Luke Ward had no way of grasping the color yellow. He’d been diagnosed with a rare genetic disorder — better known as LCA — that attacks his retinas, a condition affecting about one in 50,000 people. By kindergarten, Ward was walking with a cane and learning to read Braille.
Then, in 2019, he became one of the first patients in the country to receive the FDA-approved treatment known as Luxturna, developed by Philadelphia’s Spark Therapeutics. Doctors injected the back of his eyes with a unique treatment that sparked a genetic change in his body, blocking the effects of LCA and letting him grow new pigments. When I spoke to him in 2022, Ward bragged about a yellow belt he’d earned in karate class. He was no longer legally blind. He still required glasses, but he was mostly an able-bodied, energetic nine-year-old.
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Luke’s surgery took place at a riveting moment for the biotech industry. (Biotech refers to the research and commercialization of products that involve genetic modification, a field that’s been driven by medical innovations, such as cell and gene therapy.) Luxturna was the first gene therapy for an inherited disease to receive FDA approval. In 2019, Swiss pharmaceutical giant Roche acquired Spark for $4.8 billion — at the time, a record for the priciest acquisition of a Philly firm in history.
For several years after that, the sector exploded. Companies were sprouting up and out of university labs and raising tens of millions of dollars in venture capital — well before they could even dream of sniffing profitability. In 2021, New York and Silicon Valley venture capital firms invested $8.4 billion in Philly companies — more than the previous nine years combined — with biotech being a big part of that.
It felt like a turning point — Philly finally breaking through with homegrown, commercial successes.
Today, however, that unbridled enthusiasm is gone. “Four years ago, you could go out and raise $300 million,” says Tim Conrey, the managing principal of Scheer Partners, a real estate broker specializing in life sciences and biotech. “That money just isn’t available anymore.”
If you’ve followed the business headlines this year in Philly, you’ve seen what Conrey is talking about: layoffs, imperiled real estate, and even outright closures in biotech. Even the poster child of success in the city, Spark, has succumbed to the downturn. In April, Spark announced that it was laying off half its workforce, more than 300 employees.
“For a few years now, investors in the healthcare innovation space have been pulling back,” says former Spark Therapeutics CEO Jeff Marrazzo. “When you add on the general uncertainty created by the changes that have happened in the federal government, that’s unfortunately made it worse.”
“Philly is still clearly the place to be for cell and gene therapy.” — Tim Conrey
Those federal woes are significant. On March 27, the Food and Drug administration’s top vaccine official, Peter Marks, resigned at the behest of his new boss Robert F. Kennedy Jr. After a fiery resignation letter (and subsequent television interviews) became public, biotech stocks quickly tumbled. Marks was a champion of novel medicines, especially those to treat rare diseases. Under his watch the FDA approved the first cell and gene therapies, including Luxturna. For many, RFK Jr.’s leadership threatened to stall the biotech pipeline.
In reality, though, Marks’ resignation was just the latest gut punch for the sector. Seed funding for biotech had already shriveled to its lowest level in 10 years. Meanwhile, President Trump has proposed a 40-percent cut ($20 billion, annually) to the largest grantmaker for biotech research, the National Institutes of Health.
“What we do in the next 30 days may well dictate the future of #GeneTherapy #CellTherapy #Vaccines #GeneEditing for the next 100 years,” the CEO of the Bay Area gene therapy startup Siren Biotechnology, Dr. Nicole Paulk, posted on X.
Given the state of both Washington and Wall Street, just how bad does the future look for biotech companies in Philly? Conrey, who makes a parallel to the dot-com boom of the early-2000s, says there’s a silver lining to a little right-sizing.
“We’re getting back to realistic growth,” says Conrey. “We’ve rebounded from difficult markets before.”
The beginnings of Philadelphia’s biotech downturn
This isn’t the first downturn that’s threatened to stymy advancements in cell and gene therapy.
In 1999, teenager Jesse Gelsinger volunteered for an early “safety study” at Penn. The preclinical trial was to test a possible cure for a genetic liver disease that he had. Though the other participants experienced flu-like symptoms, Gelsinger tragically passed away — and with him, for a time, gene therapy died, too. His story became national front-page news. Almost overnight, venture capital disappeared for large swaths of the biotech field across the country.
The concern today is quite different, says Marrazzo, because the science has evolved by leaps and bounds. “What’s so exciting about this moment is that real, fundamental progress is being made in areas like gene editing and cell therapy,” he says. “We are solving more issues.”
Although saving lives, biotech drugmakers have simultaneously struggled to scale their ideas, overcome manufacturing challenges and achieve profitability. Conventional drug development is a risky financial proposition. But the economics of gene and cell therapy are notoriously more difficult. Beyond the enormous costs to produce and administer those treatments, they have, until now, mostly focused on rare diseases — capping the market upside for those products.
The pandemic temporarily shrouded some of those inefficiencies. “I couldn’t go into work without a biotech company calling me to get more space,” says Conrey of Scheer Partners. “Suddenly all of this money was funneling into life science. I think people overestimated what Project Warp Speed could do as a catalyst for growth.”
