Ep 11 - 22JUN2020 

Jeff Cranmer: Welcome to BioCentury this week. I'm Jeff Cranmer, Executive Editor, and I'm joined by my colleagues  

[00:00:07] Amanda Micklus: Amanda Micklus, Senior Biopharma Analyst  

[00:00:10]Simone Fishburn: Simone Fishburn, Editor in Chief  

[00:00:13]Steve Usdin: Steve Usdin, Washington Editor  

[00:00:15] Jeff Cranmer: Today, we are going to start by looking at the state of financing biotechs in what has been one of the world's hottest biotech hubs in recent years. BioCentury has just completed a survey that we did with our colleagues over at the U.K.'s. BIA -- that's the bio-industry association -- and Amanda, you were running this for us. I believe the survey found that even though most UK biotechs raised money fairly recently, there seems to be an urgency to do another financing sooner, rather than later. What's driving that? 

[00:00:53]Amanda Micklus: What the survey found was that more than half of the company's -- 56% to be exact -- have come off recent fundraising, so they did a fundraising less than a year ago. But 45% of private companies said that their next financing would be within six months. And actually another 15% said within a one month. And, one of the reasons that might be driving this urgency to do a financing sooner than later is that cash is running out for a lot of these companies. More than half of the private company, respondents said that they have less than a year of cash left. 

[00:01:34] Another reason that could potentially be driving this is in a conversation that I had with Steve Bates, who's the CEO of BIA. He said that the rapid growth of companies and the rapid pace that the science is moving, could be driving these companies to want to raise funds sooner than later.  

[00:01:57] And another interesting thing that he pointed out was that the financing round sizes in Europe are quite small compared with the U.S. which means that company executives are busier trying to raise money than they are trying to manage their teams. Now, on the other hand, among the public companies that were part of the survey, those seem to actually be well-funded. They were a small part of the survey sample, and, three of the seven companies did their last financing over two years ago. One company had raised money within the last year and another had raised in the last one to two years. And three of the seven companies had over two years of cash left. So that group seems to be well-funded.  

[00:02:42] Another thing that I wanted to point out that came out of the survey is that the confidence that these companies have in being able to raise their next financing and reach their target financing level. The confidence is quite strong. And this may be likely because the overall biotech venture funding has been quite strong itself and largely unaffected so far by the COVID-19 crisis.  

[00:03:10] Simone Fishburn: I think this is really important actually. And, I think enough of my accent is left for people to know that that's, you know, I've got some roots there myself. 

[00:03:19]But I've been watching it. I actually had an interesting bet with a VC, who will remain nameless, over where was the third largest hub for growth after Boston and San Francisco. And it does depend a little bit on whether you look at it by seed and series A or by the amount that they raised. 

[00:03:38] But the U.K. has absolutely got itself on the map in the last few years -- by the way I won the bet, which is always important, although I haven't yet got my dinner that I was promised -- so the U.K. has been growing, and as Amanda has pointed out, a lot of the landscape is smaller companies. 

[00:03:55] And so it is really important to see that even this huge setback of COVID, and specifically the economic downturn of it, hasn't really dampened confidence for their ability to go. And I think Amanda, a couple of other things came out. So I'm pleased to see that there's confidence; pleased to see they will go out and raise money. 

[00:04:15]A couple of other things I think here are important. One is that you found that actually a minority our turning to government assistance. And not that there's anything wrong with going to government assistance, but that they feel that the private sources of funding are sort of rich enough.  And the other, Amanda, is that the geography of it, you know a lot were --most of them said they were going to go to U.K. sources -- but they're also going quite internationally. Maybe you could just, just a couple of words on that.  

[00:04:43] Amanda Micklus: Right, so we asked the companies where in the world are you looking for your investors and, Simone as you said, the vast majority said Europe, as well as the U.S. And actually there's quite a bit of overlap between those two, where the companies are looking for both European and U.S. investors. And then within Europe, almost all of the respondents said that they will be calling on U.K. investors.  

[00:05:10] But one surprising thing was that over 50% of the respondents were also looking for investors in the Netherlands, France and Germany. And, we thought that this was slightly high given Brexit and transition coming out the end of the year. This is also something that Steve Bates from BIA commented on.  

[00:05:31]Simone Fishburn: But also China and that's kind of interesting because, Steve, you might be going to talk about whether Chinese investors will find it easier there than in the U.S. 

