SVB fall casts shadow on early-stage U.S. biotech

Vir Biotechnology

13/03/2023 22:25

By Patrick  Wingrove
       March 13 (Reuters) - The collapse of Silicon Valley Bank
 SIVB.O  will leave early-stage biotechnology companies with a
funding void, investors and analysts said on Monday, but larger,
publicly-traded drug companies should escape unscathed.
    About 50% of U.S. biotech companies, developing drugs for
everything from cancer to heart disease and rare conditions,
banked with Silicon Valley Bank (SVB), including a large number
of private firms, according to WBB financial analyst and
managing partner Steve Brozak.
    Analysts said the direct impact to U.S. biotech companies
overall was limited, although several drugmakers such as Axsome
Therapeutics Inc  AXSM.O  and Rhythm Pharmaceuticals Inc
 RYTM.O  disclosed cash deposits with the bank. Vir
Biotechnology Inc  VIR.O  had some $220 million with SVB.
    "It's a pretty profound situation. Everyone that has been in
the (biotech) business has amassed respect for SVB as a brand
both on the commercial side as well as the investment banking
side," said Robert Williamson, chief business officer at
Triumvira Immunologics, which does not have exposure to SVB.
    Startup-focused lender SVB Financial Group last week became
the largest bank to fail since the 2008 financial crisis,
sending shockwaves through the global financial system and
prompting regulators to step in to contain the fallout.
    Analysts said the situation would have been far worse for
biotechs had the U.S. government not stepped in over the weekend
and promised depositors would have access to their money on
Monday.
    SVB’s demise likely leaves smaller biotech clients without
an alternative lender, said Brozak, since other banks will now
probably raise their funding thresholds to points that make
investment difficult for smaller entities.
    “Where are they going to get their money?" said Brozak, with
one of the industry's major lenders out of the game.
    One healthcare investor who spoke on condition of anonymity
said SVB’s absence meant fewer companies financed and biotechs
paring back pipelines of medicines in development. “There’s
definitely going to be a winnowing of the herd,” he said.
    The full effect of SVB’s collapse on the sector may not be
seen for some time because of the different reporting
requirements for SVB’s non-public borrowers. 
    While public companies have to disclose their exposure in
deposits, loans and liabilities with SVB, in line with the U.S.
Security and Exchange Commission’s major event reporting
requirements, private companies can decide whether or not to
tell investors about the level of harm suffered.

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 (Reporting by Patrick Wingrove in New York; Additional
reporting by Michael Erman in New York and Manas Mishra in
Bengaluru; Editing by Bill Berkrot)
 ((Patrick.Wingrove@thomsonreuters.com;))