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Real Estate Collapse: In Q2, A Record 44 NYC Neighborhoods Closed Fewer Than Five Deals

Real Estate Collapse: In Q2, A Record 44 NYC Neighborhoods Closed Fewer Than Five Deals

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Real Estate Collapse: In Q2, A Record 44 NYC Neighborhoods Closed Fewer Than Five Deals Tyler Durden Wed, 08/12/2020 - 15:30

By Eliza Theiss of Property Shark

Marked by strict lockdowns, the halt of economic activity and the loss and suffering brought on by COVID-19, New York City’s real estate market was bound to present a decidedly different picture in the second quarter both year-over-year (Y-o-Y) and quarter-over-quarter (Q-o-Q).

First, it’s important to note that, during the last quarter, a record 44 NYC neighborhoods closed fewer than five deals — a metric we consider to be the lowest minimum threshold for calculating a neighborhood’s median sale price. As a result, these neighborhoods are not represented in our findings. In total, we analyzed the second quarter’s median sale price and sales activity changes in 157 NYC neighborhoods.

Next, the most notable change was brought on by Brooklyn, which — for the first time ever — had more neighborhoods among the city’s most expensive than Manhattan. Specifically, of the 52 neighborhoods that were ranked as the city’s 50 most expensive (due to two ties), Brooklyn claimed 23 entries versus Manhattan’s 21 neighborhoods, while Queens was represented by eight areas.

Pandemic-Depressed Market Slashes Manhattan Sales in Half, Brooklyn Sales Only by a Third

Overall, the median sale price for the four boroughs contracted 2% Y-o-Y in Q2 and gained 4% Q-o-Q, stabilizing at $675,178. But, while the overall median of the four boroughs remained largely unchanged, sales activity plummeted — down 36% Q-o-Q and down 43% Y-o-Y. In particular, Manhattan was hit the hardest of the four boroughs. Its sales activity was halved, and the median sale price dropped 22% Y-o-Y from $1.27 million to $990,000.

That significant drop was brought on by two major factors: a change in the ratio of property types sold and sale prices sliding under the influence of the new economic and public health crisis. And, while condo units represented half of all sales in Q2 2019, that share dropped to 44% in Q2 2020. Moreover, the median sale price of condo units traded in Q2 contracted 7% Y-o-Y from $1.745 million in 2019 to $1.625 million in 2020.

At the same time, the number of co-ops traded dropped at a less dramatic rate and, as a result, co-ops made up a larger share of Manhattan residential sales: 55% this year compared to 49% last year. However, the median sale price of co-ops contracted at a sharper rate than condos, dropping 10% Y-o-Y — from $830,000 in Q2 2019 to $750,000 in Q2 2020.

Brooklyn led in terms of sales activity, with the number of transactions recorded here in Q2 dropping only 32%, while its median sale price slid 2% to $702,000. Although sales activity decreased across all asset types — down 29% Y-o-Y for co-ops, 30% for condos and 41% for single-family homes — the median sale price presented conflicting trends across different property types. As a result, Brooklyn’s Q2 2020 residential market presented a fractured image.

Condo and co-op sales took up a larger share of Brooklyn’s residential sales in Q2 2020 compared to Q2 2019 — to the detriment of single-family home sales. In particular, houses represented 22% of all second-quarter sales in 2020, as opposed to 25% in 2019. Meanwhile, co-op units represented 28% compared to 27% a year ago, and condo unit sales increased from 48% to 50% of all sales.

Notably, the median sale price of single-family homes increased 7% Y-o-Y to $773,000 and the co-op median gained 9% Y-o-Y to reach $462,000. However, the drop in the median sale price of Brooklyn condos paired with their increased share of total sales deflated the entire borough’s Q2 median this year. Specifically, Brooklyn condos registered a 4% Y-o-Y drop, going from last year’s $863,000 to $825,000 in Q2 2020.

Bronx Single-Family Sales Surge, While Queens Condos Heat Up Borough Pricing

The Bronx and Queens showed similar trends, both in terms of pricing and sales activity evolution across all residential property types. Queens fared well in terms of price growth, with its median rising 12.3% Y-o-Y from $463,000 to $520,000, although transactional activity shrank 42% Y-o-Y. Meanwhile, Bronx prices actually rose at a slightly sharper rate of 12.5% Y-o-Y, but sales activity plunged 46% here.

In particular, price growth in the Bronx was fueled by the significant increase in the share of sales of single-family homes. While condos made up 23% of all second-quarter sales in 2019 and single-family homes 34%, in 2020, the share of condo sales dropped to 18% of the borough’s total residential sales, while single-family homes made up 40%.

