Jul. 27 at 10:08 PM
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1 of 2 - Really Good Article From SFGate:
"Layoffs, shutdowns and billions up in smoke. What's wrong with Bay Area biotech?"
Just north of San Francisco International Airport lies one of the densest clusters of biotechnology companies in the world. The neighborhoods along Brisbane’s and South San Francisco’s eastern shorelines are massive scientific engines. Into the office parks go ideas, PhDs and money; out comes life-lengthening research. But lately, this strip of land has become ground zero for the Bay Area’s most relentless torrent of layoffs.
Even as the massive cuts at tech giants like Google have waned, the local biotech industry is still lurching from one bout of job losses to another. Since late 2022, bad news in biotech has been nearly inescapable: flopped trials, slashed drug pipelines, bankruptcies and stock price collapses that destroyed billions of dollars in value. It’s all led to layoffs, plunging thousands of workers into unemployment amid a competitive job market.
Biotech — a field named for the basic premise of using biological processes to develop technology and products, often for health care — is an industry of extreme financial risk and life-or-death stakes. In its Bay Area and Boston hubs, billions are spent on research that may never yield a product. Clinical trials cost millions of dollars but sometimes only result in dangerous side effects. Success, on the other hand, can range from a useful research paper to a treatment for a rare disease, and even a multi-billion-dollar windfall.
With experimental science’s potential for immense rewards, biotech has always been a rocky, expensive business. But that doesn’t explain why it’s so rough right now — to the point that one local biotech analyst, Kyle Hipple at Colliers, told SFGATE he hears about major layoffs “every few weeks.” And that may be underselling it.
-- An investor exodus leads to a flood of layoffs and shutdowns --
No two companies lay people off for the exact same reason, or under identical conditions. But the Bay Area’s out-of-work researchers can point blame at one overarching culprit: the flow of money into biotech companies went from a torrent to a trickle.
Investor funding is the lifeblood of biotech, especially its startups. Even if a small research-focused outfit has some revenue from dealing its intellectual property, that cash typically comes nowhere close to its total costs, and many companies have no revenue at all. They’re relying on investors’ excitement and checks to keep lights on, cell cultures cold and employees paid.
For years, that hype grew and grew. In a May report, analysts from Pitchbook called the stretch from 2012 to 2017 biotech’s “steady ascent” before it reached a peak in 2018 — venture capitalists raised an eye-watering
$152.3 billion for biotech investing that year.
Then, COVID-19 arrived, bringing what Avison Young analyst Howard Huang called a “halo effect” around health care and life sciences. As the pandemic walloped other industries, vaccine development was suddenly front-page news. Investors, Huang told SFGATE, saw the low interest rates that often encourage riskier investing, plus the hype around health care, and poured money into biotech.
San Francisco-based Jon Norris, who works with pre-profit biotech companies for HSBC Innovation Banking, agreed with Huang, telling SFGATE that the pandemic made biotech suddenly seem like a safe sector for generalist investors who might previously have shied away from its complexities. Major Bay Area venture firms Andreessen Horowitz and General Catalyst plowed hundreds of millions into the industry. Some pre-product companies went public and saw their valuations soar into the billions, using the fresh funding to pursue multiple costly drug prospects at once, hire teams of researchers and grow into larger offices.
“When we’re having record years, there’s a lot of froth to the market,” Norris said. “People get very excited. Folks who haven’t been involved necessarily on a day-to-day basis jump in because they’re trying to leverage up in a hot area.” (By “froth,” Norris basically meant, “overvalued companies.”)
The investor excitement wouldn’t last forever. From August 2021 to May 2022, the Nasdaq Biotechnology Index, which tracks the industry’s stock prices with a special focus on giants like Amgen and Moderna, dropped by more than 30%. Several newly public biotech companies saw their market caps plummet, vanishing billions of dollars in value.
Pitchbook’s analysts dubbed the stretch from 2022 onward the “market rationalization.” Norris called 2023 a “year of retrenchment.” Either way, it was rough for the industry. When investor confidence falls, it’s more difficult for public companies to raise additional cash. And startups suddenly needed better results — not just the start of a trial, but positive data from it — to hit their next “value inflection point” and win new venture funds in a Series B round, for example, Norris said.
