From Uncertainty to Action: Navigating Volatile Biotech Funding with Scenario-Based Planning
- Daniel Yuan
- Jul 29
- 4 min read
Updated: Nov 12
Federal funding has long been a cornerstone of biomedical innovation, but growing uncertainty now threatens this critical partnership. In FY2025, the Department of Defense’s Congressionally Directed Medical Research Program (CDMRP), a key funder of early-stage, high-impact research, had its budget cut by 57%. These cuts eliminated disease-specific support for 23 areas, including lung cancer and traumatic brain injury (1,2). Other agencies, such as the NIH and NSF, have already been affected by early budget cuts, with final budget decisions later this year (3-5).
the Department of Defense’s Congressionally Directed Medical Research Program (CDMRP), a key funder of early-stage, high-impact research, had its budget cut by 57%
Here we explore how federal funding has historically supported early-stage biotech ventures, and the importance of scenario-based FP&A in driving innovative patient impact amidst the growing uncertainty ahead.
The Critical Role of Federal Funding in Early-Stage Therapeutic Development
Federal support through grants—offered through programs such as the DoD’s CDRMF, NIH’s Small Business funding, the U.S. Department of Health and Human Services’ (HHS) Biomedical Advanced Research and Development Authority (BARDA), the HHS’s Advanced Research Projects Agency for Health (ARPA-H) and the National Science Foundation (NSF)—play a fundamental role in helping life sciences companies navigate the funding gap between early discovery and the clinical validation needed for commercial viability: a period often referred to as the “valley of death” (5-9).
While startups backed by major pharmaceutical companies or prominent academic founders typically have easier access to private capital, federal grants are a common source of non-dilutive funding many independent or lesser-known innovators rely on to advance early-stage development while maintaining ownership and decision-making capabilities. In 2023, the NIH reported that $187 billion of its grant funding has contributed to over 99.4% of the drugs approved between 2010-2019 (8).
NIH reported that $187 billion of its grant funding has contributed to over 99.4% of the drugs approved
Emerging Challenges Amongst Federal Grant Volatility
Despite the integral role that federal funding has played in supporting life sciences innovations, the recent widespread cuts threaten to disrupt this key partnership. Several trends that have already arisen from the recent turmoil include:
Increased competition: fewer grants mean more applicants per opportunity. Some agencies, such as the National Cancer Institute, are already reporting record-high rejection rates as of July 2025 (3).
Less access: new policies, such as the NIH’s recent restriction on foreign institutional sub awardees, limit collaboration options for smaller companies and complicate existing R&D partnerships (9).
Delayed and inconsistent payments: some companies have reported grant payments being delayed or canceled, disrupting planned research activities and undermining cash flow predictability.
These developments signal a more constrained funding environment for the foreseeable future. While policies and expectations for federal funding are expected to be ironed out in the upcoming months, companies must prepare for less federal support, more complex structures, and increasing financial instability.
Transforming Uncertainty in Biotech Funding into a Managed Variable Through Multi-Scenario Planning
In such a volatile funding environment, traditional budgeting approaches such as fixed annual plans and static forecasts are no longer sufficient. Delays in grant disbursements, shifting regulatory timelines, and reduced access to non-dilutive funding have exposed the limitations of reactive financial management.
To navigate this volatility, life sciences organizations must adopt planning strategies that are dynamic, scenario-based, and predictive of current events. The ability to evaluate multiple paths and anticipate disruptions accordingly has become vital for sustaining continuity and scientific progress.
Scenario planning is central to this shift. With structured multi-scenario modeling, companies can:
Adjust R&D timelines in response to delayed or reduced federal funding
Use timely and relevant information to model and strategize trade-offs in pipeline prioritization based on capital availability and program vulnerability
Allocate operating resources in alignment with real-time and future financial constraints
Establish mutual understanding across departments regarding runway, spending flexibility, and milestone expectations
Scenario-based planning through strong financial planning and analysis (FP&A) capabilities allow companies to respond proactively to change by turning uncertainty into a managed variable (1o).
Scenario-based planning through strong financial planning and analysis (FP&A) capabilities allow companies to respond proactively to change by turning uncertainty into a managed variable.
A robust FP&A function enables companies to anticipate funding disruptions, model the financial impact of shifting grant timelines, and restructure development plans without compromising long-term objectives. In an environment where non-dilutive capital is increasingly constrained and variable, scenario-driven planning helps preserve strategic focus and sustain scientific progress, particularly for high risk, early-stage programs.
The View from the Crow’s Nest
Federal funding cuts present a significant risk to therapeutic innovation and patient outcomes. But while government capital may decline, strong FP&A provides a strategic advantage. With rigorous planning, scenario modeling, and cross-functional alignment, companies can maintain financial control and preserve their ability to deliver innovation even in an increasingly unpredictable funding landscape.
If you are interested in learning more, get in touch at strategy@spinnakerLS.com.
Spinnaker offers true partnership and comprehensive guidance to help leaders navigate the complexities of the Life Sciences industry and chart a path to success. From early-stage market assessment through commercial execution and ongoing lifecycle management, we deliver tailored solutions to ensure optimized practicable results.
Sources:
Congressionally directed medical research programs funding for FY2024. https://www.congress.gov/crs-product/IF10349
Transforming health care through innovative and Impactful Research. Congressionally Directed Medical Research Programs, https://cdmrp.health.mil/pubs/press/2024/funding_press_release24%C2%A0
Kaiser, J. Odds of winning NIH grants plummet as new funding policy and spending delays bite. https://www.science.org/content/article/odds-winning-nih-grants-plummet-new-funding-policy-and-spending-delays-bite
Garisto, D. Trump moves to slash NSF: Why are the proposed budget cuts so big?. https://www.nature.com/articles/d41586-025-01749-x
Jarvis, L. White House NIH cuts will worsen biotech start-ups woes. https://www.bloomberg.com/opinion/articles/2025-06-10/white-house-nih-cuts-will-worsen-biotech-start-ups-woes
U.S. Department of Health and Human Services.. Find funding. National Institutes of Health. https://seed.nih.gov/small-business-funding/find-funding
Vorperian, J. C. How to get federal grants as a startup?. Stanford Biotechnology Group. https://www.stanfordbiotechgroup.com/insights/federal-startup-funding
Galkina Cleary, E., Jackson, M. J., Zhou, E. W., & Ledley, F. D. . Comparison of research spending on new drug approvals by the National Institutes of Health vs the Pharmaceutical Industry, 2010-2019. JAMA health forum. https://pmc.ncbi.nlm.nih.gov/articles/PMC10148199/#:~:text=Funding%20from%20the%20NIH%20was,25
Molteni, M. . NIH halts funding for new projects with foreign collaborators, citing National Security Concerns. https://www.statnews.com/2025/05/01/nih-halts-research-funding-for-projects-involving-foreign-collaborators/#:~:text=The%20National%20Institutes%20of%20Health%20announced%20Thursday%20it%20will%20no,no%20later%20than%20September%2030.
Tjahaja, S. Navigating uncertainty: How scenario planning empowers FP&A in pharma and Biotech. https://www.spinnakerls.com/post/navigating-uncertainty-how-scenario-planning-empowers-fp-a-in-pharma-and-biotech
