The Department of Health and Human Services is allegedly denying clinical trial funding for biotechs based on their ties to certain foreign investors, Fierce Biotech has learned.
At the BIO conference in Boston this week, Fierce spoke with a biotech executive who had their grant pulled, as well as an industry thought leader who backed up the claims about a change in the HHS' funding approach.
“I'm sure that NIA [National Institute of Aging] is not going to be happy with me, but I think everyone should know—Juvena was supposed to get a $2.5 million phase 2 SBIR grant that they last minute didn't give us,” Juvena Therapeutics CEO and cofounder Hanadie Yousef, Ph.D., told Fierce Biotech at this year’s BIO international convention held in Boston.
“They didn't tell us exactly why,” the CEO said, adding that the withdrawal was right after the federal agency had asked Juvena about its foreign investors.
In 2022, the chronic muscle- and metabolic diseases-focused biotech raised $41 million, with both U.S. and ex-U.S. investors participating in the series A round. The latter group included Hong Kong-based Horizons Ventures, U.K.-based Manta Ray Ventures and South Korea-based Iron Grey. The biotech is currently in the process of a series B fundraise, Yousef said.
“We think we're supposed to get wiring. They go silent on us,” she said about the expected $2.5 million federal grant.
Instead, the Juvena leader received a March 8 email from the National Institutes of Health (NIH) serving as the notice that the decision to fund its phase 2 trial had been denied "at this time." The email, which has been viewed by Fierce Biotech, consisted of one paragraph and did not include the reason for the decision.
As of publication, the HHS, NIH and NIA have not responded to Fierce’s request for comment. The Trump administration has canceled (PDF) a wide range of grants this year as part of its efficiency push, without always providing reasoning behind the decision.
Yousef called the trial’s principal investigator to figure out why the funding had been refused so late in the game.
“We thought we were going to pass,” she explained, noting that everything with the Committee on Foreign Investment in the United States appeared to be in order.
Yousef claimed she was told informally by another person with insider knowledge that “a lot of the companies that should have gotten phase 2 [funding] were denied because of their Chinese investors.”
But the shift appears to affect more than just companies with China-based investors. It’s apparently coming into play with other countries, too—including nations historically considered U.S. allies.
“We're in a situation where some of the companies are confused about their ability to take foreign investment,” said John Stanford, founder and executive director of Incubate, a nonprofit organization of biotech venture capital firms and patient advocacy groups designed to educate policymakers on life science investment and innovation.
“We've been hearing about SBIR grants canceled,” Stanford told Fierce in a separate interview at BIO. “Anecdotally, we've also heard it's a lot more than China and its countries—Canada, Norway, the EU—that traditionally we think of as allies.”
“Again, that's anecdotal,” he stressed. “But we would be very concerned [about] the idea that we won't take Canadian investments or Japanese investments or EU-based investments.”
“We want foreign investors coming to U.S.-based companies to develop drugs for the world,” Stanford said. “That is a win-win-win.”
Back in February, President Donald Trump issued a memorandum titled the “America First Investment Policy” that aims to restrict both inbound and outbound investments related to “foreign adversaries” in certain strategic industries. The document lacks specifics but puts China front and center while mentioning both healthcare and biotech among the sectors it will regulate.
In a seemingly similar change, the NIH announced plans last month to end the subaward process for funding recipients outside of the U.S. A subaward occurs when a grant recipient redirects some of their received funds to a third party, like a research group at another university, which then carries out part of the grant’s work. Before the new structure is fully implemented—which is expected by Sept. 30—the NIH won’t issue any new grants that include subawards to foreign institutions.
Luckily for Juvena, the biotech just scored a deal with Eli Lilly worth more than $650 million in milestones. Together, the two will use Juvena’s AI-enabled screening platform to identify candidates that improve muscle health and body composition.
The two-year-in-the-making pact is a “breath of fresh air,” Yousef said, citing the lean nature of biotech cash runways.
Previously, Juvena had received a $254,000 SBIR award from NIH for work on "biologics for improved aged muscle function," plus a $3.9 million grant from the California Institute for Regenerative Medicine.
Moving forward, Yousef said the biotech is engaging in other partnering discussions related to Juvena’s platform across different types of muscle diseases, plus a preclinical obesity asset dubbed JUV-112.
Meanwhile, the U.S. biotech recently launched a phase 1 trial assessing endocrine therapy JUV-161 for myotonic dystrophy type 1 (DM1) and sarcopenia. The trial is held in Australia, where Juvena is given a 40% rebate, Yousef said.
“We decided to go ex-U.S. strategy since 2024,” the Juvena CEO said, citing the high national chemistry, manufacturing and controls costs.
As for that planned phase 2 trial, the biotech is planning to file an investigational new drug application with the FDA next year for JUV-161 based on the Australia data.
But if there are still delays being reported at the FDA, Juvena has contingency plans in place. The biotech is considering trials in other countries, such as Canada and Europe, Yousef said.