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Biotech investors and executives are growing worried that restrictions intended to contain the coronavirus epidemic in China could delay the work Chinese contract research organizations perform for American startups — particularly if those restrictions last for several months.

The impact on biotechs so far appears to be minor, in part because the restrictions — including travel bans and workplace closures — coincided with the Lunar New Year, when many businesses expect employees to be away from work anyway.

But the longer restrictions are in place, the more likely that crucial experiments and drug development work will be affected, industry insiders said in interviews — and some decision-makers believe they can’t afford to wait and see.


“For me, and for our company, we’ve decided to be very aggressive in trying to manage this risk,” said a vice president at a venture-backed biotech company who asked to remain anonymous because his company is still in stealth mode.

“You’re burning money even if you’re doing nothing,” he said. “We’ll continue to burn through our A round, even though we’re not doing all the science we want to do.”


The company has a contract with a CRO based in Wuhan, where the outbreak likely started, but has started asking European and North American CROs to work on experiments that haven’t yet begun.

“We’d rather spend more money and have an overabundance of resources in the short run if, in fact, China comes back online in a few weeks or a month, instead of being completely out of the game for an extended period of time,” he said.

With hundreds of contract research organizations — often staffed in part with scientists who trained in U.S. labs — China has become a destination for early-stage U.S. biotech companies looking for outside help to design, test, and manufacture potential drugs.

Coronavirus Coverage: Read the rest of STAT’s up-to-the-minute reporting on the coronavirus outbreak.

The outbreak of the new coronavirus, 2019-nCoV, has disrupted life across the country. Most notably, the government has forbidden travel into and out of Wuhan and other nearby cities in Hubei province.

Travel to and from the country has been sharply limited. Some airlines have cancelled passenger flights to destinations around China through late March. Several countries have evacuated their citizens; Americans who have returned from Wuhan have been subject to the first federal quarantine instituted in 50 years.

However, experts caution that it’s still not clear what — if any — impact these measures or related delays will have on any individual company or on the biotech industry as a whole.

“It’s still early, but the impact so far — I’d say it’s limited,” said Harri Jarvelainen, a biotech consultant partially based in Beijing. “Looking at Twitter, some people are talking about a lockdown on the CRO industry — but it’s really not that bad.”

Jarvelainen, who is also the COO of two biotech startups in San Diego, visited one CRO’s facility in Suzhou — about 70 miles west of Shanghai and over 400 miles away from Wuhan — last week to check on an experiment slated to end on Feb. 2; he found that everything was running on schedule.

At this time of year, that schedule was expected to be slightly irregular anyway. The outbreak coincided with the Lunar New Year holiday period — a time when Chinese CROs anticipated employees would be traveling.

“We have a number of projects that have been planned for and supported through the Lunar New Year holiday,” said Nina Kjellson, a general partner at Canaan. “Those types of contingencies are routine.

“But now it’s feeling like it could be longer,” she said.

The venture capital firm — which invests in early-stage biotech and tech companies — has invested in about 15 startups currently doing some kind of drug development, Kjellson said; several have critical work being conducted at CROs in China.

Canaan isn’t the only venture capital firm whose investments depend in part on work done in China. Chinese CROs account for a majority of the outside scientific experts working with companies in which New Enterprise Associates has invested, said NEA partner Sara Nayeem.

Wuhan and other cities in the central part of the country account for only a small portion of the country’s CROs relative to the area around Shanghai, according to one 2015 paper. Most of the Wuhan-based CROs included in that paper focused on medicinal chemistry — that is, designing and making new drugs.

Among the CROs with a presence in Wuhan is WuXi Apptec, a Shanghai-headquartered company with facilities throughout China as well as in Korea, the United States, and Germany.

Several people told STAT that WuXi employees in Wuhan are expected to return to work on Friday.

But even outside of Wuhan, the outbreak has had noticeable effects — albeit relatively smaller ones.

At least one European contract manufacturing and development organization has reportedly elected to extend the New Year holiday for employees at its plant in Suzhou; a university campus in the city is also closed until further notice. Jarvelainen tweeted that he didn’t see another person at the Suzhou hotel he visited.

China’s coronavirus containment measures — the travel restrictions, the extended holiday period, and the quarantines — could wind up putting CROs a few weeks behind schedule. And some experiments may be more sensitive to that kind of disruption than others. Waiting for certain experiments could put everything else on hold; testing a drug in animals or in cell cultures is impossible if the drug itself hasn’t been made, for example.

“Disrupting one part of the whole process may allow other things to keep going — but you will reach a stopping point,” Nayeem said.

And some experiments need enough people to be consistently available to care properly for research animals. If they’re not, months of work might need to be redone to ensure the results are accurate.

“Some of these studies run for nine months,” Nayeem said. “The disruption of something that’s already ongoing — that’s where you could see companies really lose out.”

The most obvious and immediate impact, Kjellson noted, will likely be the toll the outbreak has taken on CRO employees in China.

“The impact is significant not just in terms of the potential impact on data and timelines, but also [in terms of] the human component,” Kjellson said. “These people are colleagues, friends, partners.”