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The abrupt suspension of Sarepta Therapeutics’ Elevidys gene therapy in July 2025 following multiple patient deaths marked a defining moment for the gene therapy sector. The FDA’s intervention, platform revocation, and heightened safety scrutiny triggered cascading effects across the industry, from developers and CDMOs to investors and regulators. Yet while the crisis exposed critical flaws in communication, oversight, and risk management, it also presented an opportunity for reflection and recalibration. This article examines what went wrong, how the sector is responding, and what steps must be taken to rebuild trust. With more disciplined oversight, transparent disclosure, and risk-aware innovation, gene therapy can still fulfill its transformational promise.

Introduction: A Shock to the System

In July 2025, the gene therapy sector was rocked by a crisis that unfolded with stunning speed. Sarepta Therapeutics, once viewed as a leader in genetic medicines for rare neuromuscular diseases, abruptly suspended shipments of its flagship gene therapy Elevidys following the deaths of multiple trial participants. What began as internal concern over adverse events quickly escalated into a full-fledged regulatory intervention, as the U.S. Food and Drug Administration (FDA) requested the halt of commercial distribution and placed multiple clinical trials on hold. The company’s initial resistance to the FDA’s request, followed by a reluctant reversal amid public and investor backlash, only intensified scrutiny.

This incident has since been framed as a turning point for gene therapy. Some have questioned whether the sector’s momentum can survive such a public failure, speculating that this may represent the beginning of a broader unraveling of confidence in adeno-associated virus (AAV)-based therapies. However, writing off gene therapy altogether in this moment would be premature and ultimately unhelpful. The Sarepta case is not evidence of the field’s collapse but rather a stark reminder of the risks inherent in pushing scientific innovation into clinical practice without adequate transparency, communication, or nuance.

Here, we explore the circumstances that led to the Sarepta–FDA standoff, the implications for developers, contract development and manufacturing organizations (CDMOs), investors, and regulators, and what it will take for the sector to regain trust. The path forward will demand a more disciplined, transparent, and risk-aware approach. But that path still exists. The promise of gene therapy promise remains, but its future now depends on whether the field can adapt to a new era of accountability.

The Sarepta–FDA Showdown

The sequence of events that unfolded in mid-2025 around Sarepta Therapeutics and its gene therapy Elevidys marked one of the most significant regulatory confrontations the gene therapy sector has seen to date. Elevidys, designed to treat Duchenne muscular dystrophy (DMD) using an AAVrh74 vector, had been granted accelerated approval for ambulatory patients in 2023, with expectations for broader use pending further data. But in July 2025, the FDA initiated a safety review following the deaths of three patients — two adolescents with DMD and one adult with limb-girdle muscular dystrophy (LGMD) — who had received the therapy under either commercial access or investigational protocols.^1,2

In response to these deaths, the FDA requested that Sarepta immediately suspend all U.S. shipments of Elevidys and halt ongoing clinical trials using the same vector. Rather than complying, Sarepta issued a public rebuttal asserting that there were no new safety signals warranting such action in the ambulatory DMD population. This defiance was met with growing concern from stakeholders, particularly as a previously undisclosed fourth death — an eight-year-old patient in Brazil — came to light during this period.^3,4 Although the FDA later determined that the Brazilian case was not causally linked to the therapy, the company’s initial decision not to disclose it compounded reputational damage.

The regulatory pressure did not stop with a shipment hold. The FDA revoked Sarepta’s platform technology designation for AAVrh74, signaling that future submissions would require individual data packages rather than benefiting from streamlined review under the prior platform umbrella.¹ The agency also proposed adding black box warnings to Elevidys labeling, further highlighting safety concerns.

On July 28, the FDA permitted Sarepta to resume Elevidys shipments, but only for ambulatory DMD patients, where the benefit–risk profile appeared more favorable.³ The use of Elevidys in non-ambulatory patients remains suspended as regulators and the company evaluate the need for stricter eligibility criteria, additional safety monitoring, and potential label changes.

In parallel with the regulatory crisis, Sarepta initiated a sweeping corporate restructuring. Roughly 500 employees (approximately 36% of the workforce) were laid off in July, and the company signaled a strategic shift away from systemic gene therapy toward its RNA-based and LGMD programs.^5,6 While the official rationale focused on aligning resources with high-impact opportunities, many viewed the move as a direct consequence of the FDA’s actions and an admission of the damage done.

The fallout extended beyond operations. Sarepta’s inconsistent communication — delayed acknowledgment of patient deaths, optimistic public statements contradicting regulatory actions, and opaque clinical disclosures — undermined investor and stakeholder trust. As scrutiny intensified, the company’s valuation collapsed, and its once-promising leadership position in gene therapy became a cautionary tale for the sector.^7,8

Sector-Wide Fallout: Who Felt the Shockwaves

The crisis was not contained to one company or one therapy. Its ripple effects were felt across the gene therapy ecosystem, triggering renewed skepticism, regulatory recalibration, and market repricing. Developers, CDMOs, regulators, and investors alike were forced to reevaluate long-held assumptions about the safety, scalability, and oversight of gene therapies, particularly those involving systemic AAV administration.

