The FDA Keeps Changing Its Mind, and Rare Disease Biotechs Are Spiraling
The FDA keeps approving rare disease drugs at a record pace, but surprise rejections, reversed decisions, and canceled meetings are rattling the companies and investors who make those treatments possible. The result: a funding crisis hiding inside a regulatory one.
Imagine spending ten years and hundreds of millions of dollars developing a drug for a disease that affects a few thousand people. You follow every rule the FDA gives you. You design the trial they asked for. You collect the data they said they needed. And then, right before the finish line, the agency says it's not enough.
Now imagine watching the FDA reverse that decision three months later.
That's not a hypothetical. It's what happened with tabelecleucel, a cell therapy for a rare and deadly complication that can follow organ transplants. In January 2026, the FDA rejected it, calling the single-arm trial "insufficient" to support approval. Then the agency agreed to reconsider based on new information, accepting a resubmission for renewed review.
Welcome to 2026, where rare disease biotechs feel like they're playing a game whose rules keep changing mid-play.
A Roller Coaster With Real Consequences
At STAT's Breakthrough Summit West in May 2026, the mood among rare disease CEOs was somewhere between frustrated and terrified. Mahzi Therapeutics CEO Yael Weiss described constant, worried questions from investors about what FDA's recent personnel moves mean for drug approvals. She called it "a roller coaster."
She's not alone. The past eight months have been littered with surprise rejections. In February, the FDA shot down Disc Medicine's bitopertin for erythropoietic protoporphyria, a rare condition where sunlight literally causes agonizing pain. The kicker? Bitopertin was supposed to be the poster child for Commissioner Marty Makary's new fast-track review program. The FDA said the blood-based biomarker (a lab measurement used as a stand-in for clinical improvement) didn't clearly connect to real patient benefit.
So much for fast-tracking.
Meanwhile, Regenxbio's gene therapy for Hunter syndrome got a complete response letter in February. Pharming Group's leniolisib for a rare immune disorder: rejected in February. And just to keep things interesting, the FDA accepted a resubmission for the same tabelecleucel it had rejected weeks earlier. The agency's signals are reading like a broken traffic light: red, green, red again, all within the same intersection.
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When the Ref Cancels the Game
Perhaps no story captures the chaos better than Kezar Life Sciences. The small biotech was developing a drug for autoimmune hepatitis, a rare liver disease. It had a critical FDA meeting scheduled for October to discuss trial design. Then, without explanation, the FDA canceled it.
The meeting was delayed by roughly four months. Without FDA guidance, Kezar's development plans stalled. Investors lost confidence. The company began winding down. By the time the FDA finally held the meeting and Kezar reached a "breakthrough" agreement on a trial path, it was too late. Kezar had already decided to sell itself to Aurinia.
Kezar CEO Chris Kirk didn't mince words, describing a pattern of "volatility at the FDA" including staff departures and inconsistent decisions. He called the current behavior "stochastic and maybe even capricious," warning it harms both patients and the broader biotech ecosystem.
The Numbers Tell Two Stories
This is where things get confusing. By the raw stats, the FDA is still approving rare disease drugs at a healthy clip. Half of CDER's 46 novel drug approvals in 2025 carried orphan drug designation (the formal label for treatments targeting rare diseases). That 50% share is at the high end of historical norms.
In early 2026, the agency greenlit treatments for conditions like Menkes disease, achondroplasia, and arginase 1 deficiency.
But underneath those healthy topline numbers lurks a more troubling pattern. In 2025, CDER issued 19 complete response letters for 18 novel drugs, meaning a meaningful chunk of programs hit a wall. And within the biologics center (CBER), where many gene and cell therapies for rare diseases are reviewed, the rejection rate was particularly stark.
Follow the Money (It's Leaving)
Here's what makes this more than a regulatory process story: it's a funding crisis in disguise. A survey cited by a rare disease coalition found that 84% of biotech investors have reduced, paused, or withdrawn rare disease investments because of FDA uncertainty. About two-thirds of companies say capital raising has gotten harder over the past year.
For big pharma, a CRL is a headache. For a single-asset rare disease biotech with 18 months of cash runway, it can be a death sentence. These companies can't simply pivot to another indication or wait out the storm. They need clear regulatory signals to raise their next round, plan their pivotal trial, and build a commercial team.
The irony is painful. Rare diseases are supposed to be biotech's sweet spot: small patient populations, orphan drug incentives, pricing power, and a willing FDA. The Orphan Drug Act has been one of the most successful pieces of health legislation in history. Now the incentive structure that made it all work is fraying at the regulatory seam.
The Policy Paradox
On paper, 2026 should be a golden age for rare disease drug development. Commissioner Makary's FDA has rolled out a suite of new frameworks: the Rare Disease Evidence Principles program for ultra-rare genetic diseases, a "plausible mechanism pathway" that could allow approvals with smaller data packages, and a "bespoke therapy" pathway for individualized treatments tested in just a handful of patients. The agency shifted from requiring two pivotal trials to a one-trial default for many drugs, which disproportionately helps rare disease developers who struggle to enroll enough patients for even one study.
These are genuinely good ideas. The problem is execution. When the director of the Office of Orphan Products Development gets reassigned during the rollout of these very reforms, it sends a signal. When a drug gets rejected and then un-rejected within 90 days, it sends a louder one. CEOs and investors are telling reporters that critical policy expectations exist only in journal articles and speeches, not in binding guidance documents.
Nearly 100 rare disease advocacy groups, CEOs, and investors have organized to push the administration to "restore regulatory clarity" and appoint stable leadership at the biologics center.
What Happens Next
The stakes are higher than stock prices. For the roughly 30 million Americans living with a rare disease, most of whom have no approved treatment, these small biotechs represent the only realistic path to a therapy. Every company that runs out of cash or sells itself at a discount because of unpredictable FDA behavior represents a drug that might never reach patients.
Rare disease biotech has always been a high-wire act. Small populations, complex biology, expensive trials, and binary FDA decisions make it inherently risky. But risk is manageable when the rules are consistent. What's not manageable is a regulatory environment that feels, as one CEO put it, capricious.
The FDA doesn't need to lower its standards. It needs to stop moving the goalposts after the ball is already in the air.
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