Challenges for U.S. Biotechs Amid COVID-19 Vaccine Funding Cuts and Regulatory Shifts

Highlights

• The WHO adopted a new pandemic preparedness agreement, while the U.S. withdraws from the WHO and cuts COVID-19 funding.
• HHS terminated $11.4 billion in COVID-19 funding at the CDC, signaling a shift away from pandemic response spending.
• FDA introduced a new approval framework prioritizing older adults and high-risk populations, with confusing trial requirements.
• Four biotechs—Vaxart, Novavax, GeoVax, and CastleVax—face challenges including stop-work orders, funding cuts, and regulatory delays.
• Vaxart’s oral vaccine trial was paused and later resumed; Novavax received delayed approval with postmarketing trial requirements.
• GeoVax and CastleVax lost BARDA funding but plan to continue development through alternate means.
• Industry experts warn that reduced public funding and regulatory uncertainty threaten long-term vaccine innovation and pandemic preparedness.

WHO Agreement and Shifting U.S. Vaccine Landscape

As the World Health Organization (WHO) recently adopted a new agreement to coordinate global responses to future pandemics, the U.S. vaccine development landscape is encountering mounting uncertainties. This stems from declining funding, evolving regulatory policies, and the country's partial disengagement from the WHO.

The WHO’s move aims to enhance worldwide pandemic preparedness by learning from the COVID-19 crisis. However, the U.S. withdrawal from the organization, coupled with significant funding reductions and revamped regulatory requirements, casts doubt on the future of next-generation COVID-19 vaccines and broader pandemic readiness efforts.

Funding Cuts Impact Vaccine Innovation

Historically, vaccine research has not been a top priority for the pharmaceutical sector, with investment favoring more profitable therapeutic areas. Much of the early innovation behind COVID-19 vaccines originated from public funding channeled through universities and smaller biotechnology companies.

In March 2024, the U.S. Department of Health and Human Services (HHS) terminated $11.4 billion in COVID-19 funding at the Centers for Disease Control and Prevention (CDC), stating, “The COVID-19 pandemic is over, and HHS will no longer waste billions of taxpayer dollars responding to a non-existent pandemic that Americans moved on from years ago.”

According to Cheng Li, director of Biotech Equity Research at Oppenheimer, these funding cuts, alongside job losses at the Food and Drug Administration (FDA) and reductions at the National Institutes of Health (NIH), threaten to disrupt pharmaceutical innovation. Li explained, “If you have fewer dollars going to basic research, you’re going to have fewer breakthrough therapies in the next 10 years, and you will save fewer lives in the next 20 years.” He also emphasized that while vaccine funding cuts may not have an immediate effect, the long-term consequences could be severe.

Regulatory Changes and New FDA Approval Framework

Recently, the FDA introduced a new approval framework for future COVID-19 vaccines, prioritizing individuals aged 65 and older, as well as high-risk groups aged 6 months to 64 years. This new framework requires placebo-controlled trials for vaccine approval, which has caused confusion due to a narrow definition of what qualifies as a placebo.

Case Studies: Four Biotech Companies Amid Funding Challenges

Vaxart’s Oral Vaccine Candidate

In February 2024, HHS suspended a potential $453 million government contract with California-based Vaxart, halting the Phase IIb trial for its oral COVID-19 vaccine candidate, VXA-CoV2-3.3. The trial evaluates safety, efficacy, and immunogenicity compared to approved mRNA vaccines. Cheng Li noted that government funding is essential for advancing this program, especially given the logistical advantages of oral vaccines, which could improve vaccination coverage in future pandemics by alleviating cold chain constraints.

The stop-work order triggered a restructuring at Vaxart, including layoffs affecting approximately 10% of its workforce, according to its 2024 financial report. However, in April, HHS lifted the stop order, allowing the company to resume patient enrollment. Li highlighted that clinical trial pauses disrupt operations, manufacturing, and recruitment, posing risks beyond financial losses.

Novavax’s Nuvaxovid Approval Delays

Unlike Vaxart, Maryland-based Novavax did not face a stop-work order but experienced uncertainty surrounding the FDA’s full approval of its updated COVID-19 vaccine, Nuvaxovid. The approval, granted on May 16, 2024, came roughly six weeks after the original Prescription Drug User Fee Act (PDUFA) date of April 1. Speculation about requiring a new clinical trial surfaced, although Novavax maintained that such trials would be postmarketing studies, as later confirmed by the FDA’s approval notice detailing four postmarketing commitments.

Nuvaxovid’s approval is limited to seniors aged 65 and older and adults 12 to 64 years with high-risk conditions, contrasting with Moderna’s Spikevax and Pfizer/BioNTech’s Comirnaty, which have full approvals for patients aged 12 and above. The uncertainty impacted Novavax’s stock, which fell nearly 20% after efficacy concerns were raised in April. Nonetheless, Novavax reported a 610% year-over-year sales increase primarily driven by Nuvaxovid. Li noted Novavax’s stronger position due to its billion-dollar market cap and partnership with Sanofi.

GeoVax’s Multi-Antigen Vaccine Development

GeoVax, a smaller biotech, faced a stop-work order and funding termination from the Biomedical Advanced Research and Development Authority (BARDA) in 2024. The company’s CEO, David Dodd, attributed the termination to government efficiency efforts under the current administration. Despite losing funding estimated at less than $750,000 annually, GeoVax intends to continue its Phase II trial programs without significant operational changes.

GeoVax’s vaccine candidate, GEO-CM04S1, employs a multi-antigen approach designed to elicit a more robust immune response and potentially increase durability against emerging variants.

CastleVax’s Intranasal Vaccine Efforts

Similarly, CastleVax, a Mount Sinai spin-out, received BARDA funding aimed at advancing its intranasal COVID-19 vaccine candidate, NDV-HXP-S. The company had planned a Phase IIb efficacy trial but had not started it as of April 2024. CEO Michael Egan revealed the likelihood of a funding agreement termination due to a stop-work order but confirmed that smaller-scale studies would proceed using internal or external non-governmental funds.

The intranasal vaccine approach targets mucosal immunity in the respiratory tract, which could enhance protection by preventing viral transmission via airborne spread.

Industry Implications of Funding Uncertainty

Cheng Li highlighted that the cancellation or suspension of government funding, even when later restored, creates a negative perception among biotech investors. Given the high-risk nature of early-stage vaccine development, inconsistent government support exacerbates financing challenges. Li warned, “It’s becoming a negative feedback loop—when you have fewer investments in early research or platform innovations, you are less likely to have really novel and groundbreaking technology or candidates.”

He concluded that without stable funding and investment, even promising vaccine candidates may fail to progress through global trials and commercialization, illustrating how market dynamics and political decisions directly affect scientific advancement and public health preparedness.