CGT innovation under pressure

The last decade has been transformative for cell and gene therapy (CGT). From the first wave of CAR-T cell therapy approvals in 2017, to landmark breakthroughs in rare disease gene replacement, CGT has evolved from experimental science to a multibillion-dollar industry.

As of the end of 2024, the U.S. FDA had approved 38 CGT products — including now-blockbuster therapies Zolgensma (Novartis) and Yescarta (Kite Pharma) — with global market estimates topping $25 billion and a projected CAGR pushing 25% into 2034.

But in 2025, a new challenge has taken center stage: A tightening macroeconomic environment that threatens to slow the pace of innovation. Venture funding has cooled. Government grants are harder to come by. And a wave of inflation, high interest rates, and global trade instability has begun to ripple through the biotech ecosystem, hitting CGT especially hard.

The cost of capital has changed

The CGT boom of the 2010s and early 2020s was fueled in part by cheap capital. With interest rates near zero, venture firms and institutional investors were flush with cash, and willing to take big risks on early-stage therapies that promised transformative results. That era is over.

The U.S. Federal Reserve’s sustained interest rate hikes since 2022 that were meant to combat inflation, have made borrowing significantly more expensive. For venture firms, that means higher hurdles for deploying capital. For biotech startups, it means shorter runways, delayed programs, and a tougher road to IPO or acquisition.

The data reflects this: Global CGT financing peaked at $23.1 billion in 2021, then dropped to $12.6 billion in 2022 and just $11.7 billion in 2023. Although 2024 showed a modest recovery ($15.2 billion), the headwinds remain strong. Q1 of 2025 was again down yielding only ~$300 million raised for early-stage CGT companies (Seed and Series A), a roughly 50% reduction in funding value from the preceding quarter. An estimated $2.5-3.0 billion was raised across the board in CGT for Q1 versus $4.4 billion in Q4 2024.

Startups are feeling the squeeze. Many face tough choices — laying off staff, shelving promising programs, or accepting down rounds, especially those that raised capital during the heyday at inflated valuations. For some, it’s even more dire. The industry is seeing an uptick in shutdowns across the board; and not just among therapeutic developers, but also in supporting sectors like services, tools, and technology platforms. Even well-capitalized players aren’t immune, with several large biotech and pharma companies pulling back strategically, especially from gene therapy.

Tariffs and global supply chain strain

The biotech sector, including CGT, relies heavily on a complex international supply chain. Plasmids manufactured in Asia, viral vectors sourced from Europe, and reagents flown in from around the world make up the backbone of advanced therapy development. The resurgence of global tariffs, particularly between the U.S. and China, has both increased material costs and created logistical uncertainty.

As international trade relations fluctuate, CGT companies are forced to build redundancies into their supply chains, raising the cost of goods and delaying timelines. For therapies already priced in the millions per dose, even a small cost increase can shift the balance between commercial viability and collapse. It can be hard to fathom, but even when a single dose is priced at $2 million, only a 5–10% cost increase can be the difference between a sustainable business model and commercial collapse, especially for small companies or niche indications.

Moreover, for companies pursuing global approvals and reimbursement, nationalistic policies and protectionist trade practices complicate regulatory pathways and market access.

The shadow of the national debt

The U.S. national debt recently surpassed $36 trillion and may exceed $37 trillion before this publishes. With that, rising interest payments are beginning to crowd out discretionary federal spending, including funding for biomedical research. Agencies like the National Institutes of Health and the Advanced Research Projects Agency for Health are under increasing pressure to do more with less.

For CGT innovators, that means grant funding is becoming more competitive and less generous. Programs that once served as critical early lifelines for exploratory science are being scaled back or redirected. The result? Many startups are left with brilliant science but no bridge to translate it into viable clinical programs.

At the same time, budgetary constraints are slowing the adoption of high-cost therapies by public and private payers. Even when a CGT product is approved, the lack of broad, timely reimbursement can stifle commercial growth, particularly in rare diseases where per-patient costs often exceed $1 million/dose.

Less funding = less innovation

The net effect of these macroeconomic pressures is simple: Less capital flowing into the ecosystem and fewer shots on goal.

In earlier years, ambitious ideas could find capital even in early preclinical stages. Today, many venture capitalists are prioritizing derisked, late-stage programs or platforms with broad applicability, leaving highly innovative, high-risk programs out in the cold. I was even told recently by one venture capitalist that their firm had dubbed early-stage cell and gene therapy 100% un-fundable. Gene editing startups, novel delivery technologies, and first-in-class therapies are among the hardest hit, despite often holding the most long-term potential.

And it’s not just about money. The slowdown affects talent recruitment, clinical trial enrollment, manufacturing investments, and the ability to pivot in response to new data. Innovation doesn’t just require ideas — it requires momentum. And momentum is much harder to maintain under pressure.

Still, the industry pushes forward

Yet, despite all this, the CGT industry is not stalling — it’s evolving.

Over the next 12 months alone, the FDA is expected to review or approve several new CGT products, including therapies for Duchenne muscular dystrophy, Fabry disease, and Hunter syndrome. If successful, these programs could collectively generate over $4 billion in annual revenue by 2030.

Even amid constrained funding, many CGT companies are advancing smarter, more targeted strategies:

• Allogeneic cell therapies that reduce cost and scale production
• Modular platforms that reuse delivery and regulatory elements across indications
• Built-in safety switches and tunable gene expression to address regulatory and payer concerns

What’s more, the demand for curative therapies remains as strong as ever. Patients, physicians, and regulators alike continue to support the accelerated development of CGT options for conditions with no viable alternatives.

Innovation under pressure = better innovation

There’s a paradox in play: Scarcity often breeds creativity.

The biotech landscape is no stranger to boom-and-bust cycles. In fact, many of today’s most successful therapies and platforms were born during previous downturns, times when teams were forced to refine, focus, and differentiate. What emerges from these periods is often leaner, smarter, and more resilient.

We may see fewer companies funded in 2025, but those that are funded may be the ones with the strongest science, clearest paths to market, and most compelling value propositions. Investors and acquirers are still watching. Payers are still negotiating. Patients are still waiting. Companies are learning to be lean, scrappy and gritty, waiting for better times.

The macroeconomic challenges facing CGT are real, and they are reshaping how the industry moves forward. But if history is any guide, the best science doesn’t disappear in hard times. It sharpens.

We may be entering a phase of slower capital, but we are also entering a phase of smarter innovation. And in biotech, that’s often when breakthroughs happen.