And, because the median sale price of single-family homes ($525,000 in Q2 2020) is significantly higher than that of condos ($225,000 in Q2 2020), the Bronx’s overall median sale price grew, as well, going from $289,000 a year ago to $325,000 in Q2 of this year.

Queens, a borough dominated by single-family homes, saw its sales activity drop at the sharpest rate for this property type. At the same time, condos outperformed every other residential property type, both in terms of pricing and number of sales.

More precisely, Queens condo sales declined a mere 4% Y-o-Y, while their median sale price rose 13% Y-o-Y to reach $644,000 in Q2 2020. Likewise, condos also constituted a larger share of all sales in 2020, representing 22% of all Q2 transactions this year, as opposed to 13% in 2019.

However, as condos still madk up a relatively small percentage of all Queens sales, the borough’s second-quarter sales activity dropped 42% Y-o-Y, fueled by the 47% decline in co-op sales and 48% decrease in single-family home sales. As a result, co-ops represented 37% of all Q2 sales in Queens and single-family homes made up 41%, down from last year’s 40% and 47%, respectively.

Although sales activity decreased across the board, the borough’s 13% price increase was sustained by a 7% Y-o-Y increase in the median sale price of both co-ops ($320,000 in Q2 2020) and single-family homes ($644,000), and boosted by the 13% Y-o-Y hike for condos.

Kingsbridge Median Surges 147% Y-o-Y, Gowanus Sales Activity Heats Up 230%

At the neighborhood level, the Bronx’s Kingsbridge led in terms of pricing gains with its 147% Y-o-Y surge. Specifically, it went from $230,000 in Q2 2019 to $568,000 in Q2 2020 due to the change in types of properties sold. For instance, while the seven sales recorded in Q2 2019 were all co-ops, Q2 2020 saw six sales — three of which were single-family homes.

Kingsbridge’s pricing surge was followed by Williamsbridge’s 100% Y-o-Y boom, which brought the Bronx neighborhood’s median sale price up to $478,000. That jump was also the result of an increase in the number of single-family homes sold. While single-family homes made up half of Williamsbridge sales in Q2 2019 and had a median sale price of $462,000, in Q2 2020, single-family homes represented 67% of the neighborhood’s sales at a noticeably higher median sale price of $512,000.

At the other end of the spectrum stood Prospect Park South, which experienced the sharpest decline — down 54% Y-o-Y. It went from a median sale price of $1.23 million a year ago to $568,000 in Q2 2020. Once again, that change was brought on by a change in the mix of property types sold and their lower price points.

Specifically, in Q2 2019, Prospect Park South’s residential sales were comprised of 57% co-op units and 43% single-family homes. However, this year, single-family homes represented just 17% of sales, while co-ops took 33% and condos made up 50%. That was a significant change, as Q2’s condo sales had a median sale price of $560,000.

Nearby, the median sale price of Hunter’s Point co-ops decreased 23% Y-o-Y from $778,000 to $592,000. Additionally, while the three single-family homes sold in Q2 2019 had a median of $2.215 million, only two homes were sold in Q2 2020, and those averaged $959,000.

In terms of sales activity, Brooklyn’s Gowanus witnessed the sharpest growth rate at a whopping 230% Y-o-Y. However, it must be noted that, in terms of actual transactions, that figure represents an increase from 10 deals registered in Q2 2019 to 33 transactions registered in Q2 2020. That surge was fueled by sales in new developments in the neighborhood, such as Luna at 229 9th Street., which originated 12 condo sales in Q2 2020 and none in Q2 2019.

Meanwhile, Brooklyn neighborhood Greenwood Heights and Queens’ Hunters Point experienced the next-sharpest gains in transactional activity, both recording 123% more sales than in Q2 2019. All in all, only 15 of the 157 NYC neighborhoods included in this report registered year-over-year increases in transactional activity.

On the opposite end of the spectrum was Brooklyn’s Greenpoint. Its 83% Y-o-Y drop was the sharpest rate of decrease in sales activity among all neighborhoods that had at least five sales. In particular, only 14 deals closed in Greenpoint in Q2 2020, as opposed to the 80 that were registered here in the same timeframe last year, fueled by the sale of 48 luxury condos at the then-new mixed-use development The Greenpoint. As a result, the neighborhood’s median sale price also contracted, dropping 22% Y-o-Y from $1.36 million in Q2 2019 to $1.06 million in Q2 2020.

