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Pharmaceuticals

Biotech firms consider contingency plans as the coronavirus outbreak hits CROs

The industry’s reliance on China-based firms for chemistry services is in the spotlight

by Lisa M. Jarvis
February 12, 2020 | APPEARED IN VOLUME 98, ISSUE 7

 

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Credit: WuXi AppTec
Many US biotech firms rely on Chinese firms like WuXi, pictured here, for drug-discovery services.

As the outbreak of the new coronavirus, now officially named severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), continues to mushroom, the related work stoppages in China have put a spotlight on Western biotech companies’ reliance on Chinese contract research organizations (CROs). The situation has prompted some start-ups, and the venture firms that back them, to rethink their contingency plans—particularly when it comes to chemistry services.

Biotech firms had anticipated delays related to the Lunar New Year holidays, and so far the restrictions on travel stemming from the outbreak have extended that work gap by only a week. But as the virus continues to spread—according to Chinese authorities, more than 60,100 people have been infected and over 1,400 have died as of Feb. 13, mostly in China—some biotech firms reliant on China are becoming nervous about how long their projects could be on hold.

Much attention is on WuXi AppTec, the largest Chinese CRO. Although many of the firm’s operations are in Shanghai, its small molecule–discovery team is in Wuhan, where the SARS-CoV-2 outbreak began.

Simone Botti, CEO of the Israeli biotech firm Metabomed, says his firm has worked with WuXi AppTec’s chemistry team in Wuhan for three years, and in that time the partners have become a tight team, going out for beers during visits and swapping photos. On a personal level, “we’re really worried about them right now,” he says.

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But on a business level, Botti worries about his company’s ability to advance certain drug-discovery programs. Although Metabomed, which to date has raised roughly $30 million, had a business continuity plan in place, its backup partners are also in China. With its plan Bs affected, “this is a critical event,” Botti says. “It’s challenging our capacity to stick to timelines, so we’re going to be monitoring the situation day-by-day.”

On Feb. 12, WuXi said that all sites were back up and running, with the exception of Wuhan, which it said “will reopen when local regulations permit.” Some customers have been told work might resume on Feb. 20, but WuXi is also trying to shift projects to other sites.

Still, some biotech executives are concerned that the smallest customers will be lowest on the priority list as CROs like WuXi work through their backlog. The situation has prompted some start-ups to look for alternative partners, although executives acknowledge that the chemistry services industry in the US and Europe is a shadow of its former self.

Octagon Therapeutics, a seed-stage biotech firm located in the Lab Central incubator in Cambridge, Massachusetts, depends on CROs in China and India for the majority of its chemistry, CEO Isaac Stoner says. And like many seed-stage companies, Octagon has only enough funding to get through a specific set of project milestones—enough money to last months, not years, Stoner says.

Deciding that “we’re not taking any chances,” he has signed on with a secondary chemistry partner, Woburn, Massachusetts–based CreaGen Biosciences. “We will have a secondary supply chain set up domestically at all times going forward—and we won’t be alone in that,” Stoner says. “I think this might result in a significant change in thinking in terms of how people do this sort of outsourcing work.”

CreaGen’s president, Raj Rajur, says he has received “many inquiries” from early-stage companies in a similar bind—enough that the firm has put a notice on its website directing visitors to the right contact. In the past week, the company added three new customers seeking to fill the work gap, and Rajur says the CRO is currently recruiting additional staff to meet the increased demand.

“I don’t know if it’s short lived, but I hope it will be continue,” Rajur says.

Similarly, RxCelerate, a service provider in the UK, has been approached by several companies looking for a backup provider in case their Chinese partners are further delayed, Chairman David Grainger says.

Bruce Booth, a partner at the life science venture capital firm Atlas Venture, says that at his company, the conversation about the biotech industry’s dependence on Chinese CROs began a year ago, when the trade war with China started heating up.

“We discussed contingency planning at most of our drug discovery start-ups,” he says, a dialogue that included identifying alternative providers. “The crisis in China helps reinforce that multiple partners in different geographies are important relationships so that some of the execution risk can be mitigated.”

UPDATE

This story was updated on Feb. 13, 2020, with the official name of the virus, current numbers of coronavirus infections and deaths according to Chinese authorities, and information on WuXi's Wuhan site plan.

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