Source: Boston Globe
By: Jonathan Saltzman, Globe Staff, Updated January 7, 2024, 1:00 p.m.
If 2022 was one of the worst years for the biotechnology industry, a pillar of the Massachusetts economy, 2023 was even worse.
After a hiring spree early in the pandemic, at least 74 cash-strapped drug firms based in Massachusetts (or with operations here) made layoffs or closed last year in one of the worst downturns in memory, according to Dan Gold, president of Fairway Consulting Group, a life sciences recruiting firm. Local biotechs raised only $7.7 billion in venture capital in 2023, down from $8.7 billion in 2022 and $13.7 billion in 2021, which had set a record.
Only two local startups dared to go public last year in the forbidding climate, in contrast to 25 that debuted in the public market in 2021.
But as more than 8,000 biotech executives, investors, and analysts converge on San Francisco this week for the 42nd Annual J.P. Morgan Healthcare Conference — the largest biotech business meeting of the year runs Monday to Thursday — industry leaders see glimmers of hope.
The Federal Reserve has stopped raising interest rates. Deal-making is on the upswing. Biotech stock prices are recovering from recent lows.
“I think we’re coming out of one of the more difficult periods the industry has experienced in the last decade or two,” said Reid Huber, a partner in Boston-based Third Rock Ventures, which creates biotech companies.
John Evans, chief executive of Beam Therapeutics, a Cambridge biotech working on a new generation of gene-editing drugs to treat sickle cell disease and other disorders, agreed. “There’s no question that 2023 was a challenging year on the back of multiple challenging years,” he said. “2024 looks good, I think.”
The reasons for optimism start with the Fed, which, after repeatedly raising interest rates to tame inflation, is widely expected to lower them this year. That should make biotechs more appealing to investors — the XBI index of biotech stocks ended last year up by about 8 percent — and lower borrowing costs for firms.
The sector has also achieved several major drug development successes.
Blockbuster medications that control weight and diabetes, such as Wegovy and Ozempic from Denmark’s Novo Nordisk and Mounjaro from Indianapolis-based Eli Lilly, have taken the industry by storm. Just look at the billboards promoting the drugs at South Station.
In July the Food and Drug Administration gave full approval to Leqembi, the first medicine proven to slow the progression of early-stage Alzheimer’s. The drug is made by Cambridge-based Biogen and its Japanese partner Eisai. Lilly, meanwhile, is widely expected to win approval of a similar Alzheimer’s drug, donanemab, early this year.
In a historic move in December, the FDA cleared the first medicine in the United States to use the revolutionary gene-editing tool called CRISPR-Cas9. The drug, called Casgevy and made by Boston-based Vertex Pharmaceuticals and Swiss-based CRISPR Therapeutics, uses Nobel Prize-winning technology to treat sickle cell disease.
Industry veterans and investors have also been buoyed by several recent multibillion-dollar acquisitions of Massachusetts drug firms by pharmaceutical giants looking for innovative medicines to replenish their pipelines.
On Nov. 30, AbbVie, of North Chicago, Ill., said it had agreed to pay more than $10 billion to buy Waltham cancer drug maker ImmunoGen. Less than a week later, AbbVie announced it would purchase Cerevel Therapeutics and the Cambridge firm’s pipeline of experimental neurological and psychiatric medicines for $8.7 billion.
And on Dec. 22, Karuna Therapeutics, a Boston biotech company working on medicines for psychiatric and neurological conditions, struck a $14 billion deal to be acquired by drug giant Bristol Myers Squibb — the biggest buyout of a Massachusetts company last year.
“It’s a tale of two cities currently in our cluster,” said David Lucchino, former chief executive of Frequency Therapeutics, a Lexington biotech that closed last year after its hearing-loss program failed and its remaining assets were acquired by Korro Bio. “If you’re public and you haven’t proven yourself yet, I think the market is pretty unforgiving.”
But, he said, if a company can generate compelling clinical data for novel experimental medicines, investors are willing to open their wallets. A bigger drugmaker may even pony up billions to buy the firm.
Michael Henderson, chief executive of Apogee Therapeutics, was among the few fortunate biotech executives to thread the needle last year.
His firm, based in Waltham and San Francisco, raised $345 million in July in one of the only two IPOs by Massachusetts biotechs last year. (Watertown-based Neumora Therapeutics raised $250 million in September.)
“You can still find capital for high-quality science,” said Henderson, whose company is working on drugs that target inflammatory diseases, such as eczema.
Early in the pandemic, he said, money poured into the sector from some investors who didn’t appreciate how risky drug development is and how few experimental medicines get approved.
“Science is hard. Science takes time,” said Henderson. As that reality sank in for casual investors, he said, “you saw a lot of outflows from biotech.”
To be sure, no one is predicting a return to the high-flying days of 2020 and 2021 — at least not yet. Companies are continuing to save money and hedge their bets
For example, several biopharma companies seeking to fill C-suite openings only want to hire executives on an interim basis, said Gold, of the Fairway life sciences recruiting firm. Employers want to achieve more progress in drug development before they make permanent hires.
“They’re really making sure that if they bring someone in for a senior position,” Gold said, “they actually need that person.”
Jonathan Saltzman can be reached at firstname.lastname@example.org.