Going Private: A Lifeline for Struggling Biotechs in a Challenging Market

In a stark reflection of the current biotech landscape, several companies are opting to go private as they grapple with financial pressures and market challenges. This trend highlights the difficult choices facing biotechs in an increasingly competitive and capital-intensive industry.

Bluebird Bio's Surprising Privatization

Bluebird bio, once a trailblazer in gene therapy, recently made headlines with its decision to sell itself to private equity firms Carlyle Group and SK Capital Partners for a mere $29 million. This move comes as the company faced a severe cash crunch, unable to sustain operations beyond the first quarter of 2025. William Blair analysts described the privatization as "likely inevitable" given the company's financial straits.

The deal underscores the challenges faced by specialized biotechs, particularly those developing high-cost therapies. Bluebird's struggle to commercialize its gene therapies, coupled with ill-timed international expansion efforts, contributed to its financial difficulties. Jack Allen, senior research analyst at Baird, noted that the company had "stretched itself too thin" in pursuing global markets for its expensive treatments.

A Growing Trend in the Industry

Bluebird is not alone in its decision to go private. Other biotechs have taken similar steps to avoid bankruptcy and refocus their strategies:

• Freeline Therapeutics, a developer of gene therapies for chronic diseases, went private in early 2024 after selling to major shareholder Syncona.
• Genetron Health, a precision oncology platform company, completed its privatization in March 2024 to enhance operational flexibility.
• 23andMe, the consumer genetic profiling company, announced plans to go private in August 2024, although a special committee recently rejected CEO Anne Wojcicki's proposal to acquire outstanding shares at $0.41 each.

These moves reflect a broader trend in the biotech sector, where companies are seeking alternatives to the pressures of public markets and regulatory burdens.

The Double-Edged Sword of Privatization

While going private offers some advantages, it is not without its challenges. Arda Ural, Americas Life Sciences leader at Ernst & Young, suggests that privatization may provide companies with "breathing room to focus on long-term development goals without the immediate pressure to deliver quarterly results."

However, Stephen Majors, global head of communications at the Alliance for Regenerative Medicine, expresses skepticism about the viability of this strategy for most cell and gene therapy companies. He notes that the biotech sector, particularly in advanced therapies, relies heavily on outside capital, which is more readily available in public markets.

David Barrett, CEO of the American Society of Gene & Cell Therapy, emphasizes that fundamental challenges such as reimbursement delays and manufacturing costs persist regardless of a company's public or private status. He states, "Whichever methodology gets gene therapies faster, more safely to patients, then that's the one that we think is the best."

As the biotech industry continues to navigate these turbulent waters, the decision to go private remains a case-by-case consideration. For some struggling companies, it may offer a necessary lifeline, while others may find alternative paths to weather the storm and bring innovative therapies to patients.