Gene Therapy Developers

For developers, the most immediate impact was reputational. The deaths associated with Elevidys — though still under investigation — cast a long shadow over the entire field. A sense of “guilt by association” emerged, with both AAV and non-AAV gene therapy programs facing heightened scrutiny from institutional review boards, regulators, and potential partners. Even companies with entirely distinct vectors or delivery modalities found themselves fielding questions about risk mitigation and adverse event transparency.⁹

This environment has intensified the focus on foundational design choices. Vector selection, dosing strategies, and inclusion criteria are under the microscope, with particular attention paid to patient comorbidities, especially hepatic function. Trial protocols that had previously passed through review without challenge are now being reconsidered or delayed, as sponsors and regulators take a more cautious approach to systemic gene delivery in pediatric or fragile populations.

The revocation of Sarepta’s platform designation also sent a broader message: regulators may no longer accept that one successful filing using a particular vector ensures a smooth path for follow-on programs. Developers who have relied on platform designations to accelerate pipelines are now navigating a landscape where each therapy may need to stand entirely on its own merits.¹

Contract Development and Manufacturing Organizations

CDMOs, especially those with business models built around AAV manufacturing, are also feeling the effects. In the near term, some projects may be delayed or deprioritized as sponsors revisit trial plans or retool product designs in light of emerging safety concerns. While overall demand for viral vector manufacturing remains strong, uncertainty surrounding the regulatory posture toward AAV-based systemic delivery could slow investment in certain capabilities.¹⁰

At the same time, the moment presents an opportunity for CDMOs to evolve. Developers are seeking deeper scientific partnerships that offer not only technical execution but also input on patient stratification, dose optimization, and long-term safety planning. CDMOs able to support these strategic needs, particularly through integrated services that blend CMC expertise with clinical pharmacology and pharmacovigilance, may emerge stronger as the sector resets its expectations.¹¹

There is also growing interest in next-generation vector systems that offer enhanced targeting, reduced immunogenicity, or non-viral delivery options. CDMOs with experience in these emerging technologies are likely to see increased demand as developers seek to de-risk future programs.

Regulators

The Sarepta case has reinforced the FDA’s shift away from broad platform assumptions and toward more individualized, product-specific assessments. While platform designations were once seen as a way to streamline oversight and reward technological consistency, the events surrounding Elevidys illustrate the limitations of that model. Even therapies using the same vector and manufacturing process may perform very differently depending on patient population, delivery route, or coexisting health conditions.¹

In addition to reasserting case-by-case review, the agency is placing more emphasis on long-term safety monitoring and international data sharing. As gene therapies often involve a single administration with lifelong implications, regulators are now pressing for more robust post-marketing surveillance, greater transparency around global adverse event reporting, and potentially new guidance documents for vulnerable subpopulations, such as pediatric patients with neuromuscular diseases.¹²

Investors

Perhaps no group reacted more immediately than investors. The Sarepta news triggered a sharp decline in the company’s share price, but it also set off a broader revaluation of risk across the gene therapy space. Investors began to pull back from smaller or single-asset companies in favor of those with broader pipelines, adjacent platforms like CRISPR or small interfering RNA (siRNA), or more established safety profiles.⁷

Risk appetite has shifted decisively. Where once the narrative centered on upside potential and pipeline velocity, the focus has turned to clinical execution, disclosure practices, and worst-case scenarios. This repricing reflects not just the tragedy of individual outcomes, but a recalibration toward the practical challenges of delivering high-dose, systemically administered gene therapies in real-world settings.

While this market correction is painful in the short term, it may ultimately result in a healthier funding environment that prioritizes scientific rigor, operational excellence, and long-term viability over hype cycles.

Lessons Learned: A Hard Reset, Not a Death Sentence

The Sarepta crisis has inevitably drawn comparisons to the 1999 death of Jesse Gelsinger, the first widely publicized fatality in a gene therapy trial. That event prompted a near-total shutdown of gene therapy research, a collapse in funding, and a decade-long erosion of public trust. What’s striking in contrast is that the response to the Elevidys tragedy — while swift and serious — has been more measured. Trials have been paused, platform designations revoked, and safety scrutiny intensified, but the sector has not recoiled in fear or shut down altogether. This reflects how far the field has come: both in its technical sophistication and its institutional maturity. Today’s developers, regulators, and investors are responding not with abandonment, but with accountability — recognizing that while the science holds promise, its execution must catch up.

The fallout from this crisis has offered the gene therapy field a sobering set of lessons. While the scientific potential of gene transfer technologies remains substantial, the events of 2025 exposed the fragility of public trust and the structural vulnerabilities that can emerge when optimism outpaces oversight. This was not the failure of a single molecule nor an indictment of the entire modality. It was a convergence of misjudged risk, communication failures, and overreliance on regulatory shortcuts — each of which canbe corrected.

Underappreciated Risk

For much of the past decade, gene therapy has advanced under the banner of unprecedented innovation. Rapid approvals, high-profile investments, and transformative outcomes for some patients contributed to a narrative that treated success as inevitable. Yet biology remains stubbornly complex, especially in systemically delivered, high-dose AAV therapies. The liver has long been understood as a potential vulnerability in these approaches, but preclinical toxicity signals, often viewed as manageable or species-specific, now appear in a harsher light.

