Biotech Playbook Breakdown: Who Will Risk Developing Tomorrow's Cures?

By Laura Koivusalo

Most breakthrough medicines begin in academia, are developed further in biotechnology companies and, if successful, eventually end up in the hands of large pharmaceutical companies capable of bringing them to patients worldwide.

For decades, this division of labor has defined drug development. Universities generated discoveries. Biotechs translated them into products. Pharmaceutical companies supplied the capital, manufacturing capacity, and commercial infrastructure needed to scale them.

This arrangement reflects not just a difference in each party’s specific skillset, but also their tolerance of risk.

Academic researchers took scientific risks by pursuing ideas that might never work. Venture investors financed the uncertain process of transforming laboratory discoveries into therapies. Pharmaceutical companies absorbed the enormous costs of late-stage clinical development and commercialization.

Today, that balance is beginning to shift. Scientific discovery remains the fuel of the biotechnology industry, but science itself does not run on curiosity alone. It runs on capital, incentives, and time. Across Europe and North America, academic funding has become increasingly fragmented, competitive and politically shaped. Shorter grant cycles and growing pressure to demonstrate commercial relevance are changing not only which research projects receive funding, but also how scientists think about their work.

The consequences reach far beyond academia. Traditionally, biotechnology companies were founded around promising scientific discoveries and financed by investors willing to shoulder the considerable uncertainty of turning laboratory findings into medicines. Early-stage capital funded the difficult process of determining whether a scientific hypothesis could survive manufacturing, regulation, and the clinic. Successful programs would then be licensed or acquired by pharmaceutical companies, generating returns that flow back into the next generation of innovation.

The De-Risking Effect

Increasingly, however, investors are now asking a different question: how much risk has already been removed?

The amount of venture capital entering biotechnology has not disappeared, but its appetite for uncertainty has changed. Young biotech firms are increasingly expected to launch not with promising scientific hypotheses, but with development candidates that have already been substantially de-risked. Recent industry reporting illustrates this shift: roughly two-thirds of biotech venture rounds in the first half of 2026 went to companies that already had drug candidates in human testing.

The economics of drug development help explain why.

Drug development has always been an exercise in uncertainty. Across all therapeutic areas, only around 8.5% of drug candidates entering non-clinical development ultimately reach the market. The greatest attrition occurs in Phase 2 clinical trials, where companies must demonstrate that a treatment delivers meaningful benefits in humans. Even among programs that enter Phase 1 clinical trials, the overall likelihood of approval remains below ten percent.

Meanwhile, pharmaceutical companies face pressures of their own. In the coming years, many of the industry's biggest products will lose patent protection, exposing billions of dollars in revenue to generic competition. For the past few years, large pharmaceutical companies have responded by acquiring increasingly mature biotech assets with late-stage clinical data already in hand. More recently, however, dealmaking has begun to shift again. The first-half of 2026 has seen about 60% of biotech M&A deal value from companies before Phase 2 with assets that could potentially become the next multi-billion-dollar blockbusters.

Venture investors, while nominally independent of public markets, have had to face a bitter reality in the long period of market correction followed by the COVID-19 stock boom. With a closed IPO market, their main exit opportunity has been through M&A to pharma companies. This has directed private investment appetite into the companies most likely to be on the pharmaceutical company target list.

From Scientific Risk To Manufacturing And Implementation Risk

The question, then, is no longer whether innovation will continue. It is who is willing to take the risk of creating it.

While this shift is seen throughout the biotechnology industry, it is especially pronounced in the emerging field of regenerative medicine. Cell and gene therapies promise something that traditional pharmaceuticals rarely can, the possibility of repairing or replacing damaged cells and restoring biological function, offering new hope for patients with conditions such as diabetes, Parkinson's disease, and blindness. As populations age and the burden of chronic disease continues to grow, the need for treatments that extend not only lifespan but healthspan has never been greater. While the underlying science continues to create a stronger evidence-base for transformative therapies, companies must still solve complex challenges related to manufacturing, supply chains, regulation, and reimbursement before treatments can reach patients. Many of these therapies also challenge traditional pharmaceutical business models, as one-time or potentially curative treatments require new approaches to pricing, reimbursement, and long-term value creation.

Cell and gene therapies, unlike conventional small molecule drugs, are often inseparable from the manufacturing process itself, meaning that scientific, engineering, and clinical risks must be solved simultaneously. On the other hand, cell and gene therapies have been reported to have 2-3.5x higher likelihood of approval after entering the clinic than conventional drugs. While the scientific risks after reaching the clinical stage have already been reduced, the manufacturing and implementation risks still carry significant weight.

In other words, regenerative medicine does not simply require scientific breakthroughs. It requires new ways of distributing risk across academia, startups, hospitals, investors and pharmaceutical companies.

The industry's traditional boundaries are beginning to blur. To reduce the friction in translating scientific discoveries to drug development candidates, academic groups will need to think beyond publications. Considering manufacturability, regulatory strategy, and clinical implementation early on can substantially reduce downstream uncertainty. This means that academic laboratories increasingly need access to translational expertise much earlier than before.

Ecosystem Approach Needed

This shift is particularly visible in regenerative medicine, where scientific knowledge is often dispersed across multiple institutions and where no single organization possesses all the expertise required to bring therapies to patients. The future of biotechnology may therefore depend less on brilliant discoveries alone and more on our ability to connect the people capable of advancing them.

Scientific breakthroughs still begin in laboratories. But bringing them to patients increasingly requires an ecosystem capable of collaborating to share costs, responsibility, and developmental uncertainty. Regulators offer early support to advanced therapy developers, new manufacturing platforms are being developed to address scale and accessibility, hospitals are building specialist infrastructure and healthcare systems are starting to explore reimbursement models that recognize the long-term value of potentially curative treatments.

These developments are encouraging, but they will not by themselves close the widening gap between academic discovery and investable development programs. That will require new ways for financing that translation, such as grant funding instruments encouraging public-private partnerships, enabling combinations of invested capital and public funding, or incubator programs and facilities that support that early engagement between academia, hospitals, biotechs and pharmaceutical companies.

Without such mechanisms, valuable discoveries may be stranded — not because they lack therapeutic potential, but because no single organization can justify carrying them through the most uncertain stage of development.

The old biotechnology playbook assumed that venture capital would finance this uncertainty until pharmaceutical companies were ready to step in. That model is becoming less reliable. The answer is not to expect academia or biotech startups to shoulder the burden alone, but to build a development ecosystem in which risk is deliberately distributed rather than continually pushed upstream.

Tomorrow’s medicines will still depend on scientific courage. Whether they reach patients will depend on whether the institutions around that science are equally willing to navigate the development risks together.

About The Author:

Laura Koivusalo, D.Sc. Tech, is CEO and cofounder of StemSight, a regenerative medicine startup aiming to permanently restore lost sight to patients suffering from corneal blindness. On the journey with StemSight, Laura Koivusalo was selected as one of the Ten Outstanding Young Persons in the World by Junior Chamber International (JCI). Koivusalo holds a doctorate in cell and tissue engineering and has hands-on knowledge in cell and tissue biology. For Koivusalo, being an engineer means tackling any challenge enthusiastically and always seeking functional solutions. Koivusalo has always worked in multidisciplinary teams, which has taught her to communicate well with people from different backgrounds while working toward common goals.