Neil Eisberg | Editor
The US biotech sector has seen major upheaval and contraction over the first half of 2022, which is only just beginning to reverse. The pace and the numbers of employees affected over such a short period has been described as unprecedented by many observers.
The companies involved are not just small biotech startups, but also include one example from international Big Pharma: Novartis, according to the Layoff Tracker, produced by online newsletter Fierce Biotech. In late June 2022, Novartis revealed that around 8000 employees, out of a total workforce of 108,000 worldwide, would be losing their jobs.
Other smaller US biotech companies have considerably reduced their workforces. For example, BridgeBio, has gone through two cycles of laying off staff, due to current market conditions, according to its founder and CEO, Neil Kumar.
Other organisations have simply gone out of business, like Genocea, which as recently as April 2022, had reported proof of concept results for a solid tumour T-cell therapy. Kaleido Biosciences, founded by Flagship Pioneering, has also suffered this fate after a number of setbacks in its microbiome-focused research.
Yumanity, a biotech focused on the treatment of neurodegenerative diseases founded in 2014, has over the past six months announced a 60% staff reduction; the sales of a selection of assets to Johnson & Johnson including a development drug; and finally the company has been merged into the immune-oncology biotech concern Kineta, which will continue Yumanity’s research collaboration on two therapies for amyotrophic lateral sclerosis and frontotemporal dementia.
Back in February 2022, Gemini Therapeutics, focused on hematologic therapies but described as floundering, was planning an 80% staff reduction. However, a ‘white knight’ in the form of Disc Medicine has now agreed a merger to form a company under the Disc Medicine name that will focus on the continuing development of hematologic programmes. These programmes, including drug candidates in-licensed from AbbVie and Roche, will benefit from an improved funding platform provided by a syndicate led by Access Biotechnology and a cash injection from Gemini in exchange for stock.
‘New brooms’ have also been responsible for workforce reduction, as, for example, at Zymeworks, with the new CEO Kenneth Galbraith announcing, on taking over in January 2022, a halving of the senior leadership team and headcount reduction of 25% by the end of 2022. The company has since been the target of a number repelled takeover attempts.
Staff reductions have also followed the termination of a collaborative development or licensing agreement. At Nektar Therapeutics, for example, in April 2022, Bristol Myers Squibb ended a four-year licensing agreement following a third trial failure involving a combination of Nektar’s bempegaldesleukin and the BMS PD-1 checkpoint inhibitor Opdivo for the treatment of renal and bladder cancer. This resulted in a 70% reduction in the respective Nektar team and the loss of two executives, however, Nektar has pointed out that the company still has a number of other partnerships under way.
As a result of inconclusive results in mid-phase trial of a multiple sclerosis therapy, at Atara Biotherapeutics, in August 2022, some 20% of employees were to be euphemistically ‘let go’.
Other biotech’s announcing workforce layoffs in August include Absci; MacroGenics; VBL Therapeutics; Nuvation Bio; and Zymergen, following its recent acquisition by Ginkgo.
In total, Fierce Biotech reported job losses at over 74 biotechs since the beginning of 2022. The highest numbers were in March and April, with 17 organisations each month. And while the trend is slowing, it is expected to continue, despite a glimmer of hope that the financial tide is turning for biotech with improved earnings in Q2 2022.
This US biotech meltdown is likely to be exacerbated with the Senate’s Prescription Drug Pricing Bill introduced in July 2022 by the Democrats. The bill forms part of the Inflation Reduction Act, and signals negotiations between the pharma industry and Medicare. The Inflation Reduction Act also includes climate and tax measures but the provisions affecting the pharma sector are likely to come under extreme scrutiny.
Some US biotech investment firms have described the bill as likely to make the development of small molecule drugs ‘uninvestable’, according to comments from leading biotech venture capital firms reported by Fierce Biotech.
The Act has been passed by the US Senate and House of Representatives, and signed by President Biden, however, the US Department of Health & Human Services must now generate the necessary regulations to enact the requirements.
One thing is certain is that the pharma sector will be sharpening its response. Individual drug companies as well as trade organisations like the Pharmaceutical Research & Manufacturers of America (PhRMA) have already said the so-called ‘negotiations’ are really a smokescreen behind which Medicare can enforce financial punishments on companies that do not comply with its pricing proposals.