Layoffs continue to batter biotech, with Big Pharmas piling on the pain

More companies laid off staff last month than in January 2022, driven by trims at billion-dollar Big Pharmas and smaller biotechs that had to downsize for the second time in less than a year. 

Over the last four weeks, at least 13 different companies have announced staff reductions, resulting in hundreds of layoffs and maintaining pessimism that the industry as a whole has yet to find the floor. That exceeds the eight companies that had layoffs in January 2022 and ties the fourth-highest month of layoffs recorded in the last 13 months.

Eric Celidonio, founder of the staffing firm Recruiting, told Fierce Biotech in December that employment in 2022 was buoyed by Big Pharma openings even as layoffs struck smaller companies. 

“That’s the thing that's keeping this business really in great standing is that [for] every one of those small biotech layoffs, there is, three, four, five positions waiting in Big Pharma,” he said at the time. “So people are literally trading to safety, they're going to bigger pharma now that the jobs are.” 

Now, Big Pharmas have moved to cut staff as well. Amgen and Merck KGaA are the latest to announce plans to shed staff.

There were a few ominous storm clouds entering 2023 that spelled potential trouble, specifically for private companies that relied on venture funding. The number of series A deals in 2022 dropped to 2019 levels in the third quarter before ticking back up in the fourth quarter, according to an annual report from Silicon Valley Bank (SVB). Series B deals fell each subsequent quarter after a first-quarter spike. In the fourth quarter, only 15 series B deals were made, the lowest number in at least the last three years. 

Jon Norris, managing director for business development for SVB's healthcare wing, said the layoffs and cash-saving measures that have been ubiquitous in the last year stem from an overheated venture market in 2021. 

"Where you see things now is a refocusing on constructive cash burn," he said in an interview. "I think that in the end, you know, that focus means that these companies have to … be very cognizant of how they're spending their capital." Norris added that the trend is likely to last the whole year. 

Spurred in part by the J.P. Morgan Healthcare Conference at the beginning of the year, there was a sense of cautious optimism that the biotech industry would be able to turn a corner in short order, given the disappointment that defined much of 2022. In other words, few people were interested in entertaining the bleak possibility that the worst was yet to come. 

Some biotechs have now had to institute multiple rounds of layoffs. TCR² Therapeutics announced a 40% cut to its team earlier in January, the second round in less than six months after Fierce Biotech learned the company cut a fifth of staff members in August 2022. Inovio is in the same boat, cutting another 11% of its workforce six months after downsizing by 18%. Today, Instil Bio cut 15 more people in the U.S. after 60% of staff were sent packing in December. 

The irony is that as layoffs have persisted, the capital markets have somewhat stabilized. The biotech index fund XBI has climbed nearly 9% so far in 2023 and is up 11.74% over the last six months, trading at $88.80 per share. At its peak on Feb. 5, 2022, the XBI was trading at $166.78. Similar trends are seen over on the Nasdaq Biotechnology Index, which is up nearly 4% in 2023 and more than 13% in the last six months. Cowen says the capital trends—while encouraging—should be taken with a grain of salt. 

"Nevertheless, we believe these trends provide some useful perspective on the potential durability of a rotation back toward biotech should we continue to see evidence of improving sentiment and lasting biotech outperformance, as it could signal the beginning of another multi-year run for the sector," the firm wrote in a Wednesday note. 

Not all companies are shrinking to start off the new year. Moderna plans to hire 2,000 more workers, evidence of the company’s rocketing growth. 

“Moderna’s not just a life science company—it’s a digital company—you know—the mRNA platform is an information technology,” said Chief Technical Operations and Quality Officer Jerh Collins, Ph.D., in an interview with Fierce Pharma last week. “So we’re quite happy to have lateral thinking where we tap into skills in other industries besides life science.” 

While Moderna is cognizant of the layoffs striking the industry, Collins doesn’t feel the trend is particularly outsized compared to reductions seen elsewhere, like in the tech sector where tens of thousands of people have lost jobs. 

“If I look at the biotech space, I don’t particularly see ‘it,’” he said, with “it” referring to signs of an especially tumultuous downturn for biotech specifically. “I would be speculating any further but I don’t see any reason for concern in the biotech space.”