416: NIH funding uncertainty thwarts U.S. researchers

0:06Heather Pierce: Welcome to The Read Out Loud, a weekly biotech podcast from STAT. I'm Allison DeAngelis.

0:11Anil Oza: I'm Adam Vorstein.

0:13Heather Pierce: And I'm Elaine Chen.

0:17Heather Pierce: Today, we discuss the unprecedented changes at the NIH. The agency managed to avoid major budget cuts and was able to keep their funding at slightly higher levels than last year. But the unpredictability of the country's major funder of medical research continues to cause turmoil for scientists. The one word I would use is uncertainty. And it's not unlike the uncertainty that everybody feels outside of science. Uncertainty about tariffs. Uncertainty about interest rates. Uncertainty about the war. Imagine if you're a scientist being uncertain about the work you're going to do, the money you have to do the work, and the people you need to do the work.

1:07Anil Oza: Also on today's chatty agenda, the shuttering of a CRISPR-Cartee company, the Nobel Prize in medicine, and why biotech investors are so gloomy.

1:17Heather Pierce: But first, a word from our sponsor.

1:27Anil Oza: biotech moves fast blockbuster clinical trial wins brutal drug blow-ups shifting market tides if you're not paying attention you're already behind that's why i write biotech scorecard every thursday morning i cut through the noise and break down what matters right now data deals and the people and companies making real moves it's unfiltered analysis from someone who's been covering biotech for more than 20 years. If you want to keep up and stay sharp, subscribe to Biotech Scorecard, only for Stat Plus subscribers.

2:07Anil Oza: Okay, guys, so the Boston Globe is running this contest trying to pick the best Boston movie of all time, and they're inspired by the fact that it's the 20th anniversary of The Departed. I want to go through these movies with you because there are some tough choices to make, and I'm curious as to what you guys think about the best Boston movie. All right. You have to choose between The Friends of Eddie Coyle or Boondock Saints. I think these movies both came out before either of you were born.

2:37Heather Pierce: No comment. No comment? All right.

2:39Anil Oza: I will tell you that The Friends of Eddie Coyle is a classic Boston crime movie. It's fantastic. 1973. You should watch it. Okay. Next bracket. Good Will Hunting or The Departed? Elaine, come on. You've seen both of these movies. What do you think?

2:57Heather Pierce: No, don't ask me. I don't know what is most Boston. The most Boston movie is The Departed. But I think the best movie, this is controversial, Good Will Hunting.

3:09Anil Oza: I agree with you, Allison. Robin Williams' performance is just A+. Okay. This is one that all of us, we have some stake in this one.

3:20Heather Pierce: spotlight or the town well i mean i think that we would be fired if we said anything other than

3:26Anil Oza: spotlight right it's a very good journalism movie are you gonna say the town adam no i went with

3:33Heather Pierce: spotlight i would say spotlight yeah i mean it's uh the boston globe catholic church i mean it's

3:39Anil Oza: like it's to our core okay last one and this is the fun category fever pitch or ted i unabashedly

3:48Heather Pierce: love fever pitch i love the drew barrymore jimmy fallon pairing they had this very controversial ending to the movie where actually the red socks win and then ultimately they did win in 04 and broke the curse of the bambino so i fever pitch all the way no contest i went with ted what oh

4:10i like ted what am i gonna say well let's talk about biotech something that you actually have

4:17Heather Pierce: good judgment on. Sure.

4:18Anil Oza: Yeah. Let's talk about biotech.

4:20Heather Pierce: Okay. Everybody's talking about what's going on with Caribou Biosciences, which is shutting down after failing to raise enough money to fund a late-stage clinical trial of its off-the-shelf CAR-T therapy for lymphoma. Adam, you talked to the team. What's going on there? Why did this happen?

