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While investor activity in Massachusetts’ life sciences sector is generating new demand for tens of thousands of square feet in Cambridge, the state’s broader biopharmaceutical sector could emerge from the coronavirus pandemic weaker than some may assume, according to a new report from the Pioneer Institute.
Many companies will find themselves commercially weaker, dealing with delays in new product launches and with fewer resources to invest in research and development, the study sayd.
“There will certainly be worldwide demand for COVID-19 treatments,” study author William Smith, a visiting fellow at the institute, said in a statement. “But they will also require massive investments in clinical development and manufacturing, and political pressure on pricing makes it impossible for companies to recoup those investments.”
Massachusetts institutions received nearly $3 billion in National Institutes of Health funding in 2018, the second highest amount among the states. That same year, private venture companies invested $4.8 million in the commonwealth’s life sciences companies. In terms of new businesses, more than a third of U.S.-based biotechs that went public in the first half of 2019 were Massachusetts-based. That kind of activity has sent occupancy rates in the industry’s home turf of Cambridge’s Kendall Square near 100 percent, and sent rents through the roof.
Asking rents for Cambridge lab space were $101 per square foot on a triple-net basis with a vacancy rate below 1 percent in the first quarter, a recent CBRE study found, and biotechs had requirements for around 50,000 square feet of additional space in the city.
However, the stay-at-home orders and other elements of the pandemic have caused most drug-makers to delay clinical trials for non-COVID-19 treatments, the report stated, citing Evaluate Advantage and IQVIA research. This which could significantly disrupt long-term product pipelines. Drug-makers are also experiencing supply chain disruptions thanks to the pandemic, like many manufacturers around the world, the report says, which could hamper production or bringing new products to market.
The biggest impact could be on the long-term profits a firm could recoup from its drugs, Smith wrote. Since firms typically file patents before clinical trials begin, significant delays eat up the period during which treatments can be sold under patent before opening up to competition from generic makers. The delays are particularly damaging to small firms, whose future may depend on a successful trial, Smith wrote, and citing an April survey added that some small biotechs are feeling pressure on their cash positions.
Firms with COVID-19 treatments, too, could ultimately see their profits trimmed by political pressure to offer these treatments at low or no cost, Smith writes.
