“Hold on to her nails.” The Massachusetts biotech industry is preparing for another tough year.

Because of it all, the startups hoping to go public didn’t dare venture into the turbulent, shrinking stock market. Many companies are trying to survive until an economic turnaround occurs. Some have gone gold recently, including once-promising Colorado cancer company Clovis Oncology and startup Cambridge Neurology. Faze medicines.

said Jeffrey Quillen, a partner at law firm Foley Hough who works with biotech startups from inception to stock market debuts. By the end of 2022, he said, the biotech industry was “holding on its nails.”

Many of these commentators were represented at the JP Morgan Healthcare Conference in San Francisco last week, the largest biotech business meeting of the year. Hotel rooms and restaurant kiosks have become boardrooms for companies seeking to attract investors or banking in a major breakthrough through a deal with — or acquisition by — a larger pharmaceutical company. But the money that flowed freely two years ago is clearly going to be hard to come by. An air of foreboding looms in the halls, with many speculating that the grim outlook could extend into 2023.

Jean-Jacques Benaim, CEO of the California drug company BioMarin, said during an interview at a luxury hotel during a conference. “You will see companies disappear, merge and acquire.”

Biotech leaders have warned of the collapse, and small companies across the country, including Boston, have already resorted to layoffs or abandoning experimental drug programs to buy another year or two. Industry The underlying problem—too much, too fast growth—isn’t unique to Massachusetts, but because the Boston area is widely considered a biotechnology hotspot, the pain may be particularly pronounced here. But some in the industry say the cleanse may be beneficial in the long run.

Main Street in Kendall Square. Boston’s biotech industry has spilled over from this ancient stronghold into Fenway, the seaport and surrounding suburbs.Jonathan Wiggs/Globe Staff

“If our sector is going to take a hit, Boston is within sight,” said Hussein Morag, consultant and New England life sciences leader at Deloitte. “There will be slaughter, and unfortunately some of the good science will decline, along with the not-so-good science, but industry will come out stronger.”

And despite the economic downturn, it’s not as if the financing spigot has turned off. newly Report of the Massachusetts Board of Biotechnology found that companies headquartered in the state It raised $8.72 billion in venture capital funding in 2022, down 36 percent from the previous year, but still the second-highest year on record.

Many of these companies depend on emerging ideas to Cancer treatment or immune diseases. Others create the new or to improve Forms of gene therapy, or using Artificial intelligence to Design drugs.

Still, the IPO landscape was dismal, with eight biotech companies in the state going public last year compared to 25 the previous year. The larger life sciences companies were reluctant to make big acquisitions last year, too, with the acquisition of 26 Massachusetts-based biotech companies valued at about $5.9 billion, compared to 34 companies for about $64 billion in 2021.

Many industry leaders are hopeful that financing and acquisitions will return as soon as this summer, but they expect it will take longer for IPO appetite to develop. Executives point to a number of national and global concerns that can occur Changing those expectations, including inflation, higher interest rates, the specter of a recession, the war in Ukraine, tensions in Congress, and drug pricing legislation.

“These are the issues that weigh heavily on the sector,” said Barry Green, chief executive of Cambridge-based Sage Therapeutics. “And it’s very difficult for Wall Street to embrace a sector with so much uncertainty.”

Many companies trade at a fraction of their tops, drawing their total stock values ​​below the amount of cash they have on hand and setting timers on the brink of bankruptcy. Lexington-based Concert Pharmaceuticals, which only had enough cash to survive through June It was just bought by Indian pharmaceutical company Sun Pharma.

“There was a huge overcorrection,” said Andrew Hiden, an investor at Bessemer Venture Partners in Cambridge. “The overall state of the industry remains very strong. When I think about the scientific progress that has been made over the past decade, there is a lot to get excited about.”

“These are the issues that weigh heavily on the sector,” said Barry Green, chief executive of Cambridge-based Sage Therapeutics, referring to the biotech industry. “And it’s very difficult for Wall Street to embrace a sector with so much uncertainty.”ANGELA WEIS/AFP via Getty Images

With the value of smaller biotech companies depreciating dramatically, and larger drug companies pouring in, investors are wondering if big pharma will go on a shopping spree. “There’s a great opportunity for those sitting on the money to get a deal,” said Chris Caruso, partner at Deloitte, which focuses on life sciences mergers and acquisitions. “Some of the companies that have been hit are likely to be targeted.”

Although it looks like a buyers’ market, a wave of acquisitions has yet to materialize. Two small biotech companies in Massachusetts, Albireo and CinCor were acquired by major European pharmaceutical companies last week, marking a slow start to a season normally packed with biotech business deals. As Sencor CEO Marc de Gardel told the Globe, “Pharmaceutical companies seem to be pretty picky about what they want.” Cincor, which is developing pills to treat high blood pressure, was bought for $1.3 billion by AstraZeneca.

Experts said partnerships and collaborations between companies large and small are becoming more common Large corporations are looking to invest in new science without the financial risk of buying outright a company whose experimental treatments may ultimately fail. Biotech companies that might have gone it alone two years ago also view such partnerships as a lifeline to their dwindling coffers.

“We look for partners where it makes sense,” said Chris Round, president of EMD Serono, the Rockland-based US healthcare subsidiary of German life sciences giant Merck KGaA. “And as we go into what looks to be more difficult economic times over the next couple of years, I think we’ll probably end up doing more of that, as will everyone else.”

Relatively sheltered from a downturn in financing, many leaders from medium- and large-cap biotech companies see the coming crash as a natural and necessary part of the boom-bust cycle. These executives say companies founded on a single premise or set of unrealized experiences need not continue.

“It’s a good pruning thing away,” said Richard Pops, CEO of Alkermes, an Irish pharmaceutical company with US headquarters in Waltham. “Well-informed companies can raise capital, but the cost of capital will be infuriating,” he added, because they may need to sell their shares at greatly diminished values.

The layoffs that began last year in the biotech industry are likely to continue for cash-strapped companies. But executives in Massachusetts say they are having such a hard time filling vacancies that they are not worried about unemployment in the sector. “There’s so much demand, it’s crazy. It’s a war for talent in biopharmaceuticals,” Green said.

The reflection of a woman is seen through a colorful poster affixed to a window in Kendall Square on November 7, 2021.

Jessica Rinaldi / Globe Staff

Two years ago he was extending job offers and returning candidates with three to five more offers, said Seth Ittenberg, chief executive of Bluerock Therapeutics, a stem cell subsidiary of Cambridge-based Bayer. This may not happen any more, he added, and job seekers may have to be less selective about who they work for, as well as less demanding about benefits such as working from home.

Venture capitalists focused on the biotech say they will continue to invest in new startups, but warn that the money will not flow freely, especially to the third, fourth, or fifth startup trying to tackle the same problem or work on similar technology. competitors.

“Fewer companies will be funded as investment standards go up. By definition, the quality of what is being funded goes up as well,” said Jorge Conde, general partner at California-based venture capital firm Andreessen Horowitz. “And hopefully they’ll be more focused and stronger. “

Robert Vessey, head of early research and development at Bristol-Myers Squibb, which is opening a new research site in Cambridge this year, doesn’t expect scientific progress to slow in homegrown startups. “The Boston-Cambridge ecosystem is very strong and innovative, there is a great deal of company formation skills, and I am sure the ecosystem will get through this period and remain a leader in the field.”

This view — that the region’s biotech industry will weather the storm — has been echoed by many investors.

“Boston remains the biotech capital of the world,” said Hiden. “This is not going to change anytime soon.”


Ryan Cross can be reached at ryan.cross@globe.com. Follow him on Twitter @tweet.

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