4:38Anil Oza: Pure and simple, lack of money. For many, many years, they've been developing an off-the-shelf CAR-T therapy for lymphoma, which is a type of blood cancer. Unlike the patient-specific CAR-Ts, these are donor T cells that are genetically engineered with CRISPR, and then they're mass-produced. So just like any other cancer medicine, they would sit on a shelf, and a physician can grab that medicine and use it to treat their patients. The premise was that it could be as effective and safe as a patient-specific CAR-T. It's taken them a long time. They got to the point where they were ready to start a phase three clinical trial, but they needed to raise money.

5:17Anil Oza: And there was just no interest. Rachel Horowitz, the CEO, said that when they talked to investors, they're either not interested in funding cell therapies or they just don't believe in the concept of this off-the-shelf cell therapy. And so unfortunately, they've had to shut the company down.

5:36Heather Pierce: That really surprises me, I have to say, because from the outset, if we take a step back, The cell therapy space has actually seen a resurgence in biotech. We've seen quite a bit of M &A over the last year or two around CAR-T therapies, pharmaceutical companies who are actually interested in acquiring this technology and really developing it further. And when you talk to investors, what they're really looking for are companies that have drugs that are in the clinic, that are being tested in humans, which is what Caribou has. They're about to move into a phase three trial. So on paper, this meets what the industry is looking for.

6:18Heather Pierce: Does it really come down to a disagreement over this CRISPR-based CAR-T, you think, Adam?

6:24Anil Oza: I don't think it has anything necessarily to do with CRISPR. You know, Caribou is a company that was spun out of the lab of Nobel laureate Jennifer Doudna. She's one of the CRISPR pioneers, received a Nobel Prize for that. And they do use CRISPR in the process of creating this off-the-shelf CAR-T. I think it was more the fact that they just missed their moment. it's taken them so long to get to this point that a lot of people in the field of CAR-T have moved on we've gone from the patient-specific CAR-T which were the first ones the Gileads and Bristol Myers J &Js marketing those today and then you had these off-the-shelf CAR-T products they've been struggling to kind of get moving but people are looking ahead and they're saying in vivo CAR-T And so what you've seen is a lot of the companies, like the ones I just mentioned, Gilead, Bristol, J &J, they have all invested or acquired in vivo CAR-T companies, meaning the gene editing, the editing of the cells actually happens inside the body, inside the patient's body and not in a lab.

7:33Anil Oza: And so they've kind of just boxed out the off-the-shelf companies like Caribou. And I think that's one of the reasons why they have not been able to find money for that phase three study.

7:49Heather Pierce: Well, it's apt that we're talking about Nobel Prize winning medicine because the Nobel Committee announced this year's recipients this week. Elaine, drumroll, please tell us who the award went to. So we learned this week that the Nobel Prize in Medicine was awarded to a trio of scientists who have worked on discoveries related to optogenetics. Optogenetics essentially uses light combined with genetic modifications of neurons to switch on or off cells in the brain. This makes it possible to show how nerve cells function, shape memories, feelings, behavior. One professor likened it to going from a Rand McNally Road Atlas to something more like Google Earth.

8:36Heather Pierce: And not only does it help us understand how the brain works, but it's also led to the development of experimental treatments for things like blindness and Alzheimer's. Now, Elaine, one, many of the STAT staff pointed out that Vice President J.D. Vance actually worked in this field at one point in time. He worked for an early optogenetic startup called Circuit Therapeutics as director of operations. But two, this decision was a little bit different than people were expecting. I think that folks were expecting GOP-1 drugs to be on the shortlist, if not get the prize for medicine. Tell us more about that.

9:16Heather Pierce: Yeah, I think that was the expectation of a lot of people. And a lot of people were betting on GLP-1. But it may be just that it's too early. I mean, we know that the Nobel Awards, when they award for discoveries, it's many, many years after the actual discoveries were made. So it might just be that we're too early. Okay, lastly, let's talk about investors and why they've been so gloomy. As most people know, the XBI, the index that tracks biotech stocks, is a pretty good sentiment of how investors are feeling. So far this year, the XBI is up 23%. Typically, that would be reason for celebration.

10:00Heather Pierce: But the reality is a lot of investors are suffering right now. Adam, what's going on?

