Trump's federal funding shift could stifle biotech innovation

Over a month into the second term of Donald Trump’s presidency and we have already seen some big changes affecting the healthcare industry.

Now, there will be further financial implications from a Trump Administration, with a set of directives targeting the NIH, surrounding grants for biopharmaceutical research and development.

GlobalData reported that NIH Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grants involving innovator drugs totalled over $1.4bn between 2020 and so far in 2025, in their Pharma Intelligence Centre Grants Database. 

The NIH in the US is the world’s largest funding body for biomedical research, providing federally-backed grants to early-stage small businesses in the US, under each of their programmes. The idea behind the programmes is to encourage innovation with an emphasis on commercialisation. Biotech start-ups across the region are mostly dependent on these grants to fund R&D in the initial phases, in lieu of backing by venture capitals. 

The grants database showed that grants involving innovator drugs encountered consistent year-on-year growth, with a 37% increase in grant value between 2020 and 2025. More than 80% of these grants were allocated to companies working in the preclinical stages of development, totalling US$1.1 billion in the four years from 2020 to 2024. This shows the extent of the support the SBIR and STTR programmes are providing for early-stage R&DS for small biotechs. This is helping to propel growth in the industry, where investment in innovation is needed and applauded. 

The therapeutic areas that gained the most grant funding in this time window were Infectious diseases (receiving US$295 million), followed by therapeutics for the central nervous system (US$241 million). As an example, biotech company Amplo Biotechnology acquired US$3 million from the SBIR grant programme, to be invested in furthering research into their gene therapy, DOK7-targeting, for the treatment of congenital myasthenic syndromes. 

As we move into 2025, with a new administration deciding where government funding will be spent, new restrictions have been set in place. On 8 February the NIH announced the cutting of US$4 billion from the biomedical research funding pot. More of these restrictions include cancellations of NIH grant review panels, and a 90-day funding freeze along with a stop working order for USAID. Both of these new embargoes could have a knock on effect on the progression of drug development research, and cause disruptions to clinical trials, particularly USAID-funded global trials. This could have disastrous impacts on time to market for some therapeutics, even with the cessation of development of drugs, which could have disastrous implications for the lives of patients waiting for treatment. 

Broader statements covering the allocation of federal funding from the Trump Administration suggest that government funding will be diverted away from programmes that do not fit directly with Trump’s agenda. Research into areas such as infectious disease, once so popular, will be likely to be drastically cut, and trial applications highlighting diversity in the early-stage research are also more at risk of a decrease in funding allocation. 

Source:

Pharmaceutical Technology. Trump presidency signals potential downturn in NIH SBIR/STTR grant funding for biopharma drugs. [Date accessed 19/02/2025].