Warp Speed, the federal government’s rapid-response to create a Covid-19 vaccine, nudged more private investors to piggyback on the wave — the inverse of what’s been happening of late. “The entire world was paying attention to drug development processes around vaccines,” says Marrazzo. “And partly because of that, a lot of money poured into healthcare. [General investors] began to realize that if they end up betting on a company that gets a Covid vaccine approval, they can make a lot of money.”
Some people began to tout the region’s biotech sector as a transformational piece of the economy of the future. Boosters, including some local politicians, spoke about well-paid manufacturing jobs that were just around the corner, requiring no more than a high school diploma. In 2023, Roche broke ground on a 500,000-square-foot University City Gene Therapy Innovation Center (expected to open sometime next year) which signaled the manifestation of that imagined frontier.
But as time went on during and after the pandemic, investors got impatient. Interest rates rose, as did the cost of building materials for lab space. Over the past two to three years, private equity firms have been steadily trimming their biotech portfolios.
And Philly has felt the pinch: Carisma Therapeutics, after laying off most of its staff last year, has decided to fully wind down its operations; PhaseBio declared bankruptcy two years ago; Cabaletta Bio, a University City cell therapy company, has gone from trading at $22 in February 2024 to just above $1 today.
Those examples, plus more, have had a chilling effect on the once-booming real estate market for biotech space. “Back in 2022, we had over 3.5 million square feet of active real estate deals in the sector,” Conrey says. “Today, we have probably 800,000 square feet.”
There’s now a growing fear that myriad investments in biotech, including branding efforts — boosters have proudly marketed Philly as the “birthplace of cell and gene therapy” or “Cellicon Valley” — might never pay off, unless we can smartly navigate the current storm.
“Fundamentally, I would still bet on Philadelphia over the long term for cell and gene therapy,” says Conrey. “But what would really help the region is to do what Massachusetts did, which is to create a government-backed investment fund.”
Shapiro’s solutions
The last time that I delved deeply into the biotech industry with my reporting, I heard similar pleas: Pennsylvania, in order to compete with other biotech hubs (in places like North Carolina, Boston and Silicon Valley) and spur true economic development, needs a robust expansion of incentives at the state level.
Richard Vague, a venture capitalist and Penn trustee who financed much of Carl June’s research, has been advocating for the state government to borrow a page from the book of his home state of Texas. In 2007, voters in Texas passed a public referendum that authorized the state legislature to create what’s become known as the Cancer Prevention and Research Institute, or CPRIT. Essentially, CPRIT is a public venture fund that makes targeted investments in start-ups that are focused on cancer-prevention treatments. Since its inception, CPRIT has dished out more than $3 billion in grants — which, in turn, have created nearly 150,000 jobs, according to the agency’s own reports.
“What’s so exciting about this moment is that real, fundamental progress is being made in areas like gene editing and cell therapy.” — Jeff Marrazzo
Long before the federal cuts to the NIH, FDA and others, Vague proposed the idea of creating a CPRIT-like program in PA, albeit one that was concentrated around investments in biotech companies.
While that’s yet to materialize, Governor Josh Shapiro’s proposed budget for the next fiscal year does include a new $30 million program for seeding innovative companies in life sciences and biotech.
“This could be a huge potential shot in the arm for these companies,” says Chris Molineaux, the president of Life Sciences PA, the Commonwealth’s largest trade association for the sector. “Our ultimate objective at Life Sciences PA is to make PA the most attractive place from a policy standpoint and a business standpoint to open and operate a life sciences company. And with the governor’s support, it makes it more attractive for investors to invest in companies here.”
Shapiro has also floated the idea of creating a “clinical trials network” — a series of medical research facilities throughout the state, supported by the government, which would help to lower the costs of companies and incentivize them to stay here. “Making your way through those hurdles is fundamental to being a successful life sciences company,” says Marrazzo. “The faster you do them, the faster you turn a hypothesis into a proven one — whether that’s correct, or not correct. Either way, the faster you get to that answer is helpful.”
Still, if passed, the Shapiro budget will hardly make up for funding cuts at the NIH. It also won’t match the level of investment of our competition. Massachusetts, for one, has a $1.5 billion innovation fund that’s helped grow its ecosystem of medical research. But it’s a step in the right direction.
Marrazzo, who served on Governor Shapiro’s transition team, believes that it’s not time to panic about biotech yet. He points to the prominence of biotech in the administration’s 10-year economic plan, on top of the line items in the latest budget, as reasons to hold out hope.
“I think those ideas would create a unique advantage for the state,” he says. “It’s a very challenging time, for a lot of reasons. However, an industry that’s both creating family-sustaining jobs and also solving healthcare problems is still a great place to be. The question right now is how do we survive it, and how do we create competitive advantages for companies, people, and the region?”
Ironically, because PA already lagged behind Texas, Boston and the Bay when it came to capital investments, the market turmoil has not been as devastating to the local landscape, as much as it has elsewhere, according to some. “I would posit that in comparison to Boston, we’re not as overbuilt,” says Conrey, referring to the declining demand for labs and manufacturing space. “And it’s put us in a position where, if things turn around in the next 6 to 12 months, we’ll be healthier than some of those other markets.
“Philly is still clearly the place to be for cell and gene therapy.”
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