AVEO Pharmaceuticals (stock chart) was in the news this week because they were forced to revise the timing of their topline data from the third quarter to the fourth quarter. As a result of this news their stock dropped from over $2.80 to under $2.00. The reason for the delay was the number of progression free survival (PFS) events occurred slower than forecasted combined with ten patients leaving the study without documented progression. The point is, delays can decimate the value of your company and they can be caused by a multitude of events.
PFS events are out of one’s control but are part of running a clinical trial, they are a business risk. Physical loss or damage to an R&D location is also out of one’s control, but the financial impacts can be an insurable risk. The problem is that most companies either don’t have the coverage in their insurance policy or have it but not enough.
Your policy should be setup to pay the actual loss of business income you sustain due a covered peril to property that is directly related to your “research and development operations.” The policy should pay for the period equal to the length of time it takes restore the damaged property. For example, your key R&D site had a fire and it took 3 months to restore resulting in a 3 month delay of you launching your product, the insurance would pay this difference if setup correctly.
Let’s say you are not ready to launch a product, you are at the other end of the spectrum and are conducting animal studies. The same fire scenario described above occurred and your R&D documents or prototypes were damaged or destroyed. If your insurance policy is setup correctly, the continuing operating expenses you incur while you restore your operations should be covered by your insurance policy.
AVEO is an example of what happens to a company when there are delays. In AVEO’s case the delay was due to something out of their control (their CRO could be negligent for a part of the delay, but that is another issue). If you can tell your shareholders and key stakeholders that yes there was a delay, but that the financial loss due to the delay is insured, wouldn’t that be a much better conversation to have? The question is – are you insured for these risks and if so are you insured adequately? Or are you just finding out that these risks can be insured by reading this article? If it is the latter, I would be happy to discuss with you how I can help.