In 2023, the biopharma sector saw its highest bankruptcy rates in over a decade, with continued issues into 2024. Factors include rising interest rates and economic uncertainties affecting fundraising. Notable bankruptcies include Eiger BioPharmaceuticals and Gritstone bio. Industry experts predict further challenges ahead as conditions remain unfavorable for capital acquisition.
In 2023, the biopharmaceutical sector experienced the highest number of bankruptcies in over a decade, with 14 companies filing for Chapter 11 protection. The trend continued into 2024, where 13 firms followed suit, reflecting ongoing difficulties in securing funding due to the aftermath of the pandemic-induced financial boom.
According to Cristine Schwarzman, a partner at Ropes & Gray, while Chapter 11 filings are commonly reported, they represent only a part of the overall issue, as many companies choose to dissolve through less public and costlier means like ABC proceedings. Previously, the peak in biopharma bankruptcies occurred in 2019, with seven filings recorded.
David McIntosh, also a partner at Ropes & Gray, noted that the primary challenges stem from tighter capital availability amid rising interest rates and a turbulent political environment. Consequently, public biotech markets remain lackluster, and venture capitalists have become increasingly selective about their investments.
The surge of bankruptcies reflects a shift from the pandemic era when financing was more readily available. Schwarzman highlighted that many biotech firms accumulated significant debt during this period, leading to an increased number seeking bankruptcy protection to rectify their financial standings. McIntosh cautioned that the trend is likely to persist due to ongoing inflationary pressures and geopolitical uncertainties.
The collapse of Eiger BioPharmaceuticals was particularly noteworthy among 2024 bankruptcies. This biotech firm had notable projects but suffered a significant setback in a Phase III trial, ultimately prompting the sale of its assets to other companies, including Amylyx Pharmaceuticals.
Another significant case was Gritstone bio’s bankruptcy filing, which occurred in late 2024 in hopes of salvaging research and development operations through a stalking horse transaction. The auction of its assets fetched $21.2 million, although earlier promising Phase II results were tempered by pressing financial concerns.
Athersys also entered bankruptcy proceedings, selling its assets to Healios for approximately $2 million. With a long development history behind its MultiStem cell therapy, the firm’s attempts at successful trials had ultimately fallen short, contributing to its financial demise.
As of early 2024, the trend of bankruptcies is already manifesting, with companies like Omega Therapeutics signaling impending insolvency. McIntosh posited that unless public sentiment toward biotech improves significantly, and private investments increase in riskier sectors, these closures will likely continue.
The biopharmaceutical sector is experiencing unprecedented levels of bankruptcies, primarily due to difficulties in fundraising following the pandemic. With rising interest rates and economic uncertainty, both public and private biotech companies are facing significant financial pressures. The trend suggests a continued struggle for the industry unless market conditions improve significantly.
Original Source: www.biospace.com
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