10:05Anil Oza: Yeah, it's a strange time to be a biotech investor. You know, it really started this summer as the XBI was making some new highs. People were really happy, but it's gotten worse. And certainly as we move into the fall, you know, when I talk to investors now, they are like seriously depressed. What's weird about this is the XBI is doing pretty okay. And so you really have to kind of look below the surface to find the trouble. And when you look at the individual companies that make up the XBI index, many of the biotech stocks that are most commonly owned by both like the specialist funds and even retail investors, you call those the crowded longs, like lots and lots of people own these stocks.

10:51Anil Oza: They are underperforming, particularly since August. And then compounding this misery is stocks that are often shorted, meaning investors are betting that the stock prices will go down. Those stocks are actually outperforming. So the stock prices are moving higher and investors are losing money on the stocks that they own. They're losing money on the stocks that they're shorting, which translates into it's not like a nuclear winter. It's not as bad as it was a couple of years ago. But people are not enjoying themselves as we sort of move into the end of the year.

11:28Heather Pierce: But, Adam, the XBI, this index that tracks biotech stocks, a whole group of them, the XBI is doing well. Explain how these two things exist at the same time.

11:39Anil Oza: Yeah, the best example is probably we look at Moderna. OK, it's one of the best performing stocks in the XBI. Nearly all those gains came since August when the company reported the results of that mRNA cancer vaccine. Stock base exploded. A lot of investors were actually shorting Moderna at that time, or maybe they weren't even involved at all. So, you know, they either lost money or they didn't capture any of those performance gains. You know, we also think of the XBI as a biotech stock index, but there are many stocks in the index which are more tech or AI focused. They have done really well and have contributed more to the overall strength of the XBI.

12:25Anil Oza: Those stocks are really not widely owned by biotech investors.

12:29Heather Pierce: OK, what does this all mean for the biotech industry at large?

12:34Anil Oza: It has an impact, right? You know, we can think about this in a macro way. You know, interest rates are rising, which makes it more expensive for biotech companies to borrow money, raise money. We know that drug development is really expensive. And the thing that biotech companies probably do best is raise money. In this environment, when you have rising interest rates, plus you have all this kind of weird market stuff going on where investors are losing money, their willingness to finance biotech companies, it can get maybe a little dicier, more difficult for companies to raise money. I mean, in a raging bull market, would Caribou have been able to raise money?

13:12Anil Oza: Maybe.

13:18Heather Pierce: Well, I don't follow the public markets much, but I will be speaking to some private market investors and venture capitalists at our Stat Summit next week. You can still buy tickets online at statnews.com slash events.

13:39Heather Pierce: We will have lots to talk about from the summit, but first, we're going to delve into how the unprecedented changes at the NIH are affecting the future of biomedical research.

13:58Heather Pierce: Since the president took office, the NIH has made major reductions in staff, terminated thousands of research grants, and delayed many others. But as this fiscal year comes to a close, the agency actually gave away slightly more money for research than it did last year. This happened after Congress averted a 40 % budget cut to the agency that President Trump had wanted. But there's been significant changes to the way NIH distributes its money, and that continues to cause turmoil in the scientific community. We spoke to Dr. Chaitan Sasadri. He's a professor of medicine at the University of Washington who has been studying tuberculosis for 20 years.

14:36Heather Pierce: By May of 2025, I had zero dollars in NIH funding. Every single grant I had was terminated, delayed, or frozen. By the end of 2025, I was able to get most of that money back, but with conditions. And until I really changed the way I did business, I couldn't get my money back, any of it back. In that period, there were several people in my group. They left the lab. They took other jobs. So the lab shrunk. I am very privileged to still be standing. There are people who aren't doing the work anymore after the trauma of the last 18 months. Their funding disappeared. Their institutions couldn't float them, and they're gone.

15:27Heather Pierce: We wanted to get a sense of what is happening at the NIH and what it means for the future of medical research in this country. We're joined by our reporter, Anil Oza, who over the past two years has been reporting on changes to the NIH policies and funding. Welcome, Anil.

