 2024 revenue to $4.3 billion, the company's innovation roadmap-featuring technologies like constellation mapped read and spatial transcriptomics-positions it to capitalize on the growing demand for precision medicine, per the Illumina innovation roadmap Illumina innovation roadmap. Illumina's financial discipline is evident in its non-GAAP earnings of $0.95 per share in Q4 2024, as reported in its fiscal results Illumina financial results. With genomics increasingly integrated into drug discovery and diagnostics, Illumina's role as a foundational enabler of innovation ensures its relevance in a post-MFN world.

Regeneron Pharmaceuticals (REGN): Diversified Pipeline and Manufacturing Strength

Regeneron's Q2 2025 results highlight its ability to thrive under pricing pressures, with revenues of $3.68 billion and non-GAAP EPS of $12.89; the company's flagship product, Dupixent, achieved $4.34 billion in global sales, driven by expanded indications, as shown in Regeneron's Q2 release Regeneron Q2 2025 results. Its pipeline, featuring 10 phase III candidates and breakthroughs in obesity treatment (e.g., semaglutide and trevogrumab), is summarized in an InvestorsHangout recap InvestorsHangout recap.

Regeneron's $7 billion investment in U.S. manufacturing infrastructure further insulates it from supply chain risks, while its $5.56 billion–$5.795 billion R&D budget for 2025 reflects sustained commitment to innovation, according to an Edgen report Edgen report. Strategic share repurchases ($1.08 billion in Q2 2025) also signal confidence in long-term growth (as noted in the company release).

The Path Forward: Balancing Affordability and Innovation

While MFN pricing pressures persist, the biotech sector's adaptability offers hope. Companies like CRISPR, Illumina, and Regeneron exemplify how strategic R&D focus, global partnerships, and financial prudence can mitigate the risks of price controls. However, investors must remain cautious: the CBO warns that reduced U.S. revenues could lead to higher prices in other markets, potentially exacerbating global health inequities, a point also raised in the earlier Harvard Law School report.

Conclusion

The MFN policy's impact on pharmaceutical R&D is a double-edged sword, but for firms with sustainable pipelines and financial agility, it also presents opportunities. CRISPR Therapeutics, Illumina, and Regeneron stand out as undervalued contenders, leveraging cutting-edge science and strategic foresight to navigate the new normal. As the industry evolves, these companies exemplify the resilience required to balance affordability with the relentless pursuit of medical breakthroughs.