Recent US tariffs and federal funding cuts mean a heightened uncertainty for biopharma investors, and small biotechs are set to weather most of the sector’s financial burdens and development activity.
At the 2025 LSX World Conference in London, UK, greater instability was forecast for the industry in a welcome address by Cody Powers, partner at ZS Associates, a management and consultancy company. Speaking on 29 April, Powers said that cuts to FDA and federal research funding, along with potential tariffs from the US Trump administration, spell decreased investor confidence in 2025, compounding an already difficult funding environment.
Go deeper with GlobalData
Powers stated that the shaky financing environment ahead is chiefly due to US developments in Q1 2025 spurring international reaction, as industry and regulators struggle to adapt their operations amid disruptions in the sector. He cited, for example, the effect of delays to FDA approvals to biotechs, pointing to an open letter by industry representatives to US Senator Bill Cassidy outlining the challenges faced as a result.
“Small [market] caps have faced the most challenging environment … the larger the company, the more shielded you’ve been,” Powers said. He noted a higher number of biotech bankruptcies in recent years as a worrying sign of the strain placed on small developers, largely due to difficulties gaining funding to develop early-stage, emerging therapies, as investor attention shifts towards lower revenue but safer late-stage investments.
Even so, Powers stated that the majority of innovation and revenue in the sector is derived from small biotechs, despite these challenges.
“The number of approvals that large cap [companies are] responsible for, relative to the biotech sector, continues to fall, and conversely, the number that the biotechs are responsible for continues to go up,” he said.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataHe also estimated that approximately three-quarters of all products launched had some tie back to an emerging biopharma organisation, with around four-fifths of approvals by big pharma now coming from acquired assets rather than those developed in-house.
Powers concluded by advising companies to seek more conservative, piecemeal investment and development strategies. He encouraged developers to acquire assets in numerous small deals rather than large acquisitions and to invest more exclusively in areas of existing specialisation and strength.