The deaths under investigation in the Elevidys program, particularly those linked to acute liver failure, underscore that enthusiasm alone is not a substitute for fully quantified risk. The ability to prevent such events will depend not just on better science, but on a more disciplined process for recognizing and acting on early warning signs, even when they emerge in small or imperfect data sets.^1,9

Transparency Is Non-Negotiable

One of the most damaging aspects of the Sarepta episode was not just the occurrence of adverse events, but the company’s handling of that information. The delayed disclosure of a third patient death and the omission of a fourth case in Brazil created the impression that material information was being withheld, even if the underlying cause remained under investigation.^3,4 In a field where patient safety is paramount and regulatory scrutiny is constant, such lapses are not just tactical errors; they are existential threats to credibility.

Developers must treat communication as a core part of their risk management strategy. This means having predefined protocols for evaluating and disclosing serious adverse events, including mechanisms for flagging uncertain or unconfirmed cases to regulators, trial sites, and the public. The instinct to protect shareholder confidence or preserve narrative continuity must never take precedence over clinical transparency.

Platforms Are Not Immunity Shields

Platform designations have often been celebrated for streamlining development, particularly for rare disease programs where repeating full safety evaluations for each new vector application can slow progress and raise costs. However, the Sarepta case has shown that platform status is conditional, not permanent, and that it does not insulate developers from scrutiny when clinical outcomes diverge from expectations.

The FDA’s decision to revoke Sarepta’s AAVrh74 platform designation was a reminder that such privileges must be earned continuously rather than presumed indefinitely.¹ The industry’s tendency to treat AAV platforms as modular and interchangeable — plug-and-play systems where only the gene of interest changes — has led to blind spots in evaluating how vector performance varies by context. Tissue tropism, immune response, and toxicity profiles can shift dramatically depending on patient characteristics and administration protocols. Platform thinking can aid development, but it must never override rigorous, case-specific evaluation — especially when each rare disease, and each patient living with it, presents unique risks, vulnerabilities, and lived experiences.

Precision Medicine Needs Precision Oversight

The gene therapy field has long positioned itself as the vanguard of precision medicine. But true precision requires more than targeted genetic payloads; it demands a granular understanding of patient heterogeneity and the capacity to tailor risk mitigation accordingly. The outcomes observed in the Elevidys program illustrate this clearly: ambulatory patients appeared to tolerate treatment more safely than non-ambulatory ones, and age, liver health, and comorbid conditions likely played meaningful roles in determining outcomes.^7,10

Going forward, developers must build risk stratification into every phase of their programs, from trial design through commercial rollout. This includes not only selecting appropriate inclusion criteria but also segmenting by delivery route, dosing thresholds, and immunologic profile. Precision medicine cannot succeed with one-size-fits-all safety models. It demands a layered approach that sees individual risk not as a confounding variable but as a design feature to be accounted for from the outset.

Taken together, these lessons do not foreclose the future of gene therapy. Rather, they establish the terms under which that future can be realized responsibly. The Sarepta crisis may well be remembered as a turning point — not because it ended an era, but because it finally demanded a higher standard.

Amid discussions of platforms, vectors, and regulatory designations, it is vital to remember what’s truly at stake: the lives of patients and families who entrust their futures to experimental science. For the individuals who died after receiving Elevidys — and for their loved ones — the promise of innovation became a devastating loss. Rare disease communities often see clinical trials not just as research, but as hope. That hope must never be taken lightly. Every gene therapy candidate represents more than a molecule; it represents a person, a story, a risk borne with courage. The field’s future depends on treating that trust with the reverence it deserves.

The Path Forward: How to Build Resilience and Restore Trust

If the Sarepta crisis served as a stress test for the gene therapy ecosystem, the way forward must be defined by more than retrospective analysis. Rebuilding confidence will require intentional recalibration by all stakeholders: not a retreat from innovation, but a re-anchoring in responsibility. The urgency of the work these therapies aim to address has not diminished. What must change is how that work is executed, communicated, and governed.

For Developers

The first step for gene therapy developers is to reassess assumptions that may have calcified during years of sector-wide momentum. Vector safety, particularly for high-dose, systemically delivered therapies, can no longer be treated as a solved problem. New attention must be given to capsid tropism, transgene expression control, and immunogenicity, especially in light of emerging clinical data that highlight context-dependent toxicity profiles.^9,10

Developers must also rethink how they define and apply eligibility criteria. Rather than defaulting to broad enrollment to capture marketable populations, clinical trials should start with narrower, better-characterized subgroups where benefit–risk ratios are more clearly understood. Early-phase trials, in particular, should incorporate independent safety monitoring boards and enhanced interim analysis checkpoints to allow for proactive course correction.

The sector’s credibility will increasingly hinge not just on the novelty of its science but on the rigor of its implementation. Companies that build safety into their development culture, not just their trial protocols, will be best positioned to weather future scrutiny.

For CDMOs and Technology Partners

Contract manufacturers and enabling technology providers occupy a pivotal role in the gene therapy supply chain, and their contributions must now evolve beyond throughput and scale. The demand is growing for vector engineering platforms that can address the specific risks spotlighted by the Sarepta experience, particularly liver toxicity and innate immune activation. Capsid modifications, tissue-specific promoters, and dose-sparing innovations are not just scientific enhancements; they are risk mitigation strategies with direct regulatory relevance.

