On biotech’s cutting room floor lies a littering of IV bags and powdery oral pills. Cast off trial documents and FDA regulatory submissions, hastily pulled back, are piling up in the recycling. Befuddled clinicians, suddenly without a clinical trial to conduct or a pipeline candidate to work on, are wandering around.
This, after “a six-month period to forget” in the markets, according to Evaluate Vantage. We’re seeing a seemingly unprecedented reckoning from biotech C-suites, where executives are making tough calls about continuing to keep the lights on or cutting once promising candidates.
Every day of the second quarter earnings reporting period we’ve seen small companies regretfully informing the world that they are cutting this program or that. Others are desperately seeking strategic partnerships to save therapies they think are promising. Meanwhile, Big Pharma is making plenty of licensing deals, but they tend to be with drug discovery engines with the hopeful goal of finding something new, rather than picking up a cast off.
In axing the ovarian cancer med HPN536, Harpoon Therapeutics’ CEO Julie Eastland lamented the promise being let go, but said resources have to go elsewhere at this time “to ensure Harpoon is well positioned for future success in the current challenging biotech climate.”
Harpoon will now try to find a partner for future development of the med, which needs further dose optimization work. Eastland expects the company’s current cash balance to run operations into the second half of 2023.
Infinity Pharmaceuticals’ CEO Adelene Perkins similarly blamed “the current market environment” plus the long road ahead in the clinic for the decision to seek a partner for the urothelial cancer therapy eganelisib. No new efficacy studies will be started for the macrophage reprogramming therapeutic until a partner is secured, even though Infinity had two studies in the works.
“Infinity has a track record of fiscal discipline, and this approach allows us to focus our current resources on ongoing clinical trials, extend our cash runway into 2024, and provide the flexibility to accommodate potential partners’ input on the prioritization and design of our next studies,” Perkins said. “These initiatives support our commitment to advancing development of eganelisib across multiple oncology indications to maximize value for patients and shareholders.”
The small biotech is expected to end 2022 with a cash balance range of about $35 million to $45 million, which should keep things going until 2024.
Besides these two, there were reports of program culls at ProQR Therapeutics, Kala Pharmaceuticals and Synthetic Biologics, VYNE Therapeutics, Bolt Biotherapeutics and more over the past week or so. Pyxis Oncology and Atai Life Sciences began the week by saying goodbye to a clutch of programs too.
Not all of these companies named the market specifically. For instance, Bolt ran into toxicity trouble for BDC-2034, leading to the cut. But all noted the need to make a longer cash runway.
Pyxis will get little, if any, relief despite letting go of three assets. The biotech said the reprioritization will extend its runway into the second half of 2024, compared to the third quarter of 2024 that was previously projected.
‘A light buffet’
These pipeline cuts mark the end of a dark half for biotech, which has also undergone unprecedented layoffs and seen shares drop dramatically. Pyxis was one of those companies that caught the IPO rush, debuting at $19 on Oct. 8, 2021, and now sitting at just below $3.
Another $200 billion in value was lost by biotechs in the second quarter, matching the same dismal figure from the first, according to Evaluate Vantage. IPOs have stopped almost entirely, and those companies that jumped on the rush last year to go public have struggled with declining share values.
“There are hints of a marginally brighter future lurking if we look hard enough but we have to remember the context,” Evaluate Vantage wrote in a recent report on the state of the biopharma markets. “All markets are in a pretty gruesome state and biotech and pharma are, if anything, slightly ahead of the curve.”
The signs of hope include a slight uptick in M&A activity—although Evaluate Vantage called this “a light buffet” rather than a feast at this point. There’s been plenty of speculation that deal activity will pick up as valuations come down for biotechs, but the bump really has not been seen yet.
We have, however, seen a few small biotechs cannibalizing each other, joining forces to ride out the market together. Bone Therapeutics will become BioScenic in a reverse merger-type deal with French arsenic salts biotech Medsenic, for instance. In another deal, Disc Medicine will take over what's left of Gemini Therapeutics—including whatever is left of the $136.6 million the company had in the bank at the end of last year—to work on a couple of hematology assets picked up from AbbVie and Roche.
But Evaluate Vantage cautioned that deals take time, so with valuations down to levels that may appeal more to Big Pharma, we could just be in a waiting period, with executives huddled in board rooms hashing out the details.
Hopefully, the third-quarter earnings report will be marked by dealmaking rather than the end of promising assets.