Follow the money: What life sciences funding looks like in 2026

Falling grant success rates, a biotech funding recovery and heavy investment in AI can seem to tell a simple story about where life sciences capital has gone.

Funding remains available, but it is harder to access at some of the earliest stages and increasingly concentrated around companies that can demonstrate clear value. For contract research organizations (CROs), contract development and manufacturing organizations (CDMOs) and other pharma service providers, that changes where customers can spend and what they need each investment to achieve.

The ramarketing review cuts through the headlines to explore the developments shaping life sciences, with a different ramarketing expert each month providing context, commercial perspective and the stories that matter most.

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Introducing August’s sector expert

Rachel Martin, Scientific Content Writer

With a background spanning academic research and healthcare marketing, Rachel brings a strong understanding of both scientific evidence and audience engagement. Having contributed to more than 12 published research papers before moving into marketing, she now applies that analytical mindset to scientific content — translating complex information into clear, credible communications that support wider strategic and commercial goals.

Why more research funding can still mean fewer new grants

Talk of a life sciences funding squeeze can sound strange when the headline numbers continue to grow. The US National Institutes of Health (NIH) awarded $35.3 billion through competing and noncompeting grants in fiscal year 2025, slightly more than the previous year. Funding allocated specifically to research project grants also increased by 3% [1].

Applications rose while the number of new or renewed awards fell, pushing success rates down [1].

Competition for NIH funding

Source: US National Institutes of Health [1]

The NIH explains that the RPG success rate declined because application numbers increased while the number of awards fell. It also notes that fewer new awards and a higher average cost per award were likely influenced in part by greater use of forward funding [1]. Researchers planning the next study and suppliers waiting for those projects to move ahead can face a tighter market even when total expenditure remains broadly stable.

The same pressure is visible within one of the world’s most established life sciences clusters. Massachusetts received 9.3% of all NIH funding in 2025, yet its number of awards declined by 6.2% [2]. The pressure is concentrated around access to new awards rather than the absolute size of the research budget.

A biotech funding recovery that is leaving some companies behind

Biotech venture funding is recovering, but the headline totals conceal how unevenly that capital is distributed. Data from Massachusetts, SVB’s broader biopharma dataset and the UK market show stronger funding totals alongside signs that money is concentrating in larger financings [2-4].

A recovery that looks different beneath the headline

Sources: MassBio [2], Silicon Valley Bank [3], BioIndustry Association [4]

Taken together, the recovery is much stronger for some companies than the aggregate figures imply. Businesses still trying to secure early validation can face a tight financing environment even while sector-wide investment rises.

Has AI taken the money?

AI makes that distribution harder to read because its investment numbers are extraordinary. In 2025, AI and machine learning companies accounted for 65.4% of all US venture deal value, up from 50.9% the previous year. They attracted around $222 billion in investment [5].

The headline share can make it look as though capital has simply migrated out of life sciences, but the deal data complicates that reading.

AI accounted for 39.4% of US venture deal count in 2025, showing that interest extends well beyond a handful of businesses. Yet the size of the largest transactions has also transformed the overall market. The five largest companies raised almost $60 billion between them [5]. Across the US venture market, financings worth at least $100 million represented only 3.2% of deal count but 67% of total venture value [5].

That concentration changes how the sector-level figures should be read. NVCA estimates that once AI mega-rounds are stripped out, life sciences returns to roughly 20% of US venture deal value, close to its historical share [5]. Life sciences itself still attracted $37.3 billion during 2025.

AI and ML’s share of US venture investment in Q1 2026

88.8%
Share of US VC deal value

42.5%
Share of US VC deal count

Source: PitchBook and NVCA [6]

The gap shows how heavily very large financings can influence the aggregate market.

The UK shows the same concentration within life sciences. Isomorphic Labs’ £1.6 billion Series B accounted for most of Q2 2026’s biotech venture total [4]. AI is attracting a substantial share of capital, but the data does not support treating that investment as a dollar-for-dollar transfer out of conventional drug development [4, 5].

AI investment is running ahead of scaled impact

AI deployment versus measurable impact

71% said AI deployment had advanced at least somewhat over the previous six months

45% said AI initiatives had produced measurable improvement

13% reported measurable improvement at scale

The 13% reporting measurable improvement at scale is included within the 45% reporting measurable improvement

Source: Deloitte life sciences executive survey [7].

Deloitte’s results show that deployment is moving faster than measurable value at scale [7]. IQVIA’s 2026 R&D analysis found an early signal of higher success rates for AI-enabled programs at emerging biopharma companies, while cautioning that the validated cohort is small and industry-wide success rates were unchanged [8]. The recent improvement in clinical program productivity was also not sustained in 2025. Trial durations increased overall and inter-trial intervals lengthened by three months [8]. AI-enabled R&D is producing credible early signals, but those gains are not yet visible as a broad improvement in industry productivity.

What a more selective funding market means for pharma services

For companies supporting drug development, aggregate funding totals are a weak guide to customer opportunity. Funding stage gives more useful context on when a project can move and what each external spend is expected to achieve.

What funding concentration changes for pharma services

• Academic research: High overall research spend can coexist with greater uncertainty around whether new projects secure awards.
• Seed and early biotech: Tighter runway can place more scrutiny on outsourced work and the evidence generated before the next financing milestone.
• Better-funded programs: Larger rounds increase spending capacity, but that capital is tied to expectations for meaningful development progress.
• AI-enabled businesses: Strong investor appetite does not remove the requirement to demonstrate measurable R&D value.

That makes the next development or financing milestone a more useful frame for outsourced spend than aggregate funding totals.

Communicating value when capital is selective

Across the datasets, large sums are still moving through life sciences, but access is more uneven and mega-rounds exert more influence over the headline totals.

In a more selective market, broad claims around capacity or technical capability carry less weight on their own. Customers working under tighter funding constraints need to understand what an external partner helps them achieve with the next portion of their development budget. Those with substantial backing still need evidence that outsourcing decisions contribute meaningfully to the milestones on which future value depends.

At ramarketing, we help life sciences service providers connect technical capability with the commercial context their customers are working in. That means understanding where investment is going and what customers are being asked to prove once they receive it.

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References

[1] NIH. “Fiscal Year 2025 By the Numbers: Extramural Grant Investments in Research.” National Institutes of Health. 2026. https://grants.nih.gov/news-events/nih-extramural-nexus-news/2026/03/fiscal-year-2025-by-the-numbers-extramural-grant-investments-in-research
[2] MassBio. “Massachusetts Biopharma Sees Strong Resurgence of Capital Even as Workforce Numbers Lag.” Massachusetts Biotechnology Council. 2026. https://www.massbio.org/news/recent-news/massachusetts-biopharma-sees-strong-resurgence-of-capital-even-as-workforce-numbers-lag/
[3] Silicon Valley Bank. “H2 2026 Healthcare Industry Trends.” Silicon Valley Bank. 2026. https://www.svb.com/trends-insights/reports/healthcare-investments-and-exits/
[4] BioIndustry Association. “UK biotech financing April – June 2026.” BioIndustry Association. 2026. https://www.bioindustry.org/resource/uk-biotech-financing-april-june-2026.html
[5] NVCA. “2026 NVCA Yearbook.” National Venture Capital Association. 2026. https://nvca.org/wp-content/uploads/2026/04/NVCA-2026-Yearbook-4.9.26.pdf
[6] PitchBook; National Venture Capital Association. “Q1 2026 PitchBook-NVCA Venture Monitor.” PitchBook and NVCA. 2026. https://nvca.org/wp-content/uploads/2026/04/Q1-2026-PitchBook-NVCA-Venture-Monitor.pdf