The SBIR/STTR programs, a vital source of non-dilutive funding for early-stage biotechs, remain on pause with no clear path to reauthorization. The logjam is due to a niche debate between a few members of Congress over foreign-funded company eligibility, stalling the entire program.
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The National Defense Authorization Act (NDAA) has elevated biotech to a national security asset, alongside AI and quantum computing. This shift creates new funding opportunities through a dedicated Department of Defense (DOD) biotech office, distinct from traditional NIH grants.
The market is currently ignoring the long-term impact of deep cuts to research funding at agencies like the NIH. While effects aren't immediate, this erosion of foundational academic science—the "proving ground" for new discoveries—poses a significant downstream risk to the entire biotech and pharma innovation pipeline.
For its American Dynamism fund, Andreessen Horowitz provides more than capital; it fields a dedicated policy team in Washington D.C. This team works to change structural government problems, like defense procurement, creating a more favorable market for its portfolio and the broader startup ecosystem.
An ideologically driven and inconsistent FDA is eroding investor confidence, turning the U.S. into a difficult environment for investment in complex biologics like gene therapies and vaccines, potentially pushing innovation to other countries.
The updated Biosecure Act replaces a fixed list of sanctioned Chinese firms with a dynamic designation process controlled by the administration. This shifts risk for U.S. biotechs from a known quantity to an unpredictable political process, where any Chinese partner could be deemed a "company of concern" at any time.
The NDAA introduces a "reverse CFIUS" policy requiring US investors to notify or seek permission before investing in foreign companies in sensitive sectors. While biotech is not yet included, this framework could be extended, significantly impacting global venture capital strategy.
The biotech ecosystem is a continuous conveyor belt from seed funding to IPO, culminating in acquisition by large biopharma. The recent industry-wide stall wasn't a failure of science, but a halt in M&A activity that backed up the entire system.
Venture capital for US seed and Series A cell and gene therapy companies has collapsed from a historical high of 17-21% of deals to only 7% this year. The sharp decline is driven by a confluence of factors including patient deaths, persistent manufacturing challenges, and growing regulatory uncertainty.
Unlike its predecessor, the likely-to-pass Biosecure Act 2.0 doesn't name specific companies like WuXi AppTec. Instead, it grants the administration discretionary power to define "companies of concern" and the resulting market consequences. This ambiguity leaves biopharma companies uncertain about future supply chain partners and market access, creating a prolonged period of strategic risk.
The industry's negative perception of FDA leadership and regulatory inconsistency is having tangible consequences beyond investment chilling. Respondents report actively moving clinical trials outside the U.S. and abandoning vaccine programs. This self-inflicted wound directly weakens America's biotech ecosystem at the precise moment its race with China is intensifying.
