The 44th Annual J.P. Morgan Healthcare Conference brought over 8,000 industry leaders to San Francisco with a mood best described as thoughtful optimism. After years of volatility, biotech appears to be stabilizing, though we thought the same thing 12 months ago. This does feel different. The XBI ended 2025 up by more than 30%. Venture capital activity surged in Q4. Massachusetts-based companies announced significant financing rounds and partnerships in the days leading up to the conference. But beneath the optimism lies a more complicated picture, one that demands attention from policymakers and industry leaders alike.
The AI Inflection Point
The headline partnership of JPM 2026 was a $1 billion co-innovation lab between Eli Lilly and NVIDIA. But the significance wasn’t the dollar amount. It was the vision: co-locating biologists and AI engineers to build models that transform drug discovery from artisanal craft to scalable engineering. As Lilly CEO David Ricks put it: “Each small molecule discovery is like a work of art. If we can make that an engineering problem, versus … this artisanal drug-making problem, think of the impact on human life.” NVIDIA also announced a collaboration with Massachusetts-based Thermo Fisher Scientific to build autonomous lab infrastructure.
The companies that figure out how to integrate AI into their R&D workflows, not just experiment with it, will have a decisive advantage. The window to build that capability is now, and it seems like there’s been more uptake over the last year.
The China Question: A New Space Race
The biggest licensing deals announced at JPM 2026 went to Chinese biotechs. Nearly half of all U.S. in-licensing deals in 2025 involved Chinese drug developers. China now runs approximately 40% of global oncology trials, with faster enrollment and lower costs than Western counterparts. The National Security Commission on Emerging Biotechnology has warned that the U.S. must “take swift action” or “risk falling behind, a setback from which we may never recover.”
The instinct to block or restrict is understandable but counterproductive. The U.S. cannot win by slowing China down. We can only win by speeding ourselves up. That means investing in domestic R&D, creating a supportive policy and regulatory environment, and recognizing that this is a competition we must run. The framing has shifted from protection to competition—it’s the new space race.
The Early-Stage Crisis
While late-stage dealmaking is thriving, early-stage biotech remains in crisis. Seed and Series A activity declined again in 2025, with VCs overwhelmingly prioritizing de-risked assets with clinical data. The result is a funding gap at exactly the stage where breakthrough science gets started. It is also the worst possible timing to not have the federal SBIR program to help bootstrap these new enterprises.
It’s worth noting who is paying attention: Middle Eastern sovereign wealth funds (including Saudi Arabia’s Public Investment Fund and UAE’s Mubadala) are actively investing in U.S. biotech startups. Their interest validates the strength of American innovation. The question is: why isn’t domestic capital equally eager? We don’t want to cut off foreign investment; we want it to be additive to a robust domestic funding environment.
The Exit Imperative
Boston-based Aktis Oncology became the first biotech IPO of 2026, and several other companies filed to go public during the conference. This matters beyond the individual success stories. Exits recapitalize the entire ecosystem. When VCs can return capital to their limited partners, that money flows back into new early-stage investments. Without exits, the funding squeeze at the earliest stages only gets worse. The IPO window appears to be cracking open, but it remains highly selective. The companies getting through have clinical-stage assets, strategic pharma relationships, and differentiated science. For everyone else, the wait continues.
The Policy Wildcard
NIH funding remains a source of significant uncertainty. The agency’s new “unified funding strategy” has eliminated traditional paylines and introduced “geographic balance” as a factor in grant decisions. For Massachusetts, New York, and California, which receive the largest shares of NIH funding, this raises real concerns about future allocations. While it appears Congress will keep NIH fully funded, the uncertainty of the last year and entering this year itself is damaging. As MassBio’s Ben Bradford noted in The Boston Globe: “Uncertainty makes it very hard for institutions to appropriately plan for hiring and using valuable grant dollars to advance critical early-stage science.”
The consequences are already visible: talented entrepreneurs leaving biotech, promising programs being shelved, and companies prioritizing only assets that can show clinical progress within two years. Who will ultimately bear the cost? Patients who will never see the therapies that didn’t get developed in time or at all.
What This Means for Massachusetts
Massachusetts was well-represented at JPM 2026, with local companies (including Aktis Oncology, Nimbus Therapeutics, Parabilis Medicines, Kinaset Therapeutics, and Caldera Therapeutics, among others) announcing IPOs, venture rounds, and strategic partnerships. The Commonwealth’s drug candidate pipeline grew 14% year-over-year in 2025. The fundamentals of this ecosystem are sound.
But leadership isn’t guaranteed. Preserving it requires continued advocacy on federal policy, sustained investment in early-stage research infrastructure, and an industry (and investors) willing to take risks on early science. The science, capital, and talent are here, but keeping them here will take effort from all sides. JPM 2026 showed an industry finding its footing after years of disruption. Massachusetts is positioned to lead what comes next.