'We need to be focused on surviving': A legendary biotech investor who's founded more than 40 companies shares his top advice for startups to get through the coronavirus crisis

• Flagship Pioneering CEO Noubar Afeyan is advising small biotechnology companies to consider partnering on research or stopping certain research projects to survive the coronavirus crisis.
• "Anybody who continues to try to thrive and hope to God that they survive in the process is not going to do enough to ensure that survival is assured," Afeyan told Business Insider in a recent interview.
• Many research projects are now being disrupted. Hospitals are focused on the viral outbreak, and clinical trial participants are staying at home.
• In particular, the life sciences entrepreneur predicts biotechs that are either cash-strapped or dependent on a single experiemental drug will be particularly vulnerable in the coming months.
• Visit Business Insider's homepage for more stories.

As the coronavirus has disrupted the research and testing that's crucial to developing new drugs, one of the most prolific entrepreneurs and investors in biotech says small biotech companies now have to prioritize surviving the coming months.

Noubar Afeyan is the CEO of Flagship Pioneering, a Cambridge, Massachusetts-based incubator and investor in life sciences companies. Afeyan recently spoke with Business Insider and shared the advice he's given the 41 Flagship companies.

Since founding Flagship in 2000, Afeyan's business has produced companies worth more than $34 billion in aggregate value, according to the firm. Flagship's most successful venture is Moderna, a $10 billion biotech that is now testing a coronavirus vaccine.

Read more: The inside story of how Moderna developed a potential coronavirus vaccine in record time

Most biotechs spend years, if not decades, racking up deficits with no meaningful revenues. They raise money based on the potential of experimental treatments in development. A major catalyst in sustaining themselves is generating positive data from clinical trials and then raising more cash based on those results.

But trials are now being disrupted in greater and greater numbers because of the coronavirus pandemic. Hospitals and physicians are focused on the outbreak, and many people who would be participating in a clinical study are staying home. Atlas Venture partner Bruce Booth has also noted the financial challenge these delays may cause small biotechs.

Flagship's companies typically focus on thriving, Afeyan said, while maintaining the balance sheets to ensure their survival. As many biotechs are now facing disruptions to research, he said the focus is now squarely on surviving.

"Anybody who continues to try to thrive and hope to God that they survive in the process is not going to do enough to ensure that survival is assured," he said.

This will require difficult decisions, such as potentially stopping certain research programs to conserve cash, or exchanging some long-term upside on certain experimental drugs for an immediate injection in capital by partnering with other companies.

And some small biotechs will be more vulnerable than others. Companies that are largely dependent on advancing one drug or have trimmed their balance sheet too tightly are going to particularly vulnerable, Afeyan said.

Biotechs that succeeded through previous downturns 'didn't get overly greedy'

But companies can weather the storm by making the right decisions. Looking back at previous recessions in 2001 and 2008-2009, Afeyan said the biotechs that did the best prioritized having enough capital on hand to get through and "didn't get overly greedy" on holding onto projects.

Flagship's companies are typically developing a novel platform for medicine that doesn't exist. If the ideas pan out, they usually are applicable to many diseases intead of just one. For platform companies like this, Afeyan said partnerships are particularly important.

"If you have a platform, you can afford to give away upside on one thing in order to prevail and do multiple other things," he said. "If you don't, the whole platform goes down the drain."

Afeyan also predicted that the industry will likely see companies consolidate that have piled into the hottest areas of drug development, such as cell therapy, gene therapy, and the liver disease called NASH.

"There's a lot of companies in biotech that generally do the same thing," he said. "Some of this is actually going to rationalize that. Vulnerability doesn't mean demise, it just means change of direction."

He predicted the industry may see more 'mergers of equals' in biotech, where two small biotechs combine. This rarely, if ever, happens in the industry, but Afeyan said it sometimes should.

One silver lining for biotech is a boosted importance in society

Finally, Afeyan does see some positives coming out of the crisis, including biotech playing a bigger role in the public's mind.

The entrepreneur has never seen this level of attention being paid to the industry from the general public, particularly for companies like Gilead Sciences and Moderna that are researching coronavirus treatments and vaccines.

Afeyan cofounded Moderna and now serves as chairman. It's one of several Flagship companies now working on vaccines, treatments, or diagnostics for COVID-19.

"I think that is going to be a step change in the potential for biotechnology, Afeyan said."We are now being viewed as technologically capable of combatting a kind of global biological battle that we're engaged in."

Afeyan has already lined up significant funding for his next bets, recently announcing that Flagship closed a $1.1 billion fund in late March. Some of this cash will support plans to go into health security research that will "improve societal health defenses," he said.