As I noted last week, the Fed is being remarkably free with its funds for giant corporate borrowers, more than a few of whom brought their risk upon themselves. I noted then that a group of borrowers with an urgent mission has been left behind: small biomed companies ineligible for the Fed’s facilities or the PPP. Data emerging over the course of the last few days shows just how grave this crisis has become – over 500 clinical trials were cancelled at just one university and hundreds more cancellations were disclosed to the SEC. Cancer research takes the hardest hit, followed by neurological work on strokes, ALS, and other hard ways to go. No disease group has been safe from clinical-trial disruption. Some of this is due to necessary prioritization of COVID work, but most of it results from sudden gaps in funding. Urgent public-private collaboration is at least as essential as bringing cruise lines back upon the sea. Here are ways to make it happen.
First to just a few key facts about what’s known as translational biomedical research. This is the research that picks up from where work funded by the National Institutes of Health (NIH), foundations, and families has shown that a therapy holds out hope demonstrated by test tubes, mice, and other early-stage experiments. The next steps – the translational ones necessary to bring a drug or device to each of our medicine cabinets – are phased clinical trials with increasing numbers of patients willing to participate in tests of safety and efficacy. These trials cost millions of dollars, millions that used to come from foundations and philanthropists at the start and then from venture capital firms and larger biopharma companies as the odds of success grew higher.
COVID has emptied many of these coffers. The events and contributions on which foundations depend have disappeared for the duration and all but the most affluent philanthropists are husbanding their resources. Funding for small biomed companies generally comes from small VC firms, many of these now suffering life-threatening experiences of their own. Big VCs (think Softbank) are licking a lot of wounds and big biopharma is rushing resources to COVID, shutting down many other projects to transfer personnel and facilities to the pandemic. This is a necessary diversion, but it makes the funding gap for biomedical research all the worse.
Experts say it will take years to make up even a few lost months – lab animals euthanized during the pandemic will need to be bred again to complex specifications, patient-eligibility criteria will need to be redrawn and rerun, and many funding sources will be hard-pressed to do much for as long as macroeconomic gloom prevails.
What then could public-private partnerships do to address this urgent, if silent, medical crisis? First and easiest is for the Fed to make it possible for small biomed companies to access the Main Street facility and to encourage banks to craft bonds for larger biomed companies consisting of loans eligible under the Fed’s corporate facilities. This won’t be easy since the biomed funding construct generally doesn’t include loans and most banks have no experience in this sector. Still, if the Fed can revise its criteria for oil and gas companies, it can give biomed at least an even chance.
An easier option that reflects the proper role of fiscal policy is found in H.R. 2620, bipartisan legislation creating a limited federal guarantee for a $1 billion pilot program funding vision and blindness research. This legislation was, though, crafted in a quieter time when we could wait the five years it would take to demonstrate financial-market interest and taxpayer protections. Now, we don’t have that kind of time, not for blindness, not for cancer, not for crippling birth defects, not for anything.
EyeBonds were always meant to be a stepping stone to a new ESG asset class we call BioBonds. Making the world greener isn’t the only social good to which finance can and should turn – making more of us healthy and happy ranks right up there, one would think. As a result, Congress can and should use the EyeBond example in H.R. 2620 as the platform for a broader, larger program in which the federal government backs billions more dollars from institutional investors for promising research across the spectrum of disease and disability.
I am hopeful that legislation along these lines will soon be offered and invite anyone interested in lending a hand to give me a call.