CDMOs that support their clients with integrated regulatory risk modeling, particularly linking CMC decisions with clinical development and long-term safety considerations, will become more valuable strategic partners. This may involve early collaboration on patient stratification models, vector biodistribution studies, or adaptive manufacturing protocols that can accommodate evolving safety data or population-specific formulations.

As regulatory expectations shift, CDMOs will need to become more agile, both in process design and in how they support clients navigating uncertainty. Those that can demonstrate technical excellence alongside strategic foresight will help lead the industry through its next phase.

For Investors

Investors are recalibrating their criteria in the wake of recent events, and for good reason. The past decade encouraged large bets on single-product gene therapy companies based on platform potential, accelerated approvals, and speculative upside. But in a market where safety can reset value overnight, the emphasis must shift toward durability and diversification.

Companies with multiple therapeutic strategies — not only across indications but across modalities — are more likely to withstand regulatory disruptions or trial setbacks. Innovation alone is no longer a compelling pitch; it must be paired with clinical execution and operational discipline. Transparency, especially in adverse event reporting and trial communications, has become a marker of credibility.

There is also new opportunity in adjacent sectors. Companies working on delivery systems, vector optimization, or immune modulation strategies may be poised to benefit as the industry retools its foundational assumptions. Investors who can identify and support these enabling technologies may find returns that are not only stronger, but more resilient.

For Regulators

The FDA and other global regulatory bodies have a delicate role to play: restoring public trust while continuing to facilitate access to transformative therapies. One clear area for improvement is the formalization of platform designation guidelines, particularly outlining when and how such status may be revoked. This would help developers better understand the contingencies of regulatory flexibility and reduce reliance on assumptions that may not hold across programs.¹

Regulators might also consider implementing tiered warning structures or labeling frameworks that evolve with accumulating safety data. A static label applied across all patient populations can obscure important risk differentials and limit clinicians’ ability to make informed decisions.

Finally, harmonization across regulatory jurisdictions will become increasingly important as adverse event data, real-world evidence, and post-market safety signals emerge from global programs. Standardized reporting practices, shared pharmacovigilance systems, and cooperative regulatory reviews could help prevent future crises and build a more coherent global approach to gene therapy oversight.¹²

All of these measures point toward a sector growing up. The scientific tools are still powerful. The unmet need remains vast. But the path forward must be walked with greater humility, vigilance, and coordination than before. Gene therapy does not need to be perfect to succeed, but it does need to be accountable.

Conclusion: A Crisis of Confidence, Not of Capability

The challenges facing Sarepta Therapeutics are serious, and the consequences of its missteps have reverberated throughout the gene therapy sector. But to interpret this moment as a wholesale indictment of genetic medicine would be to confuse a crisis of execution with a failure of potential. The setbacks are real: lives were lost, public trust was damaged, and regulatory protections were tested. Yet the underlying science that supports gene therapy remains sound, and the therapeutic needs it seeks to address are as urgent as ever.

What this crisis has exposed is not a flaw in the idea of gene therapy but a breakdown in how that idea has been operationalized. Overpromising, underreporting, and overreliance on assumed regulatory pathways created vulnerabilities that could no longer be ignored. The future of the field now rests not on how quickly it can return to the status quo, but on how willingly it embraces a higher standard of accountability, transparency, and scientific rigor.

Gene therapy’s promise is still within reach. Its capacity to deliver durable, potentially curative treatments remains unmatched in many disease areas. But there are no shortcuts left. If the sector is to regain the trust of regulators, investors, clinicians, and. most importantly, patients, it must earn that trust deliberately. That work begins now, but the industry is well positioned to execute it.

References

1. FDA Requests Sarepta Therapeutics Suspend Distribution of Elevidys and Places Clinical Trials on Hold for Multiple Gene Therapy Products Following 3 Deaths. U.S. Food and Drug Administration. 18 Jul. 2025.

2. Walker, Joseph. “Sarepta Therapeutics Stock Plunges After Another Patient Death Is Linked to One of Its Gene Therapies.” Wall Street Journal. 18 Jul. 2025.

3. Perrone, Matthew. “Sarepta will resume gene therapy shipments after FDA review of recent patient death.” Associated Press News. 28 Jul. 2025.

4. “Sarepta’s 27% Sell-Off Is ‘Overblown,’ ‘Overdone’ And ‘Overly Bearish.’ Here’s Why It Happened.” Jar of Hope. Accessed 1 Aug. 2025.

5. FDA Informs Sarepta That It Recommends That Sarepta Remove Its Pause and Resume Shipments of ELEVIDYS for Ambulatory Individuals With Duchenne Muscular Dystrophy. Sarepta Therapeutics. 28 Jul. 2025.

6. Gatlin, Allison. “The FDA Will Reportedly Ask Sarepta To Stop Selling Elevidys. Shares Plummet.” Investors.com. 18 Jul. 2025.

7. Nathan-Kazis, Josh. “Gene Therapy Was the Biggest Idea in Biotech. Now It Has Lost Support on Wall Street.” Barron’s. 20 Jul. 2025.

