Biotech Is Back in Play—But This Time, the Risk/Reward Equation Has Changed

When Robert F. Kennedy Jr. removed Peter Marks from the FDA last month, the message to the market was unambiguous: brace for a regulatory winter. The former director of the Center for Biologics Evaluation and Research was widely seen as a bulwark against bureaucratic inertia—his ouster sent a chilling signal to investors already wary of Kennedy’s anti-vaccine leanings and erratic leadership style.

But the narrative is shifting fast.

Last week, newly appointed FDA Commissioner Marty Makary emerged as an unexpected ally to biotech. His message wasn’t one of deregulation—it was one of modernization. In a five-minute interview, Makary arguably did more to stabilize sentiment in the sector than the last three months of earnings reports.

That’s not an exaggeration.

Regulatory Sentiment as a Market Catalyst

This isn’t the first time regulatory tone has acted as the catalyst for a biotech re-rating. Think back to 2016, when Hillary Clinton’s tweet about drug pricing sent the entire sector into a prolonged correction. Or the 2012 Jumpstart Our Business Startups (JOBS) Act, which quietly opened the door to more speculative IPOs and helped fuel a surge in early-stage biotech funding.

Biotech is uniquely tethered to federal policy—not just in terms of price regulation, but the process of approval. When that process becomes unpredictable, the sector de-risks aggressively. But when visibility returns—even rhetorically—risk premiums compress quickly.

Makary’s agenda, if implemented, reshapes that premium.

Here’s why.

Makary's Agenda: Evolution, Not Revolution

While some headlines have framed Makary’s comments as radical, they’re actually an extension of efforts already underway:

• Computational modeling over animal testing: A technology-enabled pivot that’s long been in motion, now getting political cover. This could cut years off preclinical timelines and level the playing field for smaller biotech firms that can’t afford extensive in-vivo testing.

• Accelerated rare-disease approvals: Rare diseases offer faster paths through the FDA because of unmet need and limited patient populations. Conditional approvals based on biomarkers or surrogate endpoints aren’t new—but Makary’s public endorsement signals an institutional willingness to go further, faster.

• De-risking the agency’s pharma ties: By vowing to curtail “cozy” relationships with drug companies, Makary is attempting to recast the FDA as an impartial arbiter of science—rather than a passive conduit for pharma influence. This appeals to public trust while still supporting innovation.

Critically, he’s not trying to remake the FDA overnight. This is an attempt to restore faith in the agency's core mission: getting effective drugs to patients efficiently without politicizing the pipeline.

That message has investment consequences.

What Investors Need to Watch Next

1. Staffing and Execution Risk
   Makary insists scientific roles haven’t been cut—but early reports suggest real slowdowns in the FDA’s guidance cadence. Review times are lengthening. Calls aren’t being returned. For biotech firms burning through cash while waiting on trial amendments or IND responses, these delays are existential.

Until staffing levels stabilize, especially in reviewer and inspector roles, investors should assume that time-to-market risk remains elevated.

2. Medicare Drug Pricing Reform
   Trump’s executive order correcting the “pill penalty” in the Inflation Reduction Act is another under-the-radar win. By equalizing negotiation timelines for oral and injectable drugs, the order restores a major incentive to pursue small-molecule development. That’s a margin game-changer.

This benefits mid-cap and large-cap names with robust oral pipelines—think Vertex (VRTX), Alnylam (ALNY), or even Eli Lilly’s (LLY) next-gen GLP-1 formulations.

3. Capital Rotation Within Biotech
   We’re seeing a clear bifurcation between speculative names and clinical-stage innovators. Early-stage, pre-revenue biotech still faces a brutal funding landscape. But developers with Phase II/III assets, especially in rare diseases or oncology, are regaining institutional interest.

If you're allocating capital here, the play isn't to chase the rebound. It’s to identify companies with:

• Runway beyond 2026

• Exposure to fast-track pathways

• A regulatory story aligned with Makary’s agenda

Broader Implications: Innovation Policy and Global Competitiveness

Zoom out for a moment.

What Makary is proposing isn’t just domestic reform, it’s a signal to the global biotech ecosystem. The U.S. has long been the world's biotech incubator because of its regulatory clarity, risk-tolerant capital markets, and IP protection.

When that triad is threatened, innovation migrates… to the U.K., to Singapore, to the EU.

Makary’s stance reinforces the U.S. as the global leader in biotech acceleration. That has profound implications for capital formation, foreign investment in U.S. biotech, and the broader geopolitical competition over biomedical dominance.

If the U.S. drifts from science-based policy, others will fill the void. But for now, Makary’s comments suggest that Washington still understands the stakes.

The Takeaway

The past few weeks have been a case study in how policy sentiment can swing a high-beta sector like biotech. But the lesson isn’t to blindly chase the rally. It’s to recognize the structural changes underway—and to position for the firms that are built to survive the next policy pivot, not just the current one.

Makary’s FDA may not be a silver bullet. But in a world where political risk often derails innovation, a science-first, efficiency-minded commissioner is more than investors could have hoped for.

If you’re seeking ways to structure exposure to this new regulatory landscape, Surmount has been selectively leaning into this rotation—especially through biotech-focused overlays and factor-based allocation strategies.

This isn’t 2021 biotech euphoria. It’s something more durable. And arguably, more investable.