The FDA just changed how it approves gene therapies.
And the numbers tell us exactly who benefits.
What Changed
FDA Commissioner Martin Makary and top deputy Vinay Prasad announced the "plausible mechanism" pathway on November 12, 2025.
The pathway lets companies get marketing approval for individualized therapies without traditional randomized trials. Instead, they need three things: proof the therapy targets a known genetic defect, confirmation it hits that target (through biopsies or preclinical tests), and clinical improvement in several consecutive patients.
The FDA processed baby KJ's single-patient application in one week. That case involved a custom CRISPR therapy for CPS1 deficiency.
Mouse models showed 42% successful editing in liver cells, which the FDA accepted as target confirmation.
The Numbers Behind This
Gene therapy venture funding dropped from $8.2 billion across 122 deals in 2021 to $1.4 billion across 39 rounds in 2024. That's an 83% decline in three years.
Overall cell and gene therapy funding fell from $23 billion in 2021 to $15 billion by 2024. Meanwhile, weight-loss drugs pulled in $1.75 billion in venture capital, nearly triple the 2023 figure.
The sector needed this regulatory change.
Manufacturing costs remain high, and the "overall economics and policy landscape has been problematic" according to Boston Consulting Group's biopharmaceuticals leader.
Who Benefits
CRISPR gene editing companies stand to gain the most.
CRISPR Therapeutics $CRSP reported 110 cell collections in the first nine months of 2025, double all of 2024.
Vertex expects over $100 million in CASGEVY revenue this year with significant growth in 2026.
William Blair analyst Sami Corwin said the pathway has "broad, positive implications" for cell and gene therapy companies.
But there's a catch. The application beyond rare diseases "is a bit more unclear."
Companies that can prove mechanism of action will move faster. The FDA's framework requires:
A known molecular or cellular defect
Proof the therapy hits its target
Clinical improvement data from consecutive patients
Real-world evidence collection post-approvalBluebird Bio was acquired by Carlyle and SK Capital Partners in June 2025. The deal came after financial challenges and a third FDA denial of their priority review voucher, with the company at risk of defaulting on loan covenants. That's what happens to companies with older platforms when funding dries up.
Winners & Losers
Legacy gene therapy companies face real pressure. Since 2021, drug companies have dropped more than 50 gene therapies.
Companies that can't prove mechanism of action will struggle. The pathway demands:
Clear molecular targets
Verifiable editing proof
Historical disease progression data
Post-market surveillance capacity## Impact on Biotech ETFs
The iShares Biotechnology ETF $IBB rallied 26.1% over six months through October 2025, rising 18.2% YTD vs the S&P 500's 17.2%.
That marks a turnaround. The biotech index offered just 3.74% returns in 2024 and 0.97% in 2023, far below the broader market.
Biopharma licensing reached $63.7 billion in Q3 2025, with YTD value hitting $183.7 billion. The FDA's new pathway should accelerate this trend.
The SPDR S&P Biotech ETF $XBI returned 22.38% YTD through October 2025, outperforming IBB.
XBI uses equal weighting, which favors smaller companies.
IBB concentrates in larger, profitable firms.
The regulatory shift benefits precision medicine players regardless of size. Companies that can demonstrate target editing and mechanism of action will attract capital faster. Those that can't will continue losing ground.
What This Means
An estimated 300 million patients have rare genetic disorders. The plausible mechanism pathway opens this market to commercialization without traditional trial economics.
The policy rewards technical capability. Companies need robust preclinical models, biopsy confirmation capacity, and post-market surveillance infrastructure. That infrastructure costs money upfront but eliminates the need for expensive Phase 3 trials.
Financial markets are responding. The sector's recovery in 2025 preceded the FDA announcement, suggesting investors anticipated regulatory change.
The question now is execution. Which companies can actually deliver verifiable, targeted genetic corrections at scale?
The answer determines who captures value in this reshaping market.
