Biotech’s Oncoming “Space Race” Era
It is still too early into the #COVID19 global outbreak to know how it will permanently affect daily life going forward. Just like how the terrorist attacks of September 11th transformed aspects of life forever, such as increased airport screening and security, #COVID19 is likely to have ramifications both small and large to the way we live. Acceptance of telemedicine, attitudes about working from home, and how we generally approach well-being are some things that might change for the better. However, we can’t say for sure that all changes will be positive.
As a biotech investor, I am doing this exercise too and trying to think about how #COVID19 might affect our sector going forward — both positively and negatively. There are numerous immediate challenges, but I am thinking more about what might change forever. Based on what I am seeing in the news lately, and my own perceptions from world travel, I am increasingly convinced that geopolitical factors are going to be a new central issue for our global biotech community going forward. While I hope I’m wrong, either way I recommend that colleagues around the world consider this because some ramifications are not good. Get ready for biotech’s new “Space Race” era.
Recent news events suggest that COVID19 is seeding distrust, protectionism, and a competitive race to be the winning nation to solve the problem. While succeeding is our highest goal collectively, I do think we need to be careful about how governments dial up politics in the process. COVID19 seems to be positioning biotech as the new “space race” of our era where success is viewed as a matter of national security and geopolitics. This could be our new normal going forward. Consider the following recent events.
- The CureVac headline.
While I don’t think anyone knows exactly what happened with this, here is a rough timeline. 1) CureVac’s American CEO (CureVac is a German company with operations in Germany and Massachusetts) participated in the White House roundtable with pharmaceutical executives two weeks ago, 2) allegations arose that the U.S. offered him investment with the caveat that any successful vaccine the company develops be used first, or even exclusively, in the United States, 3) the American CEO was abruptly replaced by the company’s German founder, 4) German government officials went on the record to say how uncomfortable this idea made them and that the issue would be discussed in a crisis committee meeting. While I have no doubt some details are blown out of proportion and/or missing, what is clear is that Germany now appears to view CureVac, a standard small biotech company by every measure, as a strategic asset of national security. That would be a new concept for such a company.
2. COVID19 has turned vaccine development into a race among nations.
In the United States, there were big headlines on Monday when the National Institute of Allergy and Infectious Diseases dosed a first subject using Moderna’s messenger RNA (mRNA) vaccine. This achievement took only 63 days from when the RNA sequence of the virus became available — a record to be proud of.| 24 hours later in China, there were big headlines when the Chinese Academy of Military Medical Sciences and its collaborator CanSino Biologics received approval to start dosing patients in China’s first vaccine trial. As a sign of the significance within China, South China Morning Post in Hong Kong published this story entitled Chinese military scientists ordered to win global race to develop coronavirus vaccine. | That these trial initiations were announced within 24 hours of each other is probably not a coincidence. It is likely a sign of how competitive this race, and perhaps the future of our industry will be globally. As you can imagine, the media attention of the two events differed significantly in each geography.
Here are some of the leading companies in vaccine development that nations seem to be backing either officially or unofficially. There are dozens more behind this.
3. President Trump’s upcoming executive order on the pharmaceutical supply chain.
While the full details are not yet known, it has been reported that President Trump will be handed an executive order on Friday that aims to reduce or even eliminate the U.S.’s dependence on foreign makers in the supply chains for medicines, medical devices, and equipment. It is prudent for the U.S. to be thinking about this, but the details will matter a lot. The executive order will likely include a “buy American” provision that will require government agencies to purchase American-made pharmaceuticals, medical devices, and equipment. As you can imagine, this could have significant operational and regulatory implications for the way our industry works going forward. It will also clearly have a real impact on business in the manufacturing hubs of India, China, and Ireland, where much of the API, generic drugs, and other manufacturing activities of our industry happens today. U.S. companies and multinationals alike will need to consider how this will impact their business going forward.
4. Bringing biotech into CFIUS purview in the United States and the screening of foreign direct investment in the European Union.
Those who have been watching closely know that this increased nationalism and the national security aspects of our business had already been evolving coming into COVID19 — and that’s probably going to get ramped up now. The FIRRMA legislation that was passed in the United States in August of 2018 brought life sciences squarely into the purview of CFIUS (The Committee on Foreign Investment in the United States). That put a material chill on investment in U.S. life sciences companies by Chinese investors and has at times caused multinationals as large as Novartis to wonder how it might affect their deals. In the European Union, a push for similar scrutiny of foreign investment is beginning to heat up as well. The point is that national protectionism in biotech was already ramping up before this and is likely to take an even stronger turn after COVID19. Given that such moves have already had a material impact on some investment sources, we might need to consider whether this will it cause even more challenges for fundraising in the future?
Why does this all matter, and isn’t competition a good thing?
While there is nothing wrong with friendly competition, I think as a global industry we should be very careful about going too far down this political road for a few reasons. First, health knows no borders. It is not a topic to be politicized. Second, science at its core is all about collaboration. It would be a bad thing for the world if barriers are erected that challenge this. Third, our industry is all about trust and doing what is best for patients. This is why I thought the CureVac headline (I have no idea how much of it was actually true, if any) was so potentially damaging. At this historic “all hands on deck” moment in time when our industry is putting its best foot forward, we don’t need actions that can sew mistrust in medicine by the general public. Now is the time for a renewal of society’s faith in our biotech industry.
Either way, I do think this “space race” era is about to begin for the biotech industry and so we should be ready for it. What it means for investors is that we need to increasingly factor in the global landscape as we make our investment decisions. I do think that healthcare is going to be a sector that shines coming out of the COVID19 tragedy, so I am generally optimistic about the future, but at the same time I do see changes coming. As for companies, this could have both fundraising and operational implications. I hope it won’t ultimately impact how companies collaborate with each other because that would be counterproductive. Let’s work together as an industry to make sure this doesn’t happen for patients and science both.
