The math of biotech VC is about to change
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Biotech venture capital is risky business, inherently at the mercy of regulators and binary outcomes.
- Now it may face a new challenge in the form of Vinay Prasad, who this week was named to lead the FDA's Center for Biologics Evaluation and Research.
The big picture: Prasad's new role includes oversight of everything from vaccines to cell and gene therapies, and he believes that the FDA too often has acted as a rubber stamp for pharma (both big and small).
- He's even argued that eliminating the FDA would be preferable to the agency in its current form.
- Prasad softened this rhetoric in an introductory speech to the troops yesterday, but still is expected to significantly raise the bar for certain drug approvals.
By the numbers: Biotech was venture capital's second-busiest sector in 2024, behind software, with $26.2 billion of disbursements and a 12% market share, per PitchBook.
- A lot of these investors and startups already were worried about FDA staffing cuts.
- Prasad may add new layers of cost and uncertainty for biotechs that have active candidates in Phase 2 or Phase 3 trials.
- He also could cause some VCs to think twice about backing new startups — not only in areas he regulates, but even in downstream areas like pharma services.
🧠 Thought bubble, from Axios Pro Deals biotech reporter Katherine Davis: "Many biotech startups, particularly developers of mRNA vaccines and gene therapies for rare diseases, rely on accelerated approval designations. These determine capital runways and may be in Prasad's crosshairs."
Yes, but: Prasad won't have oversight of cancer drugs, even though he's a trained hematologist oncologist who's also been critical of approvals in that area.
- Around 38% of biotech VC dollars last year went into startups that either are focused on oncology, or at least have oncology pipeline plans.
The bottom line: The math of biotech VC is about to change.
