A wave of biotech layoffs: will the trend continue throughout 2024?

Biotech layoffs

In the ever-evolving field of biotechnology, spearheaded by discoveries that fuel therapeutic success, the last couple of years have seen the industry taking measures to ‘optimize the workforce’ amid economic uncertainty. Or to put it plainly, the biotech industry has been faced with a string of layoffs.

Following the lead of big pharmas like AbbVie and Bristol Myers Squibb in 2022, many companies have made the decision to let go of their staff, with layoff percentages ranging from just under 10% of a company’s workforce, all the way to 90% or more. 

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    2023: a miserable year for biotech layoffs

    According to data gathered by Fierce Biotech, a total of 187 biopharma layoffs were recorded last year. This signifies a rise of 57% compared to 2022, which in itself was also a bad year for industry workforce reductions, with a total of 119 layoffs taking place. At least 9,150 employees were laid off from the 60 companies that reported numbers of staffers impacted in 2023. 

    Y-mAbs Therapeutics kicked off the first round of layoffs last year, as the company made the decision to cut 35% of its workforce after its rare pediatric cancer drug was rejected by the U.S. Food and Drug Administration (FDA). This was followed by 13 more layoff announcements in January alone, which included a colossal 95% staff cut by Finch Therapeutics as the company grappled with numerous issues, such as a lack of funding and slow trial enrollment. 

    The year then continued with a steady wave of layoffs every month; so much so that another data analysis by Fierce Biotech showed that the number of layoffs in 2023 had already reached 2022’s grand total of 119 by August. The miserable year for biotech layoffs finally drew to a close with Belgium-based biotech Oxurion announcing on December 29 that it was shifting its focus to only preclinical activity, meaning it had to cut down its workforce to only 10 staff members. 

    Pharma companies also affected by layoffs

    It’s not only clinical-stage biotech companies and startups that have been impacted by layoffs. Plans to trim down the workforce in 2022 actually came after Swiss pharmaceutical Novartis, which has an estimated revenue of $50.5 billion, according to 2022 statistics, dismissed thousands of its employees across the globe. Prompted by reorganization plans to merge its oncology and pharmaceuticals arms into a single department, it not only left staffers but also those in executive positions without jobs.

    In 2022, U.S.-based biopharma AbbVie, renowned for its blockbuster drug Humira – a monoclonal antibody targeting autoimmune diseases like rheumatoid arthritis and ankylosing spondylitis – slashed around 99 jobs in one of its facilities in California, in the U.S.

    Along with AbbVie, American multinational Bristol Myers Squibb, having accumulated a revenue of $46.2 billion in 2022, disclosed that it would cut 48 jobs in New Jersey, U.S., last May. This followed the company’s decision to axe 261 jobs across two sites in California in November 2022, in relation to the company acquiring Turning Point Therapeutics, a biopharma specializing in oncology. More recently, two months after acquiring San Diego biotech Mirati Therapeutics in January 2024, in a deal worth $4.8 billion, Bristol Myers Squibb said in a Worker Adjustment and Retraining Notification Act (WARN) notice, that it is laying off 252 staff members at Mirati’s headquarters. 

    Even COVID-19 hero Pfizer has been on a global cost-cutting campaign. It said in November last year that it was planning to axe around 500 jobs at its Sandwich site in Kent, as it decided to end its Pharmaceutical Sciences Small Molecule (PSSM) operations there. Continuing its spur of layoffs, it also said in January that it would be cutting 52 employees at one of its facilities in South San Francisco, according to another recent Worker Adjustment and Retraining Notification Act (WARN) alert.

    What spurred the trend of biotech layoffs?

    Financing for biotech companies was down last year by 48.6% compared to 2021. Furthermore, in 2022, the IPO market plummeted, with volatility and market uncertainty driving down IPO proceeds by 93%. With the entire industry struggling financially, many companies were forced to shut down, cut assets, or find other ways to survive the biotech winter – which is exactly why all of these layoffs started taking place. 

    Jo Varshney, founder and chief executive officer (CEO) of VeriSIM Life, expressed that budget cuts are bound to stir the industry. “The macro-economic environment is definitely challenging, with budget cuts across the big commercial pharmaceutical industry rippling down to even the smaller biotech companies. Additionally, access to capital is contracting which means that follow-on venture financing rounds are not happening as quickly as they once did, if at all. For companies still early in their asset development stages, I think we’re seeing some of the riskier and early-stage programs being cut, which impacts the R&D teams at those companies.”

