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Potential impact of the corona crisis on the life sciences industry

Written by Guest Author on in the category VC Views with the tags , , , .


Concerned about the current corona crisis, the V-Bio team have come together to think about the immediate and future impacts that this situation may have on the biotech and pharmaceutical industries.

This VC Views article was guest authored by Christina Takke and Willem Broekaert from V-Bio Ventures

Over the past week every news headline has focused on COVID-19. The industry is accelerating its own in-house research to match the pace of the pandemic. The business development market is wide open, as large and mid-sized pharma companies are interested in partnering with early stage initiatives to advance investigational COVID-19 programs (in addition to pursuing their own in-house activities).

Many different approaches are being developed: repurposing of existing anti-viral drugs; vaccine approaches, by companies whose share price has rocketed following the announcement of a new development program; and biologics approaches (including monoclonal and polyclonal antibody products) aiming to find an immediate answer for patients weakened by uncontrolled viral replications.

It is crucially important to fight the direct impact this viral infection is having on patients’ lives and on over-stretched healthcare systems.
 

This area of the biotech industry is receiving enormous attention at the moment. New funding initiatives are being set up by multiple governments, as well as by large charity organisations such as the Bill and Melinda Gates foundation.  The pharma and biotech industries are deploying accelerated development schemes, and regulatory agencies are pragmatically exploring how the clinical development path for new drugs can be shortened while maintaining safety standards.

In addition to these scientific and clinical efforts, public policies are also being implemented to try and break the chain of transmission. We’re seeing more and more countries issuing tougher lockdowns to ensure social distancing.

How far will the ripples reach?

It goes without saying that all these immediate measures are crucial to quickly finding solutions to this human crisis. It is crucially important to fight the direct impact this viral infection is having on patients’ lives and on over-stretched healthcare systems.

However, we also need to be aware of the far-reaching impacts of the current measures. While clinical trials for COVID-19 programs are ongoing, with many more to come later this year, clinical developments for other indications will sadly be delayed and halted until further notice.

For young biotech companies, this broad range of unforeseen delays will generally not be factored into their business plans; many of them will be forced to revisit their short-term financing needs.
 

Travel restrictions for patients and bottlenecks in hospital systems are the major drivers for clinical delays in non-COVID-19 clinical trials. Companies with pre-clinical development programs will also face some delays, although these will be less prominent than for their clinical counterparts. Social distancing requires labs to work in shifts ensuring less people at the benches and a reprioritisation of the pipeline programs.

For young biotech companies, this broad range of unforeseen delays will generally not be factored into their business plans; many of them will be forced to revisit their short-term financing needs. 

Entrepreneurs might have to turn to their investors

At V-Bio Ventures, we have reviewed the impact of the COVID-19 pandemic on our portfolio companies, with a priority on the safety and health of the people involved. Careful analysis and contingency planning will help to guide the small biotech companies through this period. As it is hard to predict the duration of this crisis, funds might need to allocate additional resources to deal with the situation. A strong and diverse investor base will be crucial for young biotech companies’ abilities to cope during this period and emerge even stronger thereafter. 

If VCs are able to continue investing in a future-proof industry, they can potentially provide a solution for the crisis we are currently going through.
 

The current situation makes us recall the financial crisis of 2007-08, which also shook up society in an unexpected way. In 2007-08, the banks had been at the basis of the crisis, while the underlying developments within the pharma and biotech industries were initially not directly impacted. Of course, the period of funding drought had its impact on the years 2009-10 following the crisis. 

The current situation is different. During the recent years, the financial institutions have reinforced their capital buffers. Now, the financial sector can hopefully be part of the solution to keep the nascent European biotech ecosystem in business. This is especially relevant for the ancillary businesses crucial for a growing ecosystem, such as contract research organisations, contract manufacturing organisations and tools providers (ect.).

A prerequisite for the knowledge industry will be that venture capital funds are still able to raise capital and close new funds. If VCs are able to continue investing in a future-proof industry, they can potentially provide a solution for the crisis we are currently going through.

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