In honor of XBI making its return to $100 - on a short squeeze but it still counts - I offer the regular reminder that NIH funding has a lot of influence over the sector. Funding of biotechnology research ramped significantly in response to the 21st Century Cures Act and the Cancer Moonshot program between 2014 and 2018.
XBI followed.
Notwithstanding the recent performance of the biotech sector and small cap generally, government funding at the rates seen between 2014 and 2018 are not poised to return. Another Continuing Resolution to fund FY 2024 is on deck. The possibility that the House and the Senate can agree on appropriations for FY 2024 by the start of FY 2025 is in doubt. If a CR is in place on May 1, an automatic 1% cut to discretionary spending - that includes NIH but not Medicare - kicks in.
For FY 2024, which ends September 30, NIH is likely to see no increase in new funding followed by a 1% reduction for FY 2025. Never underestimate the power of crafty bureaucrats to shift money from bucket to bucket but those tricks only work for the short run, so be cautious with the anecdotes.
Compounded the budgetary issues, is the distrust that has emerged between NIH and Congress, especially the House, regarding oversight of aggressive research techniques like Gain of Function and the Institutes unwillingness to talk about it.
The private sector could step in but they are unlikely to to fill the gap completely if for no other cause than their discipline. There has been talk that the BioSecure Act, which declares WuXI Apptec a national security threat, could include appeasement to the Academic Medical Centers in the form of research supply chain support, akin to the CHIPS Act. Barring those events, NIH is not the honey pot it once was so don't get too comfortable.
Emily Evans
Managing Director – Health Policy
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