Brooklyn Overtakes Manhattan for First Time, Lands More Neighborhoods in Top 50 Priciest

Among the neighborhoods omitted from our analysis due to insufficient sales activity were high-profile names like Hudson Yards, Malba and the Columbia Street Waterfront District, which ranked as the #1, #7 and #9 most expensive NYC neighborhoods in Q1 2020. Consequently, TriBeCa reclaimed the title of #1 most expensive neighborhood in NYC, despite a 14% Y-o-Y price drop that brought its median sale price down to $3.73 million. At the same time, sales activity plummeted 52% Y-o-Y.

The city’s #2 most expensive neighborhood was Little Italy at $2.75 million. Its median sale price registered a mild 3% Y-o-Y uptick, paired with a 4% gain Q-o-Q. But, its sales activity dropped 22% Y-o-Y, closing only seven deals in Q2 2020.

Similarly, SoHo’s $2.425 million median sale price earned it the title of NYC’s #3 most expensive neighborhood, despite its 8% median sale price contraction. However, its drop in transactional activity was more dramatic — down 67% — closing only 15 sales compared to 46 registered in Q2 2019.

Overall, Manhattan supplied six of the city’s 10 most expensive neighborhoods and Brooklyn four. However, when looking at the 50 most expensive neighborhoods, Brooklyn had a heavier presence than Manhattan — a historic first. Specifically, of the 52 neighborhoods that had the 50 highest median sale prices of Q2, 23 were in Brooklyn versus Manhattan’s 21 neighborhoods. Queens was represented by eight.

Manhattan Snapshot: TriBeCa Retakes Top Spot, Inwood Has Lowest Median at $405K

As is most often the case, Manhattan’s three most expensive neighborhoods were also NYC’s three priciest: TriBeCa, Little Italy and SoHo. But, its competitively priced neighborhoods are often what incite the most interest here in what is, historically, the city’s priciest borough.

With a median sale price of $405,000, Inwood was Manhattan’s #1 most affordable neighborhood, following a 5% Y-o-Y drop. However, Inwood’s sales activity was halved, as was Tudor City’s, Manhattan’s #2 most affordable area. The latter posted a median sale price of $455,000 following a 10% Y-o-Y hike, which was the only year-over-year pricing gain among Manhattan’s five lowest-priced neighborhoods.

At the same time, Washington Heights underwent an 18% Y-o-Y price crunch that cemented its $468,000 median as the borough’s #3 lowest.

Brooklyn Snapshot: Sales Activity Drops Only 32% Y-o-Y, DUMBO Becomes #4 Priciest NYC Neighborhood

Three of Brooklyn’s priciest neighborhoods were among the city’s top 10 most expensive. Brooklyn’s median sale price leader, DUMBO, landed at #4 with a $2.075 million median. That came as a result of a noticeable 38% Y-o-Y increase spurred by the sale of three units at 100 Jay Street with a median of $2.45 million. At the same time, DUMBO’s sales activity was halved.

Carroll Gardens was right on DUMBO’s heels as Brooklyn’s #2 most expensive neighborhood and the city’s #5 priciest. Its median was on the rise, as well, gaining 42% Y-o-Y. However, sales activity in Carroll Gardens dropped at an even sharper rate than in DUMBO, coming in at 65% below Q2 2019.

Hitting a median sale price of $1.46 million following a 38% Y-o-Y drop, Cobble Hill was Brooklyn’s #3 priciest neighborhood in Q2 20201 and #8 city-wide. This was after a somewhat artificially inflated median in Q2 2019, elevated by the 17 sales registered at The Cobble Hill House, where the median sale price was $2.32 million.

On the other end of the borough’s pricing spectrum stood Gerritsen Beach, Coney Island and Midwood, which logged the lowest median sale prices. In particular, Gerritsen Beach was Brooklyn’s #1 most affordable neighborhood at $402,000, following a 7% Y-o-Y slide. Sales activity here dropped a mere 5% Y-o-Y, while Coney Island dropped 39% Y-o-Y.

However, Coney Island’s median gained 6% to become Brooklyn’s #2 lowest median. Meanwhile, Midwood’s 32% Y-o-Y drop pulled its median sale price down from last year’s $650,000 to $441,000 in Q2 2020, and transactional activity was slashed by 43% Y-o-Y.

All in all, the borough’s median sale price dipped 2% Y-o-Y, closing Q2 at $702,000. Notably, Brooklyn’s sales activity dropped only 32%, representing the lowest decline in transactional activity among the four boroughs.

