Bets on Biotech
The nonprofit world steps in to finance for-profit drug ventures
The foundation pledged to give Aurora, which conducted bioassay screens to aid in drug development, $42 million provided it met project deadlines. The foundation's experiment might have stalled when Vertex Pharmaceuticals bought Aurora in 2001. But by then Aurora had already developed an assay to help test the effectiveness of a cystic fibrosis drug. So the publicly held Vertex kept working with the foundation. "If the CF Foundation was not willing to step up and support early-stage development, I am positive we wouldn't have prioritized work," says Vertex President Joshua Boger. The research was too risky, and "it's not a market that Wall Street is going to get excited by," he says.
The CF Foundation has invested over $161 million in drug development. Donors are demanding new approaches, says Beall. "It's not like the old days where you gave $50,000 and hope it goes well. That's all gone. Everyone now is held accountable." But some nonprofits have warmed up slowly to the idea of making investments that might not pay off. Earlier this year the Prostate Cancer Foundation, founded in 1993 by former junk bond king and cancer survivor Michael Milken, re-evaluated its strategy. It decided to start working with for-profit ventures to help them design clinical trials, although it has yet to fund a company.
Billions. The Bill and Melinda Gates Foundation, the world's largest foundation and a major funder of drug development, has given nonprofits focused on treating diseases raging in the developing world another incentive to test out the entrepreneurial model. The Microsoft founder is experimenting with his wealth to find new ways to target cures. "They are the biggest game in town, putting billions of dollars a year into existing and new treatments," says Christopher Earl of BIO Ventures for Global Health, which tries to persuade biotech companies to take on nonprofit projects. "The biotech industry is an integral part of that."
Drug companies have typically shied away from diseases prevalent in poor countries because they can't charge a premium for cures and protect drug patents. And biotech scientists are stunted by the lack of sustainable markets for any drugs they develop. So international foundations are working to spur multinational companies into exploring these areas.
The biotech-nonprofit marriage may still hit some rough patches. Figuring out pricing can be tricky, as can knowing when to pull the plug on research. In addition, as venture capital regains its appetite for start-ups, biotech entrepreneurs might turn their noses up at foundation money. But industry insiders say the successes so far show it's a financing model that should gain momentum. So biotech executives had better start honing their grant-writing skills.
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