'They May Cease To Operate': Federal mRNA Pullback Threatens Lab Leasing

Health and Human Services Secretary Robert F. Kennedy Jr. this week scrapped $500M in federal funding for messenger RNA vaccines and barred new public partnerships, threatening one of the few growth drivers in life sciences — and a pillar of lab leasing.

Big drugmakers can absorb the hit, but smaller firms reliant on mRNA may face drastic pivots or survival battles.

“Many small companies rely on these programs to operate. They may cease to operate, or curtail research, or pivot to other specialities,” Amesh Adalja, a senior scholar and professor at the Johns Hopkins Center for Health Security, told Bisnow Friday.

The 22 projects and $500M canceled this week are a drop in the bucket for Big Pharma, which rakes in billions in profits every year. But the HHS announcement’s indication that future federal partnership on mRNA research would not be initiated, undercutting projections for the growth of the technology.

While the biggest pharmaceutical companies have many income streams and offer lucrative drugs like weight loss injections or cancer treatments, their smaller counterparts are more focused and reliant on government contracts. Cutting off federal funds could also mean cutting off their growth, Adalja said.

Drug companies and smaller tenants were among the few bright spots highlighted at Bisnow’s 2024 International Life Sciences event, as renewed interest in research and development was set to drive growth.

In the pandemic’s wake, mRNA research drove existing companies to expand and new companies to launch, intent on leveraging the Covid-19 vaccine’s success into new inoculations. 

Lab spaces under 10K SF became a fast-growing component of leasing demand as venture capital bestowed funds on startups seeking to make a name in the growing world of pandemic preparedness.

That world will get smaller following Kennedy’s announcement, Adalja said.

“This removes those investments and may halt innovation in the pandemic space,” he said. 

Moderna, one of the first two distributors of the Covid-19 vaccine, specializes in mRNA products and was in expansion mode, announcing global ambitions in 2023. Two years later and just days before the HHS announcement, Moderna said it would lay off 10% of its workers, roughly 800 people, as slowing vaccine sales ate into margins. 

In May, HHS ended a $590M Biden-era contract with Moderna to develop mRNA vaccines for the bird flu.

The company was among those listed in the Tuesday HHS announcement as having their partnerships with the government canceled, modified or rejected, along with companies like Pfizer, Sanofi Pasteur and Astra Zeneca.

Moderna did not respond to requests for comment.

Existing commercial products like those for Covid-19, RSV and the flu will continue to be produced and make money, but the development of new treatments using what the scientific community considers a promising technology will be stifled, he said.

The head of the country’s largest lab landlord is on alert.

“Yes, the life science industry is very concerned with this decision and we are at work in Washington, D.C., on this matter as we speak,” Alexandria Real Estate Equities founder and chairman Joel Marcus told Bisnow by email Wednesday.

Alexandria counts major pharmaceutical companies, including Moderna, among its largest tenants. Last year, the drugmaker began moving employees into its new 460K SF headquarters in Cambridge, Massachusetts, developed by ARE. 

Earlier this month, Alexandria announced its largest-ever lease at its Campus Point project in San Diego. The 466K SF build-to-suit space is set to be occupied by a pharmaceutical tenant. 

Lab spaces broadly are hurting for tenants. Life sciences property vacancies reached 23.9% nationwide, according to new Cushman & Wakefield data, the latest in a steady stream of increases. Average asking rents are down 3.3% to $67.88 per SF, and the quarter brought a net negative 1.2M SF of absorption.

Another 7.7M SF of new space is under construction, although that number is half of the total in the same period of 2024.

Bisnow reporter Patrick Sisson contributed to this story.