Queens Snapshot: 34% Y-o-Y Drop Makes Briarwood Borough’s Lowest-Priced Neighborhood

In Queens, eight neighborhoods were among the city’s 50 most expensive. Nonetheless, the borough navigated a tumultuous second quarter with sales activity dropping 42% Y-o-Y. It registered only 1,365 sales, as opposed to 2,340 in Q2 2019. Queens’ median sale price, however, rose 12.3% Y-o-Y, reaching $520,000 in Q2 2020.

Fresh Meadows was its #1 most expensive neighborhood at a median sale price of $930,000, following a 9% Y-o-Y uptick. While that growth rate was lower than the borough’s 12.3% Y-o-Y gain, Fresh Meadows’s median was upheld by the type of properties that changed hands. In fact, in Q2 2020, only single-family homes were sold here, all of which sold for more than $800,000. As a result, Fresh Meadows’ $930,000 median also made it the #27 most expensive neighborhood in NYC.

Queensboro Hill was Queens’ #2 priciest neighborhood with an $893,000 median sale price. That number tied it with Manhattan’s Gramercy Park to secure the city’s #32 priciest neighborhood. While Queensboro Hill’s sales activity plummeted 60% Y-o-Y, Hunters Point saw sales surge 123%. The borough’s #3 priciest neighborhood at $890,000, Hunters Point tied Brooklyn’s Greenwood Heights for the NYC neighborhood with the second-highest gain in transactional activity.  

Queens’ #1 lowest-priced neighborhood was Briarwood at $213,000, following a 34% Y-o-Y reduction in its median sale price. Both here and in the borough’s #2 most affordable neighborhood of Corona, sales activity was halved.

Likewise, Corona’s median was also on the downswing, dropping 32% Y-o-Y to $260,000. In the meantime, Lindenwood — Queens’ #3 best-priced neighborhood — bucked the trend with a 7% Y-o-Y increase to reach $270,000 in Q2.

Bronx Snapshot: Up 13% Y-o-Y, Spencer Estates Becomes Most Expensive Neighborhood in the Bronx

As usual, the Bronx didn’t manage to make its way among the city’s 50 priciest neighborhoods.  However, it did register the sharpest pricing gain among the four boroughs, climbing 12.5% to a median sale price of $325,000, although sales activity fell 46% Y-o-Y. Its #1 most expensive neighborhood was Spencer Estates, which logged a $619,000 median after a 26% Y-o-Y price expansion. As such, it ranked as the #67 priciest NYC neighborhood.

NYC’s #74 priciest neighborhood and the Bronx’s #2 highest, Morris Park just made the cut with five sales at a $585,000 median sale price. And, with an 8% Y-o-Y pricing gain, Pelham Gardens was the #3 priciest Bronx neighborhood at $572,500, while its sales activity dipped 8%.

Tied at a median sale price of $162,500, High Bridge and Fordham became the lowest-priced neighborhoods in the Bronx. Specifically, High Bridge’s median ticked up 3% Y-o-Y with transactional activity unchanged, while Fordham’s sales were halved, and its median dropped 34% Y-o-Y.

Meanwhile, following a 16% Y-o-Y appreciation, Kingsbridge Heights became the #2 most affordable Bronx neighborhood at $185,000, while Parkchester’s 8% Y-o-Y bump gave it the #3 lowest median sale price in the Bronx at $188,750.

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Economics

Energy Stocks Are Down, But Remain Top Sector Performer

High-flying energy shares have hit turbulence in recent weeks but remain, by far, the leading performer for US equity sectors so far in 2022, as of yesterday’s…

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High-flying energy shares have hit turbulence in recent weeks but remain, by far, the leading performer for US equity sectors so far in 2022, as of yesterday’s close (June 27), based on a set of ETFs. But with global growth slowing, and recession risk rising, analysts are debating if it’s time to cut and run.

The broad-based correction in stocks has weighed on energy shares lately. Energy Sector SPDR (XLE) has fallen sharply after reaching a record high on June 8. Despite the slide, XLE remains the best-performing sector by a wide margin year to date via a near-36% gain in 2022.

By contrast, the overall US stock market is still in the red via SPDR S&P 500 (SPY), which is down nearly 18% year to date. The worst-performing US sector: Consumer Discretionary Sector SPDR (XLY), which is in the hole by almost 29% this year.

