Between the years 2022 and 2025, the biotech, pharmaceutical, and medical device sectors experienced one of the most prolonged and challenging operating environments in life science industry since the global financial crisis of 2008. A sustained contraction in venture funding, a near-closure of the biotech IPO market, and heightened investor risk aversion especially for startups forced sponsors to reassess drug and device development priorities and fundamentally altered how clinical research programmes were funded, planned, and executed.
These pressures exposed clear differences in how clinical research organisations (CROs) were structured and managed. While many smaller CROs struggled to remain viable and several large global providers undertook significant downsizing to protect margins, a subset of mid-sized, privately owned CROs demonstrated notable resilience during these last years. These organisations maintained profitability, delivery continuity, and client confidence throughout a prolonged market contraction.
This paper examines the structural causes of the biotech downturn, its implications for clinical development and the CRO market, and the characteristics that differentiated resilient organisations within the life science industry. FGK Clinical Research is presented as a case study illustrating how long-term decision-making, staff continuity, and a policy of disciplined operating models translated into sustained performance during a period of exceptional stress in the health market.
The Biotech Downturn: Causes and Context
From Peak to Pressure: The Venture Capital Drought in Biotech
The downturn that began in 2022 was driven primarily by a sharp contraction in capital availability – which followed the high availability of financial resources during the years of the COVID pandemic – rather than by short-term operational weakness within the biotech sector. Rising interest rates, persistent inflationary pressures, and macroeconomic uncertainty led investors to retreat from innovations with high-risk and long-horizon assets. Biotech companies with a drug development pipeline, many of which are pre-revenue and dependent on external financing to fund clinical development, were disproportionately affected.
Venture capital funding declined sharply from its 2021 peak and remained depressed through the years 2023, 2024, and into 2025. At the same time, the biotech IPO market effectively closed, removing a critical pathway to late-stage capital for health innovations. Although public equity markets showed intermittent signs of recovery, this did not translate into improved funding conditions for private and clinical-stage companies. Investors shifted capital to de-risked, late-stage assets, making it even more challenging than before for clinical stage companies to secure funding for early clinical phases (Figure 1).
As a result, sponsors entered a prolonged period of years of capital preservation. Development strategies were reassessed, pipelines were rationalised, and fewer programmes were advanced in parallel. This venture capital and funding environment in general is widely described by industry analysts as the most sustained biotech financing downturn since 2008 (Figure 2).
Figure 1: General scheme of funding rounds in biotechnology in correlation to clinical milestones: Capital availability generally follows a risk-adjusted trajectory that mirrors clinical success probabilities. Image created by FGK with help of AI
Figure 2. Global biotech venture funding, 2018–2025 (actual data). Image created by FGK with help of AI
Source: Publicly reported biotech venture funding data and industry analyses, including PitchBook, Precision for Medicine, EY, and BioPharma Dive.
Implications for Clinical Development
The contraction in funding during the last years did not halt clinical development, but it fundamentally changed its character. Sponsors became significantly more selective and risk-aware in how studies were initiated and outsourced.
Internal decision-making cycles lengthened, feasibility assumptions were scrutinised more closely, and tolerance for execution risk decreased markedly. Delays, inefficiencies, or loss of continuity could materially affect a company’s ability to reach its next financing milestone.
The prolonged weakness of the biotech IPO market reinforced this behaviour (Figure 3). Even as select public markets stabilised, capital formation for clinical-stage companies remained constrained, resulting in delayed study starts, reduced trial volumes, and heightened pressure on development timelines.
Figure 3. Annual biotech IPO counts, 2018–2025 (actual data). Image created by FGK with help of AI
Source: Compiled from published industry counts including BioSpace, BioPharma Dive, EY Global IPO reports, and Reuters.
How the Biotech Downturn Redefined the CRO Market
The Vulnerability of Global Giants vs. Small Providers
The sustained slowdown in sponsor activity placed significant strain on the CRO sector in the past years. Many organisations had expanded rapidly during the 2020–2021 upcycle, building cost structures aligned to peak demand. When funding conditions deteriorated, this operating leverage became a vulnerability.
Smaller CRO companies, often exposed to client concentration and cash-flow volatility, were particularly affected and especially in the years 2023-2025, a number exited the market altogether. Larger global CROs were generally more resilient financially but responded through workforce reductions, hiring freezes, and internal reorganisations to protect margins.
These pressures led to a clear divergence of outcomes across the CRO sector, with some organisations downsizing or exiting while others maintained operational stability (Figure 4).
Figure 4. CRO market outcomes during the biotech downturn. Image created by FGK with help of AI
Source: Industry reporting and consulting analyses, including BCG, Reuters, and BioSpace.
The Rise of the Resilient Mid-Sized CRO
For sponsor companies, the most immediate impact of CRO restructuring was disruption to delivery continuity. Changes to project teams during or between studies resulted in loss of protocol-specific knowledge, increased onboarding requirements, and slower issue resolution.
At a time when sponsors were operating under constrained timelines and limited financial flexibility, this loss of continuity introduced unacceptable execution risk. As a result, continuity of people within a company, not just processes or systems, emerged as a key differentiator in CRO selection.
