Biotech in 2022: Industry leaders and investors on trends and challenges to watch
It’s been a remarkable few years for biotech, in the Pacific Northwest and beyond. The optimism that emerged with the successful development of COVID-19 vaccines and treatments continued to propel investment and advances through 2021.
Venture capital funding for the life sciences hit record highs nationally for the 12 months ending in September, reaching more than $30 billion. In the Seattle region, companies raised a whopping $898 million from September 2020 through September 2021, compared to $328 million from September 2018 through September 2019.
Five Washington state biotech companies also entered the public markets last year, including: Sana Biotechnology, which raised $587 million in its IPO; Absci, which raised $200 million; and proteomics company Nautilus Biotechnology, which reeled in $345 million in a SPAC merger.
Meanwhile, the U.S. Food and Drug Administration approved more than 50 new drugs in 2021, maintaining a swift clip.
More recently, the pace of IPOs has slowed nationally from earlier record highs, and biotech stock indexes have dropped. But overall the biotech scene is still red-hot — and there’s likely more to come in 2022.
What does this year hold as far as top trends and challenges? We asked six biotech leaders from the Pacific Northwest what they see unfolding in the next year.
Alice Ly, principal at Alexandria Venture Investments and head of Alexandria LaunchLabs, Seattle
What areas of biotech do you see having the biggest impact in 2022? 2022 will be revealing for what is ahead for advanced therapies as the robust global pipeline of more than 1,800 gene and cell therapies currently in trials produce clinical readouts. We may get much-anticipated approvals for advanced therapies to deliver to patients, or we may come up against detours that push biotech to continue innovating, for instance, developing non-viral delivery technologies to realize the promise of gene therapy. Any way you slice it, impact will be felt in 2022. Ultimately, how well industry and regulatory bodies work together to establish new frameworks for advanced therapies will shape 2022 and beyond.
How will the Pacific Northwest play a role? With its deep pool of groundbreaking scientific innovators, entrepreneurial managerial leadership, highly skilled translational scientists, and experienced biomanufacturing technicians, Pacific Northwest talent will continue contributing to the advancement of the gene and cell therapies in both the near and long term.
What are the biggest challenges for biotech companies in 2022? With the biotech selloff in 2021, we may see continued pullback from biotech by non-life science funds, but I anticipate a strong comeback in 2022 by small- and mid-cap biotech, backed by deep-pocketed life science investors who are committed to this sector. Such investment, paired with the cash-heavy coffers of pharma, may lead to more merger and acquisition activity, which will be a challenge for some but an opportunity for others.
François Baneyx, professor of chemical engineering, vice provost for innovation and director of CoMotion, University of Washington
What areas of biotech do you see having the biggest impact in 2022? With the multiplication of SARS-CoV2 variants and a pandemic moving to the endemic stage, vaccine development and data-driven repurposing of existing and investigational drugs will remain front and center for the biotech sector. The new year will usher in precision medicine treatments that dampen the severity of SARS-CoV2 infections, along with ultrafast and inexpensive COVID-19 testing technologies.
Beyond COVID, we will see progress in cell therapies, especially in therapies derived from donor cells and induced pluripotent stem cells, and their integrated manufacturing. We will also see the emergence of a growing number of startups that deploy synthetic biology and protein design tools to enhance food, water, and energy security, and to combat climate change.
How will the Pacific Northwest play a role? A bustling tech sector, top universities, hospitals and research centers, a growing pool of capital and talent, diverse and contrarian viewpoints, and a passion for equitable healthcare and the environment: the Pacific Northwest has all the ingredients for leading the next biotech cycle where AI/Machine learning is a commodity, automation is critical, and convergent creativity is paramount.
What are the biggest challenges for biotech companies in 2022? Even with accelerated regulatory processes, emergency approvals and at-scale manufacturing will remain challenging. The race for talent and quality wet space will intensify, especially in the Puget Sound area, and the pandemic will continue to throw monkey wrenches at the most exquisitely crafted strategies and business plans.
Hilary Hehman, vice president of business development at Fred Hutchinson Cancer Research Center
What areas of biotech do you see having the biggest impact in 2022? It’s hard for cell therapies, based on CAR T cells and T cell receptors, to not be my first answer to this question — coming from Fred Hutch, an early innovator in the field with multiple industry partnerships. There is an adjacency to the therapeutic products that is hugely impactful, however. I’m seeing a strong biotech push to develop platforms to support product scalability, particularly around manufacturing of therapies. Manufacturing speed and vector reliability [for gene delivery] is a bottleneck to scalability that many biotechs are trying to solve, and quickly.
How will the Pacific Northwest play a role? Investment interest in Seattle and the Pacific Northwest, from Vancouver B.C. to Oregon, has grown exponentially over the last five years. The growing recognition of the scientific innovation that resides in the Pacific Northwest is apparent in the region’s explosive portfolio of new biotech companies founded out of academic centers. I believe that this will continue, particularly because Seattle’s startups and biotech companies are delivering on their promise to create clinical and patient impact.
