COVID-19 R&D drives sectors research spending in Q1

27 May 2021

Peter Winter / BioWorld

The top 100 public biopharmaceutical companies with market caps greater than $1 billion, and excluding big pharma companies, spent a total of almost $12 billion on R&D in the first quarter of 2021, compared to $9.4 billion invested last year. A BioWorld analysis of the quarterly filings of this group found that the 24% year-over-year increase in spending was driven, in part, by companies involved in developing COVID-19 vaccines and therapeutics.

Gaithersburg, Md.-based Novavax Inc., for example, ramped up its R&D spending by a whopping 3,388% to $593 million in the first quarter of 2021, compared to $17 million in the same period in 2020. The significant increase was primarily due to the development of NVX-CoV2373, its nanoparticle protein-based COVID-19 vaccine candidate. In its financial report, the company said that its June guidance of submitting an emergency use authorization (EUA) for the COVID-19 vaccine was being pushed back to the third quarter. It also revealed that it had run into production delays for the vaccine caused by a global shortage of materials that included bags, filters and growth media.

The news precipitated a significant pullback in the company’s shares (NASDAQ:NVAX), and they have lost about 40% of their value so far this month. H.C. Wainwright analyst Vernon Bernardino wrote, “We believe the company remains a solid player in the COVID-19 vaccine landscape and think concerns about a delay in regulatory filings and manufacturing challenges are only temporary setbacks.”

Novavax reported first-quarter revenue of $447 million, compared to $3 million in the same period in 2020. That significant increase was due to increased development activities relating to NVX-CoV2373 for services performed under the U.S. government and Coalition for Epidemic Preparedness Innovations agreements. As of March 31, 2021, the company had $2 billion in cash, cash equivalents, marketable securities and restricted cash.

COVID-19 vaccine developers Moderna Inc. of Cambridge, Mass., and Biontech SE, of Mainz, Germany, were also among the top 20 companies, ranked by total R&D spending. Moderna reported a 249% jump in its R&D spending, with Biontech not far behind with a 233% increase in R&D expenses. (See Top 20 biopharmaceutical companies by R&D spending in 1Q 2021, below.)

United Therapeutics Inc. attributed its 330% increase in R&D expenses for the first quarter in part to a $105 million purchase of a pediatric disease priority review voucher (PRV), which it redeemed when it submitted a new drug application for Tyvaso DPI, a novel dry powder inhalation formulation of treprostinil, for the treatment of pulmonary arterial hypertension and pulmonary hypertension associated with interstitial lung disease. The PRV provides for an expedited eight-month review by the FDA, instead of the standard 12-month review period.

Newcomers

Gene therapy developer Beam Therapeutics Inc., which is developing precision genetic medicines through base editing, is a newcomer to the top 20 list. Its R&D expenses were $190.1 million for the first quarter of 2021, up 805% compared to $21.5 million for the first quarter of 2020. The expenses, the company reported, included $155 million of expense related to in-process research and development acquired from Guide Therapeutics Inc. The announced deal is valued at up to $440 million, which includes $120 million up front, plus up to $320 million in stock-based technology and product success milestone payments.

A recent graduate to the public ranks, Seattle-based Sana Biotechnology Inc. also made it to the top 20 list. The 526% jump in its R&D expenses was primarily attributed to non-cash expenses for the increase in the estimated fair value of success payment liabilities as well as personnel-related expenses related to increased headcount.

The company raised a record-setting $675.6 million from its IPO in February. The funds will support its in vivo and ex vivo cell engineering platforms for use in areas such as oncology, diabetes, CNS disorders, cardiovascular disease and genetic disorders.

By the numbers

Sana is among 52 companies that have graduated to the public ranks this year, collectively generating just over $9 billion. They now bring the total of public biopharmaceutical companies tracked by BioWorld to 558 and have a total market cap valuation of $1.31 trillion. Contributing 89% of that total valuation are 166 companies that currently have market caps greater than $1 billion.

While the sector appears to be on pace to establish another record for financings this year, the same cannot be said for the performance of biopharma companies on the capital markets, It has been a rocky period, with the BioWorld Biopharmaceutical index down by more than 7% year-to-date, and the Nasdaq Biotechnology Index, a modified market capitalization-weighted index of more than 200 biotech companies, down 2% in the same period. Weighing on the sector has been softer-than-expected earnings among the top tier companies.

Cowen & Co. analysts attributed in a research note the underperformance to “generalists continu[ing] to have modest exposure to biotech as they worry about the possibility of drug pricing/reimbursement reform, seeking returns in sectors that will benefit more from a reopening of the economy.” In addition, “specialists are not confident biotech is poised for a market-beating rally, and risk aversion has crept higher.”

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