Biotech Companies like Biogen Feeling The Pinch As Industry Layoffs Continue
Key takeaways
- Biogen lays off unspecified amount of employees while Pear Therapeutics files for bankruptcy
- The biotech industry is struggling as funding dries up and the SVB fall-out runs deep
- Taking a long-term view of the industry and sticking with Big Pharma companies could be an effective hedging strategy
The heady highs of 2022 are long gone for the biotech industry. Layoffs are plaguing the sector, which has a long way to fall after basking in the glory of being the pandemic hero and benefiting from a funding boom.
But developments in the industry and the long-term view of pharmaceuticals shouldn’t be ignored by investors who can stomach the short-term pain. Here’s the latest on biotech layoffs and why they’re happening.
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What’s the latest in biotech?
The job cuts misery has continued in the tech sector, with biotech no stranger to them. In the last week digital health provider Pear Therapeutics has filed for Chapter 11 bankruptcy, laying off 92% of its staff while just 15 remain as it searches for a buyer. Foundation Medicine has also announced it’s laying off 135 employees.
It’s not just the smaller players that are making job cuts — Big Pharma is doing the same. Biogen announced yesterday (Monday 10th April) that it was laying off an unspecified number of employees. The stock price is down 1% on Tuesday.
In February, Pfizer said it would be cutting nearly 200 employees, while Johnson & Johnson has made steady cuts to its workforce including 322 jobs in its medtech division phased out by the end of April.
What’s caused the industry downturn?
Biotech sounds like it should be a recession-proof market — everyone needs medicines, right? But the reality is that, like any other industry, it relies on outside investment. And we all know that investment has all but vanished in recent months as the economy remains shaky.
Developing medicines that may or may not pay off is an inherently risky endeavor. Backers want to see a return on their investment, and with high interest rates drying up credit lines that pool of money has shrunk. As for an IPO? Forget it.
Not to mention the collapse of Silicon Valley Bank, which was the bank for start-ups. Its sudden breakdown has left investors even more cautious than they were before — and some biotechs have been left out in the cold. To top it off, there are some upcoming issues over pricing in the new Medicare program launching in 2026 which analysts think could impact stock prices.
The bottom line
The biotech industry couldn’t look more different than it did just 18 months ago. With layoffs happening left, right and center, it’s a definite downturn for the market right now.
That being said, it can be a high-risk, high-reward strategy for investors who are willing to brave the stormy economic climate. Big Pharma is well-poised to survive and thrive as we face an aging population crisis, so it’s best to take a long-term view of the industry.
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