The conference is back. What about the industry? Taking the biotech pulse at #JPM23

SAN FRANCISCO — If the annual JP Morgan conference is speed dating for biopharma deals, fewer eligible singles appeared to have shown up for 2023.

While attendees continued to pack the rooms for presentations, panels, networking events and happy hours, multiple people told Endpoints News that the confab felt quieter than past years.

“It’s less busy,” said Vor CEO Robert Ang. “I’d say it’s like 70%. But I think everyone’s really glad to come back.”

Biopharma once again congregated in San Francisco — for the first time in three years — in a tempestuous season.

Robert Ang

Over the past year, multiple biotechs have shut down, scaled back or retooled their plans, laying off sizable groups of employees in the process. Many public companies were hit hard on share prices. Although the Nasdaq Biotech Index is trading slightly higher than it was a year ago, the same can’t be said about the S&P Biotech ETF. Few private players made the decision to IPO, and biotech funding in the fourth quarter of 2022 was down more than 50% compared to the prior year.

With fears of a global recession looming, Big Pharma shied away from dramatic M&A gambles, and the deals that did emerge ahead of the meeting’s Monday kickoff, from AstraZeneca’s buyout of CinCor to Ipsen’s acquisition of Albireo to Chiesi’s takeover of Amryt, fell short of offering the big morale boost some were looking for.

Yet conversations with biotech executives and investors outside the Westin St. Francis on the outskirts of the annual gathering suggest the downturn isn’t dampening the mood. The science that underlies the research and development of new drugs, they argue, is still moving at a stunning pace. If anything, longtime players in the industry are hopeful these turbulent times will weed out the weak — and are eager to prove that they are the strong ones who deserve to stay.

Harsh times

There’s no sugarcoating it: Biotech, or at least big parts of it, is hurting.

Vik Bajaj

“It’s a time of upheaval for our industry,” said Vik Bajaj, managing director at Foresite Capital. “There’s been a lot of rearrangement that’s been tough on a lot of people.”

On top of inflation and supply chain issues, Bajaj said he’s worried about two other undercurrents: First, because of holes on the policy level, the biopharma industry isn’t as prepared for future pandemics as the general public may expect; and second, geopolitical tensions and the subsequent trade tariffs and barriers may hinder the increasingly global collaboration of scientists.

He stressed that the consequences won’t be drastic or overnight. But if left unsolved, those issues could create a “long-term tax” on the industry that could change what companies do and how they do it.

At Cerevel Therapeutics, a Nasdaq-listed neuroscience company developing a slate of programs spun out from Pfizer, CEO Tony Coles acknowledged being affected by what he called “micro-environmental things” — such as staffing shortages at clinical sites resulting from Covid and the labor market.

“Those kinds of things are things that we’re dealing with, putting mitigation plans in place. We’re monitoring those timelines very carefully,” he said.

Samantha Singer

For biotechs that are in even earlier stages, the biggest question is often survival. As the IPO window stays shut, fundraising private capital becomes paramount, especially for those that are either not seeking to or struggling to partner with pharma companies.

“It seems to be more difficult than it has been,” said Samantha Singer, who worked at Biogen and the Broad Institute before becoming CEO of Abata, a developer of regulatory T cell therapies for autoimmune diseases. “People are very cautious. They’re taking a long time to make decisions because they’re really doing a lot of careful research. I think it’s a little harder to get someone to take the first step to be the lead.”

Discerning investors

One common narrative for explaining the current biotech downturn goes like this: The go-go times of biotech investing amid a global pandemic where makers of drugs and vaccines carried the hope of the world brought in a tidal wave of cash from generalist investors. When the tide went out, what’s left are specialist investors who ask tougher questions and are pickier about where they put their money.

Joshua Brumm

“We just financed so many companies,” said Josh Brumm, president and CEO of Dyne Therapeutics, which is developing oligonucleotides for muscle diseases. “All these companies need to come back and continue to raise money. And so I think it was a little bit of a flight to quality.”

Chris Bardon, who leads public market investment for MPM Capital, contends that despite the volatility, there’s nothing fundamentally dysfunctional with the system. Companies that come up with good clinical data, she said, are still getting rewarded.

“You have to get over the finish line with the money that you have,” she said. “That’s the rule of the game.”

Ang, the Vor CEO, pointed to his company’s recent $115.8 million raise on the public market as proof. It followed the announcement of first-in-human data for Vor’s edited stem cell product.

“We are very much in an era (where) investors, in particular, just need to see that evidence,” he said.

Two to three years ago, platform companies touting flashy technology could’ve hauled in massive sums while they were still years away from the clinic. Now the sentiment seems to be focusing on translating technology into real products — or at least meaningful updates — sooner.

Peter Maag

Kyverna Therapeutics is gearing up for its first-in-human trial, and it’s dreaming big in cell therapies for autoimmune diseases. CEO Peter Maag believes there’s “ample cash” sitting around; the company just needs a smart strategy to obtain it.

“What used to be one financing event might be now a string of pearls where you think about multiple smaller financings to build the company,” he said.

Bob Nelsen, co-founder of ARCH Venture Partners, told Endpoints founding editor John Carroll in a fireside chat that his firm is investing “at the fastest pace on a dollar basis that we’ve ever invested, even now.” And while there was “a bunch of crap” that got money when it was hot, according to him the overall quality was better than previous upcycles.

“But there will be a shakeout of those companies, and I think there needs to be some consolidation,” he said. “Every graduate student probably can’t have a company.”

Rock bottom?

There’s hope that after the recent tough times, the industry is at a turning point.

“I think people are generally feeling like we probably hit bottom as a biotech sector and we’re on our way back up,” said Peter Anastasiou, CEO of gene therapy biotech Capsida Biotherapeutics. “What fuels that tends to be good data, partnerships, investor interest, pharma interest.”

Still, some of the reverberations from the JP Morgan meeting — including deal talks behind closed doors — won’t be seen or felt until months, if not years.

Bob Nelsen

“While 2023 is going to have these challenges due to macroeconomics, these types of times are sometimes the very best times to build companies,” Vijay Pande, general partner at Andreessen Horowitz, said on a panel at the WuXi Global Forum.

Nelsen noted at the Endpoints event that the scarcest resource isn’t capital but human capital — finding capable CEOs to run the companies being founded.

After all, as insiders underscore again and again, scientists are still making progress and hitting breakthroughs.

“So I have a great deal of optimism that scientific productivity is continuing to fuel productivity in the industry,” Bajaj said, adding later, “We all have to be optimistic in this field.”

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