This trend will continue at least until there are successful clinical trials. Many would like to pin the fact that VCs are sitting out on a combination of President Bush's ban on expanding federal funding and regulatory uncertainty. However, it is interesting to note that the trend is also true in the ESRC-friendly UK.
Once investors get beyond the hype, I expect there also will be limited capital infusions from public offerings of stock sales, which leaves the bulk of American industry progress to be funded by federal and state governments. So not only are there ethical problems with government-sponsored research, we are looking square at another corporate welfare scheme.