Biotech’s nuclear winter not over yet—Wolfe

Investing.com -- Wolfe Research told investors in a note Thursday that the biotech sector remains in a “nuclear winter,” with policy uncertainty and weak funding keeping smaller players under pressure, even as markets appear to recover.

The firm highlighted reports that recent Trump administration actions targeting Chinese assets could influence biotech, but said “milder policies from Trump may not do much” for the broader industry.

The analysts noted that a draft Trump order reported by the New York Times could impose a national security review for U.S. pharma deals with Chinese drugmakers.

Wolfe’s Washington Policy Analyst Tobin Marcus said potential measures “could range from mild to severe but may not immediately commit the US to following through on the more severe items.”

Among possible outcomes, the analysts cited promotion of domestic production of commodity APIs, while more severe actions, such as forced divestitures of Chinese IP, are seen as “a bridge too far and unlikely”.

Wolfe pointed out that ONC traded down 12% premarket and was down 8% intraday, while the XBI index fell 1.2%.

“We thought there’d be more excitement in US biotech, but market perception is tepid and consistent with Tobin’s take that the action would lean on the milder side,” Wolfe said.

Funding constraints are said to remain a critical challenge. Wolfe stated that smaller biotechs face limited capital as M&A activity slows, creating “a vicious cycle of fewer IPOs and less excitement in biotech.”

Wolfe reiterated a bullish view on commercial biotechs, including MDGL, BBIO, IONS, and INCY, but cautioned that policy alone may be insufficient to revitalize the broader sector.

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