Biotech and Pharma Market Update: Q1 2026 in Review

Life science sectors gets funding relief

According to Shrayer, the biggest news for the life science sector so far in 2026 was the passing of the US$47 billion National Institutes of Health (NIH) budget, absent the previously floated 40 percent cut. This is good news for the industry, he said, even while remaining concerned about the number of grants being awarded.

“At least we have an NIH budget. I think for a decade we saw NIH funding increase rapidly, and it doesn’t seem like that's going to be the case over the next few years," Shrayer said to INN.

He emphasized that the ability to raise money is often the biggest challenge for smaller biotech companies, especially in a lower-growth environment where higher interest rates and tighter capital markets matter.

Franklin Templeton’s February perspective reinforces that point, noting that smaller and mid-cap biotech names continue to trade below historical averages, and that gaining access to capital now depends heavily on demonstrated clinical progress and credible commercialization paths.

The authors point to ongoing strength in oncology, neurology, rare disease and cardiovascular medicine, along with interest in obesity and metabolic disease. GLP-1-based therapies remain a major growth engine, but competition is intensifying, especially around new delivery approaches.

Platform technology and gene editing

Shrayer told INN that he’s bullish on platform technology players, noting that his firm is maintaining a position in Danaher (NYSE:DHR), which he described as a “backbone” platform play on pharma and life sciences due to the company's position as a core infrastructure provider and research partner.

While he has tempered his initial excitement about CRISPR Therapeutics (NASDAQ:CRSP), citing treatment complexity, he’s still optimistic about the broader gene‑editing platform opportunity.

He noted the evolution from early gene therapy to CRISPR, pointing to base-editing companies such as Beam Therapeutics (NASDAQ:BEAM) and players like Prime Medicine (NASDAQ:PRME), and even to emerging concepts such as INSTALL circular DNA technology, which was discussed recently in Nature.

“To me, the platform is exciting because it’s a wider range of diseases you can treat," he said.

Shrayer also said technologies that can support multiple partnerships and collaborations underpin broader pipelines, commenting, “A company like CRISPR, with its technology, can go out and sign partnerships.”

He highlighted its partnership with Vertex Pharmaceuticals (NASDAQ:VRTX) as a prime example, where stem cells from type 1 diabetes patients are replaced with gene-edited versions capable of insulin production.

“Vertex released data last year (that showed) 10 out of 12 patients after one year no longer needed insulin, which is incredible, but the problem is (patients) have to be on immunosuppression drugs for the rest of (their) life, so the body doesn’t reject these transplanted stem cells," Shrayer explained.

In his view, the therapy as it exists today is highly promising, but clinically constrained by that requirement:

“So now CRISPR and Vertex are working on the next iteration of making edits to these stem cells so that they’re not recognized as foreign by the body, and you don’t have to stay on immunosuppressing drugs for the rest of your life. Personally, I think we’ll get there. I think there are huge target markets that you can address with these types of technologies.”

By contrast, Shrayer views single‑asset biotech success stories as more exposed to patent expirations and the need to continually buy to replenish their pipeline.

“I feel like that’s a drain on cashflow that people don’t always appreciate," he said.

AI's role in the life science sector

Conversations about artificial intelligence (AI) in the life science sector are maturing amid high enthusiasm.

Shrayer sees clear utility in medtech, particularly in imaging, surgical guidance and workflow automation, but is more skeptical about its transformative impact on drug discovery.

“We’ve seen AI really help with protein folding. I think AI can help with that, and that would be a benefit," he said. However, AI is less useful in other areas, such as mRNA design.

That distinction matters for investors.

Citeline's Pharma R&D Annual Review 2026 indicates that AI in the life science sector is being evaluated more heavily by its practical commercial applications, not speculative excitement. Essentially, investors are prioritizing tangible improvements in specific areas like clinical trial efficiency versus assuming AI will “rewrite biology overnight."

In the realm of medical devices, Shrayer highlighted Stryker (NYSE:SYK:US) as “well positioned” to benefit from AI across multiple fronts, pointing out the company’s Mako robotics platform, which uses AI with pre-op CT scans to guide surgeons on diseased versus healthy bone and implant selection.

“Another one that we’re looking at is Siemens Healthineers (ETR:SHL,OTCPL:SEMHF), a company that makes imaging equipment, X-rays, CT scans and MRI machines. AI is very good at analyzing images,” Shrayer said.

He highlighted the firm as a real-world example of a life science company using software to deepen the value of existing hardware, workflows and clinical relationships.

Investor takeaway

Several highly anticipated drug launches, clinical trial readouts and regulatory decisions across major treatment areas are expected in the coming months. Innovation in cancer care is in focus, with Franklin Templeton analysts highlighting targeted small molecules, antibody-drug conjugates, radioligand therapies and engineered immune approaches as modalities attracting sustained capital and deal flow within oncology.

Market participants are also awaiting the approval of Eli Lilly's (NYSE:LLY) daily oral GLP-1 pill, a potential game changer that could disrupt the injectable-dominated obesity market.

For investors, the core takeaway is that 2026 is shaping up as a year of selective optimism.

The science remains compelling, but the landscape appears likely to stay bifurcated, and the coming months could see a “survival of the fittest” scenario.