What are the biggest challenges for biotech companies in 2022? Talent and staffing will continue to be challenging, across the board. There are simply not enough trained scientific hands to staff the massive number of biotech companies, and companies are competing for the talent. Recruitment and retention are top of mind for everyone in biotech.
Eric Rosenfeld, founder of the Oregon Venture Fund
What areas of biotech do you see having the biggest impact in 2022? One of the most vexing, unaddressed opportunities for biotech in 2022 may be the ability to continuously monitor airborne pathogens and detect them in real time. Molecular recognition technology seems to be getting really close to the point where on-site biosensors may soon be able to detect airborne viruses in real time. Imagine the health, safety and economic benefits for schools, workplaces, and public gathering spaces.
How will the Pacific Northwest play a role? Within Oregon and Southwest Washington, it’s encouraging to see several employers, such as Oregon Health Sciences University and Absci, attracting a growing number of world class professionals in computational biology, biochemistry, and cellular programming to our region. Once they’re here, they tend to stay.
What are the biggest challenges for biotech companies in 2022? The demand for skills far exceeds the supply, especially when it comes to expertise across data science, software, and life science.
Michaele Armstrong, associate director at sp3nw
What areas of biotech do you see having the biggest impact in 2022? Contract research and contract manufacturing organizations will play key roles in addressing the growing needs of the pharmaceutical and medical device supply chain. Contract providers support well-established large companies that are addressing therapeutic, diagnostic, and technology solutions, as well as provide valuable resources for life science startups which lack the equipment and skills for essential components of their development.
How will the Pacific Northwest play a role? Efforts including the Evergreen Bioscience Innovation Cluster, a Washington statewide economic development initiative to fill supply chain gaps in the biopharma and medical device sectors, will address the growth needs of associated industries. These include contract pharma research services and pharma packaging and labeling services, which are anticipated to grow more than 4% annually within the next five years, and supply manufacturing and wholesaling for medical devices and instruments. By enhancing workforce development and ecosystem supports, the initiative will make the Intermountain Northwest and Washington a magnet for companies providing and consuming contract research, development, and manufacturing services for medicines and medical devices.
What are the biggest challenges for biotech companies in 2022? I’m sure these will be no surprise: Talent, supply chain and entrepreneurial/startup support. sp3nw’s Flexible Infrastructure for Resilient Entrepreneurship (FIRE) and its partnership with the Evergreen Bioscience Innovation Cluster seek to address these issues. FIRE programs include evaluating credentialing for biotechnician assistants as an entry point into industry, elevating knowledge and skills for rural angel investor groups, and directly supporting startups with mentors and interns. The innovation cluster facilitates regional business growth by promoting collaborative relationships between biopharma and medical device contract service providers and customers.
William Canestaro, managing director at Washington Research Foundation/WRF Capital
What areas of biotech do you see having the biggest impact in 2022? We will see an outsized impact of tech-enabled biological discovery. We are moving past the days of brute force library screening of drug candidates. The companies that I’m most excited about for 2022 are those that use tools that are made possible by advances in computing to create platforms that can solve discrete and impactful problems. Some great examples that we are seeing with this include de novo protein design and advances in diagnostics that predict treatment efficacy, made possible by greater computing power.
How will the Pacific Northwest play a role? The Pacific Northwest is a recognized global leader in cell therapy and protein design. We will continue to grow these areas as we draw talent from around the world. We also benefit from companies like Microsoft that are thoughtfully building a life science strategy that enables AI/machine learning tools to be applied to novel data sets and problems.
What are the biggest challenges for biotech companies in 2022? The biggest challenge currently is talent. It has always been critical to have a strong team, but biotech is having a moment right now. We are creating new platforms and treatments at a pace that would have been unimaginable three to five years ago. The rate-limiting factor is finding the people that can translate these innovations into real-world drugs/treatments/diagnostics/vaccines etc.
I also worry that the pendulum will swing even further into an overheated private life sciences market. How much money venture capitalists raise is a leading indicator of activity, and there was record amounts going into biotech venture capital firms last year. They’re now going to have to put that money to work over the next one to three years.
Science does have a fair degree of uncertainty, and there are only so many translational discoveries that can form the basis for companies coming out per year. Scaling that requires going upstream to funding from the National Institutes of Health and the National Science Foundation. It’s a supply and demand problem.
As more VCs look for places to put their money to work, they’re going look more upstream in terms of stages of development and they are going to fight more for position in deals. It’s a CEO’s market, but the returns from many of these funds aren’t growing proportionally to match the unreasonable prices they’re paying to get into deals. This disconnect has become especially pronounced in 2021.