Was the decline in venture financing partially fuelled by a breakdown in the Triple Helix Innovation Model?
Authored by Dr Chih Wei Teng
Observing recent investment trends in the global cell therapy sector suggests that we have reached peak interest (Figure 1). However, such dramatic swings in biotechnology investments are not unusual. Recall the broken promise of gene therapies in the late 1990s and early 2000s, which resulted in much disappointment only to see us living through its revitalisation in 2023 and 2024. I accept that this does not alleviate the apprehension and challenges in capital raising faced by many cell therapy-based biotechnology companies.
Figure 1: Aggregate venture financings (Series A – Series D) for cell therapy companies by cell source1
No doubt punters, academics and industry experts have hypothesised and given many reasons for the declining investment in cell therapies. I heard these repeated by several stakeholders I reached out to in preparation for this blog post. Some observations pointed to the November 2023 announcement from the FDA about its investigation into the risk of T cell malignancies2. The FDA article prompted swift responses from academics and industry, including an article published in Nature Medicine,3 but investors were already spooked. As such, investors and prospective biopharmaceuticals looking for investment and licensing opportunities were not only more cautious, but also renewed their interest in exploring other treatment modalities. Other observations reflected concerns about high costs, unsustainable healthcare budgets and elusive strong revenues from approved cell therapies as described in the literature4,5,6.
What initially sparked my curiosity were discussions with venture capitalists and biotechnology companies who raised concerns about the lack of government leadership in advancing novel therapeutics. Between the political squabbles in the United States and a wounded post-COVID China, which government can truly claim to focus on setting the right conditions for innovation? In those discussions, I started to think more about the role of government in incentivising and disincentivising innovation, especially during the COVID-19 pandemic. It is hard to overlook the steep rise in investments at the beginning of the COVID-19 pandemic, followed by the sharp decline after 2021.
The COVID-19 pandemic had some negative impacts on the innovation of medicines, and consequently investment dollars. The most obvious are the operational impacts, described in many publications, including the one by Qiu et al7 on disruptions to supply chains, clinical trials and market access. This severely impacted promising startups and projects at the preclinical and clinical development phases. The critical shortages of products, such as saline solution, prevented many experiments and production runs from taking place. In fact, the shortage of saline solution is still experienced in the second half of 20247. The COVID-19 black swan event put an end to countless investor-backed projects and, needless to say, resulted in financial losses.
However, there is a more subtle negative impact hidden in the shadows of the remarkable breakthrough of the mRNA vaccine that warrants more attention. While we can all celebrate the amazing speed and immense global collaboration undertaken for the vaccine’s development, this modern miracle can be explained and enabled through the Triple Helix Model of Innovation. This model, which fosters interactions between academia, industry and government, creates the conditions necessary to fast-track the development and commercialisation of practical and marketable products and services. It was astonishing that the pandemic was declared during the first quarter of 2020, and by the end of the second quarter numerous candidates were lined up for clinical trials. On one hand, we had the heroic success of the mRNA vaccine but something broke during the COVID-19 pandemic.
Fuelled by numerous pressures, governments decided that vaccination was the only way to address the COVID-19 pandemic. This approach was despite many biotechnology companies pivoting their investigational new drugs (INDs) or technologies to treat symptoms or effects of COVID-19. Publications such as those by Nobari et al9 outlined a list of clinical trials, some of which involved using cell-related therapies to treat the adverse effects of COVID-19.
No doubt investors would have jumped on the bandwagon to finance promising therapies to treat COVID-19 given the eminent global crisis and the willingness of the FDA to issue Emergency Use Authorizations. It was potentially a quick return on investment. Research by Yu et al10 concluded that many COVID-19 solutions were privately funded. But it was all hands on deck with the vaccine program. Government funding was channelled to accelerate vaccine research, such as the United States’ Operation Warp Speed, clinical trials refocused to support promising vaccine candidates from Big Pharma, health policies in major jurisdictions shifted from curative to preventative measures, and budgets were shored up in anticipation of purchasing large quantities of approved vaccines.