8. Kilgore, Tomi. “Sarepta finally gets some good news: A patient death wasn’t its DMD drug’s fault.” MarketWatch. 29 Jul. 2025.

9. Ellison, Ayla, Fraiser Kansteiner, Angus Liu, and Gabrielle Masson. “Untangling Sarepta’s gene therapy fallout and a growing trust deficit.” FiercePharma. 1 Aug. 2025.

10. Blake, Oliver. “FDA Safety Scrutiny and the Future of Sarepta Therapeutics’ Gene Therapy Portfolio.” AInvest. 25 Jul. 2025.

11. Hale, Victor. “Assessing the Long-Term Viability of Sarepta Therapeutics Amid Regulatory and Safety Crises.” AInvest. 27 Jul. 2025.

12. Nathan-Kazis, Josh. “Top FDA Official’s Surprise Departure Means More Uncertainty for Biotech.” Barron’s. 30 Jul. 2025.

Originally published on PharmasAlmanac.com on August 5, 2025.

U.K. companies in the healthcare sector are seeking international penetration, either organically or through M&A deals, to gain access to larger addressable markets.

M&A Market in the U.K.

Demand pressures, staff shortages, patient empowerment and technological advancement have spawned a new wave of innovative companies serving the U.K. healthcare market, which is dominated by a single player — the National Health Service (NHS). Tech-enabled and SaaS-based businesses are in demand as recent NHS reform has made digitization a central focus. It has historically been challenging for small businesses to achieve traction within the NHS, but the NHS is now actively supporting and seeking innovative digital technologies, increasing opportunities and funding for private companies.

As these companies reach maturity and saturation in U.K. markets, they are looking internationally to reduce concentration risk and gain access to larger addressable markets. Scaling internationally is often a challenge for these companies, and few have successfully exported their technology organically. Where there is an international opportunity, particularly in the U.S., interest is increasing — from private equity investors, often in parallel to trade interest.

Simultaneously, on the life sciences side, we are seeing strong interest in outsourced services companies that specialize in the commercialization of biopharma products, particularly as pipelines become increasingly personalized and complex. Companies providing solutions to successfully clear increasingly rigorous regulatory and reimbursement hurdles (e.g., market access, real-world evidence, patient engagement and adherence) are attracting strong interest, particularly those companies that are data driven and tech enabled.

The Brexit Question

The healthcare sector is resilient and tends to be less impacted by major economic and political upheavals than other industries. M&A activity and deal completions have been relatively immune to the challenges associated with Brexit. However, as Brexit approaches and uncertainty about how the U.K. will depart the European Union remains, there has been a slight ebbing in interest in pursuing M&A.

International Moves by U.K. Companies

The pharmaceutical sector is an increasingly global industry, and M&A activity reflects this dynamic. A number of U.K. pharma outsourcing companies interested in achieving significant scale have, with PE backing, been looking to acquire U.S. firms. In some cases, U.K. firms have grown organically into the U.S. market, establishing their own offices in the U.S. The key incentive is the size and importance of the U.S. biopharma market; it is also the location where many global contracts are procured.

Countries such as Japan, China and India are also becoming areas for both organic growth and targeted acquisitions. In addition to being very large markets for pharmaceuticals, they present significant opportunities for U.K. companies offering pharmaceutical outsourcing services and digital healthcare solutions.

Consolidation Opportunities

The biopharma outsourced commercialization space presents an exciting opportunity for large-scale consolidation. There has been significant consolidation among contract research organizations (CROs), and the focus has shifted to later-stage companies. U.K. firms are looking to synergistically combine commercialization businesses to establish a spectrum of services that can effectively bring drugs to the market and preserve their market positioning.

There is also significant fragmentation in the digital solutions sector, but it is unlikely that a single digital platform could address all needs best, either in the pharmaceutical or the healthcare settings — hence, there is no obvious consolidation play. However, selected businesses offering integrated niche specialist digital solutions will likely be acquired and rolled into larger organizations.

Global Focus for Clearwater International Clearwater International is a global M&A and corporate finance advisor with 15 offices and 250 M&A professionals. We advise our clients on M&A, private equity and debt raising transactions, largely in the mid-market.

In addition to a truly international business, we have strong partnerships with firms that have an established presence in individual markets, particularly the U.S. We have extensive experience with pure healthcare, business services and technology companies active in the healthcare and life sciences sector and a highly seasoned team with strong credentials, who have brokered hundreds of deals.

We have an intimate knowledge of M&A transaction requirements across the world. We can find outstanding acquisition opportunities or the right buyer across borders. We offer tailored and strategic thinking to prepare companies for sale and, with our highly personable approach and technical knowledge, we help clients maximize their opportunities in an increasingly global market.

Originally published on PharmasAlmanac.com on March 12, 2019.

Publicly funded biotechs have experienced drastic reductions in market value in recent months, while private companies continue to attract financing and are in-licensing technologies and expanding staff. With the slower economy, companies are often expected to drop early-stage projects to focus on more advanced lead candidates. These changes will impact demand for CDMO services beginning in late 2022. The M&A market could also be further affected, given that there are already limited CDMOs optimally situated for acquisition. We look at a few recent deals and which companies might be on the block.

