Biotech and pharmaceutical-stock investors had better strap in for some upsetting news. Efforts to slow down the rapidly spreading coronavirus so hospitals have a chance to keep up are going to affect the industry in more ways than one.
Biogen (BIIB +1.81%) and Eli Lilly instructed all employees to work from home whenever possible, after employees from both companies tested positive for COVID-19. Unfortunately, infected employees and work-at-home policies aren't the only disruptions facing the industry. Here's why 2020's going to be a slow year for biotech and big pharma.
Image source: Getty Images.
1. Paused review process
Travel advisories set by the State Department and the Centers for Disease Control and Prevention, combined with travel restrictions imposed by foreign governments, make dispatching international inspection teams more complicated than usual.
On Tuesday, the Food and Drug Administration announced the postponement of foreign inspections through April. Site inspections are an important part of the review process, and their postponement means that any new drug applications under review that involve a foreign manufacturing site will probably be delayed by at least a couple of months.
2. PhRMA offices closed
The Pharmaceutical Research and Manufacturers of America (PhRMA) is biopharma's main lobby trade group -- and right now its Washington, D.C., headquarters is closed. On Monday PhRMA learned that a March 5 visitor to its offices was later diagnosed with COVID-19.
The trade group intends to spend the rest of the week cleaning all its facilities, and it asked employees who met with the visitor who tested positive to self-quarantine until March 20.
PhRMA didn't say whether the visitor was a Biogen employee, but it seems likely. Massachusetts health officials have tied at least 32 COVID-19 cases to the biotech company.
3. Cancer's canceled
The American Association for Cancer Research (AACR) has canceled its annual meeting scheduled for April. A rescheduled meeting is being planned for later this year.
The canceled conference is lousy news for start-up biotechnology companies that need to attract attention to themselves. For example, Arcus Biosciences (RCUS +6.11%) is a clinical-stage biotech that had hoped to impress investors with clinical trial data for AB928, a potential new treatment for colon cancer.
Without any products to sell yet, Arcus lost $84.5 million in 2019 and finished the year with just $188 million in cash. Now that the meeting's canceled, it could get a lot more difficult for Arcus and dozens of companies like it to develop new cancer therapies.
Image source: Getty Images.
Looking ahead
Arcus has enough resources to move AB928 into a pivotal study, but probably not enough to launch a new cancer therapy. If social distancing to slow down the spread of COVID-19 lasts longer than expected, this biotech and dozens like it might need to put operations on pause for several months.
PhARMA probably won't have any trouble keeping its members on the same page while operating from a distance, but social distancing could make influencing legislation more difficult than usual.
Generally, expensive new drugs to be sold in the U.S. are also manufactured here, so the FDA's foreign-inspection hiatus won't have an enormous effect on potential new drugs. Unfortunately, the same can't be said for low-cost generic drugs.
Try to relax
If the drugmaker you hold shares of has an experimental drug under review, check out the location of the manufacturing site. Unless it's outside the U.S., the effects of ongoing COVID-19 lockdowns aren't likely to have a lasting effect.
While it looks like the bottom's falling out from under your biopharmaceutical stocks, panic-selling now would only serve to lock in a loss. Instead of logging into your broker app to see how far shares of your stocks have tumbled, stay focused on the fundamentals.
