Biotechnology

Get ready for a wave of biotech layoffs

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In a constantly evolving field of biotechnology spearheaded by discoveries driving therapeutic efficacy, recently, the industry is taking steps to optimize workforce amidst economic uncertainty. Or simply put, the biotech industry is now faced with a series of layoffs. And following in the footsteps of big pharmacies like AbbVie and Bristol Myers Squibb last year, are companies like US-based gene therapy company Encoded Therapeutics, which has made the decision to lay off nearly 10% of its staff.

Citing plans to save capital through 2026, the company is focused on preparing a proof-of-concept study for its drug candidate ETX101, which is a gene therapy for Dravet syndrome, a rare neurological disorder.

Another biotech that announced plans to lay off employees this month is Xalud Therapeutics. American biotechnology is shifting focus to the amyotrophic lateral sclerosis (ALS) program. ALS is a progressive neurodegenerative disease that affects the nerve cells that control muscle function in the body. The company’s ALS candidate is set to advance preclinical studies while seeking to partner with its premier osteoarthritis drug.

When the company proposed downsizing to extend the runway, Jo Varshney, founder & CEO of VeriSIM Life, stated that budget cuts would definitely move the industry.

“The macro-economic environment is really challenging, with budget cuts across the big commercial pharmaceutical industries rippling to even the smaller biotech companies. In addition, access to capital is contracting which means follow-up business financing rounds are not happening as quickly as they used to, if at all. For a company that’s still in the early asset development phase, I think we’re seeing some early stage programs and risk being cut, impacting the R&D team at the company,” said Varshney.

In addition, the collapse of the Bank of Silicon Valley “was a pretty big blow,” explained Varshney, but added that the US government prevented what would have been a catastrophe for innovation.

Layoffs and biopharma companies

However, it’s not just clinical-stage biotech companies and startups that have been affected by the layoffs. Last year, US-based AbbVie biopharma, best known for its blockbuster drug Humira – a monoclonal antibody that targets autoimmune diseases such as rheumatoid arthritis and ankylosing spondylitis – cut about 99 jobs at one of its facilities in California, US.

Together with AbbVie, American multinational company Bristol Myers Squibb, which has amassed $46.2 billion in revenue by 2022, announced it would cut 48 jobs in New Jersey, USA, in May. This follows the company’s decision to lay off 261 jobs at two California locations in November last year. This is related to the company acquiring Turning Point Therapeutics, a biopharma specializing in oncology.

The plan to slash the workforce by 2022 comes after another multinational, Swiss pharmaceutical Novartis, which has an estimated revenue of $50.5 billion, according to 2022. statistics, laid off thousands of its employees worldwide last year. Spurred on by a reorganization plan to merge its oncology and medicine branches into a single department, it left not only staff but also those in executive positions without jobs.

Downsizing: not a thing of the past

But what the proposed mergers and acquisitions are pushing amidst the looming economic crisis, after witnessing a significant downturn in the stock market and, in particular, for the biotech sector, the downward spiral of workforce reductions does not end in 2022. This year’s slew of layoffs were started by Y-mAbs Therapeutics, a clinical-stage biotechnology company headquartered in New York, USA, specializing in antibody immunotherapy for cancer.

A once-promising radiotherapy candidate, omburtamab, for the treatment of neuroblastoma – a rare cancer that affects children – was kept by the US Food and Drug Administration (FDA) which has questioned the therapy’s effectiveness. As a result, Y-mAbs Therapeutics continued to save 35%, in an effort to reprioritize its pipeline and rethink its financial strategy in January.

Stopping pipeline construction

Four months out of the year, over 50 biopharmaceuticals lay off 1000 employees, implying that, perhaps the sector has yet to fully recover from the downturn in the initial public offering (IPO) market of 79% by 2022.

Biopharma global Biogen is among them. After laying off nearly 900 workers last year, the company disclosed further cuts this year as a means of restructuring its business plan.

The layoffs come after the FDA-approved Alzheimer’s drug Aduhelm was dubbed a commercial failure because of its questionable efficacy which put insurance companies on high alert to cover the drug.

Meanwhile, global healthcare company Grifols is laying off 8% of its workforce, according to its announcement in February. A Spanish plasma-based drug company has let go of more than 2,000 of its members as it seeks to cut debt.

In addition, companies such as Massachusetts-based Greenlight Biosciences, as well as the UK’s Oncorus and Freeline Therapeutics have all decided to downsize their workforces. Greenlight Biosciences and Oncorus laid off 96 and 55 employees, respectively, with the latter offering adieu to the bankruptcy-hit CEO and COO. And Freeline Therapeutics will increase its headcount to 65 after losing 30% of its workforce while halting the development of the candidate for Fabry’s disease, a rare neurological condition.

Can innovation combat biotech layoffs?

As the current layoffs are plaguing the biotech industry, Varshney stated that these are difficult times.

“The incredible innovations we’re seeing in new therapies like ADC, immuno, cell and mRNA are bound to suffer. New approaches are increasingly being incubated at startups with solid science. 63% of all new molecular entities in 2018 were from smaller biopharmaceutical companies, compared to just 31% in 2009. Not to mention that academia is under pressure of its own; they can’t pick up the slack. So, as the biotech startup ecosystem goes, so does our hope for patients with unmet needs,” said Varshney.

However, innovation is key, according to Varshney.

“I really believe in innovation. I think we have to innovate out of the current equation that is placing a strong demand on capital for biotech to bring their science to market,” said Varshney, who believes harnessing the potential of artificial intelligence (AI) in drug discovery can not only accelerate the process but also cut cost.

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​sship fora” of the US with VeriSIM Life, is focused on addressing the high costs of drug development by replacing laborious physical experiments with AI-powered computer-driven experiments, making them faster and cheaper, which could be significant in mitigating the economic downturn.

While the irony of leveraging AI to fight job loss exists, such as nearly 4,000 lost their jobs last month already linked to technology, Varshney’s point about AI making drug-hunting cheaper, thereby saving capital – a concern for many biotechs – may be valid.

As one of the latest companies to succumb to this trend is US-based cancer therapy firm Molecular Templates, which was set to employ 44% of its employees after downsizing more than 50% earlier this year, the future of the sector remains uncertain. But even though things don’t seem clear at the moment, Varshney’s views on innovation could be something to think about as the industry navigates a bleak economic ecosystem.

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