Some Recent Noteworthy Deals

Much of the investment activity in the past year has been in the cell and gene therapy (CGT) space. In fact, nearly 20 CGT CDMOs were acquired in the last 9 months alone. Some of these deals were typical, with companies in the biologics and even the CGT space expanding capacity and capabilities. Examples include the acquisitions of OXGENE by WuXi Advanced Therapies and Xpress Biologics, a plasmid DNA producer, by ArchiMed.

Others were more interesting, such as Recipharm’s acquisitions of microbiome CDMO Arranta Bio and viral vector CDMO Vibalogics, which move the company from a historical focus on small molecules and sterile manufacturing into the CGT space.

The $350 million investment of SK Inc. (SK pharmteco is the holding company for the SK CDMO business based in California that comprises AMPAC Fine Chemicals, SK biotek, SK biotek Ireland, and Yposkesi) in the Center for Breakthrough Medicines (CBM) is also notable. CBM will use the equity financing to create what it claims will be the world’s largest end-to-end cell and gene therapy CDMO supporting plasmid DNA, viral vector, and CGT manufacturing.

Once CBM is built out, that organization will probably be the largest independent group in the United States. It will face competition from FUJIFILM Diosynth Biotechnologies, however, which recently announced that it is doubling the existing lab footprint at its Research Triangle Park BioProcess Innovation Center through a collaboration with sisterFUJIFILM company, FUJIFILM Wako Chemicals U.S.A., Corp.

Other Japanese conglomerates have been active as well. For instance, Asahi Kasei recently acquired Bionova. AGC Biologics purchased a state-of-the-art CGT commercial manufacturing facility in Longmont, Colorado, from Novartis Gene Therapies. KBI Biopharma, which is owned by JSR Group, is another large Japanese organization; although it has not made any deals in the last couple of years, it seems likely to be considering opportunities.

Another company that has been busy in the conventional biologics space is Curia, which continued its expansion efforts with the acquisitions of LakePharma and Integrity Bio.

Keep In the Context of the Public Pounding

All of this recent activity must be looked at today through the lens created by current economic conditions. The biggest change has been the dramatic reduction in stock prices — in some cases as much as 95% — for publicly funded biotechs. There was a small bounce back in May, but 90% drops remain common.

However, the same isn’t true in the private sector, where almost no softening has occurred. The valuations of these organizations have come down, but the 100+ multiples seen with public companies do not exist, and funding is continuing to come into the private sector. Biotechs with private funding continue to grow, in-licensing new technologies and expanding staff. A good example is Inceptor Bio, which has in-licensed three platforms based on CAR-T, CAR-NK, and CAR-M technologies.

Next Up: Closedown of Early-Phase Biotech Investment

The slowdown in the economy will affect internal biopharma investments, according to That’s Nice’s Director of Advanced Therapies Jason Rahal, who has 25 years of experience in the CDMO biologics and CGT spaces. With funding dropping off — following an absolute explosion in 2020 and 2021, biotechs are focusing on their latest-phase development projects and moving them into clinical trials. Nearly all of the funding for multiple preclinical and early-phase trials will be pulled and shifted to support their lead candidates in phase II. Outsourcing of preclinical and early-stage clinical materials will be mostly stopped.

This movement will really take effect in Q3/Q4 2022 and Q1/Q2 2023. Beyond that, if inflation continues to rise, and interest rates continue to increase such that the prime rate reaches 6%, most company debt will be debted out at 8 to 8½%, and a complete closedown of biotech investment in pre-IND activities can be expected.

Opportunities Remain Massive Though

Early in 2022, deals were setting a new ceiling of 10 revenue. Despite the decrease in biotech valuations, recently — whether biopharma CDMOs focused on old-school mammalian and microbial technologies or new modalities — acquired businesses that were realizing annual revenues of $2–5 million sold for 15–20 revenue. That is completely disproportionate with regard to how the biotech market is moving, but the opportunity is obviously massive and explosive.

Life Science Industrials Still Sexy

One sector that has remained particularly strong is life science industrials. It makes sense when considering general trends in personal investment during up and down economies. When the economy is strong, and interest rates are low, people are more willing to take risks to achieve higher earnings and invest in new ideas and innovative companies. When there is a downturn, however, the tendency is to invest in established firms making staple products — a “bricks and mortar” mentality, as it were.

Similar behaviors are being observed in the biopharma space today, which is why life science industrials are still sexy from the perspective of investment and acquisition. Companies providing the tools and services in support of CRISPR gene editing and similar technologies continue to be heavily funded, for instance. Mesenchymal stem cells (MSCs) and extracellular vesicles (EVs) secreted by MSCs is another frontier attracting significant attention.

Exciting Time for mRNA CDMOs

The success of the COVID-19 mRNA vaccines has demonstrated that this technology can work in humans. As a result, there is now massive interest among biopharma companies large and small to develop RNA-based therapies and vaccines. That is creating a massive opportunity for mRNA CDMOs.

Surprisingly, as of yet there have been few announcements of investments in this area by CDMOs. Vernal BioSciences, the first dedicated mRNA CDMO, is one company making news with a recent $21 million investment led by Ampersand Capital and supported by Dynamk Capital. At least two or three other CDMOs can be expected to be created as pure-play mRNA drug substance companies, which will add excitement to this space. Not only mRNA, but other nucleic acid, oligonucleotide, aptamer, and similar novel modalities that involve complex chemistry are new frontiers that will lead to new therapeutics and which everyone should watch.

