The National Institutes of Health (NIH) did not get the budget cut that many researchers feared.
In the Trump administration's FY2026 budget request, the White House proposed cutting NIH funding by roughly 40 percent and consolidating the agency's 27 institutes and centers into eight. The proposal would have represented a dramatic contraction of the federal government's role in biomedical research. Thankfully, congress rejected both.
The final FY2026 spending legislation instead kept NIH's structure intact and provided roughly $47.5 billion in funding, about one percent more than the previous year. On paper, this outcome seems like a return to business as usual. However, the topline number does not tell the whole story.
The way NIH distributes that money has changed, and the number of grants being awarded has dramatically fallen. This is largely because the NIH has accelerated its use of multiyear funding. Instead of funding one year of a grant’s budget at a time, the NIH is committing the entire multiyear budget upfront. As a result, each multiyear award ties up more of the available appropriated funding in the current fiscal year than a traditional Year 1 commitment, meaning the NIH can fund fewer new grants in a single year.
The true scale of this shift is now becoming increasingly apparent. According to Grant Witness, the NIH had awarded 47,744 grants as of August 29, compared with an average of 62,991 awards at the same point between 2021 and 2024 — a 24 percent decline. That represents over 15,000 fewer awards than the historical average. Not only this but the funding rate for early-stage investigators, those who earned their graduate degree within the past 10 years, dropped from 26 percent in 2024 to just 19 percent in 2025.
For researchers, a shrinking pool of awards means that laboratories may struggle to pursue high-risk questions, early-career scientists may find it harder to establish themselves, and promising discoveries may never progress far enough to become validated targets or therapeutic approaches.
That matters because the drug discovery industry does not build its pipeline in isolation. It is deeply dependent on the basic science happening in university laboratories, making the health of the academic research ecosystem critical to the future of drug discovery.
Creating tomorrow’s pipeline gap
Decades can pass between the moment researchers uncover a biological mechanism and the moment a biotech company turns that discovery into a molecule, a clinical program, and, eventually, an approved therapy. In between are countless experiments that never produce a product, hypotheses that fail, targets that prove undruggable, and discoveries whose value may not become apparent for years.
For much of modern biomedical science, that early uncertainty has been absorbed by the public sector. While biopharma companies do spend enormous sums on research and development, they operate under different constraints from academic researchers. Companies have to decide which programs to advance, how much capital to allocate, and whether a project has a credible path toward a commercial product. Academic researchers, by contrast, can spend years investigating biological mechanisms without knowing whether their findings will ever lead to a commercial asset.
Biotech is far more dependent on the NIH than its balance sheets suggest, because the dependence is upstream and mostly invisible.
—Melissa Mena-Schneller, MeLi MeThoDS
“Biotech is far more dependent on the NIH than its balance sheets suggest, because the dependence is upstream and mostly invisible,” Melissa Mena-Schneller, a pharmaceutical biochemist and Founder of MeLi MeThoDS, told DDN.
The output of that publicly funded research is also fundamentally different from the products that eventually emerge from industry. “The discoveries that are supported by NIH funds are generally targets, mechanisms, and platforms. They are almost never molecules,” David Crean, Chief Business Officer at MediciNova, told DDN. “In nearly all cases, the government paid for the biology and industry paid for the molecule.”
A 2023 investigation showed just how deeply the pharmaceutical pipeline is connected to publicly funded research. NIH funding contributed to scientific publications or intellectual property for over 99 percent of drugs approved between 2010 and 2019, with over 80 percent of those funds directed toward basic research on underlying biological targets.
Despite this, the consequences of reduced NIH funding will not necessarily be obvious or immediate. “The commercial output typically appears 10 to 20 years after the foundational grant,” Sreethu Sankar, Senior Product Manager at Proteintech Group, told DDN.
The clinical pipeline is already populated by programs based on science generated years earlier, allowing companies to continue developing validated targets and technologies even as the academic pipeline beneath them begins to weaken.
That makes the current decline in award numbers more significant than the relatively stable NIH topline might initially suggest. The NIH does not simply fund research; it helps generate the biological knowledge that gives future drug programs something to build on.
“Because approvals in 2030 rest on grants from roughly 2010 to 2020, drugs launching this decade are largely safe,” Sankar said. “The exposure sits in the 2033 to 2045 window.”
We cannot always rely on the market
The need for public funding is even more acute in therapeutic areas where the market itself won't fill the gap, no matter how much time passes. Antibiotics are particularly vulnerable because their societal value does not necessarily translate into a conventional pharmaceutical business model.
New antibiotics are intentionally used sparingly. “The market already underinvests in antibiotics, because a drug you take for ten days and then steward carefully is a poor commercial proposition,” said Mena-Schneller.
That creates a market failure that private capital cannot easily correct. An antibiotic can be scientifically successful and clinically important while still generating relatively little revenue. Public funding from agencies such as the NIH has therefore played a critical role in supporting the early science and development work that the market has little incentive to finance.