The case for, and against, seeing energy’s recent weakness as a buying opportunity can be filtered through two competing narratives. The bullish view is that the Ukraine war continues to disrupt energy exports from Russia, a major source of oil and gas. As a result, pinched supply will continue to exert upward pressure on prices in a world that struggles to quickly find replacements for lost energy sources. The question is whether growing headwinds from inflation, rising interest rates and other factors will take a toll on global economic growth to the point the energy demand tumbles, driving prices down.

The market seems to be entertaining both possibilities at the moment and is still processing the odds that one or the other scenario prevails, or not. Meanwhile, energy bulls predict that the pullback in oil and gas prices is only a temporary run of weakness in an ongoing bull market for energy.

Goldman Sachs, in particular, remains bullish on energy and advises that the potential for more prices gains in crude oil and other products “is tremendously high right now,” according to Jeffrey Currie, the bank’s global head of commodities research. “The bottom line is the situation across the energy space is incredibly bullish right now. The pullback in prices we would view as a buying opportunity,” he says. “At the core of our bullish view of energy is the underinvestment thesis. And that applies more today than it did two weeks, three weeks ago, because we’ve just seen exodus of money from the space… investment continues to run from the space at a time it should be coming to the space.”

Meanwhile, a bit of historical perspective on momentum for all the sector ETFs listed above reminds that the trend direction remains bearish overall. But contrarians take note: the downside bias is close to the lowest levels since the pandemic first took a hefty bite out of market action back in March 2020 (see chart below). This may or may not be a long-term buying opportunity, but the odds for a bounce, however, temporary, look relatively strong at the moment.


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Commodities

Gold as an investment; a long-term perspective

To many investors, gold was a disappointment during the COVID-19 pandemic and the high-inflation period that followed. Instead of protecting a portfolio…

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To many investors, gold was a disappointment during the COVID-19 pandemic and the high-inflation period that followed. Instead of protecting a portfolio from inflation, the price of gold declined from its all-time high reached in 2020.

At the same time, inflation in the US and other advanced economies kept rising. Nowadays, inflation in the UK is expected to reach double-digit territory at the end of this year and runs at more than four decades high in the US.

Moreover, the news that a huge gold deposit was discovered in Uganda made many wonder what the point of investing in gold is if it isn’t so scarce. The new deposit has some 320,000 tonnes of extractable pure gold.

But time is on gold’s side. As an uncorrelated asset with the main financial markets, gold has its place in an investment portfolio.

Because of that, an analysis of the price of gold from a long-term perspective is useful as it helps filter the noise. After the bullish breakout in the early 2000s, the price of gold is in a bullish run, unlikely to end despite the recent underperformance.

Only bullish patterns followed the early 2000s bullish breakout

In the early 2000s, gold traded below $400/ounce. A bullish breakout led to several bullish patterns – including the current one, which may end up being bullish after all.

First, it was a pennant – a continuation pattern that was responsible for sending the gold price to $1000/ounce for the first time ever. What followed was an ascending triangle.

After the market had cleared the horizontal resistance given by the $1,000 level, it did not stop all the way to $1,900 in 2012. The move was reversed in the years to follow, but an inverse head and shoulders pattern propelled the price to a new all-time high in 2020, as uncertainty during the COVID-19 pandemic reigned on financial markets.

From that moment on, gold is in a consolidation area. Because it hesitated at horizontal resistance, one may argue that the price of gold forms an ascending triangle. The last time it did so, the market traveled more than $900, so bears might want to watch the current pattern closely.

Gold price’s resilience against the dollar has been impressive

Perhaps the best way to interpret the market is through the eyes of the US dollar. The gold price has been resilient against a rising US dollar, and the chart below shows it accurately.

From June 2020, the gold price did not move much, while the US dollar declined initially, only to recover the lost ground. Hence, gold’s price resilience in an environment of a rising US dollar adds strength to the yellow metal because a strong dollar limits the effects of inflation by offsetting the price of imports.

To sum up, gold is consolidating. A move to a new all-time high should trigger more strength, and a higher dollar might accompany it.

The post Gold as an investment; a long-term perspective appeared first on Invezz.

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Science

How prepared is biopharma for the cyber doomsday?

One of the largest cyberattacks in history happened on a Friday, Eric Perakslis distinctly remembers.
Perakslis, who was head of Takeda’s R&D Data…

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One of the largest cyberattacks in history happened on a Friday, Eric Perakslis distinctly remembers.

Perakslis, who was head of Takeda’s R&D Data Sciences Institute and visiting faculty at Harvard Medical School at the time, had spent that morning completing a review on cybersecurity for the British Medical Journal. Moments after he turned it in, he heard back from the editor: “Have you heard what’s going on right now?”

