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Biotech That Once Promised ‘Next Gen’ COVID Vaccine Files for Bankruptcy

Gritstone Bio announced it is “taking action” to “preserve value and strengthen capital structure” on Thursday.

Photo of COVID vaccines
Photo by SHVETS Production via Pexels

During the pandemic, pharmaceutical firm Gritstone Bio was a unicorn charging alongside Pfizer and Moderna in the race to create next-generation COVID-19 vaccines. Now it’s just another post-COVID-19 biotech casualty. The company announced it is “taking action” to “preserve value and strengthen capital structure” on Thursday.

That pretzeled press release language means it filed for bankruptcy. It’s the latest in a string of challenges for small to mid-sized firms in the sector.

From Unicorn to Penny Stock

Last year, a record 41 biotech firms filed for bankruptcy, according to SEC filings. The wave of insolvencies had been a couple years in the making: When interest rates were at historic lows from 2020 to 2022, many biotechs sought funds from banks, but debt financing suddenly became more expensive as rates were rapidly hiked to fight inflation. That created a tough reality for biotech, where R&D costs are inordinately high, especially among small to mid-sized firms. Many in the industry had to pursue restructurings and layoffs.

Gritstone was once a $1 billion unicorn in competition with Moderna and Pfizer to develop vaccines during the pandemic, and was even awarded a government contract worth hundreds of millions to develop a next-generation COVID-19 vaccine in 2023, but trials earlier this year were mired by delays as the company underwent a 40% downsizing. The bankruptcy filing was all but inevitable:

  • Gritstone had $62 million at the end of June, which it said wasn’t enough to fund operations for 12 months — one analyst said its cash runway was even shorter than that, running no longer than 2024. With both liabilities and assets between $100 million and $500 million, the company said bankruptcy will allow for “value-maximizing” or, more accurately, let it continue developing treatments in Chapter 11.
  • Gritstone, which has vaccine programs touching on infectious diseases and cancer, is partnered with Gilead to develop a therapeutic vaccine for HIV. But it was dealt a significant blow last week when trial data from its vaccine program for colorectal cancer proved underwhelming. Its shares, now in penny stock territory, have fallen over 95% this year.

Pharma Phight: The acrimonious scuttle between Gritstone’s erstwhile competitor Pfizer and activist investor Starboard Value took a shocking turn Thursday, when the investor accused the pharma giant of intimidating two former executives who withdrew from its rebel campaign. Starboard is now demanding an investigation. Big firm or small, headaches come to all.