The consequences of that mismatch are not theoretical. In 2018, small biotech Achaogen won FDA approval for plazomicin, an antibiotic developed to treat serious multidrug-resistant infections. Less than a year later, the company filed for bankruptcy. The drug worked, but the economics of antibiotics were not sustainable. A medicine designed to be conserved for patients with few remaining treatment options is difficult to reconcile with a business model built around high and sustained sales.
For Stella Vnook, founder and Managing Partner of Aviva Ventures, the stakes extend beyond the economics of drug development. “Every oncology patient going through chemotherapy is immunocompromised and depends on antibiotics that work,” she told DDN. “If we let the research pipeline for antibiotics go quiet because the return doesn't pencil out on a five-year model, we're making a bet against exactly the patients who have the least room to lose it.”
The same vulnerability extends beyond infectious diseases. Sankar pointed to rare diseases, pandemic preparedness, and other areas where patient need can be substantial, but the potential commercial market is too small or uncertain to attract enough private investment.
“These areas are most vulnerable because they depend heavily on public funding,” she said. “Unlike areas such as oncology, there is often little private investment available to fill the gap.”
In these cases, reducing public investment does not necessarily shift the burden to venture or private capital. Rather, it can simply mean that some research is never pursued at all.
Science needs to be able to fail
Researchers need the freedom to investigate targets that may fail, technologies that may not work, and mechanisms that may never produce a drug. Those dead ends are essential for ruling out possibilities, refining scientific understanding, and pointing researchers toward more promising avenues.
“The single hardest thing for the private sector to replace is that basic, curiosity-driven target biology, the work with no near-term commercial payoff that becomes the foundation for an entire class of drugs a decade later,” Mena-Scheller emphasized.
A reduction in the number of grants awarded to basic science will have a huge ripple effect. The translational ecosystem depends on infrastructure and people as much as discoveries. Researchers need well-funded laboratories, trainees need opportunities to build expertise, and early-career scientists need a reason to remain in the field.
“Even when investigators get funded, reduced availability of federal capital means that graduate programs take fewer students, meaning that there are fewer bodies to actually do the research work,” Vienna Thomas, Associate Consultant at Triangle Insights Group, told DDN.
According to analysis by the Association of American Universities, leading research universities across the US admitted 15 percent fewer students to PhD programs for the 2026 academic year. The report links the decline to financial uncertainty at universities stemming from declining and unpredictable federal research funding. This has been compounded by disruption to thousands of existing NIH grants.
Sankar described the trainee pipeline as one of the hardest losses to reverse. “A lost cohort of postdocs in 2025 to 2027 is a missing set of founders and [principal investigators] in 2035,” she said. “Money can be restored in a single appropriations cycle; people who left science or the country generally do not come back.”
When investors move downstream
While the effects on drug discovery and trained scientific personnel may not emerge for decades, the consequences may appear far earlier in the financing ecosystem. These funding cuts are happening alongside an already cautious investment environment, removing an important source of support that has historically helped reduce the risk of early-stage science. NIH funding is essential for providing the validation, independent replication, and non-dilutive capital needed to move promising research toward a point where it can attract private investment.
If that validation does not exist, a startup has to spend more of its own capital proving that its central hypothesis is real before it can begin convincing investors to fund development. This could force companies to conserve cash, abandon programs or, in some cases, shut down altogether.
“There are numerous scientists, clinicians, and biotech veterans that have developed or are developing therapies that could make a real difference for patients, but many will fall victim to the valley of death because there won’t be structure to support them through the translational phase into commercial viability,” John Yu, CEO of Kairos Pharma, told DDN.
Investors want de-risked assets. Capital is not scarce. Capital is concentrated, and it has stopped buying biology it cannot see validated by someone else first.
—David Crean, MediciNova
That is particularly important for companies built around novel biology. Crean pointed to the 2026 venture market in which biopharma investment has remained substantial but has become increasingly concentrated in larger rounds and companies already in the clinic. “Investors want de-risked assets. Capital is not scarce. Capital is concentrated, and it has stopped buying biology it cannot see validated by someone else first,” he said. “Early-stage deal value share is tracking toward a record low.”
As investors increasingly gravitate toward assets with clearer evidence of efficacy and commercial potential, companies pursuing highly novel biology may find themselves increasingly shut out of the funding needed to advance their work. “The ultimate result is not the extinction of early-stage biotechnology, but a sharp narrowing of its scope toward safer, fast-follower assets, clinical-stage programs, and novel biology sourced from international academic ecosystems,” said Sankar.
A future reckoning
While the dramatic FY2026 NIH cut proposed by the Trump administration did not become reality, it does not mean that the funding fight had no consequences.
If fewer researchers are given the resources to explore unfamiliar biology today, the consequences will not be suddenly apparent. They may emerge much later, as fewer new targets, fewer trained personnel, and fewer companies built around discoveries that have not yet been made.
The biotech industry depends on a steady supply of new science to replenish its pipeline. Undermine that supply today, and the consequences may only become visible when the industry has fewer discoveries to build on tomorrow.
