As the first Americans receive COVID-19 vaccinations this week developed by big pharmaceutical companies, hundreds of startups focused on vaccines, testing kits and other COVID-19 products are riding the momentum–eager to get their own products to market in the next year.
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“At first, no one knew how to address the health pandemic, but now it is all hands on deck for the 170 or so drug candidates out there,” said Jeffrey Fu, Codagenix’s chief business officer, in an interview with Crunchbase News. “Codagenix felt like its platform could add value for society, especially for SARS-CoV-2, and we feel differentiated from other candidates.”
New York-based Codagenix is working with Serum Institute of India Pvt. Ltd. to develop a single-dose intranasal, live vaccine against SARS-CoV-2. It has raised $26.8 million in venture-backed funding, according to Crunchbase data, and its phase one clinical trial received regulatory approval this month from the Medicines and Healthcare Products Regulatory Agency to commence in London.
Codagenix will need to complete further trials before it can go to market. Currently, nearly 16.5 million cases of COVID-19 and just over 300,000 deaths were reported in the U.S. On Dec. 11, the U.S. Food and Drug Administration granted Pfizer and its German partner BioNTech approval for its two-dose vaccine, and Pfizer celebrated its first shipments of the vaccine. It’s expected that biotech company Moderna Therapeutics’ version will be next.
“It was clear to me that we are in a really cool era where the mRNA vaccine approach appears to live up to the promises that Moderna and BioNTech had originally hyped,” he said.
Historically, vaccines have not been a sexy investment. Since March, however, if a startup has a COVID idea, it could raise millions of dollars if there is a credible team and technology that makes sense, Rockman said.
Indeed, the second and third quarters of 2020 saw some of the biggest investments by venture capital investors into health care and biotechnology startups. VCs infused $34.9 billion of capital into companies as of Dec. 11, according to Crunchbase data. The third quarter saw the most funding with $14.2 billion: the highest quarterly increase compared to 2018 and 2019.
Investors say the way startups are innovating to tackle COVID will benefit the world in the long term and provides a roadmap for how to better handle future infectious disease outbreaks.
“This shows that (the Trump administration’s) Operation Warp Speed was successful,” David Blumberg, founder of Blumberg Capital, told Crunchbase News. “The vaccines came about much faster—it used to take seven to 12 years—and this was done in under a year. The bad news is there will be more pandemics.”
Zoic Capital led biopharmaceutical company HDT Bio’s $3 million seed round, which was announced in October. Eric Tan, partner at Zoic, said the vaccine race is just starting. HDT develops immune therapeutics and also is working on a COVID vaccine.
He said the reason the big pharma companies were able to get to the FDA so quickly is because they are using older data and outdated techniques, such as incubating in eggs.
“Because of that, manufacturing will require special tools and materials, which means companies will have to cut back on vaccine production goals,” Tan added. “Pfizer and Moderna have good results, but there are not enough vaccines to cover the world and may not be enough to cover the United States.”
We are already seeing evidence of that with Pfizer, he said: On Dec. 3, the The Wall Street Journal reported that Pfizer expected to ship half the COVID vaccines it had originally planned for this year.
In contrast, HDT is using more recent technology to produce its vaccines, Tan said. As a result, HDT’s technology will have the same efficacy of Pfizer’s vaccine, but will not require the same cold storage needs of minus 70 degrees Celsius, can be manufactured at a lower cost, and will not use raw materials, he added.
Meanwhile, COVID-19 is going to be around forever, said Robert Nelson, co-founder and managing director at early-stage life sciences venture firm Arch Venture Partners, so the question is: What will the world be like a year from now?
He expects vaccines will be mostly effective, though we don’t know yet how long they will last or their long-term effects. He also acknowledges not everyone will be vaccinated, so diagnostics and therapeutics will be important going forward, he said in an interview.
While the world hasn’t seen an infectious disease outbreak on the scale of COVID-19 in a century, the next global pandemic could happen again much sooner.
“Just because it is a 100-year event doesn’t mean it is going to wait that long to happen again,” Nelson said.
Startup founders say the global pandemic has highlighted the shortcomings of the country’s health care system, and startups have stepped up with innovative products and services supporting COVID-19 treatment.
Examples include SummerBio, which created an end-to-end COVID-19 test system designed to automate existing processes.
“Startups need to be agile to help wherever they need help,” said Guido Baechler, CEO of SummerBio, in an interview. “We are moving toward direct-to-consumer testing at home and seeing what other infectious disease tests could be done. By leveraging this, we can build capacity for other capabilities in the future.”
Tej Patel, co-founder and CEO of Fluxergy, also said startups got a push from COVID to highlight health care needs. The Irvine, California-based company is developing a portable laboratory testing platform and has raised $50 million in total venture-backed capital, according to Crunchbase data.
There will continue to be a need for increased COVID testing abilities while the effectiveness of the initial vaccines is still unknown, he said.
“Initially, doctors weren’t even allowed to give tests unless they thought it was COVID,” Patel added. “In today’s world, data is so important. It’s all about technology to get this information sooner.”
In terms of disrupting the vaccine space, that’s where Fu said Codagenix accels.
He doesn’t dispute that the vaccines being developed by AstraZeneca, Pfizer and Moderna are effective, but with a goal to immunize everyone at the same time, vaccines need to be easy to administer and not require sophisticated cold storage or billions of needles and syringes to pull it off, he said.
“We have a modern twist to their vaccines,” Fu added. “Ours is a scientific approach. We think ours will elicit an immune response that provides durability, though we don’t know what that will be yet. In addition, it is a single dose, and that is going to be important.”
So far, Codagenix’s vaccine has shown to be safe and effective in preclinical animal studies against SARS-CoV-2. And the company is committed to developing the vaccine for countries that won’t be able to get it elsewhere, Fu said.
Ixlayer co-founder and CEO Pouria Sanae sees the volume of COVID testing being flat through the second quarter of 2021 before experiencing a small drop as more people are vaccinated. The San Francisco-based company, which provides precision health testing, secured an undisclosed Series A round in 2019.
Sanae predicts more immediate testing for COVID, especially in a home environment, will come soon. The biggest vaccine challenge will be the “last mile:” how they will reach facilities, who will monitor which person gets what vaccine, and who will keep up with reminders for the second dose.
“This is the No. 1 thing we solve with our current customers,” he said in an interview. “Distribution to make it to the right place, notification and then post-vaccination–reporting for every individual, proof of record and daily symptom checking via apps–the combination of those three will be needed, but everyone is only talking about step one.”
Illustration: Dom Guzman
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