Heron Therapeutics, a publicly traded San Diego biotechnology company that makes cancer and pain-management therapies, is laying off one-third of its workforce as part of a corporate restructuring that could help it save $43 million annually.
Heron expects the move will help to extend its available cash and allow it to focus on its acute care and oncology treatments, the company said.
A spokesperson for Heron said in an email Wednesday that “with a very high cost of capital and continuing disruptions in the marketplace due to COVID, conservation of capital is critical.”
Heron will go from 302 employees to less than 200 by the end of this year — a 34 percent reduction in staff, the company said. A majority of the job cuts — 70 percent — will be from the research and development department. Out of the company’s total workforce, 129 employees were involved in research and development, according to Heron’s annual report.
The company has three drugs approved by the U.S. Food and Drug Administration, two of which treat nausea and vomiting triggered by chemotherapy. Heron rolled out its product, Zynrelef, a drug that dulls post-surgical pain, in May 2021, following years of back-and-forth with the FDA.
Despite the first two years of the pandemic spelling gangbuster growth for local life sciences and investors funneling money into novel research, the recent cutbacks at Heron are not an anomaly. A tally of layoffs by industry publication, FierceBiotech, noted Heron, which went public in 2014, among 61 biotechnology companies to reduce staff this year.
Barry Quart, chairman and CEO of Heron, said in a June 30 statement that this cost-reduction strategy is a result of “the current market realities and the macro headwinds facing many commercial-stage biotechnology companies.”
Quart, the company’s top executive since 2013, called the layoffs difficult but “necessary to address the challenging operating landscape and better position Heron to improve the lives of patients while creating long-term value for shareholders.”
These “macro headwinds” and “the challenging operating landscape” that Quart references in his statement point to the bear market staring down the biotech industry.
Aside from the wild swings of the stock market, companies like Heron are still up against the lingering effects of the pandemic.
Serge Belanger, a senior analyst at Needham and Company, LLC, said that he’s seen this play out across the industry, mostly for public companies.
Belanger also noted that Heron’s product Zynrelef didn’t meet the huge projected success in 2021 due to the time it takes for hospitals to adopt new therapies on top of COVID-19 overtaking medical operations. That said, Heron is leaning into its commercial products going forward and Belanger is optimistic about the market potential for its post-surgical pain management drug.
As stocks gyrate, it’s been harder for investors to finance life science companies so biotechs are looking for other ways to decrease expenses and extend what they have.
“It goes through cycles, and we just came out of a cycle where … people were throwing money at these things,” Belanger said of the big investments into life science companies. In recent months, San Diego saw a drop in venture funding, much like the rest of the country.
“They reached high valuations and now we’re, hopefully at the end of the other extreme of that cycle,” he said.
At the end of last year, Heron had cash, cash equivalents and short-term investments of $157.6 million and noted that it historically funded operations through the sale of stocks and debt financing, according to SEC filings.
Heron’s stock closed Wednesday at $3.01, down 2.59 percent, on the Nasdaq exchange.
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