Surface Oncology — a biotechnology company developing immunotherapies for cancer — is taking a two-pronged, top-down and bottom-up approach to belt-tightening amid the current biotech market slump, according to CFO Jessica Fees.
It was a top-down decision to conduct a portfolio review that led to the Boston-based firm’s Nov. 2 announcement that it would pause one of its drug development programs and look to partner it externally, as well as lay off 20% of its workforce.The moves, which leave the company with about 60 employees, extended the company’s “cash runway” from early 2024 into the second quarter of 2024.
The actions earlier th is month followed a bottom-up approach to cost containment that the company had already initiated. They also come as Fees said in an interview Monday that she expects the markets to remain “choppy’ for some time to come and as financing — particularly key to young biotech firms that need funding to support research — is tough to come by.
“It’s a challenging time to be able to raise money in the public markets,” Fees said, citing the backdrop and the biotech market in particular as one of the biggest headwinds she sees right now. In response, the firm is using its cash “very judiciously and being very mindful of spend,” she said.
A clinical stage immuno-oncology company, Surface is not alone. Along with layoffs at major companies like social media company Facebook, now Meta, and other pockets of the economy that are downshifting, the biotech sector has also been retrenching. Publicly traded biotech companies are restructuring and cutting jobs and spending this year amid a downturn driven by clinical and regulatory setbacks and macro-economic forces, according to several recent reports by Industry Dive sister publication BioPharma Dive.
Surface’s CEO Robert Ross, M.D. in the company’s earnings release stated the layoffs and the decision to pause one of its programs would enable the company to refocus its resources.
“The work done by our impressive team of scientists and clinicians was outstanding, but we believe it is in the best interest of patients and our shareholders to invest our resources where they can have the greatest potential impact in the near term,” Ross said in the statement.
For the quarter ended Sept. 30, Surface reported a net loss of $23.2 million, wider than the $19.9 million reported in the year-earlier period while the company ended the quarter with $146.35 million in cash and cash equivalents. The company’s shares have fallen about 75% year to date, according to Yahoo Finance.
The first prong of the company’s cost-cutting initiative was a bottom-up approach, Fees said. The company has sought to enlist all employees to help find ways to trim costs through an initiative called the “Scrappy Surfer” that was a play on the firm’s publicly-traded company’s SURF ticker symbol.
“The entire team contributed to where we could cut back,” Fees said. “There was a lot of good that came from that.”
One measure that the finance team came up with was to back off from a plan to replace its existing purchasing software, she said. The switch to the new software was expected to be modestly less expensive in the long run but the company avoided incurring the implementation costs, she said.
Looking ahead, the company will be on the lookout for fresh financing, potentially through such means as partnerships with other firms or through a follow-on secondary offering.
“The market is tough right now,” Fees said, but the company is “always looking to build the balance sheet.”