That includes companies supporting all aspects of the drug manufacturing process, including delivery vehicles, such as lipid nanoparticles (LNPs). Avanti Polar Lipids, a manufacturer of high-purity polar lipids used as delivery systems for complex next-generation pharmaceuticals, was acquired by Croda International Plc in August 2020. That deal was perfectly timed given the demand for these lipids for the production of the COVID-19 mRNA vaccines.

Companies are also emerging that offer improved approaches to the production of LNPs. One example is the small firm Diant Pharma, which has developed a jet-mill technology for the production of much more uniform LNPs. Dramatically reducing the variability of the LNP particle size provides a more consistent in vivo release profile.

What we are seeing in this space, in fact, is that equipment manufacturers are working with nanoparticle excipient companies who are working with drug substance companies, all with the goal of delivering optimum mRNA therapies and vaccines. CDMOs will have a key role to play in uniting these efforts and getting new drugs to market.

A Few Conventional Biopharma CDMOs Might be Available

Excitement isn’t limited to mRNA, even though the conventional biologics space is quite mature. There are some companies that present attractive opportunities for the right buyer.

Emergent BioSolutions is one. It has lost 90% of its market capitalization, but, as a biodefense contractor, Emergent has fairly large capacity for both drug substance and drug product manufacturing, much of which is state-of-the-art. The company’s culture is broken, however, and the only way forward is to take on a new management system run by a new team that is backed by a new owner. Emergent’s earnings multiple for 2021 was between four and six, when the industry average was 20–40. That significant depression in valuation makes the company an obvious acquisition target.

Goodwin Biotechnologies is another. Founded over 30 years ago, it was one of the first biopharma CDMOs in the United States. The company was slow to invest in new capacity, technologies, and modalities and struggled to grow into the leading Florida-based biomanufacturing CDMO. It is still an independent firm, although Signet Healthcare recently made an investment, and we expect Goodwin to be on the map as a rejuvenated company in Q2 2023. Once the commercial capacity is online, Goodwin will be one of the last target acquisition opportunities.

In Europe, Northway Biotech, which is located in Lithuania, is an obvious target as well. This organization has been around for more than 15 years. In addition to the owner, the Lithuanian EDC has invested in the company. Richter-Helm is a biopharma company that makes innovator products but has recently expanded its CDMO services and could be attractive to some buyers.

Back in the United States, one exciting new company is INCOG Biopharma Services, which was founded by a team with a track record of establishing CDMOs and then selling them to leading players in the market (Baxter Biopharma Solutions and Catalent). INCOG is well funded and has a great management team with really strong experience. It has already signed an agreement with Resilience to provide integrated process development, drug substance and drug product manufacturing services. Given the history of INCOG’s founders, this company will likely be acquired very quickl.

Viral Vector CDMOs Possibly on the Block

There are several viral vector CDMOs that can be viewed as attractive acquisition targets. In the United States, Genezen Laboratories was recently acquired by Ampersand Capital and is investing in a large-scale GMP buildout. It is already attracting interest from potential buyers and will likely be on the block in 2023. South Korean firm CHA Biotech’s U.S. CDMO affiliate Matica Biotechnology just opened a new GMP viral vector plant in Texas.

In Europe, Biomay, Biovian, FinVector, HALIX, and PlasmidFactory are all potential targets. PlasmidFactory is particularly interesting as a potential target for North American firms looking to gain a foothold in Europe on which they could build GMP capabilities.

A Few Final Words about the Sterile Fill/Finish Space

It is worth taking a look at the sterile fill/finish space, given that COVID-19 vaccine manufacturing contracts will be expiring at the end of 2022. These fill/finish capacities are very large-volume systems designed for large-scale commercial filling.

There are few biologics products on the market today — and even fewer candidates in development, given the increasing focus on orphan indications and personalized medicines — that require such high-volume fill/finish solutions. As a result, we are just starting to see some overcapacity and changes.

Currently, however, there are few if any fill/finish CDMOs on the market. The last big deal involved the acquisition of Lyophilization Services of New England (LSNE), which sold for more than 50 EBITDA, by PCI Pharma Services at the end of 2021. In the United States, one company that is officially not for sale is Argonaut Manufacturing Services. In Europe, Cenexi, which has fairly decent capacity across multiple facilities, came on the market in June 2022.

In the coming months, it is likely that a few smaller CDMOs with sterile capacity will be acquired by some of the larger CDMOs. This will take place as soon as biopharma companies looking to outsource smaller fills for clinical runs realize that the available high-volume capacity is too inefficient for their applications.

Originally published on PharmasAlmanac.com on June 24, 2022

Most readers in Q1 2024 will be well aware that 2023 was a rough year for biotech funding. Before we discuss the 2024–2025 funding outlook, it is instructive to review how we got here. The following discussion is a compilation of analyst reports from 2020 to 2023 from Silicon Valley Bank and Pitchbook.

