Why the pandemic's focus on infectious diseases won't reshape the drug industry, according to 3 top life science VCs

  • COVID-19 has made infectious disease a public health priority, but it still can’t change the drug industry, according to 3 top life science VCs.
  • Venrock’s Cami Samuels and Racquel Bracken, as well as Menlo Ventures’ Greg Yap, aren’t betting on the pandemic shaking up the drug development pipeline.
  • In the absence of structural change to both the industry and healthcare policy, any change will be short-lived, Yap said.
  • Visit the Business section of Insider for more stories.

Take all venture capital predictions with a grain of salt, Venrock partner Cami Samuel told Insider.

Though Andreessen Horowitz may have predicted a flood of investment dollars in infectious diseases in 2021 inspired by the pandemic in its start-of-year blog post, the early-stage biotech VC is sticking to her guns. Last March, Samuels told TechCrunch that the pandemic likely wouldn’t drastically increase investors’ interest in infectious diseases.

Almost a year later, Samuels told Insider her stance hasn’t changed. As an urgent public health crisis requiring millions, if not billions of low-cost vaccine doses, it’s unlikely to change a biotech investing space built for high-cost rare disease drugs meant for small patient populations. 

“It’s our responsibility to sell COVID treatments and vaccines at low prices to the developing world–that is not what biotech managers have been groomed to contend with,” Samuels said. 

At the same time, she pointed out infectious disease diagnostics as a particular area of investor interest, like those profiled in Insider’s top 6 infectious disease biotechs to watch. 

 Menlo Ventures partner Greg Yap and Venrock partner Racquel Bracken echoed Samuels’ overall sentiment in Insider’s recent healthcare VC panel. When asked about whether the pandemic changing the drug industry, Yap and Bracken agreed that structurally, pharmaceutical companies has never made infectious disease drug development a priority. 

Though Yap said COVID-19 would change the industry, he questioned how lasting those changes would be. There’s a reason those markets have been difficult for drugmakers, he said. Aside from a short-term awareness and fear of airborne viruses like SARS-CoV-2, Yap doesn’t expect much to change because industry fundamentals haven’t changed.

“A lot of the pandemic preparation is really planning ahead for something that we’re hoping won’t happen,” Yap added. “I don’t think we as a society are very good at investing in that.”

Structural issues are in the way of meaningful change

On the panel, Bracken seconded Yap’s statement. There are structural problems in how infectious disease drugs are reimbursed, particularly in hospitals, she added. 

Bracken said she believes the US will find itself massively underprepared for antibiotic-resistant bacteria since the healthcare industry provides only minimal reimbursement, which does not create a huge incentive for new drug development. 

“Until we fix some of those structural issues it’s gonna be hard in some of these areas,” she said, specifying hospital-based antivirals, including COVID-19 therapies, as one potential biotech opportunity despite the drug industry’s general inability to profitably develop infectious disease therapeutics.

“If we’re thinking about infectious disease the way we think about antibiotics, we have a big problem ahead of us,” Bracken said.

Unless there’s a change in healthcare policy around drug reimbursement, Bracken said she doesn’t see the industry making any major shifts. It’s a sentiment Samuels shared.

“It might sound cold-hearted as a venture capitalist talking about the business of these things, but there are so many diseases that are unmet medical needs that are decent businesses,” Samuels said.

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