An inconsistent boom-and-bust cycle funding environment for early-stage biotech innovations and burdensome regulation threaten the U.S.’s half-century-long dominance in the biotech sector.
Biotech is at an inflection point. After a prolonged downturn, later-stage parts of the sector are showing early signs of recovery. Yet beneath this partial rebound, U.S. biotech startups continue to face persistent structural challenges: constrained long-term funding, limited domestic pharmaceutical investment at early stages and insufficient government mechanisms to smooth extreme capital cycles. These are not short-term market fluctuations—these are systemic risks that threaten America’s long-term leadership in biotechnology.
While parts of the public biotech markets have shown recent signs of stabilization, these gains remain narrow and uneven, offering little relief to early- and mid-stage biotech companies that form the backbone of long-term innovation. Even after a stronger second half of 2025, when the biotech XBI rallied sharply relative to the broader market after hitting historic lows, the XBI is still only up 23% over the past three years this week, while the general tech index Nasdaq-100 is up 123% in the same time. Biotech innovation capital remains selective, and early-stage innovation is still structurally underfunded.
China is also now accelerating faster than any other global biotech ecosystem, mounting a credible challenge to America’s historical leadership in biotechnology. If we fail to urgently act, we risk relying on a foreign rival for life-saving treatments against cancer, gene therapies, critical pandemic responses and more.
A recent Senate report from the National Security Commission on Emerging Biotechnology (NSCEB), led by Senator Todd Young (R-Ind.) and NSCEB Vice Chair Michelle Rozo, argued that biotech must become a national security priority comparable to cybersecurity or military readiness. It also warned that if we neglect our biotech sector, we risk losing control over critical healthcare resources.
This urgency came into focus this week as global healthcare leaders convened at the J.P. Morgan Healthcare Conference, where capital allocation decisions, pharmaceutical business development priorities and national competitiveness narratives are set for the year ahead. JPM has become the industry’s annual reset moment and, increasingly, a point of reference on whether the U.S. intends to lead the next era of biotechnology or let faster-moving global competitors take over.
As CEO of the cancer therapeutics biotech Earli, I’ve experienced the industry’s ups and downs firsthand. Here are what I see as critical factors in its current struggles domestically—and how to turn them around.
China’s Rapid Rise in Biotech
China’s government identified biotech as a national priority in its 14th five-year plan and core key industrial policy, released in 2021, along with other deep tech areas like AI and robotics. The goal is to become the world market leader for the most efficacious and innovative drugs against key diseases. The Chinese government is aggressively investing, channeling massive government resources into biotech startups, clinical infrastructure and accelerated regulatory processes. That focus and deep investment in the sector is showing signs of working.
The country has taken a “whole-of-country” approach to fueling biotech growth, investing heavily in infrastructure, research and regulatory reform. Last year, the Chinese central and local governments launched a “Full-Chain Support for Innovation” initiative for the biopharma industry, covering stages from basic science through financing to product commercialization. Billions have been and will be invested directly in biotech startups through government-backed funds, while China’s National Medical Products Administration shortened the clinical trial review period for certain drug candidates from 60 days to 30—a move designed to further accelerate innovation.
This supportive environment has enabled Chinese firms to strike multibillion-dollar global partnerships and hit a record level of out-licensing activity, underscoring how quickly China has become a hub for Big-Pharma business development despite rising geopolitical friction. In the first half of 2025 alone, the pharma industry spent $48 billion in China—more than the entirety of 2024. This appetite for Chinese innovation was demonstrated on the first day of JPM, when AbbVie announced a large partnership tied to RemeGen and Novartis tapped SciNeuro for its anti-amyloid antibody.
China’s biotech sector surged 122% within 8 months in 2025, significantly outpacing U.S. performance and broader indices. U.S. biotechs commanded around 62% of the sector’s global market capitalization at the start of 2025; by mid-year, that share had fallen to roughly half, marking a notable erosion of American dominance.
In contrast to China, the U.S. government’s support of biotech remains fragmented and insufficient. When the new government health agency ARPA-H launched in 2023 with $1 billion in annual funds available for health innovations, it raised hopes among biotech startups. But to date, a significant share of ARPA-H awards have flowed through academic and nonprofit prime awardees—important work, yet not a substitute for a coherent national strategy to translate breakthroughs into scaled, durable U.S. biotech companies.
Private capital alone cannot fund the entire biotech innovation chain. While the NIH continues to fund critically important foundational research, recent and proposed funding cuts have further constrained its ability to support the transition of scientific breakthroughs into sustainable companies. Without coherent, dedicated funding mechanisms, promising American biotech startups stall in uncertainty, unable to compete globally.
Investors Turn Elsewhere
Biotech investments traditionally span 12–15 years, longer than typical venture capital cycles, and while capital has begun to return to the later-stage parts of the sector, early innovation remains disproportionately underfunded - and that is where most of the future critical drugs originate from. Moreover, speculation for fast and massive returns from artificial intelligence tech startups continues to divert venture capital investors from biotech.
Sure enough, AI-related companies attracted over $200 billion in venture funding in 2025, more than 80% higher than in 2024, with half of all global venture funding now directed to AI companies, up from one-fifth just two years earlier. For comparison, SVB reported the total VC spend on biopharma was about $25 billion in 2025, and a lot of that Biotech capital remains concentrated in a small number of high-profile companies, largely focused on specific therapeutic areas such as AI-driven drug discovery, bispecifics and GLP-1s, leaving early-stage innovation still underfunded.
The slow biotech IPO market has exacerbated the hesitancy of venture capital firms. Increasing M&A can only partially make up for this lack of liquidity.
Large pharmaceutical companies, which have been historically vital to biotech innovation through strategic partnerships and capital injections, have increasingly shifted their focus abroad—in particular to China—due to lower costs, a predictable and supportive regulatory environment and market growth, leaving American startups further starved of essential strategic support and funding.
Preclinical and early clinical-stage biotech firms urgently require stable, predictable funding to navigate the rigorous, lengthy drug development process. That means America needs robust, innovative funding solutions to flatten out the rollercoaster boom-bust cycles of private biotech funding. A dedicated national biotech sovereign wealth fund would be a crucial (and lucrative) step to secure America’s biotech future, supported by other public-private partnerships.
Streamlining Development
Simply increasing funding is insufficient, however. The U.S. also needs streamlined regulatory and clinical trial processes. American biotech innovation faces bureaucratic hurdles that international competitors such as China and Australia have already overcome, such as faster clinical trial review processes and simplifying site contracting, shortening approval timelines, making these nations preferred destinations for clinical research. Only if the U.S. can adopt comparable efficiency measures while maintaining its high safety standards will the country reclaim its leadership in biotechnology innovation.
According to McKinsey, most physicians in the U.S. are evaluated and reimbursed by the Centers for Medicare and Medicaid Services (CMS) primarily based on clinical care delivery, with relatively little emphasis placed on participation in clinical research. This is misaligned with promoting more clinical trials for progress. A new rating system could reward PIs for efficient trial execution and streamline regulatory approval processes for high-performing sites. By cutting clinical trial timelines by 15–20% through necessary regulatory reforms, the attractiveness and effectiveness of conducting trials domestically could be significantly improved, reinforcing U.S. innovation and healthcare leadership.
In summary, if America wants to retain its global biotech leadership and safeguard healthcare security, then our country’s leadership, including the President, must elevate biotech to a national strategic priority. Prioritizing biotech means dedicated investment, modernized regulations, innovative funding solutions and strategic, long-term commitments.
