Silicon Valley Bank (SVB) is the 16th US bank. SVB has lend 50% of startup money for technology and life science companies. Client funds total $342 billion and $74 billion in total loans.
SVB failure has impacted the biotech industry in the US and real fear has been settling over venture capital (VC) firms. Various VCs confirmed to FB they have suggested their biotech clients to withdraw deposits now.
A social media leak 2 weeks ago commented that SVB was raising up to $2.25 billion to cover losses and this really created a stampede. Even though SVB’s executives tried to calm markets down, SVB lost 60% of its market value. The regulators closed the bank down consecrating the biggest bank failure since the 2008 financial crisis.
Interviews to the VCs related with the biotech industry have not disclosed a big impact by the fall but confirmed they are suggesting their clients to take their accounts anywhere else.
Even though Vida Ventures did not explicitly disclose its clients, its CEO advised companies to transfer their deposits to other banks. Among Vida Ventures previous biotechs’ clients are Volastra Ther., Alterome Ther., Capstan Ther. and Aktis Oncology.
Another source who is close to the discussions said that the biotech he/she represents had less than $500,000 in cash at SVB, but the money transfer is still pending.
Many VCs have also offered similar advice and they have been communicating between firms to discuss what action to take. So, the situation is still under development.
SVB reopened last Monday with a capital raise failed and not been able to find a buyer.
The Federal Deposit Insurance Corporation (FDIC) set up the Deposit Insurance National Bank of Santa Clara to protect insured depositors, promising that these depositors would have access to their funds by March 13th, am.
Small and mid (smid) biotech companies are anxious. According to a biotech analyst Z. Shu, Ph.D this is justified, because cash reserves are the lifeline of these loss-making smid-cap biotech companies”.
Most companies contacted by Berenberg, and his team shared only minimal exposure to SVB, including Amicus Therapeutics, Kymera Therapeutics, CureVac, Repare Therapeutics and Affimed. Other biotech confirmed that their business with SVB were mostly short-term operating expenses. These companies are/will be in the process of moving their money elsewhere.
The trend for these biotechs is to safeguard their cash and investments in diversified portfolios and with larger banks. What remains to be seen is the exposure for private biotech companies.
Shu wrote: “We will also continue to monitor whether this initial crack would metastasize to other parts of the financial system.” To put it in the oncology jargon.
Mizuho’s Securities list among their portfolio biotech/pharma like Arcutis Biotherapeutics, Atara Biotherapeutics, Cytokinetics, Karuna Therapeutics, Merck & Co, Nkarta, Unity Biotechnology, Alector Therapeutics, Athira Pharma, Iovance Biotherapeutics, Sarepta Therapeutics and Arcus Biosciences. Mizuho Securities confirms that most of their clients have cited minimal to no exposure. They commented on a possible “contagion risk,” where the challenges at SVB could spread to other banks. This scenario remains to be seen and is monitored with interest by all parties involved.