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Boston Globe

‘The hangover can last longer than the party': Biotech is in a major slump, with no end in sight

The biotech index fund XBI is down nearly 5 percent since the start of the year. The biotech cluster based in Cambridge and Boston, the nation's largest, grapples with a record 16.1 million square feet of unleased lab space. And hiring remains soft, with many biopharma companies continuing to lay off workers — though at a slower pace than last year — and tap part-time 'fractional' executives to save money. While the building blocks of science and company creation are strong, said life sciences entrepreneur and investor Alexis Borisy, the decade-or-longer marathon of developing breakthrough therapies requires stability and predictability in the business and regulatory arenas. Advertisement 'Volatility, uncertainty . . . we don't like that,' Borisy said. Related : There's been no shortage of either in recent weeks. Plunging valuations across the biotech sector were thrust into the spotlight last month when Bluebird Bio, a Somerville gene therapy company that once topped $10 billion in market value, nearly stumbled into bankruptcy before 'Lots of companies are limping along,' said Mani Foroohar, senior research analyst at Boston health care investment bank Leerink Partners. Foroohar, a top biotech analyst, has slapped an 'underperform' rating on Moderna, the sector's brightest star in the heady decadelong boom that culminated in the industry's rally to combat the COVID pandemic. Cambridge-based Advertisement In many ways, biotech is stuck in postpandemic doldrums. Investors and real estate developers pumped billions into the sector in the run-up to COVID and through the pandemic's first year, then were caught flat-footed when demand for drugs slowed and the broader economy stalled. 'The hangover can last longer than the party,' Foroohar said. In the short term, the biggest obstacle to recovery may be the growing number of uncertainties hanging over the sector, many stemming from Trump administration's changes in policies and personnel. 'We were hoping we'd see momentum around a market turnaround . . .' said Kendalle Burlin O'Connell, chief executive of the Massachusetts Biotechnology Council. 'What we've seen federally is a lot of chaos and uncertainty.' Among the worries heard in Cambridge's Kendall Square, the area's biotech hub, is whether — as President Trump appointee Elon Musk moves to dismantle the federal bureaucracy — the Food and Drug Administration will have enough staffers left to review new drug applications. Elon Musk wielded a chainsaw on stage during the 2025 Conservative Political Action Conference in Maryland on Feb. 20. ERIC LEE/NYT 'That's a concern I'd never heard anyone mention before January,' said Dan Gold, president of Fairway Consulting Group, an executive search firm that places biotech researchers and executives, who spent last week talking with Boston and Cambridge companies. Many of those companies are increasingly cost conscious, knowing it will be hard to raise money in the current environment, Gold said. Instead of hiring full-time executives, they're retaining 'fractional' executives who work part time on drug programs that may or may not bear fruit. Advertisement 'I've probably got 15 chief medical officers or chief science officers that are fractional even if they're serving on the executive team at small biotechs and doing their jobs on a 20-hour-a-week basis,' he said, noting that such an arrangement was uncommon in the past. Biotech leaders are alarmed by the White House's moves to slash National Institutes of Health funding for the early-stage research that often translates into new medicines, a cutback that could And while the fallout from the Trump administration's tariffs isn't yet clear, drug makers fear they could disrupt the global supply chain and reignite inflation. That could prevent the Fed from resuming interest rate cuts, dampening the appetite for funding or buying startups. 'If the regulatory changes are dramatic, that level of uncertainty could have an impact on people's willingness to [invest in] this space,' said Terry McGuire, cofounder of Polaris Partners, a Boston venture capital firm that bankrolls biotechs. One especially worrying sign for many in the sector is the naming of Robert F. Kennedy Jr. as secretary of health and human services, overseeing key agencies such as the FDA, the NIH, and the Centers for Medicare and Medicaid Services, the largest payer for prescription drugs used by tens of millions of older and low-income Americans. US Secretary of Health and Human Services Secretary Robert F. Kennedy arrived to President Trump's joint address to Congress on March 4 in Washington, D.C. Tierney L. Cross/Getty Kennedy's ascension reflects a Advertisement The new administration could be especially tough on Moderna, which has built its business model and manufacturing capacity around vaccines to treat a range of viruses and even cancers. Earlier this month, Kennedy's HHS department said Moderna is contending with other challenges, ranging from patent infringement lawsuits to flagging demand for booster shots that prolong protection from its COVID vaccine. The company's stock has plunged over 90 percent from its 2021 peak. Moderna declined to comment. The industry downturn has shaken other Kendall Square stalwarts. Biogen's shares have tumbled nearly 60 percent from their 2021 high point amid declining sales of its multiple sclerosis drugs. In a Feb. 12 call with analysts, chief executive Chris Viehbacher acknowledged 'we have been faced with increased competition for our [MS] franchise' even as 'we now build a new Biogen' with four new drugs, including At the same time, new cutting-edge research approaches pioneered in Massachusetts, such as gene editing, have been slow to pay off, leading to program cuts, falling stocks, and hundreds of Boston area layoffs at companies such as Editas, Intellia, and Crispr Therapeutics. The belt-tightening has stalled leasing of lab space in biotech centers from Kendall Square to Boston's Seaport District, where the current real estate oversupply stems partly from developers misreading demand. Travis McCready, head of industries for the market advisory group at commercial real estate firm JLL, estimates it will take three years for new and expanding tenants to absorb vacant space in the Boston area. Advertisement Demand is weaker partly because biotechs have outsourced more lab tasks to contract research organizations and deployed new high-tech research tools — some powered by artificial intelligence — to boost efficiency, McCready said. 'Biotech companies aren't growing physically the way they used to,' said McCready. 'It's taking longer, and it takes more capital, for them to grow. Younger companies aren't getting the funding that they used to. So they're staying in place longer and that's reducing the churn.' Some glimmers of hope have emerged. Massachusetts biotechs raised $1.2 billion in venture capital in the first two months of 2025, up from $804 million in the first two months of last year, according to the state's biotechnology council. There's also been signs the initial public offering window is cracking open. Sionna Therapeutics, a Waltham biotech targeting cystic fibrosis, raised $219.2 million in an IPO last month, and two other Bay State biotechs — Odyssey of Boston and Alopexx of Cambridge — have said they plan to go public this year. There were only six biotech IPOs in Massachusetts in 2024 and just two in 2023. Meanwhile, after winning FDA approval of its Journavx treatment for acute pain, Boston's Vertex is flying high even as other homegrown biotechs struggle. The company's stock has climbed more than 20 percent since the start of the year. The exterior of Vertex Pharmaceuticals in Boston in 2022. Erin Clark/Globe Staff Biotech has always been a boom-and-bust business. Many Kendall Square veterans say the key ingredients are in place for recovery and the next expansion cycle. It's just a question of when. 'It's a fool's errand to say when the new cycle starts,' said Borisy. 'Like all things in history, you don't get to know you've entered the new cycle until you're in it.' Robert Weisman can be reached at