With the full onset of the COVID-19 pandemic in 2020, the promise and potential of biotechnology was front and center in the global conversation. The sudden spotlight, combined with interest rates near 0%, drew record capital and record new investors (who Pitchbook delightfully dubbed “tourist investors”) from many industries into both the private and public biotech sectors (Figures 1, Figure 2, Figure 3).^1,2 The first dramatic impact of biotech investing was seen in the public markets, where biotech stocks rose quickly to new records, even as the rest of the world was experiencing an economic shutdown (Figure 4).³ At this same time, some late-stage biotech companies that were previously planning acquisitions by big pharma found they could achieve a higher exit on the public market or earlier exit with less data (Figure 5, Figure 6).^4,5 2020 saw the largest number and value of biotech IPOs in history. During this time, a large influx of private investment drew record total dollars, total investments, and record high valuations over 2020–2021 (Figure 2, Figure 7).⁴ From the perspective of an observer in early 2024, many of these investments were overvalued and overfunded for the quality of data and stage of the company.

Fast-forward to the beginning of 2022, when the IPO class of 2020 began running short of cash and their market caps began to fall (Figure 4).³ In May 2022, Pitchbook’s VC IPO index indicated the recently IPO’d firms were 75% below their 52-week high, which further supports the suggestion that the firms went to the public markets on an inflated valuation (Figure 8).¹³ By this time, many big pharma had accumulated a windfall of capital from COVID-19 vaccine sales, among other pandemic-related anomalies. As they watched the valuation come down for the technology they had missed the opportunity to acquire in 2020, they began waiting for the opportune time to buy. 2022–2023 was a singular time in biotech investing, in that pharma had record amounts of capital available for acquisitions, but total acquisition dollars spend was the lowest it had been in several years.⁴

The life cycle of a biotech firm is fed by venture and private equity investment dollars. When pharma paused acquisitions, the late-stage companies (often phase I–II, Series C) who were planning an exit in 2022–2023 now found themselves without a buyer. Their investors suddenly needed to reallocate their capital to plan for additional unplanned rounds and began holding off on investments into new portfolio companies. The follow-on effect was a shortage of funding into mid-stage companies, especially Series B rounds that were intended to fund first-in-human manufacturing batches, IND-enabling studies, and some small phase I trials. This first real crunch of investment dollars was felt most heavily starting in 2H 2022, when total deals began to slow (Figure 2). By Q2 2023, the $55 billion overcapitalization of 2021 had turned into a deficit, and the portion of downrounds spiked to 15%, most heavily occurring in later-stage companies.¹

For a time in 2023, Seed and Series A firms who were raising their first funding rounds saw valuations and total funding dollars hold steady, as investors into this stage are more often high net worth individuals or smaller venture funds that count a large number of such individuals among their limited partners (LPs). This kept the pipeline of new firms flowing temporarily, only to be halted as this class of firms needed institutional funding for Series B to continue development. The 2020–2021 spike in investments also exhausted the capital sources of this pool of LPs for funding in 2022–2023.¹ The good news, however, is that as of Q1 2024, Seed and Pre-Seed valuations are holding steady, if not up from 2021 (Figure 9).²

Parallel to this series of unfortunate events, interest rates climbed to levels not seen since the 2008–2009 financial meltdown (Figure 10). High interest rates typically reduce venture investing, especially among the high net worth individuals and institutions that typically invest in smaller amounts of capital. This trend was confirmed in 2023. While high interest rates exacerbated the factors depressing later-stage funding, it also created fresh pressure on the early-stage companies that initially looked to be spared the brunt of the downturn. While 2023 saw Seed/Series A valuations hold steady, the total number of deals was low (Figure 2). One serial biotech entrepreneur looking to raise the first institutional round for her fifth startup said this was the hardest time she’s ever had fundraising –– including her time raising money during the 2008 financial meltdown.

The depressed funding into biotech startups led to depressed spending on discovery services, contract research, outsourced testing, and manufacturing services. While larger, more established firms had capital to weather the downturn, smaller service providers needed to either look to loans, venture debt, or other financial resources. 2023 saw the largest round of venture debt (into service providers and therapeutic drug/device startups) ever recorded. Therapeutic device and drug companies shed pipelines and assets in an effort to conserve cash. One large biotech venture firm described this effect as “trimming the fat.”

So where do we stand, and what is the outlook for 2024? Analysts consider the bottleneck to be pharma acquisitions, so this is where we must look for forecasting the return of capital to the biotech markets. As of February, 2024 the public market looks to be at a nadir. If pharma views the market similarly to industry analysts, we should expect to see an uptick in pharma acquisitions in 2024. After the best technology has been purchased at rock-bottom prices from the public markets, pharma should again begin buying technology from the private markets and allowing the longsuffering late-stage firms to exit. The exit valuations will depend heavily on the level of financial distress of individual companies. Once pharma has purchased their priority late-stage (and therefore de-risked) companies, this influx of capital should loosen the markets, enabling venture investors to return to fresh capital into earlier-stage companies on the private markets.

In summary, we can say the light has turned green at the stoplight, but there is a very long backlog of traffic. We predict late-stage acquisitions will pick up in 2024, followed by mid-stage institutional venture investing. The total number of Seed and Series A funding may not pick up until interest rates either come down or start on a downward trend, although the valuations appear to continue holding steady.

Figure 1. SVB — Record total investment dollars in 2020 and 2021.