At Astera Biofunds, we have always asserted that the future of how disease is treated will be dramatically different than what we have been accustomed to since the days of penicillin and aspirin. Cell and gene therapy ushers in a new treatment paradigm, where reprogramming biology to fight and prevent disease is tailored to an individual’s need with incredible precision and speed. As with all paradigm shifts, the ground had begun to move slowly and subtlety towards this future (Figure 1), until now. Due to the enormity of the current global shock from COVID-19, we can now expect an early arrival of this new treatment paradigm.
Humanity is resilient, it will recover from COVID-19 as it has done from numerous other plagues and wars. Technology has increased both the pace and magnitude of human resiliency, and more importantly has accelerated our rate of recovery. That is not to say, however, that there won’t be consequences. During the current crisis large cap pharma and biotech companies have had to pause their global clinical trials due to difficulties in enrollment and to minimize risk to their patients and staff. The delay of a large number of pipeline therapies in clinical trials, in addition to pulling in sales staff for safety reasons, will require CEOs to re-prioritize R&D resources after the crisis abates. Top priority will be to rapidly develop later stage pipeline assets with a focus on bringing in new revenue as quickly as possible. Additionally, programs that are early in the pipeline will be delayed, and once re-started those efforts may no longer bring in the originally projected ROI. Herein is the opportunity for cell and gene therapy small cap biotech companies.
A similar shock will be felt in smaller biotechs with disruption to trials and delays in R&D pipeline assets. These shocks will have the most detrimental impact on companies without the financial runway to stay solvent while awaiting the re-start of trials. Yet, within the small cap biotech space, those that have a unique focus on cell and gene therapy will provide long-term downside protection for a few reasons. Cell and gene therapies focus on egregious diseases in smaller populations that lend themselves to innovative trial design, accelerated clinical development and approvals, and specialized designations. Cell and gene therapies are extremely complex and require in depth exceptional expertise throughout development from target identification, lead optimization, and manufacturing, to trial design and execution. Success requires an unwavering singular focus on a few assets at the cutting edge of science. This determinate focus on a small number of assets is not an option for large pharma or biotech given their reliance on sizeable revenues to support their ever-expanding R&D portfolios. However, large pharma and biotech can garner an advantage in the space by partnering and/or acquiring these specialized smaller biotech companies, and thus gaining from the predicted outsized growth in this sector (Figure 2).
In summary, the COVID-19 shock to the pharma and biotech sector will accelerate the move into, and growth of, cell and gene therapies as traditional global therapeutic supply chains and clinical trials are disrupted. Small cap cell and gene therapy biotechs will be able to outpace larger cap companies in R&D speed and approvals within the space, resulting in the expansion of existing cell and gene therapy companies, as well as an increase in M&A activity within the sector.