Peginterferon lambda-1a(ZymoGenetics, Inc.)

iStock, Yutthana Gaetgeaw 2023 marked the most bankruptcies in biopharma in more than a decade, with 14 companies filing for Chapter 11 protection. The number remained high in 2024. Biopharma bankruptcies are still at higher-than-normal levels, with 2024 seeing 13 firms go under in this way—just one less than the industry’s 10-year high of 14 in 2023—underscoring the perilous fundraising situation that has persisted since the pandemic bubble burst. “Chapter 11 is really just the tip of the iceberg,” Cristine Schwarzman, a partner in Ropes & Gray’s business restructuring practice, told BioSpace in an email. While the bankruptcy code is the most commonly reported way that companies shut down, it’s not the only way. “Many more biotechs go through ABC proceedings and just dissolve, because those processes are less expensive and quicker, even though they do not provide the same benefits as the ‘free and clear’ provisions of the bankruptcy code,” Schwarzman said. Prior to 2023, the highest number of biopharma bankruptcies since 2010 came in 2019 when seven companies filed for Chapter 11 protection. David McIntosh, also a partner at Ropes & Gray in the life sciences and intellectual property transactions practice, said the key driver of this recent peak is fundraising challenges, particularly as interest rates have risen and strained access to capital. There has also been economic uncertainty due to the political environment, leading to more restrained investing, McIntosh explained. “The public markets have been cool for biotech companies, and private investors, like VCs, are being more selective in which (and how many) companies they are willing to invest in,” he told BioSpace . in an email. Meanwhile, Big Pharma has not been as quick to deal as analysts and investors had hoped, and the larger companies have also cut back on R&D expenditures. This challenging funding environment follows the pandemic boom, which saw an influx of funds across the life sciences. “The ease with which companies were able to raise capital during the pandemic resulted in biotech companies taking on more debt financing than previously in the life sciences industry,” Schwarzman said. Because of the high rate of debt financings, more companies had to go through the bankruptcy process to “de-lever” their balance sheets, she added. “I think it is also safe to say that during the pandemic, a number of private biotech companies went public that might not have been able to in normal market times,” McIntosh said. These public companies are more likely to seek bankruptcy protection because they typically have a higher valuation, more complex capital structure and investors with access to capital to fund the Chapter 11 process, Schwarzman said. Smaller private companies, on the other hand, tend to be able to wrap things up through state court processes. “To be clear, however, both private and public biotech companies are facing financial pressure right now,” Schwarzman added. Unfortunately, Schwarzman and McIntosh see the trend continuing this year. Due to geopolitical uncertainty “and the increasing likelihood that interest rates will at a minimum not be cut to deal with the continuing inflationary environment,” McIntosh said, “we do not expect these trends to fall off.” Beginning of the End To McIntosh, the most surprising bankruptcy of 2024 was Eiger BioPharmaceuticals, a metabolic disease biotech that was advancing peginterferon lambda for chronic hepatitis delta until a liver safety signal arose in a Phase III trial. “It had raised a lot of money and had a lot of interesting assets, but experienced a Phase III failure in 2023, which seemed to be the beginning of the end,” McIntosh said. Eiger sold off its assets, with some landing at Amylyx Pharmaceuticals for future development. Amylyx paid $35 million for the glucagon-like peptide-1 receptor antagonist avexitide, which is expected to begin a Phase III trial this quarter . This is a fairly typical path for the assets left behind in a biotech bankruptcy, McIntosh explained. The intellectual property is sold to other companies, presenting the new owner with the opportunity to use the assets to attract new financing at a lower valuation, he said; it also gives the drugs a second chance. Another major bankruptcy of 2024 was Gritstone bio, which filed in October in an effort to save its R&D operations. The vaccines-focused biotech was pursuing a stalking horse transaction, when a party swoops in to buy out a bankrupt company’s assets prior to a court auction process. Ultimately, Gritstone’s assets were auctioned off for $21.2 million, according to a Jan. 3 filing. Gritstone was optimistic about Phase II results for its Granite program in September 2024, which showed a 21% relative risk reduction of progression or death in patients taking the study medication versus standard of care. But the data needed more time to mature and Gritstone was running out of runway, with just $61.7 million on hand, leading to the bankruptcy filing. Cell therapy biotech Athersys was another company to file, going the stalking horse route and selling its assets to Healios for around $2 million in January 2024. Athersys had been developing its MultiStem off-the-shelf cell therapy since 1994 in ischemic stroke in partnership with Healios. Other indications included traumatic injury and acute respiratory distress syndrome. A Phase III trial in stroke that read out in October 2023 was unsuccessful . This year, the bankruptcies have already started. According to a Jan. 29 SEC filing , Flagship Pioneering spinout Omega Therapeutics had until Feb. 10 to commence bankruptcy proceedings and begin to wind down operations, likely involving a sale process with Pioneering Medicines, an affiliate of Flagship Pioneering. The news came just over a year after Omega struck an obesity deal with Novo Nordisk. “As long as the public markets disfavor biotech companies, and private investors shy away from ‘riskier’ early-stage investments,” McIntosh said, “the trend will continue.” A note about the data: BioSpace ’s last bankruptcy analysis clocked 28 bankruptcies for 2023 as of October of that year. Our new analysis uses narrower criteria, including only companies making therapeutics. Our source for bankruptcies also shifted to S&P Capital IQ and company SEC filings.