Founder Shield: Navigating Biosafety from Discovery to Approval

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Risk associated with small biotechnologies financed by venture capital all on an idea, and every year medium and large biopharmaceutical companies falter due to avoidable risks. It is therefore imperative that companies of all sizes be proactive in their efforts to prevent, mitigate and bounce back from the myriad of risks inherent in drug development.

At the top and bottom of the development pipeline, there are vulnerabilities. Shareholder expectations and intellectual property (IP) protection at risk of clinical trials and cyberattacks, it is a minefield and recruiting a risk management partner is vital.

Mitigate cyber risk

Cyber ​​risk is causing all the ink to flow – and for good reason. Recently, fears have arisen about bad actors trying to access critical data related to investigational COVID-19 vaccines. As of November 2020, AstraZeneca was one of six pharmaceutical companies target by hackers believed to be from Pyongyang, North Korea.

Using a method known as social engineering, hackers masqueraded as recruiters on LinkedIn and WhatsApp, carrying bogus job offers. According to a source familiar with the matter, the documents were designed to access the computers of those working, among other things, on COVID-19 research. Johnson & Johnson and Novavax were also on the pirate list.

It’s important to note that the hackers probably weren’t looking to steal the data in order to create their own vaccines or treatments. It is more likely that the raffle was its vital importance to companies racing to gain approval for the first vaccine.

“With the majority of targeted ransomware claims these days, cybercriminals will target the data for which they are most likely to receive a large ransom, whether that is information about individuals or corporate information. sensitive business. The question to ask yourself is: what would be embarrassing for you to lose, and how much would you be willing to pay to get this information back? said Tom Gerard, life sciences underwriter at CFC Underwriting, Ltd., a specialty insurance provider.

But there is no need for a business to sit back and wait to be victimized. An ounce of prevention is worth investing in a solid insurance policy.

“You want to make sure you have certain covers in place, because a cyber policy is going to include things like forensics to help you determine where a potential cybersecurity breach may be occurring,” said Rachel Jenkins, Chief Success Officer. client at Founder Shield, a leading risk management partner for high growth companies backed by venture capital.

Founder Shield provides cyber risk assessments to its clients to determine the potential impact of a cyber attack and identify the systems that make them most vulnerable.

Biopharmaceutical companies should also be aware of the risks they take when contracting with another organization.

“When you contract with supply chain partners, you can have access to their systems, and they can have access to your systems. So this in itself creates a burden of vulnerability for a cyber attack. It doesn’t have to come straight from your system, from your lab, ”Jenkins said.

Early exposure

You don’t have to be a top player like AstraZeneca or Johnson & Johnson to face serious threats, however.

Young biotechnology companies are immediately overwhelmed by the dizzying expectations of shareholders who are solely responsible for their existence. This can include venture capitalists, individual investors, and large corporations supporting their mission.

“A claim can come from any stakeholder, but at this pre-revenue stage, it’s very likely that it’s coming from an investor who has deposited a big check and has high expectations. And if you’re going into a partnership, you better make sure you have breach protection.

These expectations include that the business meets a certain deadline, and complaints could result from unintentional miscommunication of what deliverables to expect and when. This is why Founder Shield advises its clients to invest in Directors and officers (D&O) insurance from the start.

Hilltop Bio, a small biotech offering regenerative veterinary therapies, has been a Founder Shield client since July 2019.

“I would recommend taking out basic insurance before funding to protect your early R&D activities. It is also worth checking with your advisors / mentors to see what insurance they recommend and what steps they would take to protect the business / product in addition to the insurance, ”said the President and CEO of Hilltop, Amanda Drobnis. “It’s something we don’t always talk about but needs to be addressed from the start.”

Drobnis selected Founder Shield for its comprehensive coverage options.

“As Hilltop Bio approached the close of the first round of funding, it was brought to my attention that we would need several different types of insurance,” she said. “Founder Shield was easy to work with, provided a competitive quote, and was able to bundle the different types of insurance into one, which was very easy for us. “

Obtaining patent protection

The next threat on the commercialization ladder is intellectual property risk. This is especially important when signing the first contract with a third party.

“Pre-revenue drug discovery companies might think they have no exposure to patent infringement claims because there are no products on the market. But when R&D companies and academia mutually license valuable patented technology, there’s a lot at stake in a contract dispute, ”said Gerard.

Founder Shield also advises its clients to purchase home insurance as early as possible.

“You don’t make any income, so your income generators are your property,” Jenkins said. “Then as you go into development and start working with supply chain partners for preclinical testing and manufacturing, your property moves. ”

This threat was highlighted in March by J&J and Emerging BioSolutions, when the latter sloppy production of an ingredient in J & J’s COVID-19 vaccine. The error, which resulted in approximately 15 million ruined doses of the vaccine, occurred at the Emergent plant in Baltimore, Md., which is part of the J&J manufacturing network.

Rather, the error was a nightmare for Emergent, whose executives were called before a congressional committee – but what if it had happened to a smaller company?

“With any new product, the liability arises when you start to manufacture and store the product. One of Hilltop Bio’s biggest liabilities is the loss of already manufactured products. We have insurance, we have temperature monitors and a back-up generator, all to protect the already finished product, ”Drobnis said.

Warning in clinical trials

Equally important when starting a clinical trial are vulnerabilities resulting from the actions of a third party. This is when a company would be advised to know to what extent contract research organizations [CROs] and contract manufacturing organizations [CMOs] are protected.

“Apart from the inherent risk of bodily injury to patients due to unanticipated side effects, biotechnology must take into account the operational risk of conducting trials,” said Gerard. “While biotechnology cannot purchase insurance for errors by its service providers, it can and should seek compensation by seeking additional insured status on the insurance policies of CROs, CMOs, and others. engaged consultant. Strong contractual protection is also essential.

Clinical trials open up all kinds of liability for a biopharmaceutical company, and personal injury lawsuits are among the costliest. Businesses need to take preventative measures to protect themselves against incriminations, and that extends to contract language.

“Depending on the nature of the trial and the group of subjects, an adverse event not disclosed in the consent form can be very costly – given the often limited funding of biotechnology, claims and expenses for uninsured injuries could make the difference. difference between business continuity and business failure, ”Gérard said.

While patient lawsuits may get more high profile, Jenkins advises companies to also protect themselves against claims filed by employees with workers’ compensation coverage.

“Your employees are the ones who manage the tests. If they are injured on the job or are accidentally exposed to something, it is the responsibility of the company. If you don’t maintain proper protocols and procedures and your employees are now exposed to things they should never have been exposed to, the company is responsible, ”she said.

Protect intangible assets

According to Jenkins, most biopharmaceutical companies appreciate and adhere to the need for cyber and property insurance, but more awareness is needed on the more complex risks.

“When companies start accumulating a large amount of assets, that’s when they start to worry the most. As far as D&O insurance is concerned, this is something that I think you have to be educated about, ”she said.

Gerard offered similar advice.

“With the majority of businesses in pre-income, the most important assets you have control over are intangibles – although you may not have a warehouse with millions of dollars in inventory or machinery. , what you often have is years of data that you hope will be worth more in the future, ”he said. “For most businesses, losing a few years of proprietary data would be catastrophic, but when the future value of your business is primarily based on the value of that data, you are at real risk to the viability of your business. “

If you’re interested in learning more about how to identify the top risks for biotech companies and how to implement strategies to mitigate them, check out Founder Shield’s Biosafety Guide.

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