Trump Administration Cuts Deepen Biotech Sector Uncertainty
The biotech industry in the US is facing heightened uncertainty as federal health agency cuts under the Trump administration send shockwaves through a sector already grappling with a prolonged downturn.
FDA Layoffs Threaten Small Biotech Firms
The mass layoffs at the US Food and Drug Administration (FDA) have raised alarm among small- and mid-cap biotech companies. Many of these firms rely heavily on clinical trials and lack any marketed products to sustain them financially. Industry experts warn that delays in approvals and reduced regulatory feedback could significantly harm the sector.
“This is a perilous time for biotech,” said Tim Opler, managing director at Stifel’s Global Healthcare Group. “The knock-on effects will impact drug development in the years to come.”
President Donald Trump’s directives have also frozen grant funding from the National Institutes of Health (NIH), further discouraging investment and deterring future talent. These grants are vital for early-stage research, often forming the foundation for biotech startups.
Investor Confidence Wanes as Approvals Stall
The S&P Biotech ETF index hit an 18-month low last week and is trading at less than half of its 2021 peak. Jefferies analysts noted that nearly 30% of small- and mid-cap biotech firms are now trading at or below cash, a signal that the market sees little value in their drug pipelines.
Linden Thomson of Candriam asset management said: “The sector needs a predictable, science-led regulator to function. Without US approvals, these companies have no future value.”
In a letter to Congress, company executives expressed concern over missed approval deadlines and delays in essential meetings with the FDA. The recent resignation of Peter Marks, a senior FDA scientist, added to market jitters, especially as he was a key figure in accelerating regulatory approvals for innovative treatments.
Funding and Capital Access Shrinking
Investor sentiment has worsened since Trump took office, with high interest rates and economic uncertainty further reducing appetite for biotech stocks. Biotech firms raised just $4.2 billion this year, down from $11.1 billion during the same period in 2024, according to LSEG data.
Some firms, such as Arbutus Biopharma, have responded with staff layoffs. Others are trying to extend their financial runway or explore alternative funding options. Christian Koch of Bellevue Asset Management confirmed his fund had exited some companies unable to access capital.
Analysts, including Michael Yee of Jefferies, suggest acquisitions may become more attractive for struggling biotech firms. However, major deals have slowed amid volatile economic policies and global trade tensions.
Brian Abrahams of RBC Capital Markets summed up the mood: “Most biotech companies are trading below fair value in a near worst-case scenario.”
with inputs from Reuters
