Facing declining valuations and funding challenges, public biotechs like bluebird bio are going private to restructure, reduce regulatory burdens and refocus on long-term growth.
Bluebird bio’s recent decision to sell itself to private equity for a valuation of less than $30 million was a stunning outcome for a company that broke barriers in gene therapy. But bluebird isn’t alone, with a handful of biotechs recently striking go-private deals to avoid bankruptcy.
“Going private may allow biotech companies breathing room to focus on long-term development goals without the immediate pressure to deliver quarterly results,” Arda Ural, the Americas Life Sciences leader of Ernst & Young (EY), told BioSpace.
Bluebird was acquired by private equity firms Carlyle Group and SK Capital Partners in a cash deal valued at $29 million at the end of February. This followed a lengthy process in which the company explored strategic alternatives and admitted that it didn’t have enough cash to run past the first quarter of this year. Facing a cash crunch, bluebird had to act. William Blair analysts said the move to go private was “likely inevitable.”
The board acknowledged that, absent a significant infusion of capital, the company risked defaulting, accoding to an investor note written by Jack Allen, senior research analyst at Baird. Bluebird made some mistakes along the way, particularly by stretching itself too thin pursuing international expansion for its pricey gene therapies, Allen said in an interview with BioSpace.
Privatization is still a rare strategy in the industry but can be a viable option for biotechs struggling with public market pressures. Commercialization hurdles including pricing, reimbursement and manufacturing are compounded by declining valuations and shrinking access to capital.
A third of the biotechs don’t have the cash to run their operations for more than one year.
Following layoffs and a comprehensive review of financing options, Freeline Therapeutics, developer of gene therapies for chronic debilitating diseases, went private in early 2024 after agreeing to sell to private equity firm and major shareholder Syncona. Similarly, in October 2023, precision oncology platform company Genetron Health revealed its decision to go private via a merger with New Genetron Holding Limited. The deal, completed in March 2024, resulted in Genetron Health becoming a wholly owned subsidiary in an effort to enhance the firm’s operational flexibility and long-term focus.
Another biotech disruptor, consumer genetic profiling company 23andMe, revealed plans in August 2024 to go private, with CEO and co-founder Anne Wojcicki partnering with private equity firm New Mountain Capital to acquire all outstanding shares. With over 20 partnerships with drugmakers, including Pfizer and Roche, as well as collaborations with government and academic researchers, 23andMe is considering refocusing its strategy without public market pressures. In a February 21 SEC filing, Wojcicki stated that going private would enable the company to “focus on executing long-term value creation initiatives.”
On March 3, however, a special committee unanimously rejected Wojcicki’s proposal to acquire all outstanding shares for $0.41 apiece—an 84% drop from her previous bid. The rejection raises questions about the company’s ability to navigate its financial and strategic challenges while remaining public.
These actions highlight that even groundbreaking biotech innovators are not immune to financial challenges, regulatory setbacks and current market realities.
The Pandemic ‘Sugar High’
Experts say that the constrained capital market situation has led biotechs to take drastic actions. Ural said without the public listing, a company can get access to capital without the market hassles.
Ural noted that “the public markets saw a sugar high of IPOs in 2021,” with the COVID-19 pandemic. This wave included companies without any clinical-stage assets, many of which now face a crucial choice: remain public and bear unsustainable compliance, reporting and operational costs, or go private and streamline the portfolio to concentrate on a single lead asset.
The biotech landscape has become a “tale of two cities when it comes to valuation and financing trends,” Ural added. While late-stage assets remain highly attractive for investors, early-stage companies are struggling. “A third of the biotechs don’t have the cash to run their operations for more than one year,” Ural said.
Biotechs need to maintain a strong cash position to survive in a challenging funding climate or risk financial distress and potential shutdown. According to Ural, biotechs should ideally have enough cash reserves to cover at least 18 months of operating expenses—a high bar in the current financial environment. If a company falls below this threshold, it may face a “going concern” challenge, where auditors or investors question its ability to continue operations without additional funding. Once flagged as a “going concern,” securing new investors or financing becomes even more difficult, creating a cycle that threatens the company’s survival.
Specialized biotechs are particularly vulnerable right now, as evidenced by bluebird’s fall. These companies market therapies that can cost in the millions and can take years to ramp up once approved. Early on, they require large amounts of capital to fund research and development and commercialization.
Stephen Majors, global head of communications at the Alliance for Regenerative Medicine (ARM), was skeptical of the go-private strategy, noting that most cell and gene therapy (CGT) companies are too capital-intensive for privatization to be a scalable strategy. “Biotech, particularly CGT, relies heavily on outside capital, and the private market lacks the liquidity of public markets,” he told BioSpace.
Commercialization challenges exist regardless of public or private status for CGT biotechs. “Reimbursement delays and manufacturing costs are the biggest hurdles for CGT companies; whether a company is public or private doesn’t change those fundamental barriers,” David Barrett, CEO of the American Society of Gene & Cell Therapy (ASGCT), told BioSpace.
Faster, Safer
Some experts argue that private companies can make strategic decisions more efficiently than they would under the pressures of public shareholders.
“Publicly traded biotech companies often face pressure to show short-term progress, which can lead to prioritizing quick wins over long-term sustainability,” Allen said.
On the other hand, being public provides more opportunities for capital raises and partnerships, Majors noted. “They either need deep-pocketed investors or must rely on partnerships with larger pharmaceutical companies,” he said of private biotechs.
Barrett’s perspective is that “any company, any therapeutic developer, has to decide what is in the best interest of its overall goals.” ASGCT’s primary endpoint as an organization is to see successful commercialization for safe therapies to reach patients faster, Barrett noted. “Whichever methodology gets gene therapies faster, more safely to patients, then that’s the one that we think is the best.”
Ural agreed. “It’s a case-by-case decision to be made on each company’s specific merits.” Yet he believes that for some companies, going private may be a necessary move. “If a biotech company lacks the cash to stay public and comply with regulations, privatization may be their best option.”