Eric Perakslis

He had not. While he was knee deep in the review, a ransomware later known as WannaCry ripped through the globe at breakneck speed, descending on a quarter million computers in more than 150 countries. One of the hardest hit groups was the United Kingdom’s National Health Service, which saw tens of thousands of devices — computers, MRI scanners, blood-storage refrigerators and other equipment — compromised, bringing many hospitals to a standstill for several days. By the time the NHS sorted through the rampage, government officials estimated the attack had cost them £92 million, or $120 million, both in direct costs and lost output — including more than 10,000 canceled appointments.

For Perakslis, looking back, the coincidental timing was almost eerie. But having first called on the healthcare industry to take cyber threats seriously in 2014, Perakslis had already warned others something like this could happen.

“I wasn’t surprised at all,” he told Endpoints News. “It’s not validation. It’s just like … I hate to be right.”

Five years and a pandemic later, as the whole world got a crash course on battling a highly contagious virus, the issue of defending oneself against malicious, insidious cyberthreats appears to have quietly taken root in biopharma. It came largely thanks to a confluence of factors, from the new reality of remote work to realizations about how dangerous it could be when, say, the rollout of a lifesaving vaccine is compromised.

Even as some warn industry is woefully unprepared for coordinated attacks, in many ways, drug developers are heeding the call to pay serious attention.

“I actually think that most of the pharmas are getting there,” said Perakslis, who’s since moved to the chief science and digital officer role at Duke Clinical Research Institute. “Do I think they’re meeting the threat? No. But I think they’re doing a good job trying to get there.”

Multiple biopharma companies declined to comment, citing the fear of becoming a target. But experts offered advice on how to navigate the ever-evolving threats of cybersecurity, which can ripple well into the future, in an industry where security is tough in a connected ecosystem of universities, research centers, labs, patient groups and hospitals.

“We need to focus on really defining and explaining what we need to protect,” said Kathryn Millett, a researcher at the UK-based NGO Biosecu.re.

War, crime and others

In 2017, Merck fell victim to NotPetya, an attack instigated by the Russian government that affected multiple big companies. But the aftermath of the attack continued to generate new headlines in 2022.

A court ruled earlier this year in the pharma giant’s favor, deciding that it should be awarded $1.4 billion in insurance payout for the damages it suffered when the malware wiped out years of research, disrupted sales operations and crippled Gardasil 9 production facilities, forcing the company to dip into the US national stockpile.

Bob Maley, chief security officer at the cyber risk monitoring service firm Black Kite, describes it as a “watershed moment.”

It was useful not just in illuminating what could happen when a drugmaker gets swept up in a large-scale cyberattack, but in helping define what people mean when they talk about cyberthreats in the biopharma space. For one, NotPetya illustrated the difference between cybercrime, where the ultimate goal often is to extort money, and cyberwar, which is always meant to be destructive.

“Those things do happen, but I think that for most business purposes, that kind of event — there’s not much we can do about that,” Maley said, referring to NotPetya. “If those state actors decided they’re going to do something in a cyber warfare, they’re going to do it.”

Other, more mundane kinds of attacks, though, can be just as devastating. The potential consequences vary widely, as do the points or modes of attacks, straddling the precarious line between the corporeal and the digital.

Jean Peccoud

The sheer range of possibilities for cyberattacks in life sciences led a group of researchers to propose the term “cyberbiosecurity” in 2017 “as a formal new enterprise which encompasses cybersecurity, cyber-physical security and biosecurity as applied to biological and biomedical-based systems.” Although that was credited by some for kicking off the conversation, Jean Peccoud, a synthetic biology researcher and professor at Colorado State University who co-authored that paper, noted it’s still a broad definition.

“This is a loosely defined field,” Peccoud said in an email to Endpoints.

Depending on who you are and what you are working on, the concerns could be vastly different. Peccoud himself, for instance, believes what’s unique to life science is the “dual representation of DNA sequence”: They exist as both molecules and as computer records, and translating or even transcending the two is increasingly convenient. That’s why for him, the scariest thing that could happen would be a biosecurity incident caused by an engineered organism, possibly with malicious DNA sequences designed in software, which could affect people’s health.

Some may be most worried about confidential data getting leaked; others may fear getting brought to a standstill when hackers lock down operations, demanding a ransom. For many, the nightmare scenario happens when attackers are lurking within company data, and no one knows about it — giving bad actors free reign to tamper with, to take an extreme example, the formula or quality control tests for a drug and thereby endangering patients.