15:42Anil Oza: Thank you for having me.

15:43Heather Pierce: We're also joined by Heather Pierce. She's Senior Director of Science Policy at the Association of American Medical Colleges, which has been tracking NIH spending. Heather, thank you for joining us. Glad to be here. Anil, let's start with you. The NIH's 2026 fiscal year just ended. In a recent article of yours, you say that the NIH did actually spend its entire budget for external grants. But you say that there are still problems for American researchers. Explain what those problems are.

16:12Anil Oza: Yeah, I think it's helpful to compare this year to 2025, where there was a lot of questions swirling about whether or not the NIH would be able to spend down its full budget. This was when they laid off hundreds of workers from the NIH. They were determining grants left and right, and that really endangered their ability to push money out of the door. And so in the wake of that, we saw lots of people tracking the NIH's budget and their ability to spend down all of the money in a way that we really hadn't before. There was a lot of anxiety about this. And I think this year, the question has shifted from whether the agency would spend all of its money to how it was spending its money.

16:48Anil Oza: So at the beginning of this fiscal year, which is December of 2025, after the government shutdown, Jay Bhattacharya, the director of the NIH, put out what he called the unified funding strategy, which was this different way of thinking about which grants they wanted to prioritize funding. And part of that prioritization was alignment with political goals. And it also followed this change from focusing on peer review scores to giving more power to program officers and NIH institute directors to determine what grants are being funded. And I think the part that's important here for researchers is that it makes this whole process a little more opaque.

17:25Anil Oza: people like Chetan that have been applying for grants for 20 years, that system is no longer the same way that it was. And so it created this confusion for people that I think was really difficult to reckon with.

17:35Heather Pierce: Anil, the administration has done away with certain kinds of grants. We know, for example, those perceived to be related to DEI. How else has the administration changed its approach to who and how they fund?

17:48Anil Oza: I think the biggest change is the lack of clear direction to the outside research community. So we talk about in the story, the lack of postings that the NIH in the past would have put up to say, we want to do research in X, Y, or Z area, sort of a solicitation to the research community. And those have not been posted in the same frequency as they had in the past. And a lot of that is that such postings now need to go through HHS, they need to go through OMB. And so there's a lot more political engagement coupled with the Institute's priorities are taking a bigger role as compared to peer review scores, created confusion, people not knowing exactly what the administration wants to fund.

18:26Anil Oza: I think we know very well what they don't want to fund. So in our story, I think the most dramatic decrease that we saw was in research related to health disparities and anything related to ethnicity or race, which we know that this administration has sort of an antipathy to anything they team DEI. And I think we're seeing that in the data there.

18:44Heather Pierce: Heather, I want to bring you in because your organization represents the medical schools where much of the NIH research is happening. Even though the NIH has used its budget of external grants, there are lingering effects from the delays and the halting of grants over the last fiscal year. What are those? Well, the chaos that we saw in the first few months of 2025 with mass terminations of grants, freezing of funds to individual institutions and other policy changes that threw the research enterprise into chaos have had lingering impact. So we have a more stable research environment, although the pace of funding of NIH grants is much slower and much later in the year than we have seen historically.

19:33Heather Pierce: The number of grants is much less than we've seen historically. But those lingering effects really have impacted the research enterprise. When research is terminated suddenly, that can have a significant impact on the research team, the research program, and that field of science. Many of the grants that were terminated suddenly were reinstated after litigation or appeals, some with conditions, some with no conditions. But even a slight pause or a halt of research can put that research back for months or years or decades, depending on what needs to be rebuilt to start the research again. And beyond the research itself, Heather, that's also affected young scientists and the people who are entering these programs and one day become the scientists that then go and work for drug companies, right?

