Opinion: NIH Funding Cuts Are a Blow to Biotech

The biotech industry recently felt the splash of a very cold bucket of water. The enactment of the One Big Beautiful Bill Act, signed into law on July 4, mandates a drastic curtailment of funding for the National Institutes of Health, the cornerstone U.S. agency supporting biomedical and scientific research. Although the pre-existing landscape saw occasional grant cancellations or non-awards, this legislative change, resulting in a staggering $18 billion reduction to $27.5 billion in 2026, poses an existential quandary for biotech.

Cutting billions from the NIH’s budget directly jeopardizes the entire innovation pipeline. These funds fuel initial drug discovery, basic biological research and crucial early-phase clinical trials that propel scientific advancements. Through my work helping innovative biotech startups navigate complex challenges as biotech industry lead at Founder Shield, it’s clear to me that these cuts represent a seismic shift for the industry. The good news is that startups can take practical steps to mitigate its attendant threats.

For those of us deeply involved in the biotech ecosystem, the NIH isn’t just a government agency; it’s the unseen hand that cultivates the very ground medical innovation grows from. Its funding is the bedrock of fundamental, early-stage research—work that is often too nascent or risky for private investment, yet crucial for laying the groundwork for future therapies that change lives.

Without this support, consequences are stark: fewer innovative treatments reaching patients, significant delays in potential cures and an erosion of the U.S.’ global leadership in biotech and medical innovation. Think of NIH as the master gardener planting the seeds for future medical harvests. If those seeds aren’t planted, nurtured and funded through their initial fragile stages, there’s simply nothing to cultivate or eventually bring to market. This isn’t just about balance sheets; it’s about the future of medicine.

For biotech startups, the proposed NIH cuts translate directly into a multitude of tangible risks that threaten their very existence and mission. Based on my work with these companies, I see three critical categories of challenges: financial, clinical and operational.

Financial risks are often the most immediate and glaring. Many early-stage biotech projects, particularly those engaged in fundamental research or certain phases of clinical trials, rely heavily on NIH grants. When that grant money disappears or is significantly reduced, the immediate impact is often project delays or, even worse, terminations.

This creates a sudden and critical funding gap, forcing startups to scramble for bridge funding in what is already a highly competitive and now potentially even more risk-averse private funding landscape. Missing key milestones due to these gaps can quickly accelerate cash burn, pushing companies to make tough choices about their runways. Tragically, for some, especially those with less diversified funding or a deep reliance on a particular NIH grant, these cuts could mean shutting down.

Beyond the balance sheets, there is a very real human cost. The cessation or slowdown of ongoing or planned clinical trials due to insufficient funds is a devastating blow, delaying crucial therapies for patients who are often desperately awaiting innovative treatments. Moreover, the uncertainty surrounding trial continuity and long-term project stability can make it incredibly difficult to attract and retain top scientific and medical talent, who seek stable environments for their vital work.

Finally, the operational risks are equally daunting. Companies facing funding pressures often have to consider painful workforce reductions just to extend their runways. This, in turn, risks a significant loss of institutional knowledge as key personnel depart, eroding accumulated expertise and disrupting project continuity.

Existing collaborations with contract research organizations (CROs), academic institutions and other partners can become strained if projects are delayed or canceled, creating a ripple effect across the ecosystem. Perhaps most insidious, a prolonged period of uncertainty can shift a team’s focus from cutting-edge innovation to day-to-day survival, impacting employee morale and the company’s overall strategic direction.

Given the significant challenges these funding cuts present, a purely growth-focused mindset is no longer sufficient for biotech startups. Biotech leaders must shift their mindset toward resilience, adaptability and proactive risk mitigation. It’s about fortifying your foundations so your critical work can continue.

One of the most vital steps is diversifying your funding sources. Don’t put all your eggs in one basket; actively cast a wider net for grants from other government agencies (like the Department of Defense and BARDA) and private foundations. Simultaneously, strengthen investor relations by clearly articulating your value propositions and contingency plans to VCs and angels. Strategic partnerships with larger biotechs for co-development or licensing can also provide crucial capital and stability. Whatever strategies a company employs, financial prudence and rigorous scenario planning are critical.

On the operational front, agility and transparent communication are key. Identify and prioritize critical path activities, maintaining lean and efficient teams. Communicate openly with investors, employees and partners about challenges and strategies. Review existing contracts for funding-related clauses and exit provisions.

This is also a time when leaning on specialized advisors—be they financial strategists, legal counsel specializing in biotech funding or risk management experts—can provide invaluable outside perspective to identify blind spots and build robust, adaptive strategies.

The NIH funding cuts represent a significant storm for biotech, threatening innovation and medical advancements. The situation demands preparation over panic.