Regulatory uncertainty is no longer background noise. It is a material investment risk that reshapes how capital is deployed and pipelines are prioritized.
In the more than 40 years I have been in the life science industry, companies and their investors have operated under the assumption that while regulatory review may be rigorous, the rules of the game are generally known. That assumption is now being tested.
Changes in leadership at the FDA, less predictable policy signals and evolving approval standards have introduced a new level of uncertainty, one that directly affects development strategy, valuation models and investor appetite for risk.
On a positive note, the potential to approve a drug based on a single Phase 3 trial—a change touted by the FDA last year—is explicitly designed to reduce development time and cost, accelerating the time it takes to go from clinical testing to the market.
But other recent developments, such as issuing rejections based on unexpected changes to new drug approval criteria, may have far-reaching negative consequences for companies with new products in their pipelines, including affecting how their investors take risk into account in their valuation models.
The FDA is not signaling a retreat from innovation, but companies and investors need to weigh the impact these new policies may have on how therapies are developed, financed and ultimately delivered to patients.
Potential Impact of the One-Trial Standard
According to FDA Commissioner Marty Makary, the agency plans to move toward requiring a single pivotal clinical study, rather than the traditional two, for many medical products. The stated goal is to accelerate approvals by reducing time and cost, based on the premise that a well-designed trial, supported by robust confirmatory evidence, can provide sufficient statistical confidence.
Industry reaction has been cautiously optimistic. Faster paths to approval and greater flexibility in trial design are welcome developments. However, I heard two concerns from executives at the J.P. Morgan Healthcare Conference and Biotech Showcase this year:
- A single trial default could reduce the breadth and generalizability of clinical evidence.
- Narrower datasets may lead to weaker labels, negatively affecting physician prescribing behavior and market access.
To explore whether the new single-trial standard could indeed increase adoption risk, Litmys, the commercial strategy consulting firm where I work, partnered with Doximity, the largest digital professional network for U.S. healthcare professionals, and physician Nicole Chase to conduct a survey of 100 primary care and family practice physicians.
The results were instructive. Physicians were largely indifferent to whether approval was based on one trial or two, provided the product was adequately studied. What mattered most to them was safety profile and duration of patient exposure, followed by meaningful endpoints, robustness of clinical benefit and the overall number of study participants.
Interestingly, most of the physicians don’t evaluate trial data thoroughly on their own but rely on data summaries, guideline bodies and the experience of KOLs and peers. Specialists may view the issue differently, but these findings suggest that a one-trial standard may not, by itself, be a commercial impediment in primary care.
Surprise CRLs: When the FDA Pulls the Rug Out
On New Year’s Eve, I received a call from a venture capitalist friend. “What’s going on with Corcept?” he asked. “They hit their endpoint, still got a CRL, and the stock’s down 50%.”
On December 31, Corcept Therapeutics announced it had received a complete response letter (CRL) for relacorilant in hypertension secondary to hypercortisolism. While the FDA acknowledged that the pivotal GRACE trial met its primary endpoint and the GRADIENT study provided confirmatory evidence, the agency concluded it could not reach a favorable benefit-risk determination without additional evidence of effectiveness.
Just a week earlier, Sanofi received a surprise CRL for tolebrutinib in non-relapsing secondary progressive multiple sclerosis. Despite prior feedback, the FDA determined that even with Risk Evaluation and Mitigation Strategies (REMS), the risk of severe drug-induced liver injury could not be mitigated for any identifiable patient population.
These cases followed similar stories from Replimmune, Capricor and Biohaven, and the trouble has continued into 2026. In January, it was Atara Biotherapeutics and Pierre Fabre who received a surprise CRL, this one for Ebvallo, a T cell therapy for EBV-positive post-transplant lymphoproliferative disease. And then in February, the FDA shocked the industry by refusing to even review Moderna’s investigational mRNA-based flu vaccine, despite having agreed to the trial design that supported the application.
In each case, sponsors met predefined clinical objectives, yet approval and even review was denied based on evolving benefit-risk interpretations rather than on any new negative data.
Industry reaction has been sharply critical and increasingly anxious that the FDA is applying more conservative, less predictable benefit‑risk standards even when pivotal trials meet their primary endpoints. These recent CRLs following seemingly successful Phase 3 trials suggest a tougher, less forgiving interpretation of benefit-risk and higher expectations for trial robustness, safety margins and execution quality. The rejections could also undermine confidence in the value of earlier advice from the agency.
For investors and CEOs, these new clinical requirements and their implications for a new drug’s approval challenge a foundational assumption of investors around valuing biotechs.
Repricing Regulatory Risk
The FDA is signaling a shift toward a greater emphasis on safety and robust real world evidence updates to its benefit-risk framework (BRF). The BRF now directs reviewers to document residual safety uncertainties, therapeutic context and risk management options, making “durable” and well-characterized safety a more visible driver of decisions.
The BRF guidance emphasizes that the benefit must outweigh risk given disease severity and unmet need. Uncertainty around long term or off-target safety can block approval even when primary efficacy endpoints are met.
Recent CRLs where sponsors hit their prespecified endpoints but FDA cited inability to conclude a favorable benefit-risk balance demonstrate that this framework is being applied more stringently.
Valuation models going forward will need to assume a higher probability of CRLs and account for the impact on decisions to conduct a single Phase 3 trial. Will longer and more expensive clinical trials be needed to justify approval?
For CEOs, this environment demands both earlier and deeper FDA engagement and greater transparency with investors about agreed-upon endpoints, inclusion criteria and sources of regulatory risk.
Notably, recent CRLs show that demonstrating a drug’s incremental clinical value is no longer primarily a post-approval marketing exercise. Sponsors must now establish early and credibly that a product meaningfully improves upon the existing standard of care for a serious disease. This clarity should make the FDA more willing to accept uncertainty, single pivotal trials and narrower safety margins.
Regulatory uncertainty is no longer background noise. It is a material investment risk that reshapes how capital is deployed and pipelines are prioritized, and which companies ultimately succeed. Those that integrate regulatory realism into development strategy and investor communication will be better positioned than those that continue to play by the old rules.