    Besides, the collapse of the Silicon Valley Bank “was a pretty big punch in the gut,” explained Varshney, but added that the U.S. government prevented what would have been a catastrophe for innovation. 

    Paul Cashman, senior partner at Kingsley Gate, pointed out that, because so many biotechs eventually fail, layoffs are generally to be expected. However, as well as the unstable economic climate, he believes that the current cycle of layoffs is also largely due to the financing of more risky ideas.

    He said: “We are lucky enough to be in an age where innovation is booming, but not all ideas are viable. Given the probabilities, it is unwise to bet against the house (in this instance, the failure rate of early-stage biotechs). What has been different in this expansion-contraction cycle is the level of financing during 20/21 of more risky ideas. Money was thrown at preclinical companies – but we know they are really very unlikely to succeed. The financiers were given more license than they had enjoyed previously. More company start-ups equals more company failures, so the figures make perfect sense.” 

    Could biotechs have been better prepared for financial challenges?

    Although it would have been very difficult to avoid layoffs entirely, Cashman believes that every biotech company needs a “health warning” and “danger money,” particularly when they are hiring people who, in one sense may be highly talented, but are unsuited to dealing with the challenges most companies face. 

    “What is true is that the small print could have been written far larger,” Cashman explained. “The shortage of highly skilled scientists and managers meant that every biotech was scrambling for talent post-financing, so the hyperbole about the probable success of a company trying to hire great people became unsustainable.

    “The highly pragmatic approach of ‘we just need someone to get things done’ recruitment process, or ‘I know this person let’s hire them,’ is a sign that there will be trouble down the road. What’s needed is an earlier integration of HR practices that acknowledge that the probabilities of company success are small, but we will be honest with you, manage appropriately, and equip you with the tools you need when things do go wrong.”

    Can innovation combat biotech layoffs?

    As layoffs plague the biotech industry, Varshney expressed that these are difficult times for innovation. 

    “The incredible innovation we’ve seen in new therapies such as ADCs, immuno, cell, and mRNA will definitely suffer. Novel approaches are increasingly incubated in startups with solid science. 63% of all new molecular entities in 2018 came from smaller biopharma firms, compared with just 31% in 2009. Not to mention that academia is under its own set of pressures; they can’t pick up the slack. So, as the biotech startup ecosystem goes, in a way, so does our hope for patients with unmet needs,” said Varshney. 

    But Varshney believes that innovation will ultimately be key to combating the issues the biotech industry is currently experiencing.

    “I’m a strong believer in innovation. I think we have to innovate our way out of the current equation that puts intense demand on capital for biotechs to bring their science to market,” commented Varshney, who believes that leveraging the potential of artificial intelligence (AI) in drug discovery can not only speed up the process but also cut costs. 

    ​​Varshney’s company VeriSIM Life is focused on disrupting the high cost of drug development by replacing laborious physical experimentation with AI-driven computer-based experimentation, making it faster and less expensive, which could be significant in mitigating an economic crisis.

    While the irony of making use of AI to battle job losses exists, as nearly 4,000 workers have lost their jobs to the technology since last May, Varshney’s point on AI making the hunt for drugs cheaper, thereby preserving capital – a concern for many biotechs – could be valid.

    Although things seem to be up in the air at present, Varshney’s outlook on innovation could be something to think about as the industry navigates a murky economic ecosystem.

    Will the biotech layoff trend change in 2024?

    According to Cashman, the biotech layoff trend is already reversing a little but there will likely be a lag, as is usually the case. “I believe that Q4 2024 will see another dash for growth as interest rate cuts penetrate and the election in the US is out of the way.” 

    However, for the moment, the sector is still in cash-preservation mode, meaning companies are continuing to resort to creative financing options, such as reverse mergers, licensing, debt financings, and royalty deals. Unfortunately, this also means that this year has commenced with another string of layoffs, with 24 in January, 16 in February, and 18 in March.  

    The good news, though, is that IPOs seem to be increasing again. A run of offerings in the first six weeks of 2024 has put the biotech sector on its strongest pace since 2021. For example, CG Oncology made headlines as the first IPO of 2024, when it managed to sell 20 million shares for an impressive $437 million. This could signify a general recovery for the biotech industry later this year.

    If this happens, maybe the layoff trend within the industry will finally come to an end. But for now, we will just have to wait and see.

    This article was originally published in June 2023 by Roohi Mariam Peter and has since been updated by Willow Shah-Neville in April 2024.

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