As the industry was left without the continued investment it needed, workers began to see the flip side of 2021’s funding heyday — especially the further their employers got from their last funding rounds. The companies that ballooned in size also burned through their cash, and are now cutting staff, and entire drug pipelines, to give other bets more time. During one week in March, two biotech firms that share a San Carlos office park received poor trial results and gutted their workforces — each had once been worth more than
$1 billion. At several companies, full-scale shutdowns have followed in the wake of multiple rounds of layoffs.
Even the companies that do survive will look different as a result of the crash. Norris said that if they aren’t able to get large funding rounds, “They’re going to cut back staff and they’re going to really streamline, because people are unsure of where the bottom is in the market right now.”
-- Even ‘gold standard’ science isn’t enough --
Stephen Brady, the CEO of Tempest Therapeutics, told SFGATE that two words often come to mind when he tries to sum up the biotech industry’s state of affairs: “brutal and surreal.” An industry veteran who developed two drugs at past companies that got the companies sold, Brady is now seeing, up close, the ugly reality of investors fleeing biotech.
Based in Brisbane, Tempest designs oncology drugs meant to kill tumor cells and help the immune system target them. In 2021, the company opted to test its lead candidate, called amezalpat, on patients with newly diagnosed hepatocellular carcinoma — the common and deadly disease known more simply as liver cancer. Brady had hoped to raise more money at the end of 2021, but he noticed a sudden shift in investors’ interest in oncology.
Still, on a Wednesday in October 2023, Tempest announced extremely positive results from a study on amezalpat. The drug looked like a success, building on a combination of other oncology drugs to deliver the study’s patients improved prognoses. Tempest’s stock jumped almost 4,000% in value in a single day. The road ahead was clear, Brady told SFGATE. Tempest had the “gold standard” of good data, and could plan another, larger study.
Over the next 16 months, Tempest won “orphan drug” and “fast track” designations from the Food and Drug Administration for amezalpat, as well approval for its next trial, the more expansive Phase 3. But the trial would cost about
$150 million, and Tempest finished 2024 with less than
$42 million in assets.
Raising more money, Brady found, was near impossible. He heard the excuse from investors that they’re just not putting money into oncology companies right now, possibly scared away by past losses. It felt like Tempest, after staying small and running on a “shoestring” budget, just hit a wall, the CEO said: “This isn’t the way it’s supposed to work.”
“You do a good job and you don’t waste investors’ money and the science works, and you execute well, you should be able to keep that molecule going,” Brady said.
In April, the situation — a promising drug, but dire financials — came to a head. Tempest couldn’t afford to run the next amezalpat trial, so it announced it was open to a litany of options for moving the drug forward, including, “mergers, acquisition, partnerships, joint ventures, licensing arrangements or other strategic transactions.” A few weeks later, the company laid off 21 of its 26 full-time employees in an effort to extend its timeline for finding a deal.
Since the announcement, several Tempest workers have stayed on as consultants, Brady said, trying to help get this potentially life-saving drug into the trial and into patients’ hands. On June 11, the company raised
$4.6 million by selling stock; on June 30, it won the right to test amezalpat in China, on top of its U.S. clearance. Brady is still hopeful that a study will happen, but with the lack of investor interest, he said, “We have given up a long time ago that it’s going to be us running it.”
Amid chaos and a dearth of cash, more layoffs are coming
According to a few metrics, the industry’s layoff problem is still getting worse. Trade outlet Fierce Biotech reported earlier this month that the first half of 2025 saw 128 layoff rounds at biopharmaceutical companies, up 32% from the period a year prior. Ernst & Young, the accounting firm, published its most dour “biotech survival index” in years in a June report: A whopping 39% of the biotech companies the firm analyzed in 2024 had less than a year’s worth of cash remaining, and an additional 20% had less than two years’ worth.
“We’re going to see many more companies, unfortunately, just reach the end of their cash runways,” Fierce editor Gabrielle Masson said on a podcast about the year’s wave of layoffs....