[00:05:41]Steve Usdin: That is what I wanted to ask you about, is anybody looking to China? I think that the environment for Chinese investors in Europe right now is probably better than the United States. They don't have the CFIUS restrictions in place, but there's certainly discussion of putting those kinds of restrictions in place in Europe. So, I wonder if U.K companies are cognizant of that and if they're shying away from taking Chinese money right now.  

[00:06:05]Amanda Micklus: I believe in the survey results, over 40% were also looking for investors in China, as well as, eight in Asia, outside of China. So those two regions were also well-represented.  

[00:06:20] Simone Fishburn: And nobody seems to have cited concerns over CFIUS type of things coming in. I think it's a really good point, Steve, that we'll continue to watch.  

[00:06:29] And, just one postscript to this before we move on, is that I just moderated a panel for the BIA's virtual meeting, and that was on private equity. You know, the world of private equity is often thought of as these huge behemoths and you know, we had Blackstone that recently invested in Alnylam in an interesting sort of financing.  

[00:06:50] But there are also a large number of small private equity firms who categorically distinguished themselves from venture. It's something we'll continue to watch and they are particularly interested in CROs, CDMOs, the services. And a lot of the U.K. biotech sector includes that. And so I think people looking at different kinds of financing is something that we'll see more and more of, and it will continue to unfold.  

[00:07:17]Jeff Cranmer: I had a quick question for you both Simone and Amanda. I know that in the run up to Brexit -- I know everyone's favorite topic. One of the priorities of the BIA had been continuing to participate in the European Investment Fund, which for decades has really been a cornerstone investor for many VC funds in Europe. Now, I think the no-deal Brexit kind of scuttled that hope. And today, interestingly, we see the British business bank make one of its first life sciences moves backing Epidarex's new fund. Do you think that the company's out there need help from the British business bank or is leaving the EU going to cause hole in funding from like EIF?  

[00:08:07] Simone Fishburn: Jeff, I'm going to go back at you with one of the favorite topics, and I'm going to say the word would fit Bates. 

[00:08:16] So, here's the thing. Yeah, before Brexit people were concerned because many, many firms had money from the EIF and the idea was that if they had any money from there, they would not be allowed to invest or able to invest in U.K. firms.  You know, that's something we'll continue to watch. I think that there are -- to Amanda's point -- investors all over the place that U.K. firms will go to.   

[00:08:40] Woodford was, you know, a cornerstone of a lot of British new companies. And there was even a feeling that him pulling out could be the only thing that unraveled the sector. Well, he pulling out is probably the wrong word, but he has suddenly gone south -- let's put it -- and the sector hasn't unraveled. And so, I think overall there is somewhere between a scramble and a sort of informed march in the U.K. to find other investors. I mean, these, these things sort of congregating, I don't know if you got any postscript on that episode that you want to give?We've certainly gone there in our coverage.  

[00:09:12] Jeff Cranmer: Well, we fall, I think, two weeks ago -- it was a report that we later confirmed -- that, Woodford's holdings are now down to 50% of what they were. So, there's still thumb to sell off, but I think they've sold off the majority of it's investment. So, that's going to take another six months or so to fully resolve itself. So, we'll continue to watch.  

[00:09:36]Let's change gears now. Last week saw a ton of news on vaccine access. we had updates from operation warp speed. We had news out of the COVID-19 Vaccine Global Access Facility, otherwise known as COVAX, and we also saw E.U. Governments band together to make commitments to, equitable distribution of vaccines, at least within Europe.  

[00:10:03]Now, Steve, I know you're following this very closely. You know, of course the whole world is watching and waiting for a vaccine except for maybe small clusters of anti-vaxxers in Santa Monica and just to the North of us here. But, if in and when there are safe, effective vaccines, how will everyone in the world gain access? 

[00:10:23] Steve Usdin: Well, it's a real question. So look, on the one hand, work to manufacture COVID-19 vaccines at-risk before safety and efficacy has been demonstrated is -- it's amazing. The U.S. Government says that they're going to have 300 million doses on hand in January. And they're going to get there by producing a lot more than that with the expectation that some of the vaccines won't make it across the finish line -- so that's extraordinary. Europe has started to pay for at-risk manufacturing and it's putting in place advanced purchase commitments.  

