Biotechs raised $15 billion less through IPOs in 2022 versus 2021, and 2023 is shaping up just like 2022. The inflation reduction act, with its added uncertainty about the extent of discounts, is a big industry concern. More than 115 biotech companies have announced layoffs in 2023. What is really going on in biopharma hiring?
In an environment of rising interest rates there are safer ways to make money than investing in drug development. Developing profitable products has always been difficult and initial public offerings have fallen 40% in 2023. Investment bank Stifel reports that 180 biotechs have a market value less than their cash holdings. Some initially promising technologies, such as cell and gene therapies, are proving difficult to turn into profitable products.
The Inflation Reduction Act
Government mandated price controls, as exemplified in the Inflation Reduction Act, is causing alarmed concern and shifts in how biopharma does business. The renegotiating of prices on some prescription drugs, particularly for seniors, has profound implications for the industry. Biopharma believes it will force them to reduce investments in life-saving drug research and development, slow economic growth and diminish overall health care quality for U.S. patients. Centralized drug purchasing decisions by health care systems to manage costs due to dwindling reimbursements is shifting the primary control from doctors to insurers.
News of job cuts have become commonplace in the biopharma industry. Stifel’s report said the number of layoff announcements surged 81% over the first seven months of 2023 versus the same period a year earlier. Biogen reported they would be letting go 11% of their workforce over the next few years. Pfizer, BioNTech and Sage Therapeutics are warning of possible cuts in the near future. The workforce of smaller biotechs fell by 24% from 2022 to 2023.
The good news? Stifel goes on to report that the number of biopharma jobs is actually growing despite this industry’s turbulence. Employment in large biopharma companies has actually climbed since 2021 and mid-size drugmakers are hiring fastest of all – 73% added to their employment base since February 2021. It is the smallest companies that are in trouble. The other reason for optimism in biopharma hiring is that employees losing their jobs are quickly finding opportunity elsewhere. Workforces in large pharma grew by almost 12% since February 2021. The increasing availability of c-suite level leaders has had some positive effect as in-depth experience is being recycled to drive “the biotech ecosystem.”