Biotech is increasingly financed, governed and regulated as though it were a mature pharmaceutical industry rather than a discovery system built around scientific uncertainty. Structural changes are needed to sustain the sector’s strategic innovation.
Biotechnology is one of the United States’ defining strengths. It produces most new medicines, translates discovery into survival and sits at the center of modern healthcare. Yet the system that supports it is under strain, as it was never built for what biotech has become.
The modern biotechnology industry began in the mid-1970s as a scientific and entrepreneurial frontier. Early companies were formed around hypotheses, not products. They were driven by scientists willing to take risks and investors willing to fund uncertainty. Large pharmaceutical companies often dismissed these biotechs as too unpredictable and fragmented to matter. They were wrong.
From the outset, these were two different systems. Biotech is a discovery engine; pharma is a delivery engine. Biotech exists to learn, test and generate insight. Its timelines are long because biology demands proof. Pharma takes what is known and scales it. Both are essential, but they operate under fundamentally different constraints.
Biotech was now subject to pharma’s political risk without sharing its revenue base.
Over decades working across biotechnology and pharmaceutical companies—from bench science to leading a global pharmaceutical company and serving as chair of the Biotechnology Innovation Organization—I saw that as biotech expanded from a few dozen companies to thousands, the surrounding system did not evolve or expand to fit its nuances. Instead, biotech was forced into structures designed for pharma. Capital markets expected predictability. Governance frameworks assumed operational certainty. Policy treated the sector as transactional rather than strategic.
The result is structural misalignment. The consequences became clear in 2015, when Martin Shkreli, then CEO of Turing Pharmaceuticals, raised the price of a course of Daraprim from $13.50 to $750 overnight. The drug was decades old and Shkreli’s company had acquired it, not discovered it. The political response came within days, with then-presidential candidate Hillary Clinton targeting drug pricing, and biotech indices fell sharply—erasing tens of billions in market value among companies with no products, no pricing power and no connection to the event.
That was the moment the industry should have recognized what had changed. The distinction between discovery-stage biotech and commercial pharmaceutical companies had collapsed, and biotech was now subject to pharma’s political risk without sharing its revenue base.
A central fault line
For years, strong science masked this shift. Breakthroughs continued. Capital flowed. But the underlying tension grew. Biology moves in decades while capital moves in quarters. Investors demand visibility and speed in a field where neither can be guaranteed, so companies are pushed to act as if discovery were predictable. This is not a failure of discipline; it is a design flaw.
Even within the industry, the structural problem—that biotech is being governed as if it were pharma—has been treated as background noise. It is not. It is the central fault line.
Like biotech, pharma involves uncertainty, but it is uncertainty buffered by scale, revenue and diversification. Large pharmaceutical companies can absorb failed trials, regulatory setbacks and long timelines across broad portfolios and established cash flows. Most biotech companies cannot. Many are built around a single platform, molecule or scientific insight, often years away from revenue. They operate more like research expeditions than mature industrial companies. Yet they are increasingly governed and financed as if they were predictable operating businesses.
This distortion is now visible everywhere. At biotech conferences, conversations focus on pricing, Inflation Reduction Act negotiations and tariffs. The pricing behavior of mature pharmaceutical companies is being attached to the capital formation of pre-revenue discovery companies. Pharma’s political problem has become biotech’s financing problem. Policies designed for revenue-generating products are applied to companies that have not yet sold a single medicine. Pre-revenue biotech is now valued as if pricing controls already apply.
Scientific uncertainty was once the dominant risk in biotech; increasingly, political and reimbursement uncertainty has taken its place.
A strategic misstep
The consequences are immediate. Capital has tightened sharply, forcing promising science to be delayed or abandoned. Expectations around pricing and returns have intensified, destabilizing the system.
At the same time, the institutions that underpin the industry are weakening. The National Institutes of Health funds the majority of early-stage biomedical research in the U.S. The FDA determines whether therapies reach patients. The National Science Foundation supports the science and training that feed the system. Under the current administration, this architecture is being eroded through funding cuts, workforce losses and the weakening of independent scientific oversight. Fewer experiments are funded. Regulatory timelines become less predictable. Confidence in long-term scientific investment declines.
Reduced research funding leads to fewer discoveries and fewer companies. Regulatory uncertainty extends timelines, increasing capital risk. Capital withdrawal reduces the number of programs that can be advanced. Young scientists, seeing instability, are less willing to take entrepreneurial risk. The system contracts under its own pressure.
Other countries have been more deliberate. China has treated biotechnology as a strategic sector, aligning capital, policy and infrastructure with long-term intent. As a result, trials, capital and talent are increasingly flowing there. The U.S. still leads in science, but that lead is eroding.
The issue is not that biotech has failed to mature, but that the system around it has failed to keep pace. We built a discovery engine of exceptional power and forced it to operate within a framework designed for something else. We rely on long-term innovation but fund it with short-term capital. We depend on regulatory rigor while weakening the institutions that provide it.
If biotechnology is to remain a defining strength of the United States, the response must be structural. Capital markets must align with long-cycle innovation. Public institutions must be stabilized and strengthened. Policy must recognize biotechnology as a strategic capability, not simply a sector subject to pricing debate. The distinction between discovery and delivery must be restored. The system must support biotech and pharma on their own terms.
Until that system is rebuilt to match the realities of discovery, pharma’s political problems will continue to define biotech’s future.
