European companies developing advanced therapies such as gene and cell therapies secured at least €2.2B ($2.6B) in the first half of 2020. While this is encouraging in the face of Covid-19, it hasn’t been smooth sailing for all startups in the field, with many struggling to stay afloat during crippling national lockdowns.
The funding received by European companies developing advanced therapies was a stunning 103% higher than the same period last year, according to a recent report by the Alliance for Regenerative Medicine (ARM). With 46 phase III trials in progress, and a total of 270 continuing clinical trials in the sector, “developers are advancing a robust pipeline of therapies targeting indications from cancer to infectious disease to inherited disorders,” the report said.
This conclusion seems in line with huge fundraising ongoing from companies in the advanced therapies field. For example, the UK gene therapy company Freeline Therapeutics closed a €106M Series C round and €134M Nasdaq IPO in rapid succession this year and the Swiss gene editing heavyweight CRISPR Therapeutics got a €400M boost from a public offering.
“The biotech industry has come through the global Covid-19 pandemic with remarkable strength and resilience,” said Stephan Christgau, co-founder and Managing Partner of Nordic VC firm Eir Ventures, who was not involved in publishing the report.
“The crisis has served as a very tangible illustration of the need for new healthcare innovation and the general awareness of the importance of life science innovation has enabled many companies to secure financings and make deals, even though many development programs have been delayed by the Covid-19-induced restrictions.”
A closer look, however, paints a complex picture of the advanced therapies ecosystem. While big fish like Freeline Therapeutics and CRISPR Therapeutics are raking in funding, many small companies are scrambling to adjust their business models, with some capitalizing on Covid-19-related funds, and others simply trying to stay afloat.
“With the onset of the Covid-19 crisis in early 2020, there has been a four-month delay in starting our planned lab work as most of the labs in the UK have been closed since March, and are only now beginning to reopen,” Bakul Gupta, co-founder and CEO of UK-based cell therapy startup ImmTune Therapies, told me. He added that these delays have interfered negatively with fundraising.
“The UK government has made some efforts towards supporting startups, however, these new schemes are tailored towards more established startups, as opposed to early-stage startups like ours.”
With at least 59 gene therapy clinical trials canceled and investors cautious after incurring losses, many startups have been forced to turn to government emergency grants, as well as rethink their strategy.
Nevertheless, many are thriving: some because they have decided to pitch into the struggle against Covid-19. For example, some immuno-oncology startups are developing drugs that could control the response of the immune system against the virus, while gene therapy players such as the UK’s Cell and Gene Therapy Catapult — which often work with viruses to introduce genes into cells — can use the same skills to manufacture Covid-19 vaccines.
Others are benefiting from a deeper market dynamic, where life sciences are often seen as an essential sector by investors wary of major volatility in the economy. Advanced biotech companies, even many startups, are reporting financial tailwinds.
“We have noticed continued engagement and additional support from public money, alongside continued and sustained interest from private investors,” said Timothy Newton, the CEO of UK-based Reflection Therapeutics, a cell therapy startup that targets amyotrophic lateral sclerosis and other motor neuron diseases. “Despite the pandemic, we have not seen a decrease in private investor sentiment.”
Some have managed to turn a difficult situation into an opportunity, such as Sweden-based Ilya Pharma. This company — which is working on a bacterial cell therapy for skin and mucosa wounds — has managed to rake in a total of €10M in the first half of the year, some of it through EU startup rescue grants.
“[The first half of 2020] has been an interesting time, the company has matured and developed, we have had more relevant investor and partnering interactions than before and, at the same time, continuously had to replan and mitigate risks,” Evelina Vågesjö, CEO and co-founder of Ilya Pharma, told me.
Others, such as ImmTune’s CEO Gupta, say they are using the opportunity to improve their business models. Optimists expect that even the lab closures may teach companies a valuable lesson, which could result in better coordination and tighter logistics.
“The distance between manufacturing facilities may be reduced as companies realize that, in such circumstances, they would want to ensure easy access to them,” a Cell and Gene Therapy Catapult representative told me. “This may well result in increased clustering of facilities.”
The advanced therapy fields could also face fewer regulatory hurdles from clinical testing in the years to come. In June, the EU decided to temporarily relax clinical trial regulations for Covid-19 therapies that involve genetically modified organisms. The ARM report sees these GMO-based clinical trial regulations as “an unintended consequence of the European Commission’s GMO legislation … creating unnecessary delays.”
While temporary, the EU’s loosening of clinical restrictions has established a precedent for streamlining the clinical testing process, which could one day benefit companies targeting other diseases in addition to Covid-19.
Images from E. Resko and Shutterstock