20:32Heather Pierce: Yes, the research workforce is the most important asset that we have in advancing science, in improving lives, in improving clinical care through research. We're very concerned about current faculty, about researchers whose grants were terminated or whose research seems untenable in this atmosphere, but also looking at the future of science. those new trainees, the early career scientists, and the people who are applying for PhD programs. We absolutely have seen problems in that steady pipeline and the pathway for career scientists. It will take many years to understand what impact these two years have had on the biomedical research workforce as a whole.

21:25Heather Pierce: But we see some early signs that are concerning. What are those early signs? We are working with medical schools to understand how they change their research training programs as a result of federal funding instability and changes that impacted higher education and academic institutions. And while we're just gathering data now, that at many institutions, the offers that went out to PhD students and the number of people who started new PhD programs in biomedical research in 2025 was lower than in 2024. And it looks like that happened in many places across the country. Anil, I want to ask you, Jay Bhattacharya, the director of the NIH, has spoken frequently about wanting to find new ideas or quote-unquote edge science, but in the analysis that you and our colleagues have done on NIH's spending, what did you find?

22:32Anil Oza: We found that this year there was a slight increase in the amount of money that was dedicated to high-risk, high-reward grants, and that is important, but I would also emphasize that something that I'm hearing a lot from researchers is that on paper, this is something that the agency is prioritizing, but this uncertainty also breeds a kind of conservatism about the kinds of grants that you're going for. People are sort of in a defensive position right now when they're applying for funding, and that doesn't incentivize people taking big swings. If they have really novel and new ideas, now is not really the time to be playing that game, is what people will say because they're just concentrating keeping their lab afloat.

23:14Anil Oza: They can't really think super deep thoughts. So while in the data we're seeing that change, I think on the ground at times that is not always adding up.

23:22Heather Pierce: So I want to ask overall, how does this uncertainty around funding, timeline of funding, what's being funded, how does all of that affect the future of scientific research here in the U.S.? The United States has made a commitment to be the engine of scientific progress. And to make that happen, that needs a very clear partnership between academic institutions, industry, the federal funding of basic research to build an entire ecosystem. If something is unpredictable, unstable, then every aspect of that scientific enterprise is shaken. And in the case of NIH-funded research, it's not just what's happening at the NIH.

24:10Heather Pierce: So things like the federal shutdown, the massive layoffs, reductions in force of staff across all of the Department of Health and Human Services has made it harder to get grants awarded to a review and award grants. And an essential component of this enterprise is the trust that researchers, research institutions have in the process that funds the best ideas. Trust that when proposals go in, the most meritorious science will be funded and it will be based on what can advance health and what can advance the priorities of the nation. And that trust has been shaken the way that grants are awarded from a science-driven merit-based resource to something that some perceive as being much more political.

25:08Heather Pierce: That's something that the U.S. science enterprise has not been. I do want to follow up on that, Heather, because that conflicts in my mind with the idea that in this most recent fiscal year, there was actually more money that was awarded in these grants. Explain the nuance there for me. So the amount of money available to fund scientific research is a decision made by Congress. And so Congress actually provided a slight increase to the National Institutes of Health in fiscal year 2026 over fiscal year 2025. There are changes in what is funded and how it's funded that leads to that instability.

25:56Heather Pierce: So the key aspects of funding are not just if funding happens at all, but when it's funded, how it's funded, and what research projects and researchers are funded.

26:09Anil Oza: I would add that there is a new player in this ecosystem this year, which was the White House Office of Management and Budget. it. In the middle of the fiscal year, they submitted this landmark proposal to change regulation for all federal contracts, and it would subject federal contracts to a much higher level of political scrutiny. And so I think what is not being represented in the data, it is this message from the White House. They view all funding coming out of the government, including scientific grants as part of the political apparatus. I will say that that proposal is in limbo right now.

26:47Anil Oza: It received a lot of negative feedback, which we've written about. So it is on pause right now. But I think it sends a message that is unprecedented in the past hundred years of American science, which is that the White House views this differently and wants to take autonomy away from scientists to meet some political goals. There was a big fight in the White House between Russ Vogt, the director of OMB, and Jay Bhattacharya over how much control OMB had over scientific funding and whether or not they could quickly take funds away from Harvard. And so I think it creates this ether of uncertainty for researchers.

