This week, we take a break from stories of raising capital, mergers, and FDA approvals to look at the dark side of our industry. What happens when companies fail, people lie, and good drugs make bad lives?
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Zymergen + Ginkgo
About the Show
Life Science Today is your source for stories, insights, and trends across the life science industry. Expect weekly highlights about new technologies, pharmaceutical mergers and acquisitions, news about the moves of venture capital and private equity, and how the stock market responds to biotech IPOs. Life Science Today also explores trends around clinical research, including the evolving patterns that determine how drugs and therapies are developed and approved. It’s news, with a dash of perspective, focused on the life science industry.
Welcome to Life Science Today, your source for stories, insights, and trends across the life science industry. I’m your host, Dr. Noah Goodson. This week, we take a break from stories of raising capital, mergers, and FDA approvals to look at the dark side of our industry. What happens when companies fail, people lie, and good drugs make bad lives?
The views expressed on Life Science Today are those of the host and guests. They do not necessarily reflect the opinions of any organizations with which they are affiliated.
The biotech IPO and SPAC bonanza of 2020-21 was bound to have some organizations that could have been more consciously vetted. The once unicorn, Zymergen has been on a journey that is anything but rainbows. The biotech organization raised more than $1B in private capital and then had a $500M IPO with a $3B valuation that eventually peaked at $5B in market value and amazing claims about how they would transform the way science is done. But by late summer last year, it emerged that the company had no meaningful pipeline of revenue and no real prospects of justifying the capital invested or valuation. This should not be shunted off on the shoulders of a few greedy business leaders – though the then CEO did fall on his sword. But that’s a CEOs job, and the company was backed by big names like Softbank who should have known better. Last week, the next chapter unfolded as they cut 80 more jobs and announced a planned $300M acquisition by the other emergent biotech Ginkgo Bioworks.
Now, both of these biotech organizations sit in a much broader area of biotechnology than simply health innovations including work on agricultural innovation, Zymergen’s folding cell phone screen technology, and more. For Ginkgo, the deal pulls Zymergen’s processes and capital assets into existing workstreams which will expand Ginkgo’s technical capabilities. Ginkgo themselves are no stranger to litigious circumstances and stocks falling from grace being down 80% from their peak, and have faced down their own resistance from efforts to short their stocks to questions about the stability of their own revenue streams. Despite these challenges they continue to forge ahead with this acquisition and burgeoning partnerships in agriculture, beauty products, and viral testing. Much could be said about the cost of innovation and the market circumstance Zymergen entered in compared to the ones that they are exiting on. But at the end of the day Zymergen is currently a case study in just how rapidly biotech’s can turn $1.5B into $300M.
Cassava Investigated for Fraud
In cases like Zymergen it is unlikely anyone will ever be held accountable. Sure it’s possible we will see some lawsuits, but this exit may be the last piece of that story. But for other biotech startups the consequences can home much more directly. This may be the case for Cassava Sciences, who is currently under investigation by the Department of Justice for potential scientific fraud – or to be more specific, using fraudulent science to defraud investors.
I want to contrast this from the Zymergen example – Zymergen is more than likely the failure of multiple systems. At least looking from the outside investors, leaders, product issues, all of these collided with real delivery challenges to create the downfall. Cassava is a very different story. Cassava’s core product Simulfilm that targets Alzheimer’s is based on the work of former chief scientific officer Dr. Lindsay Burns and scientific advisor Dr. Hoau-Yan Wang. But over the last year a number of independent sources have revealed likely fraudulent work, particularly but Dr. Wang. To make it simple, both the basic scientific evidence supporting the theory behind Simulfilm and the direct evidence supporting the therapy show signs of being tampered with. Now Cassava is not dead in the water yet – and the jury is still out on if real fraud occurred here. Plus, some of the allegations are coming from those trying to short Cassava’s stock – so certainly a vested interest. But if fraud did occur, you can absolutely expect significant fall out. I think it’s worth noting that in many cases of scientific fraud a group of very few players are responsible. A couple of scientists with questionable ethics and a willingness to convince others of their pet theories using contrived data – but if they ever do meaningful research they are often eventually caught. That’s because science is basically a self-regulating group – scientists are usually the ones calling out scientists. So in the case of Zymergen you have a system failure costing investors at least $1.2B but to date there are limited legal ramifications. But when Cassava Sciences has alleged direct scientific fraud driven failure then legal investigations are quick to follow. Perhaps it bares thinking about the ways we are far better at individual rather than systemic accountability.
Teva has Proposed a $5B Group Settlement
In our final story of fraud and failure in the Life Sciences we look at Teva, the Israeli pharmaceutical company most known for the creation of a number of generic opioids, but who also has a wide range of additional generics on the market. During their earnings report this quarter they announced a plan to settle all outstanding opioid-related lawsuits in one $5B 13-year fell swoop. The plan includes $3.7B in payouts for various lawsuits and the provision of $1.2B of the generic opioid overdose medication naloxone hydrochloride nasal spray.
Whether a settlement this sweeping will be approved and absolve a company of legal culpability is yet to be seen – but it appears to be the only feasible mechanism of collective responsibility. Companies like Purdue Pharma converted to non-profit entities to sequester those that made money from the ongoing legal ramifications – and indeed how do you hold a medical system accountable the rippling impacts of misuse and abuse? In Teva’s case, with a number of multi-million-dollar losses including a $1.5B loss in the state of New York and several million dollar losses across the south – they’re currently appealing some of these cases. across the south and a $1.5B loss with the state of New York they are currently appealing. To resolve these ongoing challenges they are asking if $5B would be enough to get them out of this legal purgatory.
Thanks for joining me for Life Science Today, your source for stories, insights, and trends across the life science industry. Learn more at LifeScienceTodayPodcast.com. If you like what you hear, please tell a friend. Once again, I’m Dr. Noah Goodson, I’ll see you next week.