Biotech Funding Plummets Amid Trump Administration Policies, Investor Uncertainty

The biotechnology sector is facing a severe funding crunch, with recent data revealing a sharp decline in investments. This downturn is largely attributed to policies proposed by the Trump administration, which have created an atmosphere of uncertainty among investors and industry stakeholders.

Funding Decline and Its Implications

According to a recent analysis by investment bank Jefferies, biotech funding in May plummeted by 57% compared to the same period last year, amounting to just $2.7 billion. This figure represents a marginal improvement from April's $2.6 billion, which marked a three-year low. The current funding levels are 44% below the average observed over the past 12 months.

The impact of this funding squeeze is particularly acute for public biotech companies. In May, these firms raised only $1.1 billion through various means, including initial public offerings, follow-on stock offerings, and PIPE deals. This amount falls significantly short of the estimated $4.5 billion that such companies burn through each month on average.

Trump Administration Policies and Industry Reaction

Several policies proposed by the Trump administration are cited as key factors exacerbating the funding decline:

1. Plans to lower U.S. drug prices
2. Mass layoffs at the Food and Drug Administration (FDA)
3. Proposed budget cuts for the National Institutes of Health (NIH)

Jefferies analysts David Windley and Tucker Remmers argue that these policies have cast a shadow over biotech investment. "Current policy proposals and agency staffing cuts have cast a cloud over biotech investment," they wrote in a note to clients. The analysts emphasize that the biotech industry, with its long product development cycles of 12-15 years, requires clarity on FDA regulation, drug pricing, and funding before committing to substantial, long-term investments.

Industry Response and Adaptation

The funding crunch has led to significant shifts in the biotech landscape:

1. Increased pressure on struggling biotech companies to liquidate and return capital to shareholders
2. Companies like iTeos and Third Harmonic Bio have announced plans to sell assets and shut down
3. Firms such as Tempest Therapeutics are exploring strategic transactions due to insufficient funds for completing studies on their main drugs

Stephen Brady, CEO of Tempest Therapeutics, stated that capital markets "have been unavailable to support the next stage of advancement."

While venture capital contributions have fared better than public markets, showing only a 12% decline compared to 2024, the overall funding environment remains challenging. Monthly venture capital funding has averaged about $1.9 billion in 2025.

The biotech sector now faces what industry insiders describe as "uncertainty on steroids," with some investment firms already noting changes in their day-to-day operations. David Yang from Lux Capital reported that some academic institutions were requesting funds to cover overhead costs shortly after news of the proposed NIH cuts broke.

As the industry grapples with these challenges, many are tightening their belts and reevaluating their strategies in the face of what Michelle Hoffmann, Executive Director of the Chicago Biomedical Consortium, describes as "a lot of fear and uncertainty."