27:24Anil Oza: They're not immune to hearing that message, and though public support is still quite strong for scientific funding.

27:29Heather Pierce: It's also good to remember that making science political is different than having administration scientific priorities. So every administration does have and has had scientific priorities. We can think back to the moonshot or to the brain initiative, other priorities that a president or an administration may have. Those priorities can concentrate some of the funding in a specific direction to achieve a specific scientific goal. That's different than saying all science should be subject to political review, political overview, and subject to cancellation or termination if it doesn't align with the ideological priorities rather than the scientific priorities of the executive branch.

28:26Heather Pierce: So the NIH has moved away from using peer review scores as the sole criteria for funding grants. Can Anil, you explain that for us and what effect this has?

28:38Anil Oza: So in the past, the way that NIH funding works is that a researcher will submit a proposal to the institute of their choice based on what they study. There's some filtering of which proposals seem the most promising by the NIH. And then a subsection of them go to what are called study sections, which are a group of expert on the topic. They will rank them in some of the highest rated, go to the full committee, and they help guide decisions about what is being funded. what came out of that was a peer-reviewed score. And the criteria that had been used to score grants changed under the Trump administration.

29:15Anil Oza: Those scores were not the most important thing in guiding funding decisions, that if there was a priority that a certain institute wanted, say, diverting research in one direction or the other, they could do that. And that isn't necessarily a bad thing, right? There may be areas of research that we want to promote. We may want to guide more funding to mRNA research or to things that are seeming more promising than they have in the past. But I think the thing here to get to something else we've mentioned a lot is this opacity of messages coming from the highest officials in this administration that they want to downsize the scientific ecosystem as we know it.

29:56Anil Oza: This lack of clear direction creates this air of confusion where in the past, even if you weren't sure that your funding was coming in, you'd have the sense of like, oh, I got a good peer review score. I probably will get grant funding. Whereas it feels like now, until the second that you get that notice of award, who knows if you will get that funding or not.

30:15Heather Pierce: Heather, as pipelines shrink, as programs shrink in size and students face this level of uncertainty, what does that mean for what the scientific research ecosystem looks like from here on out? The future of the scientific workforce is the future of scientific progress. So they go hand in hand and a threat to one is a threat to the other. We do have evidence that research training programs did get smaller in response to these changes. That means there are fewer people entering the beginning of that career pathway. that's an important piece because that determines what happens in science not next year but 10 years from now or 20 years from now who is running the labs what kind of training did they have and what kind of research ecosystem did they grow up in as scientists but I do have hope for the future of U.S.

31:24Heather Pierce: science. And here's why. The people that are drawn to careers in science are creative and resilient. That's how we've moved science forward. It's how we've advanced medical care and improved lives. Those same attributes of grit and determination and creativity are also being applied in this atmosphere. The American public assumes that we will keep making scientific progress, that when you go into a hospital with a loved one, with a scary diagnosis, that what you have available to you is different and better than 10 years ago and 15 years ago. And all of that is based on medical research. That's members of Congress.

32:16Heather Pierce: That's people from everywhere in the federal government and from every state. So I have no doubt that we will get through this time and that U.S. science will progress.

32:31Heather Pierce: Heather, O 'Neill, thanks so much for joining us. Thank you for having me on.

32:35Anil Oza: Always a pleasure. That does it for another episode of The Read Out Loud.

32:42Heather Pierce: Our podcast is produced by Rachel Gottbaum. Our senior producer is Alyssa Ambrose. Our executive producer is Rick Burke, and our theme music is by Brian Joel.

32:51Anil Oza: And we'd love to hear from you. Tell us what you like about this week's episode, what you didn't like, and your favorite Boston movie. You can do all that by sending us an email at readoutloud at statnews.com.

33:02Heather Pierce: And if you like what we do, leave a review or rating on Apple Podcasts or wherever you get your podcasts. See you next week.