In the ever-evolving field of biotechnology spearheaded by discoveries that fuel therapeutic success, of late, the industry is taking measures to optimize the workforce amid economic uncertainty. Or to put it plainly, the biotech industry is now faced with a string of layoffs. And following the lead of big pharmas like AbbVie and Bristol Myers Squibb last year, are companies like U.S.-based gene therapy company Encoded Therapeutics, which has made the decision to let go of nearly 10% of its staff.
Citing plans to conserve capital until 2026, the company is focused on setting up 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 layoff employees this month is Xalud Therapeutics. The American biotech is shifting focus towards its amyotrophic lateral sclerosis (ALS) program. ALS is a progressive neurodegenerative disease that affects nerve cells that control muscular functioning in the body. The company’s ALS candidate is set to advance preclinical studies while it seeks to partner on its lead osteoarthritis drug.
As companies propose downsizing to extend the runway, Jo Varshney, founder & CEO 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,” said Varshney.
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.
Layoffs and biopharma companies
However it’s not only clinical-stage biotech companies and startups that have been impacted by layoffs. Last year, 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., in May. This was following the company’s decision to axe 261 jobs across two sites in California in November last year. This was in relation to the company acquiring Turning Point Therapeutics, a biopharma specializing in oncology.
These plans to trim down the workforce in 2022, came after another multinational company, Swiss pharmaceutical Novartis, which has an estimated revenue of $50.5 billion, according to 2022 statistics, dismissed thousands of its employees across the globe last year. 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.
Downsizing: not a thing of the past
But what was spurred by plans of mergers and acquisitions amid a looming economic crisis, having witnessed a significant decline in the stock market and, in particular, for the biotech sector, the workforce reduction spiral did not end in 2022. This year’s slew of layoffs was kicked off by Y-mAbs Therapeutics, a clinical-stage biotech company headquartered in New York, U.S., which specializes in antibody immunotherapy for cancer.
Its once promising radiotherapy candidate, omburtamab, for the treatment of neuroblastoma – a rare cancer that affects children – was shelved by the U.S. Food and Drug Administration (FDA) who questioned the therapy’s effectiveness. As a result, Y-mAbs Therapeutics went on to downsize by 35%, in a bid to reprioritize its pipeline and rethink its financial strategy in January.
Halting pipeline development
Four months into the year, over 50 biopharmas sacked 1000s of employees, implying that, maybe the sector has not fully recovered from the plummet in the initial public offering (IPO) market by 79% in 2022.
Global biopharma Biogen was among them. Having made redundant nearly 900 workers last year, the company revealed further cuts this year as a means to restructure its business plans.
The layoffs come after the FDA-approved Alzheimer’s drug Aduhelm was dubbed a commercial flop due to its questionable efficacy that made insurers wary of covering the drug.
Meanwhile, global healthcare company Grifols is laying off 8% of its workforce, according to an announcement in February. The Spanish plasma-based medicine company is letting go of more than 2,000 members of its company as it attempts to cut debt.
Moreover, companies like Massachusetts-based Greenlight Biosciences, and Oncorus and Freeline Therapeutics in the U.K., have all decided to shrink their workforces. Greenlight Biosciences and Oncorus are seeing off 96 and 55 employees respectively, with the latter bidding adieu to the CEO and COO as it is hit by bankruptcy. And Freeline Therapeutics will bring its headcount to 65 employees after shedding 30% of its workforce while it pauses the development of its candidate for Fabry disease, a rare neurological condition.
Can innovation combat biotech layoffs?
As layoffs presently plague the biotech industry, Varshney expressed that these are difficult times.
“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.
However, innovation is key, according to Varshney.
“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,” said 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 job losses last month have been linked to the technology, Varshney’s point on AI making the hunt for drugs cheaper, thereby preserving capital – a concern for many biotechs – could be valid.
As one of the most recent companies succumbing to the trend is U.S.-based cancer therapy company Molecular Templates, which is set to can 44% of its employees following downsizing by more than 50% earlier this year, the future of the sector remains uncertain. But 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.