Financial Loss · Insurance

How CFOs are Protecting Themselves From Manufacturing Disruptions as Gene Therapy and Immunotherapy Manufacting is Being Stretched Thin

Today there was an article in STAT about the shortage of manufacturing capacity for gene therapy companies (find the article here). The article goes on to talk about how the problem might only get worse as companies pursue indications in larger patient populations and the trial sizes get bigger and bigger. There was also a comment about by the CEO of an immunotherapy company pointing out that immunotherapy companies are dealing with the same issue.

When I see articles on this subject I automatically think of supply chain risk, particularly for companies that are sole sourced, which is pretty much all gene therapy and immunotherapy companies. Some of these companies are trying to bring the manufacturing in-house as early as possible which alleviates some supply chain issues but not all. Companies that manufacture in-house or outsource manufacturing have the same risk if manufacturing is disrupted; if there is a fire or some other type of event that shuts manufacturing down companies will be negatively impacted, resulting in lower revenue or delayed clinical trials.

Insurance can alleviate this risk, but unfortunately companies do not usually have their policies setup correctly to protect against these losses. Most companies mistakenly believe that their business income will provide coverage, but this would only be true if a company manufactures in-house. If a company outsources their manufacturing then business income would not respond, dependent or contingent business income coverage would be needed to have protection. I talk to countless CFOs who incorrectly believe these two coverages are one in the same, but they are not. The CFO will point out that they have blanket business income, but that will only cover losses that occur at your locations and not third party locations.

If you are dual-sourced company or have a contingent manufacturing plan in place then dependent business income insurance is not nearly as important for you as a company that is sole-sourced but still something to be considered. If, on the other hand, you are sole-sourced (either manufacturing yourself our using a single CMO) you need to pay special attention to this coverage in your property policy or you could be putting your company at risk.

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