It’s no secret. The past few years have been an incredibly challenging funding landscape for biotech. Higher interest rates, fewer grants, and investment competition from emerging technologies, like genAI, have cut into funds flowing into biotech development.
But as interest rates ease and money appears to be flowing back into biotech, clear trends are beginning to emerge. Fields like AI drug discovery and in vivo CAR-T are having their moment.
All of this coincides with a new, massive push by global governments to promote the use of New Approach Methodologies (NAMs) in drug development. Critically, multiple governmental programs are specifically moving to support the commercialization of NAMs to accelerate industry adoption. This shift has significantly changed the revenue potential and risk profile of NAM technologies and the companies that offer them. Some early investments are appearing in the NAMs space, but with how quickly regulatory expectations are evolving, perhaps investors haven’t yet caught up with the potential of this industry.
What’s Changed with NAMs?
NAMs are not a new concept. Although the definition of “NAMs” has changed significantly over the years, the idea of new methodologies as alternatives to animal methods has been discussed for decades. The US ICCVAM (Interagency Coordinating Committee on the Validation of Alternative Methods) was established by an Act of Congress in 2000.
What’s changed recently is an unprecedented global shift in support of NAMs to replace animals and other traditional methods in drug development and preclinical testing.
In April 2025, the US released the groundbreaking “Roadmap to Reducing Animal Testing in Preclinical Safety Studies” with a specific focus on the validation and qualification of NAMs. In November 2025, the UK released its roadmap, “Replacing animals in science: A strategy to support the development, validation and uptake of alternative methods”. The hotly anticipated EU roadmap to phase out animal testing is expected no later than early 2026. This trend is further shown by the CDC announcement on the elimination of primate testing in their facilities (November 2025) and the FDA’s guidance to reduce or eliminate six-month primate tox studies for monoclonal antibodies (December 2025).
Although this push is relatively recent, NAMs funding has been growing across governmental, industry, and VC sources. Examples include CN Bio securing $21 million in Series B funding in April 2024, Merck acquiring HUB Organoids at the end of 2024, and ARPA-H recently awarding tens of millions for in silico approaches for PK and tox studies.
NAMs Qualification Means Higher ROI
Despite some increasing funding, investors may still be severely underestimating how much new validation and qualification programs (like VQN and ISTAND) are increasing the value of NAMs. Programs like ISTAND confer “qualified Drug Development Tool (DDT)” status. Per the FDA:
“Once qualified, DDTs will be publicly available to be used in any drug development program for the qualified context of use. Additionally, the qualified DDT generally can be included in IND, NDA, or BLA submissions without needing FDA to reconsider and reconfirm its suitability.”
The FDA ISTAND program was made permanent in July 2025. It is intended to have NAMs reduce or replace animals. As the first NAMs to enter the program begin receiving qualification next year, there will be a direct, regulator-accepted path to disrupt the multi-billion-dollar global animal testing market. Qualification is to NAMs as approval is to new medicines.
Beyond regulatory acceptance, NAMs are expected to improve success rates of drug candidates, providing utility (and value) above traditional methods. This value add, when paired with regulatory acceptance, paves the way for widespread adoption by biotech and large pharma.
NAMs Need Funding
The best science should rise to the top. Unfortunately, that is not always the case for preclinical services. Poor sales and marketing mean bad communication and slow uptake. Bad manufacturing bottlenecks scaling and slows timelines. Uncontrolled QA means poor data handling and reproducibility. Even with the best science, these challenges will doom a NAM before it gets off the ground. These gaps plague new companies that lack the experience and resources to build the systems they need to succeed.
A wealth of incredible NAM technologies is appearing in academia and small biotech startups. Replacing technologies offered by mature, well-established CROs will take commitment, time, and most importantly, investment.
As the demand for NAMs grows and the need for investment with them, investors may be perfectly positioned to maximize their returns and help realize better, safer, and more ethical drug development.
About InnovApproach Consulting
At InnovApproach Consulting, we help organizations navigate the evolving regulatory landscape for NAM development and qualification. From NAM design to ISTAND qualification, our expertise ensures your innovation meets both scientific and regulatory expectations.
Partner with InnovApproach Consulting to position your NAM for recognition, qualification, and real-world impact.
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