“The state of play as it stands is that the problem of cyberbiosecurity itself is so large and nebulous that we cannot yet provide any clear messaging, guidance or solutions,” Millett of Biosecu.re said.

With bigger data…

While the threats of cyberattack are ubiquitous, security researchers, advocates and vendors have long warned that biopharma was a much greater target than other sectors.

“These industries offer an attractive target for cyberattacks because of their substantial investment in research and development, valuable intellectual property, connected IT and operational networks, and sensitive stores of data,” an MIT group wrote in 2018.

Emil Hewage

Emil Hewage is co-founder and CEO of BIOS Health, a Y Combinator-backed startup striving to personalize neural medicine through real time reading of patients’ neural code.

“In the discovery ecosystem we generate every week more data than that has been generated by public research efforts,” he said. “So we’re talking about many terabytes of brand new data sets per week.”

BIOS is but one player riding on a tidal wave of new discovery technologies generating data at unprecedented scale, which is often accompanied by the requisite analysis tools to interpret them. At the same time, research, development and manufacturing operations are all turning to more sophisticated technologies and data systems to measure and monitor performance on an ever-growing list of indicators.

Kelvin Lee

“The growing emphasis on cybersecurity is occurring at the same time that the industry is arguably changing to one driven by data,” said Kelvin Lee, director of the Manufacturing USA National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL), in an email.

Biopharma companies are also somewhat unique in how they are entangled in a complex ecosystem of universities, research centers, labs, patient groups, hospitals and more. That’s not to mention regulators, who impose an additional layer of compliance requirements.

“It’s not just a matter of number of systems, but also number of integrations between those systems,” said Adin Stein, head of engineering operations, IT and cybersecurity at cell therapy developer Lyell.

Then there are more ways for hackers to target companies. Businesses in general have been using more devices and connecting them, exponentially expanding the number of what security folks call “attack surfaces.”

“This is more data to lose or more subtle ways for that to be extracted and exhibited privily now,” Hewage said.

Perakslis and Peccoud also both point to a concept in the cyber space known as asymmetry: For any corporation, cybersecurity is a cost that executives try to minimize. Hackers, on the other hand, stand to gain immensely from an attack, and one person can theoretically take down an entire company (even though they usually work in groups these days).

The good thing about general problems is that general solutions exist, such as employee training and cyber hygiene.

At Black Kite, Maley said his team has gone through a long list of recommended cyber practices to try and predict which companies are most at risk of becoming victims of ransomware.

“What we found was that the bad actors, out of all those hundreds of things that could be exploited, they were only exploiting a very small subset,” he said. “What’s shocking to me is so few things that a company could do to reduce their likelihood of being a victim, for some reason, they just don’t do.”

They include patching the systems on old servers to get rid of vulnerabilities, configuring emails so that it’s harder for hackers to send phishing emails, mandating multi-factor authentication and asking employees not to use the same passwords for everything — lest their login information end up on the dark web and become easy keys for hackers in attacks dubbed credential stuffing.

“Basic, basic, basic kind of things,” Perakslis said. “It doesn’t protect you from the really hard stuff. But again, it’s like driving without a seat belt, you know. Seat belts are not going to keep you out of an accident. But it’s dumb if you get into an accident, you didn’t have one on.”

Building defense

When Kathryn Millett at Biosecu.re first conducted a pilot survey of biotech and cybersecurity leaders, all respondents agreed that cyberbiosecurity risks posed a “real and current threat.” In a follow-up survey that’s still ongoing, she’s heartened to find that the awareness has “trickled down to lab practitioner level.”

“I think there’s been enough sort of news out there, you know, and enough big stories that biotech is really taking notice, and recognizing that there’s a lot at stake and they don’t want to be part of that story,” Stein, the Lyell exec, observed.

Even if biopharma companies don’t go around boasting about it, plenty of signs point to a greater emphasis on cybersecurity. Big Pharma is increasingly bringing chief information officers into the executive suite when in the past they might have reported to the CFO. By Perakslis’ count, budgets are also increasing.

A report by cybersecurity solution provider Fortinet last year found that 98% of pharmaceutical companies surveyed “experienced at least one intrusion,” and around half of them saw between three and five intrusions. But importantly, business-critical data or intellectual property were among the least impacted.

Troy Ament

“With the uptick of these intrusions in general, companies have likely gotten better about protecting business-critical data, but that’s not to say cyberattacks targeting these pharmaceutical organizations are not serious, but it is possible that data is better segmented to prevent cascading impact if an intrusion happens,” said Troy Ament, Fortinet’s chief information security officer.