The pressure to develop and promote a vaccine solution was so great that regulators discouraged the use of non-approved medication to treat COVID-19. Physicians who sought to repurpose medications for off-label use were at risk of losing their licenses. The fast-paced, multifaceted, multi-modal efforts to challenge the COVID-19 pandemic were suddenly reduced to one. I doubt the investors who backed any COVID-19-related medical devices or cell and gene therapy companies (other than Pharma with approved vaccines11) ever saw their return.
Circling back to the Blog Carnival’s topic, will we see a permanent decline in cell therapy investments? I think otherwise. Yes, we were getting a reality check on our over-enthusiastic foray into CAR-T but what hit the industry hard was the black swan event that is COVID-19 and the irrational decision of governments to dictate silver bullets to solve problems. Luckily for us, black swan events are rare. One can only hope governments limit their intervention and take better counsel from the different teams of physicians and allied health professionals operating at the coalface.
I’m optimistic that, in time, innovative cell therapies that were born out of the COVID-19 pandemic will eventually receive market authorisation to treat respiratory diseases, inflammation issues, heart failure and other medical conditions.The truly undesirable outcomes are these: the prolonged drought caused by unrealised cell therapies, CAR-T therapy and an inability to recoup via COVID-19 investments meant that investors’ war chests were either running dry or the purse strings tightened, and governments have less money to spend now than before the COVID-19 pandemic. Biotechnology companies need to do things more efficiently and work smarter to get breakthrough results. Maybe going back to fundamentals on developing a breakthrough therapy and manufacturability are not necessarily bad things because investors’ appetites will return. After all, this decline was not due to the failure of cell therapy as a treatment modality, but a series of unfortunate events.
My blog is just one of many covering this topic as part of Signal’s eighth annual blog carnival. Please click here: Signals to read what other bloggers think about the topic.
References
1 Bak P et al. (2023) Investment and Development Landscape of Autologous and Allogenic Cell Therapies. (https://www.bblsa.com/featured-news-home/2023/8/19/celltherapies)
2 FDA (2023). FDA Investigating Serious Risk of T-cell Malignancy Following BCMA-Directed or CD19-Directed Autologous Chimeric Antigen Receptor (CAR) T cell Immunotherapies. (https://www.fda.gov/vaccines-blood-biologics/safety-availability-biologics/fda-investigating-serious-risk-t-cell-malignancy-following-bcma-directed-or-cd19-directed-autologous)
3 Ghilardi G et al (2024). T cell lymphoma and secondary primary malignancy risk after commercial CAR T cell therapy. Nature Medicine.
4 Joshua J (2024). Science Continues To Outpace Commercialization Of Cell And Gene Therapies. (https://www.forbes.com/sites/joshuacohen/2024/03/04/science-continues-to-outpace-commercialization-of-cell-and-gene-therapies/).
5 Kelkar A et al (2023). CAR T not cost-effective as second-line therapy for diffuse large B-cell lymphoma at current prices, study finds. Annals of Internal Medicine.
6 Trusheim M (2023). Value creators or financial destroyers? The potential of gene therapies to transform healthcare. (https://www.statnews.com/sponsor/2023/11/15/value-creators-or-financial-destroyers-the-potential-of-gene-therapies-to-transform-healthcare/)
7 Qiu et al (2021). The impact of COVID-19 on the cell and gene therapies industry: Disruptions, opportunities, and future prospects. Drug Discov Today.
8 Landau S & Lim J (2024). Global shortage of saline solution affecting Australian healthcare system. ABC News (https://www.abc.net.au/news/2024-07-25/shortage-saline-impact-australia-healthcare/104143020).
9 Nobari S et al (2022). Cellular Therapy: The Hope for Covid-19. Avicenna J Med Biotechnol.
10 Yu et al (2023). Biopharma innovation trends during COVID-19 and beyond: an evidence from global partnerships and fundraising activities, 2011-2022. Global Health.
11 Reliefweb (2021). Pfizer, BioNTech and Moderna making $1,000 profit every second while world’s poorest countries remain largely unvaccinated. (https://reliefweb.int/report/world/pfizer-biontech-and-moderna-making-1000-profit-every-second-while-world-s-poorest