Live music, free drinks and dance at the Big Boston Biotechnology Conference in June confirm the harsh reality. The city’s biotech sector is in trouble.
Although some industries have still struggled since the Federal Reserve began raising interest rates in 2022, few have been hit harder than the biotech sector due to Trump administration policies.
Concerns over routine medical approval from the U.S. Food and Drug Administration have scared investors. The White House’s demand for a lower drug price has cooled contract activities so far this year. President Donald Trump’s attack on Harvard University included a freeze on federal research grants, poses a long-term threat to biotechnology.
Completely, Trump “policy uncertainty has led to major disruption and operational change in biodisability companies,” Morgan Stanley said in a June report.
Meanwhile, the lack of investor desire for new issues has closed the door for many biotechnology to wait for its release. Typically, the biotech sector produces at least 12 initial public offerings per year. However, recently, “public (biotechnology) companies have been crushed,” says Dangold, president of the fairway consulting group, which employs biotech. “There’s no exit for venture people to put their money in now.”
“We’re actually seeing businesses close, and this is new,” Gold said. “I’ve never seen a closure at this volume.”
Trainees will learn the proper procedures for entering a clean room at Northeastern University’s Biopharmaceutical Analysis and Training Institute ©Craig F Walker/The Boston Globe/Getty Images
In the first six months of the year, the number of biotech IPOs since 2012 has sank to the lowest level, according to Renaissance Capital. Venture capital companies have not brought biotech companies to IPOs for the first time since 2011, the Renaissance said.
“It’s a very harsh environment,” said Matthew Kennedy of the Renaissance. “At this point, many of the biotechnology itself may be reluctant to move forward knowing that they may be struggling to sell their deals.”
Moderna, a vaccine maker headquartered on the north side of Boston’s Charles River, has seen a 27% stock price deposit this year. The company, a top 20 employer in Boston’s Cambridge area, is one of the worst performances on the S&P 500 this year.
A 15-minute drive north, Bluebird Bio was a $10 billion biotech company in 2018, but sold for less than $50 million this year. Based on three metro stops from Harvard University, Vor Biopharma said it would fire most of its staff in May.
“What we see in the public and private markets is a lot of companies that are actually folded,” said Marian Nakada, vice-president of Johnson & Johnson’s venture division, at the meeting. In June, VOR announced a $175 million funding as part of its licensing agreement with a Chinese biotech company, but a VOR spokesperson said the layoffs were still in progress.
Headquarters of Bluebird Bio in Cambridge, Massachusetts. Valued at $10 billion in 2018 © Kristoffer Tripplaar/Alamy
Boston’s small biotechnology companies have empowered the local economy. Healthcare is Boston’s largest employment sector. Government statistics show that healthcare and social assistance jobs account for 22% of the city’s workforce, well above the national average of 14%.
Boston has enjoyed a symbiotic relationship between the federal government and local universities. This has been crippled by government fund cuts. The National Institutes of Health has suspended grants to Harvard and other universities, and has achieved a fertile position in biotechnology development.
The biotech deal they are achieving is under pressure from Washington. Based on a walk from Boston’s famous Fenway Park baseball field, Verve Therapeutics was acquired by Eli Lilly for $1.3 billion in June. However, the deal was partially spurred by the uncertainty following the resignation of the top FDA official, Verve said in a June 25th regulatory filing. The company said it raised concerns that the share price could plummet after Peter Marks left, causing FDA approval to be delayed.
“The decline in the regulatory environment for biopharmaceutical companies” has made cash “even more difficult,” Verve said.
Nurse preparing doses of Moderna Covid 19 vaccine at Boston facility during the pandemic © Jessica Rinaldi/The Boston Globe/Getty Images
Earlier in June, Charles River-based Calvista Pharmaceuticals said the FDA had missed the regulatory deadline for one of its drug approvals. Kalvista said the delay was “heavy workload and limited resources.” A company spokesperson declined to comment beyond regulatory filings.
Boston’s June Biotechnology Conference was hosted by the Biotechnology Innovation Organization, the largest lobbying group in the sector. To counter Trump’s policies, the organization has increased its lobbying this year by hiring former Republican Sen. Richard Burr, who sponsored the 1997 FDA Modernization Act.
At the meeting, FDA Commissioner Marty McCurry said the agency’s “morale is improving well.”
But Gold, a fairway consulting group, said she has almost weekly conversations with FDA employees looking for a new job. “Morale is terrible from what I’ve heard.”
Modanya’s headquarters. Top 20 employers in Boston’s Cambridge area © David L Ryan/The Boston Globe/Getty Images
Morale is also struggling at Harvard University, Cambridge’s biggest employer. Promising biotechnology science that begins at such universities could be spun into independent companies. For example, Beam Therapeutics in Boston was co-founded by Professor Harvard David Liu. Beam has a license agreement with Harvard University and has paid the university $15 million since its IPO.
“I have no doubt long-term concerns about the US funding trajectory and stability of the science ecosystem,” said John Evans, Beam CEO, in an interview.