Key Differentiators of Sustainable Clinical Partnerships
Despite the challenging environment in the health market, a subset of CROs remained profitable and operationally stable throughout the downturn years. Examination of these organisations highlights several shared characteristics.
Ownership Structure and Long-Term Vision
Ownership structure played a meaningful role. Privately owned CROs, without external investors pushing short-term margin optimisation, were often better positioned to take a long-term view during years of uncertain project workload. This enabled them to avoid reactive cost-cutting, retain experienced staff during slower periods, and preserve delivery capability.
People over Process: Why Staff Continuity is the New Gold Standard
Staff retention emerged as a second critical factor. Low turnover supported stronger institutional knowledge, reduced handover risk, and more efficient execution. Over the years, continuity across studies enabled faster start-up, improved quality, and stronger sponsor relationships.
Finally, resilient CRO companies tended to operate disciplined, right-sized models. By aligning their hiring policy closely with deliverable work and avoiding over-expansion during peak periods, they reduced the need for disruptive restructuring when market conditions tightened.
Case Study: Navigating the Biotech Downturn with FGK Clinical Research
FGK Clinical Research provides a practical example of how these resilience factors translated into real-world performance during the public downturn.
Throughout the years 2022–2025, FGK remained profitable while continuing to support sponsors across a broad range of clinical development activities. This stability was achieved without large-scale restructuring and was underpinned by a deliberate focus on delivery quality, staff continuity, and long-term client partnerships.
FGK operates as a full-service clinical research organisation company, supporting sponsors across the full clinical development lifecycle, from early-stage studies through to late-phase and post-approval work. Services include clinical operations (study start-up, site management, and monitoring across Phase I–IV), integrated project management and governance, regulatory affairs across the UK, EU, and US, data management and biostatistics, pharmacovigilance and safety services, and medical writing.
A defining feature of FGK’s delivery model is team continuity. FGK reported a staff turnover rate of 3.1% in the most recent year (internal HR data), enabling sponsors to work with stable teams that retain deep familiarity with sponsor organisations, protocols, and site networks. This continuity has supported efficient transitions between studies and contributed to a high level of repeat business for the company.
In an environment where execution risk could materially affect company viability, this predictability proved a decisive advantage for sponsors.
Looking for a resilient partner for your next clinical program?
Future-Proofing: Choosing a CRO for the Next Cycle
Although market conditions have shown signs of stabilisation, sponsor behaviour has shifted in lasting ways.
The shift from 2021’s capital abundance to 2024’s efficiency-driven market has made ‘Operational Resilience’ the primary KPI for Biotech C-Levels.
Clinical development strategies are now more risk-aware, and CRO selection is increasingly viewed as a strategic risk-management decision rather than a purely transactional one.
Sponsors are likely to prioritise partners that can demonstrate resilience across market cycles, stable delivery teams, a policy of transparent operational planning, and financial discipline aligned with long-term programme success.
Endnotes
- PitchBook (2024) Biotech venture funding trends and outlook. Available at: https://pitchbook.com/news/articles/biotech-vc-funding (Accessed: April 2026).
- EY (2024) Global IPO trends: biotechnology sector update. Available at: https://www.ey.com/en_gl/ipo/trends (Accessed: April 2026).
- BioSpace (2025) IPOs slow to a trickle as biotech funding pressure persists. Available at: https://www.biospace.com/deals/ipos-slow-to-a-trickle-in-2025-as-investors-grow-more-discerning (Accessed: April 2026).
- BioPharma Dive (2024) Biotech winter extends into a third year amid funding slowdown. Available at: https://www.biopharmadive.com/news/biotech-funding-downturn-2024 (Accessed: April 2026).
- Boston Consulting Group (2023) Resilience in pharma services and CRO market dynamics. Available at: https://www.bcg.com/publications (Accessed: April 2026).
- Reuters (2024) Biotech funding slowdown reshapes clinical development landscape. Available at: https://www.reuters.com/markets (Accessed: April 2026).
About the Author:
Mark Thomas
Managing Director FGK UK
Mark is the founder and Managing Director of Clinicology Ltd, a specialized Contract Research Organization (CRO) based in Guildford, UK, which was acquired by FGK Clinical Research in 2024. Before founding Clinicology, he was founding director and board member of a medium sized global CRO. Mark has over 30 years of experience in managing pharmaceutical and medical device studies.
FAQs about the Biotech Downturn
What is the Biotech Downturn?
Venture capital funding for biotech companies declined sharply from its 2021 peak and remained depressed through the years 2023, 2024, and into 2025, which can be called a “Biotech Downturn” in the life science industry. At the same time, the biotech IPO market effectively closed, removing a critical pathway to late-stage capital for health innovations
How long did the Biotech funding drought last?
The Biotech funding drought is slowly recovering since 2025 but funding conditions for private and clinical-stage companies bare still difficult in 2026.
Why does CRO staff continuity matter for startups?
Working with a stable CRO team that retains deep familiarity with the client, the study protocol and site networks decreases the risk of delays significantly and an efficient and timely execution of clinical studies can save a great amount of money for start-up companies. Sponsors and Investors are likely to prioritise CRO partners that can demonstrate resilience across market cycles which is highly dependent on stable delivery teams at the CRO vendor.
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