Does the Spark Therapeutics writedown undermine Philly’s biotech swagger?

A shining star of Philadelphia’s life sciences ecosystem recently faced a setback, putting a dent in the region’s reputation for success in the sector.

Cell and gene therapy standout Spark Therapeutics is being restructured following the end of its trial for a hemophilia A gene therapy treatment, and parent company Roche is classifying the former startup as a financial loss, according to the Philadelphia Inquirer. 

Spark says it’s still working on a new gene product for the disease and stakeholders say this downturn doesn’t discredit its years of impact. The situation is, however, calling attention to how life sciences startups face challenges like federal funding cuts and product development costs — though industry leaders still say they’re optimistic about staying afloat by tapping into the talent and resources that exist here. 

One restructuring setback won’t worsen investment opportunities for other life science ventures, according to Dean Miller, president of the Philadelphia Alliance for Capital and Technologies. 

“You’re not going to dissuade investors because a pharmaceutical company deprioritized an acquisition,” Miller said. “That happens all the time.”

Philadelphia is consistently a top region for venture capital and life sciences. The Philadelphia Metropolitan Statistical Area is a top-five venture capital market in the US, with life sciences as one of its major sectors, according to PitchBook’s quarterly Venture Monitor report.

Despite the high ranking, access to capital remains one of Philly’s top challenges, especially locally, per Rebecca Grant, senior director of life sciences and innovation for the city’s Department of Commerce.

Recent challenges like Spark’s signal that the industry needs to work toward making gene therapy manufacturing more cost effective, which would get more therapies to market and help attract investment, Grant told Technical.ly. But it’s also an example of how a company can pivot to stay afloat and continue working. 

“They really created a lot of recognition for gene therapy and innovation,” Grant said. “Now more people understand what gene therapy means and how it can literally cure disease.” 

For Spark, it’s still too soon to know what the impact of restructuring will look like, Denise Bradley, head of corporate communications and community engagement at the company, told Technical.ly. But it remains committed to Philadelphia and to developing new gene therapies, she said.

Spark signaled strength in Philly life sciences — what does it mean now?

Spark Therapeutics is one of Philly’s go-to examples of success, and it helped build up the ecosystem in Philadelphia, Miller said. While restructuring could lead to staff cuts or shrinking offices, following layoffs at the company last summer, this is likely a short-term pain point, he said.

After developing the first FDA-approved gene therapy, Luxturna, the Penn spinout broke into the mainstream. When pharma giant Roche acquired Spark in 2019, it was the largest VC-backed exit in Philadelphia at $4.8 billion, bringing more attention to Philly’s life sciences ecosystem.

Since then, the company welcomed a new CEO and announced plans for its 500,000-square-foot Gene Therapy Innovation Center in University City, which is still expected to be completed next year, Bradley said. The company previously said the site would house over 500 jobs.

“Gene therapy is not a huge sector, and Spark was a trailblazer,” Miller said. “[It’s] never easy when your trailblazer starts to disappear a little further.” 

Still, stories like Spark’s are something that the ecosystem has seen before. Big successes come and go, but the momentum remains, he said, pointing to the example of Centocor, a biotech company founded in Philadelphia in 1979. 

Centocor’s work was groundbreaking at the time, developing large molecule therapies and treatments for rheumatoid arthritis, Crohn’s disease and other medical conditions, Miller said. 

Johnson and Johnson acquired Centocor in 1999 for $4.9 billion. At the time of acquisition, Centocor maintained its brand identity, but eventually completely integrated into Johnson and Johnson. However, the people who worked at Centocor are still around in the Philly life sciences ecosystem and helping new biotech startups get off the ground, Miller said. 

“Twenty years from now, I think we’ll be saying the same thing about Spark and its impact,” Miller said. “Not just what it did in developing a new line and approach to gene therapy, but how its people went on to found other companies, to fund other companies.” 

Fed funding blocks, fleeing investors are the bigger rift

Current economic uncertainty and funding changes at the federal level do signal a bit more concern around Spark’s turmoil, Miller said. 

The Trump Administration recently proposed huge cuts to funding for the National Institutes of Health, already seeing grants for vaccine-hesitancy research being rescinded. Philadelphia received $5.9 billion from the NIH between 2019 and 2023, according to the Commerce Department’s 2024 Life Sciences Impact Report. 

Without NIH funding, the United States will fall behind in terms of medical research, Grant said. While stakeholders hold out hope that the administration will change course, the ecosystem needs to start thinking about alternative funding opportunities, like philanthropic foundations and a local pilot program that Grant said the city is working on to target early-stage life sciences companies through the city’s small business catalyst fund.

“It takes millions and millions of pre-revenue dollars to bring a drug to market,” Grant said. “So I’m developing and thinking out a program that I hope to release soon that can help small companies around the city that are moving towards commercialization.”

However, this uncertainty could offer a benefit for Philly, she said. If there are fewer funding opportunities and companies have to be more careful with money, Philadelphia’s affordability could attract more companies. 

This could also be an opportunity to increase collaboration across the ecosystem and make capital stretch farther, she said. Researchers doing similar work at different institutions may choose to team up and have a better shot at funding while they wait for more VCs to come through with cash. 

“We would always love to see some bigger, deeper-pocketed investors,” said Kathie Jordan, managing director of the healthcare investment group at Ben Franklin Technology Partners of Southeastern Pennsylvania, “and we continue to work on building out those relationships with investors who really can lead those rounds in the tens of millions.”

Philly leans on new labs, strong workforce to push ahead

Despite setbacks, Philadelphia continues to lean into its strengths and work toward growing the life sciences ecosystem.

Lab and office space is a huge opportunity in the region right now, Grant from the Commerce Department said. Developers are continuing to build more workspace and companies are showing interest in these spaces even before they’re finished. 

“I don’t think people would be continuing to invest if they felt like this ecosystem was going to fail,” she said. 

The city also has a strong talent pool and workforce, she said. The region ranked No. 8 for life sciences talent on CBRE’s 2024 US Life Sciences Talent Trends report, slipping down two spots, but remaining in the top 10 for the third year in a row. The lower cost of living and proximity of major research institutions are also benefits. 

New success stories are also coming up. For example, Mineralys Therapeutics stock price surged after announcing positive clinical trial results for its hypertension drug candidate lorundrostat. The company raised $192 million after going public last year. 

As companies like Mineralys continue to grow, they will also hire the talent that exists here in the market, Miller said. 

But Philly needs to learn how to market itself better and get comfortable touting its accomplishments, Grant said. The key is to “evangelize” everything the ecosystem has to offer. 

“We’ve always maintained our head above water,” Grant said. “The innovation we’re creating here is just so important to the greater good globally. We’ll continue to innovate.”