By David Wainer

The Food and Drug Administration is rudderless. Its commissioner, Marty Makary, is gone. Much of the agency's senior leadership has been purged, and the scientific ranks have been hollowed out.

For the agency, the damage done could take years to repair. But for investors, risk is actually fading.

The rise of the Make America Healthy Again movement, with its vaccine skepticism and adversarial stance toward drugmakers, has hung over biotech since Robert F. Kennedy Jr. took over at the Department of Health and Human Services.

Kennedy is still atop HHS, and MAHA still has sway over parts of the American public. But for Wall Street, the political risk of investing in drug companies has been demoted: It now sits well below interest rates, clinical data and earnings in the hierarchy of concerns.

The clearest signal came on Friday. In what appeared to be a fresh shake-up after Makary's resignation, Tracy Beth Høeg -- the head of the FDA's drug division and a prominent skeptic of Covid vaccines and antidepressants -- said that she, too, was leaving. The head of the vaccine and biologics division, another industry skeptic, has also reportedly been replaced.

Who is staying matters just as much. The current acting FDA head, Kyle Diamantas, is a lawyer who has in the past represented Abbott Laboratories. He is seen by investors as a far more predictable leader.

A year ago, the departure of industry skeptics from senior regulatory posts would have sent biotech stocks surging. Instead, the SPDR S&P Biotech ETF $(XBI)$ has declined with the broader market to start the week.

Part of that reflects renewed inflation concerns and the fact that biotech stocks had already staged a massive rebound. But it also shows that investors have tuned out the FDA after relentless churn. Høeg was the fifth person to hold the drug-division role since President Trump took office, making this one of the most chaotic stretches in the FDA's recent history. The bigger point is that investors have moved past the chaos and now perceive MAHA's threat as diminished.

One major signal that the administration's harder edge of industry skeptics had lost its grip came in March, when the agency announced that its controversial vaccines chief, Vinay Prasad, was leaving. Prasad had been one of the movement's most disruptive forces inside the agency. He caused major headaches for rare-disease companies. His departure boosted a recovery that was already well under way for the biotech industry.

The recent departures confirm what investors were already betting on: In a Truist survey of investors late last year, 68% of respondents said they didn't expect Prasad, Makary and Kennedy to still be in their roles by the end of 2026. Only one now remains.

The XBI's performance under Trump tells the story. The ETF plunged after Trump's election win in November 2024, declining about 30% by April 2025. It then began a sharp recovery, as Makary sent nuanced messages to the sector. Since the April 2025 bottom, it has gained more than 70%. Even Moderna, the poster child for Covid shots, has surged.

The fate of a specific cluster of rare-disease companies remains uncertain, as they had the misfortune to seek drug approvals during the past year's turbulence. Shares of companies such as uniQure and Replimune, both of which faced controversial rejections by the FDA, have begun to recover though it is far from clear whether their cases will be revisited.

To be sure, Kennedy still causes anxiety in biotech and pharma boardrooms, and he could yet install a controversial successor at the FDA. But investors have concluded that Trump and Congress have had enough and that MAHA has been subordinated to other priorities. It was a major sign of Senate dissatisfaction with Kennedy when Trump withdrew Casey Means's nomination for surgeon general.

Longer term, the damage to health agencies is real and some of it will outlast this administration. Review panels at the FDA have been hollowed out. Approval processes have bent to political pressure. Mass layoffs across HHS have created institutional holes that won't be filled quickly. Vaccine-adjacent investment has cooled noticeably. None of that is reassuring for the future of U.S. leadership in science and biotechnology.

But investors in biotech companies have a long list of things to worry about when assessing valuations. The science of experimental treatments has to work. The commercial opportunity has to be there. The interest-rate environment has to cooperate.

Politics remains noisy, but it is still just background noise.

Write to David Wainer at david.wainer@wsj.com

(END) Dow Jones Newswires

May 20, 2026 05:30 ET (09:30 GMT)

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