The partial government shutdown, now in its fifth week, threatens to delay Food and Drug Administration approval of potentially lifesaving drugs and treatments.
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The FDA is at risk of running out of funding next month if the budget impasse doesn’t get resolved soon, FDA chief Dr. Scott Gottlieb said. The agency’s been able to keep most of its lights on since about 45 percent of its budget comes from fees the industry pays to review drug applications. But it’s not accepting new applications or fees during the shutdown, forcing the agency to stretch its remaining funding to last roughly four more weeks before it may have to curtail reviews and delay applications, he said.
That could create big problems for drugmakers, especially those that may be low on cash and scrambling to push new, innovative drugs to the market to stay in business, analysts say. Delays wouldn’t just impact companies with pending applications but those waiting to file once the shutdown ends.
“Delays will start impacting balance sheets as the potential for revenue gets pushed back further and further but the costs continue,” said Brian Skorney, a senior analyst at Robert W. Baird who covers biotech.
Applications typically take several months to review. More than 10 drugmakers were expecting FDA decisions in March, according to STAT News, weeks after the agency is expected to run out of money.
Johnson & Johnson is one of those companies. It’s awaiting approval on its Esketamine nasal spray to treat major depressive disorder. Chief Financial Officer Joseph Wolk told analysts Tuesday that some FDA meetings have been delayed but it didn’t expect that to hold up the drug’s expected approval by March 4.
“We certainly hope both sides come together to reopen the government and and the partial shutdown, but we’re monitoring it very closely,” he said on an earnings call.
Aimmune Therapeutics, a California-based biotech company that develops treatments for food allergies, is worse off.
It submitted an application and paid the fee to review its experimental immunotherapy for peanut allergies the day before the shutdown began 32 days ago. But the company disclosed in a recent regulatory filing that the FDA wouldn’t start the review for its treatment until the “shutdown and lapse in appropriations” ends.
Salim Syed, senior biotech analyst at Mizuho Securities, told CNBC that none of the companies with pending applications that he’s spoken to have admitted to any delays. At the same time, he said many in the industry think the companies really don’t know and are just as much in the dark as the public.
The companies characterized it as: “‘we think we’re OK, there’s nothing right now.’ That sort of language,” Syed said.
Despite concerns, the FDA is still working on applications and some drugmakers have received approvals during the shutdown, including California biotech company Exelixis. The FDA approved its drug Cabometyx to treat liver cancer, the company announced last week. Abbott Laboratories also won approval for a device to treat heart defects.
Other companies, like British pharmaceutical company GlaxoSmithKline, told CNBC that they are “not aware of any impact on its submissions” and are “closely monitoring the government shutdown to understand the impacts on the FDA.”
Swiss drugmaker Novartis told CNBC that at this time “there are no impacts to our applications or work” with the FDA as a result of the government shutdown and “we are staying in close communication with the FDA and evaluating all of our projects should the shutdown persist long-term.”
Still, Mizuho Securities’ Syed said the shutdown may take some time before its full impact is known.
“It’s going to create a backlog and we may not know now what that backlog looks like” for some time, he added.