Otello Stampacchia, a seasoned biotech investor, has seen the industry face many tough times over the past 20 years. He founded Omega Funds in 2004, just before the Great Recession hit, causing a major slowdown in biotech investments. After that, there was a period of strong growth, followed by another downturn. Now, in 2025, biotech startups are dealing with new challenges—layoffs, leadership changes at health agencies, competition from China, and cuts to U.S. science funding. It’s harder than ever for companies to go public, and many are struggling to stay afloat. Despite these difficulties, Stampacchia remains hopeful, believing the industry will recover and improve in the long run. ‘This is medicine, and medicine sometimes tastes bitter,’ he said. BioPharma Dive spoke with Stampacchia about the current state of biotech investing. The following conversation has been edited for clarity. BIOPHARMA DIVE: How has the slowdown in biotech IPOs affected your investment decisions? OTELLO STAMPACCHIA: We now advise companies to stay private longer if possible. For over five years, we’ve focused on acquisitions rather than IPOs as our main exit strategy. When selling to another company, you deal with buyers who know exactly what they want. But in the IPO market, there are many unpredictable factors—interest rates, market conditions, and more. Many general investors have moved away from biotech because they see better opportunities elsewhere. Has anything changed this year, with IPO activity being especially slow? STAMPACCHIA: Some public investors are struggling, which could lead to changes. These investors used to help fund later-stage companies, but now it’s becoming harder. This means valuations for later-stage investments are becoming more attractive, so we’re shifting some of our focus there. What do you think about investors pressuring struggling biotech companies to shut down and return cash to shareholders? STAMPACCHIA: Investors are now less willing to give companies the benefit of the doubt. This is a return to stricter financial discipline, which was missing when money was easy to get and interest rates were low. Public investors are under pressure themselves, so they want liquidity. If a company isn’t making progress in its research, it makes sense for them to return cash to shareholders. While it’s tough for employees when a company closes, it’s a healthy correction for the market overall. What can be done earlier to prevent companies from ending up in this situation? STAMPACCHIA: The problem often starts when companies go public. As private companies, we work closely with management and board members to make sure money is spent wisely. But once a company goes public, that discipline can weaken. They may take on too many projects or raise too much money. The key is to keep strong governance and collaboration between investors and management for as long as possible. Does the political debate around mRNA vaccines and reduced federal funding make you hesitant to invest in vaccines? STAMPACCHIA: Honestly, yes. Vaccine hesitancy is a serious public health concern, and it makes investing in vaccine companies riskier. Many investors will be more cautious about funding these projects. How have leadership changes at the FDA affected the biotech sector? STAMPACCHIA: It’s too early to know the full impact, but there’s a perception of instability at the agency. While reviewers are still doing their jobs, the long-term effects of these changes remain unclear. Perceived instability can create real challenges for the industry. How has China’s growing influence in biotech affected your investment decisions? STAMPACCHIA: Chinese companies are making significant progress, especially in biologics. They have advantages in early-stage clinical trials, which is a major competitive edge. U.S. and European regulators may not fully understand how fast China can move in this area. This could have big political and economic consequences for countries that want to maintain strong biotech industries.