[00:10:52] But on the other hand, there's a real possibility that most people globally are going to be left out at least for a year or 18 months. A senior administration official in the United States told reporters last week that all Americans who want a vaccine are going to get access before any doses are exported. And he said, well, the U.S. won't stand in the way of others getting access, but it isn't prioritizing helping anyone in any other country either. And I have to say to me that's a real disappointment. It's like if after World War II, the U.S. told Europe, you're on your own instead of creating the Marshall plan, which was essential for restarting European economies and ultimately was good for the United States to.  

[00:11:30] More than a billion people live in Africa, about a half a billion people live in South and Central America. So the question is, how are they going to get vaccines?  

[00:11:37] There are some efforts to help them. There's a collaboration called COVAX that you mentioned. It was launched by an organization -- the act Accelerator -- that's backed by the Gates foundation, the Welcome Trust, the WHO and some national governments. And they're working with Gavi, the Vaccine Alliance on a purchasing pool. That's intended to supply the vaccines, to what they call priority populations, globally. The World Economic Forum -- I wrote a story about this -- is trying to mobilize contract manufacturers outside the U.S. And Europe and South Korea and India, and some other developing countries. But to succeed, both of those initiatives are going to need a lot more funding and a lot more urgency than they've lined up so far. 

[00:12:17]Jeff Cranmer: Are these groups, Steve, collaborating with one another?  

[00:12:20] Steve Usdin: Well, there's collaboration and there's competition. You know, I've had people who work with some of the organizations that are trying to create vaccines for global access tell me that they're competing with the United States and with some of the private countries worldwide, for everything from glass viles to African green monkeys. There's finite supplies of some of the things that are really, bottlenecks to getting vaccines, manufactured, and distributed. 

[00:12:47] And, everybody's scrambling for them. The United States and Europe and regional groupings in Europe they're being pretty open about saying that they're going to look after their own first. There's more talk in Europe about global solidarity and equitable access globally and so on but, it hasn't been translated so far into actionable commitments.  

[00:13:10] I should say also there's another unknown, which is, well of course, there's the big unknown about which vaccines are ultimately going to work and where they're being manufactured. The United States is the only country, or even region, that can guarantee if any vaccine works, they'll be able to have it from their own resources, from vaccines that are manufactured domestically because there are so many different platforms that are being backed in the United States. 

[00:13:34]Simone Fishburn: So Steve, you know, just going back to the point that we've talked about before, or a lot of emphasis on vaccines, but we do know that may not be a vaccine. What about therapies? What if therapies become the solution and access of those to developing countries?  

[00:13:50]Steve Usdin: Therapies are going to be part of the solution even if vaccines work. I don't think that anybody anticipates that any vaccine is going to be a hundred percent effective. So even in the best case scenario, if you get vaccines on the market extremely quickly and there's lots of them, there's still going to be a need for therapies. There's not going to be any magic bullet. There's a survey that the Boston Consulting Group and the Biotechnology Industry Organization United States created a survey that they did of manufacturing capacity for therapeutics.  

[00:14:18] Some of the top line results of that were released today and they suggest that there's going to be capacity limits. There just isn't enough capacity  in the United States or globally to manufacture enough monoclonal antibodies, to manufacture enough biologics and probably even for small molecule manufacturing. There just isn't enough capacity there. 

[00:14:39] There's going to be constraint, problems and shifting capacity to create COVID 19 therapeutics could create shortages of other vital drugs. 

[00:14:49]The other thing is that there's also a lack of coordination and prioritization. To make this work, it's going to be necessary for someone or some entity to figure out which therapeutics should get access to manufacturing capacity and which ones can be deprioritized. If everybody's scrambling for it, it's gonna create shortages, both of COVID-19 therapeutics and of lifesaving therapeutics that would be displaced by manufacturing capacity that could be repurposed for COVID-19 therapeutics.  

[00:15:21]Jeff Cranmer: Excellent, thanks for that, Steve. Certainly a lot to process with the flurry of COVID-19 news in the past few weeks and even months. 

[00:15:30]Well that's about all we have time for this week. All of our coverage is available at biocentury.com. Our coronavirus coverage is available outside the pay wall at biocentury.com/coronavirus. And you can find our podcast on Spotify, Stitcher, Apple, and Google, as well as our own website.