Will the current coronavirus situation affect biotech and pharma business development?
Yes…and No.
As with most things, the answer depends on your point of view, the market you happen to be in, your dependence on public markets for financing, and so forth.
In this post, we discuss some of these issues, and offer some suggestions for adjusting your own processes.
No, it will not
Let’s look at one extreme scenario: Coronavirus will not impact pharma business development at all.
How can we say that?
For the majority of companies actively in-licensing novel drug candidates, coronavirus will not cause major changes to their in-licensing strategies. Yes, there will be exceptions, which we will discuss in a moment.
But for the most part, if a company is focused on certain therapeutic areas (oncology, rare diseases, etc.) and modalities (gene therapies, antibodies, etc.), then the current situation will not change their focus.
Radical changes to in-licensing strategies may occur when new CEOs come in and place their stamp on a company right away. And the current situation (especially in the financial markets) could conceptually trigger management changes which, in turn, could trigger changes in strategy. So it behooves us to keep on eye on management changes and their potential impact on in-licensing.
But for many companies with a pipeline of licensing opportunities, working virtually will not affect their processes. Things will hum right along as normal.
Yes, it will
Let’s look at the other extreme: Coronavirus will impact pharma business development in major ways.
How can we say that?
First, stay-at-home policies could slow diligence processes. Some people (and their employers) are perfectly comfortable with working from home, but others are not.
And with schools closed in many parts of the country, busy executives could be scheduling (or delaying) conference calls around competing childcare-related activities and obligations.
Second, prospective licensors who depend on partnering conferences may be in for a tough time. Several important conferences are either cancelled or going digital.
A digital approach is sensible in this environment, but will it be as successful as a live event? Will there be as many meetings or comparable quality versus a live event? We will have to wait and see.
Let us assume for a moment that the digital events will not work as well as the live events, i.e., prospective licensees decide to reduce participation or skip the event entirely. This can definitely cause delays in out-licensing processes, especially for executives who cannot make these connections outside of partnering conferences.
Third, this virus (and our reaction to it) has cause major declines in the financial markets. Companies may decide to retain cash or even prop up shares instead of executing large licensing transactions or acquisitions. Expect many companies to draw on cash reserves and open lines of credit to brace themselves for the coming economic downturn, meaning less cash available for large upfront payments.
Is your prospective licensing partner waiting for you to finish that clinical study? Those are being delayed as well.
Lastly, as much as our world is moving toward being 100% digital, due diligence and negotiation remains a face-to-face activity. With travel limitations and social distancing, moving through late-stage due diligence will be a challenge.
Licensing and COVID-19
For companies already developing antiviral therapeutics or vaccines, much of what we have said goes out the window. With a few exceptions, Big Pharma tends to shy away from vaccines and anti-virals, and the lack of antibacterial drug development has been discussed at length elsewhere.
However, with the possibility that COVID-19 may return well after the current pandemic dies down, it may result in an attractive market for licensing COVID-19-related candidates.
But the race to develop therapeutics and vaccines has become highly politicized, with companies in the US, Europe, and China essentially competing against each other to develop vaccines. Companies with technologies related to anti-viral therapeutics or vaccines (and diagnostics as well) may also become suddenly very attractive to in-licensing companies.
A good list of companies developing COVID-19 therapies can be found here.
We have even received requests from investors looking for opportunities to invest in the “COVID Space” in anticipation of quick exits.
Looking ahead
These events may have some positive effects in the long run. For example, reduced inflow of opportunities could allow companies to process their backlog of opportunities during this stay-at-home period.
This means that the deal flow pipelines will have to be quickly refilled. But when?
Good question.
Depending on how effective we are at stopping the spread of COVID-19, we could see a massive increase in the number of companies and attendees at BIO-Europe in November, and even at (shudder) JPMorgan in January, 2021. In fact, 2021 could be an excellent licensing year if the pandemic comes under control and markets begin to rebound.
How do I prepare? What should I do differently?
We will discuss these questions further in coming posts. But here are a few suggestions.
First, we still see presentations which are designed to presented live that are too busy, too crammed with information, and so forth. We still see presentations with 2, 3, even 4 slides showing management and board members (and their credentials) before any mention of the data or the assets being discussed.
As digital conferences (and hence, online presentations) become the norm for the foreseeable future, live presentations should be kept relatively light on the text and content. Save the “heavier” slides and presentations for follow up.
Second, conferences will continue to be a critical method for meeting with licensing scouts. But depending on conferences is a mistake in any economic environment, let alone this one. Digital networking and old-fashioned phone/email networking is critical.
We also suggest being a bit more open to LinkedIn invitation requests, where it makes sense to do so.
Conclusion?
We do not know what is going to happen any more than you do.
We can say that the near-term licensing market looks a bit grim.
Activity will slow down for reasons discussed above, possibly through the Summer months into the Fall. A rebound in activity during the second half of 2020 is very possible, perfectly timed for the Fall conferences and early 2021.
But for now, keep simplifying those presentations, practice your online delivery, be digitally active and engaged, and keep washing those hands.