On March 10, a day before the World Health Organization declared the coronavirus outbreak a pandemic, the Food and Drug Administration announced that it was postponing foreign inspections through April.
This increases the risk that some drug and device companies will run into issues obtaining approval for their products. F.D.A. Commissioner Stephen Hahn stated that inspections deemed “mission critical” would be decided on a case-by-case basis.
There is greater risk that some drug and device companies will run into issues obtaining approval for their products.
While the F.D.A. will be using other means of sharing information between foreign governments and inspectors to keep monitoring active, the more pronounced disruption would come for product applications, which require on-site inspections.
“We are aware of how this action may impact other F.D.A. responsibilities, including product application reviews,” the agency said in a statement. “We will be vigilant and monitor the situation very closely and will try to mitigate potential impacts from this outbreak in lockstep with the whole of the federal government. We stand ready to resume foreign inspections as soon as feasible.”
In our opinion, any company that has an application pending must remain very active in moving the process forward. And even if a company is planning to submit an application in 2020, it needs to start thinking strategically about when to file or when to hit the pause button.
Given that the majority of new therapy and product development comes from startups and middle market companies (which are often acquired by larger pharmaceutical companies), this could have a significant impact on the life science ecosystem if the travel bans continue.
It’s important to keep in mind how expensive it is to bring a product to market and that most life science companies applying for approval are pre-revenues. If the development milestones are interrupted, and investors become increasingly risk-averse, it could have major financing and commercialization process implications.
Capital markets tightening
The three months ending February 2020 had the fewest number of private equity and venture capital investments in the life science sector since 2011, according to PitchBook. While the total amount invested has continued to increase over the past several years, the number of companies securing those investments is decreasing, a point that should not be ignored while seeking financing.