Veteran Bay Area biomedical CEO Paul Hastings had to lay off five dozen employees at his company earlier this year, thanks, he said, to what he described as the Trump administration’s attacks on universities, science and medical-research funding, he said.
Trump in an August executive order said federal grants had been insufficiently vetted, and some “propagated absurd ideologies.”
Hastings, whose South San Francisco firm Nkarta engineers “killer cells” to fight disease, said biotechnology companies “across the board” are cutting staff and product-development projects as uncertainty over what comes next rattles investors.
The biotech sector, producing treatments for maladies from rare genetic disorders to cancer, is a key economic engine for the Bay Area, pouring nearly $100 billion into the region’s economy annually, according to industry group Biocom California, and sending more than $4 billion into local and state tax coffers, trade group California Life Sciences reported.
The Bay Area’s life sciences sector — mostly made up of biotech companies involved in pharmaceuticals, medicine and research — last year received $2 billion in U.S. National Institutes of Health funds, created $94 billion in direct economic output, and employed more than 150,000 people, industry group Biocom California reported. There is no projection available for 2025 funding.
Industry representatives say Bay Area biotech is under threat as the Trump administration fights to strip more research money from the universities and grant programs whose federally funded studies are turned into treatments by private industry.
That relationship between academia and business has played a role in nearly all new drugs and treatments developed in the U.S., delivering “massive patient benefit,” said Palo Alto biotech investor Srini Akkaraju. “And yet we’re throwing a wrench into this beautiful machine?”
Cancelations and suspensions of studies funded by the U.S. National Institutes of Health are already choking off the flow of the innovations Bay Area biotech companies rely on to spin federally funded researchers’ work into drugs, treatments and medical devices.
“I’ve launched drugs for rare diseases. I’ve launched a drug for reversal of blindness. I’ve introduced cancer drugs. I’ve introduced auto-immunity drugs,” said Hastings, who has spent 44 years in the biomedical industry, and is a CEO for the sixth time. “That’s what this industry has done — It’s introduced amazing innovations.”
But with funding cut and in limbo, and rampant uncertainty, investors and young scientists are pulling back from biotech, as the Trump administration has also slashed staff at U.S. government agencies, scuttled federal scientific advisory committees, and purged government data on climate change and clean energy, industry representatives said.
“The anti-science sentiment that’s pervasive and has been aided and abetted by policies and sentiments from the administration isn’t helping,” said biotech investor Srini Akkaraju.
Nearly 1,000 NIH grants in California have been hit by cuts, according to Grant Witness, a project co-founded by a former Harvard University research scientist Scott Delaney. Some have been restored through lawsuits, but more than 500 research projects in the state remain affected. The state’s collective loss of more than $500 million in NIH funding is more than a third of the $1.3 billion lost across the U.S., Grant Witness reported. Nearly 400 clinical trials — dozens for new drugs — lost funding, according to research published this month in the journal JAMA Internal Medicine.
Meanwhile, a U.S. Supreme Court ruling has halted restoration of many grants, while the Trump administration continues to seek approval in lower courts to cancel them. The administration is also battling in court to claw back at least $6.5 billion in NIH funding that supports medical research.
Investors pour billions of dollars into biotech to turn NIH-funded research into treatments. Venture capital investments in the Bay Area’s pharmaceutical and biotech hub centered on South San Francisco have amounted to $4 billion to $7.6 billion in recent years, data firm PitchBook reported.
U.S. Health and Human Services Secretary Robert F. Kennedy, Jr. on Nov. 17 insisted, “we’re not cutting science, we’re not cutting research,” at a Turning Point USA event at George Washington University. But he also acknowledged, “we cut a billion dollars worth of DEI studies.”
In the Bay Area, federally funded research at universities, particularly world-leading biomedical research institutions Stanford University and UC San Francisco, can lead to new drugs, treatments and medical devices via getting licensed to an existing company, or providing foundation for a new startup.
The NIH “dwarfs the rest of the world’s funders of biomedical research,” with funding from the institutes contributing to 354 of 356 drugs approved by the U.S. Food and Drug Administration from 2010 to 2019, a March paper in the journal Nature said.
This region’s academic-research institutions, and the commercial ecosystem they feed, are primary attractions for “the best talent in the world,” said Sam Chung, head of government relations for California Life Sciences.
Stanford’s SPARK biotechnology incubator — which brings students and researchers together with professors, biopharmaceutical experts, investors, company executives, and scientists — has in 17 years produced 61 biomedical startups, 50 of them still active, said Kevin Grimes, co-director of the program, which is funded mostly by Stanford.
But in the current climate for science, “really terrific researchers who are not from the U.S. are going elsewhere,” Grimes said, adding that some U.S. born students are veering away from academic research or seeking opportunities in China, Europe and Canada.
Heather Pierce, senior director of science policy at the Association of American Medical Colleges, noted that the symbiotic relationship between federally funded researchers and the biomedical industry is enshrined in U.S. law through the Bayh-Dole Act of 1980, which requires researchers receiving federal grants to take steps to turn their work into commercial products.
While Trump’s executive order stated that grants were not sufficiently policed, Pierce said the funded projects were selected — sometimes out of hundreds of contenders — to improve health care and public health.
Cuts to grants deemed by the administration to be related to DEI hit many studies focused on particular groups but with implications for wider public health, Pierce said.
“If we want to learn why health outcomes for breast cancer treatment for Latino women are worse than in other populations, that will give us key information about not just that population but about the disease and the treatment,” Pierce said.
Akkaraju, who is managing partner at Samsara BioCapital in Palo Alto, said the research cuts this year will lead to an “unquestionable decrease” in the startups his company backs in coming years.
“When fewer ideas are funded, that’s going to have a direct impact on the number of companies I can fund five years from now,” Akkaraju said, arguing that Trump administration policies “will hand China the worldwide leadership in biotech on a silver platter.”
Martin Babler, CEO of South San Francisco drug-development company Alumis, said skittishness among investors concerned about fallout from the Trump administration’s actions on science and research is forcing many biotech companies to cut the number of their programs developing new drugs and treatments.
“With the uncertainty and the money not flowing we are now in a situation where patients are waiting,” Babler said. “That does not help innovation and it does not help the country as a whole from a competitive or economic standpoint.”