Lee, the NIIMBL director and University of Delaware professor, noted that while the leading pharma companies are sophisticated in the space, performance is also uneven.

“Smaller companies in the field that have just a few years of experience usually do not have strong cybersecurity protocols or the funding to invest in third-party analysis and compliance services,” Alex Zhavoronkov, co-CEO of the AI drug discovery company Insilico, wrote to Endpoints. “This sometimes worries me a lot.”

At companies that do allocate enough resources, cybersecurity often consists of three pillars: cutting-edge technology that cements every system update patching vulnerabilities; outside experts who provide intelligence and an assessment of risk levels; and a framework to integrate the handling of cyberattacks into the rest of the risk management system.

“One of the best cybersecurity strategies starts with assuming you’ve already been hacked because what happens when you’re hacked, you’re going to look for data that’s leaving,” Perakslis said, and he noted companies are getting better about using real time threat surveillance data to identify and jump on issues.

Alex Zhavoronkov

Biopharma could also learn from other industries, Maley said, learning from case studies such as the breach experienced by Colonial Pipeline, where a mix of exposed remote access ports and credential stuffing led to catastrophe.

For smaller players, Hewage noted, it’s best to start thinking about cybersecurity before they lay their hands on sensitive data. Alternatively, Zhavoronkov noted Insilico decided to lower the risk by minimizing the amount of patient data its platform relies on — while carefully following compliance protocols demanded by Big Pharma partners and engaging providers to perform stress tests.

“I think as you think about particularly emerging biotech, one of the key lessons that I’ve picked up on through the community is the idea of security by design,” Stein said. “It is easier to put a security program in place and develop a culture of security than it is to go back and retrofit.”

Still, no defense is permanent.

“While the industry has certainly taken notice, being on alert never ends,” Ament said.

Culture of secrecy

After a cyberattack, biopharma companies are reluctant to share what happened with other drugmakers, losing what could be teaching moments. Maley said what to disclose has been an issue even going back to a 2006 cybersecurity conference that he attended.

“We’re still talking about it 16 years later,” he said.

To this day, Merck has kept public statements about the NotPetya attack to a minimum. And while others, from Dr. Reddy’s to Roche to Bayer to more recently Novartis, have reported cyber intrusions, they often don’t offer any details beyond whether any sensitive data were compromised.

There are legitimate reasons for staying mum, Perakslis said: “One of the important reasons is that you would never give an adversary your playbook.”

There are also few laws requiring disclosure, while board members do have a fiduciary responsibility to shareholders — which often means to limit bad press.

“I think most companies when they experience these things, one of the first questions that management asks is, well, who do we have to tell? Not who should we tell,” Maley said.

But conversations do happen, Stein said, where specifics are kept confidential and lessons are shared, whether through speaking engagements at conferences, consulting vendors or contributing to the creation of industry standards.

“I wouldn’t assume that if you’re not hearing from a particular organization, they’re not contributing very heavily to quite complex discourse,” said BIOS CEO Hewage. “And in some senses, it’s best to trust really heavily peer reviewed and vetted, industry wide conversation.”

Government agencies can sometimes play that middleman role. The US Department of Homeland Security, for instance, has established Information Sharing and Analysis Centers for early information sharing; the Department of Health and Human Services set up the Health Sector Cybersecurity Coordination Center to do something similar and alert stakeholders to threats; and the UK is also reviewing its biosecurity strategy.

That said, it is nearly impossible to truly tell how prepared a certain company is against cyberattacks — and even with options for sharing, companies tend to be selective about what they say. As a pharma insider told Endpoints, “There’s no prize for naiveté.”

Finding a balance

Even those who are most steeped in cyberbiosecurity advocacy tend to acknowledge that cybersecurity cannot, and should not, be the sole focus of biopharma companies. Their stated mission, after all, is to develop new vaccines and treatments for diseases.

With all the other projects, plans and needs vying for attention, Perakslis said it’s all a matter of prioritization and resource allocation — thinking through how much money to spend on things that are likely but low impact, versus those that are unlikely but high impact.

Understanding the risks and impact thoroughly, then, becomes key.

Finding reference in other areas, Peccoud noted that the aviation industry has an incident reporting system that’s essential to develop its safety culture. Voluntary reporting is shielded from prosecution, which, along with the National Transportation Safety Board, provides material that can be discussed in training or to develop regulation.

“Without transparency the bad guys will always have the edge,” he said.

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