By Katja Rosenkranz
The US has long been the cornerstone of global biotech growth, offering access to deep capital markets, a relatively unified regulatory path via the FDA, and a mature M&A and IPO ecosystem. Which is why the effects of this new U.S. policy direction are hard to ignore.
The environment for biotech has grown more volatile, from new tariffs and political pressure on US companies to manufacture domestically, to significant NIH funding cuts and regulatory unpredictability at the FDA and CBER – global biotech is undergoing a major upheaval. All of that uncertainty is contributing to a frozen IPO market and plummeting public biotech valuations. And all this after just 100 days of Trump in office.
According to the latest Endpoints 100 Survey, more than 60% of U.S. biotech leaders are uneasy about the agency’s direction, particularly for emerging drug classes. Fundraising remains extremely tough, with the sector increasingly focused on capital efficiency – delaying ambitious financing plans in favor of data-driven milestones. The sentiment around IPOs is likewise also negative, as are concerns that M&A activity will cool down, with most respondents expecting little improvement before 2026.
These downcast US sentiments are being echoed by biotech leaders in Europe as well. We are certainly living in strange times, when applying for a research grant to study ‘trans’membrane proteins has become a political statement, and where the culture of global supply lines and open markets – championed by the US for the better part of a century – has become more of an EU prerogative instead.
The V-Bio team recently attended Bio€quity in Belgium – Europe’s premier life sciences investments event. The new buzzword at this year’s conference was “top-up round”: a funding strategy that is now being widely employed, especially by early-stage European biotechs, with the aim to extend runway without triggering full-scale fundraises, giving startups just enough capital to hit the next data milestone and delay a major raise until markets (hopefully) stabilize.
While the US is getting unfriendlier by the day and Europe is recalibrating its international relations, China has been rapidly accelerating its own biotech sector. With strong support from the Chinese state, fast-moving regulatory pathways and a growing ability to deliver first-in-human data quickly and cost-effectively, China is positioning itself as the new global hotspot for health innovation. While the size of the Chinese market is still smaller than the US it is growing fast, rapidly transitioning from a follow-on market to a launch market, especially in oncology and chronic care.
Against this backdrop, Europe finds itself at a critical juncture. For too long, as in many other areas, European biotech has relied too much on the US. It has been the go-to market for growth capital, IPO exits, regulatory validation, and access to a unified commercial market. But as with many European sectors, we can’t rely on the US anymore. The current turbulence may feel destabilizing, but it’s also clarifying: Europe must finally build the missing parts of its own biotech scale-up infrastructure.
The good news is that Europe certainly isn’t starting from scratch. The region has an excellent scientific foundation, with top-tier academic institutions and research institutes. From the latest McKinsey report, it’s clear that there is no lack in European innovation. Instead, where many European countries are still struggling is in overcoming the gap between discovery and turning these innovations into new competitive biotech companies.
There are multiple reasons for this: insufficient professional tech transfer, entrepreneurial talent and support by VCs dedicated to company creation. We need better hands-on support to get new endeavors of the ground, create a credible public market pathway and a regulatory system that supports biotech innovation instead of stifling it.
To create a more innovation-friendly environment in Europe, we can take a page out of the US playbook: streamline company creation, support repeat entrepreneurs, and build regulatory agencies like the EMA into more agile, biotech-friendly institutions. We also need to strengthen coordination between the different Health Technology Assessment (HTA) bodies of different European countries, improving cross-border collaboration.
Critically, Europe must also solve its capital markets challenge. A unified European biotech stock exchange is long overdue. Without it, promising companies will continue to drift toward US listings – or fail to scale at all. As COVID and Russian sanctions have clearly demonstrated: Europe can act with unity (if it has to).
Lastly, the shifting US environment gives Europe a rare opportunity to reverse the brain drain of scientists and entrepreneurs leaving for greener (US) pastures. By creating ecosystems where top talent can thrive – supported by stable policy, credible investors, and a pathway to scale – we can attract scientists and entrepreneurs who might otherwise have stayed in the US. The first of these European ‘Union of Skills’ initiatives are already underway at the EU level, aiming to attract and retain top-tier talent for the sustainability of advanced sectors like biotech.
The current climate remains stormy, and there are no simple quick-fix solutions for the European biotech sector. But the current global reset may be the best chance Europe has had in decades to take charge of its biotech future. By taking the opportunity to band together and consider the big picture, we can create meaningful change whose impact will resonate through the region for decades to come.
In the meanwhile, we need to be creative and help our current companies weather the storm. For V-Bio and other VC funds, this means not only supporting our portfolio companies financially, but also through connections with our networks, advice as mentors and sparring partners. Vitally, we need to keep our chins up and encourage the next generation of scientific and entrepreneurial talent to keep creating new groundbreaking spin-offs with ideas that will benefit patients in Europe and beyond.
