fb-pixel Skip to main content

The year in biotech begins flush with cash

‘As an industry, there were more unknowns and uncertainties last year.’ JASON GARDNER, c<i>hief executive of Magenta Therapeutics in Cambridge</i> Handout

SAN FRANCISCO — Last January, when thousands of biotechnology executives and investors flooded the annual J.P. Morgan Healthcare Conference, there was a tincture of anxiety amid the talk of breakthrough medicines and shrewd corporate partnerships.

Donald Trump had just been elected president. Republican and Democratic candidates alike had pilloried the pharmaceutical industry for skyrocketing prescription drug prices. Even as the conference was going on, Trump said drug companies were “getting away with murder.”

Today, that all seems so 2017.

As the biggest annual investors event in biotechnology gets underway here Monday, concerns that Trump might do something radical — like push to allow Medicare to negotiate drug prices — have evaporated. He just signed a tax cut that will let drug makers bring billions of dollars in overseas cash home, and possibly fuel a round of corporate mergers and acquisitions. The Food and Drug Administration finished 2017 with the most new drug approvals in at least a decade. Gene-based medicines are coming to market with six-figure price tags. And venture capitalists in Massachusetts, the nation’s leading biotech cluster, have stockpiled hundreds of millions of dollars to start new companies.

“As an industry, there were more unknowns and uncertainties last year,” said Jason Gardner, chief executive of Magenta Therapeutics, a Cambridge startup seeking to develop drugs to make bone marrow transplants safer. This year, he said, “We should feel more positive.”


Noubar Afeyan, founder and chief executive of Flagship Pioneering, a Cambridge venture capital firm that recently raised another $618 million to fund biotech startups, said presidential candidates unfairly tarred all drug makers for the price gouging of a few giant companies that specialize in generic drugs. Mylan NV, most notably, was skewered for raising the price of EpiPen, the life-saving allergy medicine, more than 400 percent from 2007 to 2016.


”There’s an emerging clarity that this is not an issue of all drugs but specific subsectors,” said Afeyan, whose venture capital firm has created biotechs from Moderna Therapeutics to Agios Pharmaceuticals. “There certainly hasn’t been as naive a discussion as there was a year or two ago, when it was black and white.”

Maybe. Setting aside the political rhetoric, nothing seems to have buoyed drug company executives, venture capitalists, and investors more than the recently approved Republican tax cut. In addition to cutting the corporate tax rate from 35 to 21 percent, a provision in the law will enable drug makers to pay reduced taxes of billions of dollars in overseas earnings if they decide to funnel the money back to the United States.

The top 10 US life science companies have about $160 billion overseas, according to Jeffrey Greene, principal author of a soon-to-be-released analysis of the life sciences by the consulting firm EY. Some of that cash will likely be returned to the United States to bankroll corporate mergers and acquisitions by large companies of smaller drug startups with promising drug pipelines.

This could galvanize “the kind of large-scale deal-making that we have not seen in biopharma in nearly a decade,” Greene said in an interview.

That would be good for investors whose stocks increase in value. But it might also result in job cuts as companies consolidate and seek to eliminate overlapping jobs.

In Massachusetts, biotech research-and-development jobs have soared 40 percent over the past decade to 34,366 jobs in 2016, according to a recent study by the Massachusetts Biotechnology Council, an industry trade group.


If the Republican tax cut is expected to fuel mergers and acquisitions, the cash-filled coffers of venture capital firms in Massachusetts are expected to spur the creation of more biotech startups.

In addition to Flagship Pioneering, Third Rock Ventures recently said that it had added another $616 million to its coffers, while Atlas Venture said it had added another $350 million.

“We have capital to deploy,” said Alexis Borisy, a partner in Third Rock, who predicted that the biotech cluster in the state will create about two dozen new startups this year.

Another reason several biotech executives and venture capitalists say they are upbeat is because of FDA approvals of a wave gene-based medications with radically different approaches to treating rare and often deadly diseases.

In August, the FDA approved a CAR-T cell treatment developed by the Swiss drug giant Novartis and the University of Pennsylvania that genetically engineers patients’ own blood cells into an army of cells that seeks and destroys childhood leukemia. Treatment requires only one dose — at a cost of $475,000.

Last month, the government approved what some are calling the first true gene therapy, a medicine developed by Spark Therapeutics, to treat a rare form of inherited vision loss that can lead to blindness. It costs $850,000 for a one-time treatment, or $425,000 per eye, making it the most expensive drug sold in the United States, ranked by sticker price.


And several companies are experimenting with a gene-silencing technology known as RNA interference, or RNAi, including Cambridge-based Alnylam Pharmaceuticals, which has applied for FDA approval of a drug to treat a rare nerve disorder following positive results of a late-stage clinical trial.

“To me, the most exciting thing going on in biopharma right now is the dawn of precision genetic medicine,” said Douglas Ingram, chief executive of Sarepta Therapeutics Inc., a Cambridge biotech that’s experimenting with RNA-targeted therapeutics and gene therapies.

Still, the odds remain stacked against any of the experimental drugs that executives will tout to investors ever making it to market. Less than one in 10 drugs that enters clinical trials ultimately wins FDA approval, according to a 2016 study by the Biotechnology Innovation Organization, a nonprofit trade group.

Jonathan Saltzman can be reached at jsaltzman@globe.com.