Camera, lights, action: what biotech can learn from the film industry

This is one suggestion made by the US economics think tank, the Milken Institute, in response to the crisis in funding that has opened up in biomedical research, creating the need to develop new channels for attracting capital to drug development.

Promising discoveries in cancer and other diseases languish for lack of capital resources and development expertise, and developed products fail as a result of inadequate access to markets, claims the Institute.

Current woes

The crisis is exemplified by the current woes of the pharmaceutical industry, with its thinning pipelines and aversion to risky, early stage research. As a result R&D output, as measured by applications to the FDA for permission to conduct clinical trials or to register new drugs on the market, has plummeted.

The shortage of funding is most acute in the early stages of drug discovery and development, says the report.

Meanwhile, less than 10 percent of global investment in pharmaceutical R&D targets the diseases that affect up to 90 percent of the world’s population.

In the face of this, the Milken Institute recently ran two Financial Innovation workshops to identify ways to leverage private foundation resources and donations to reduce credit risk, attract investors and accelerate commercialisation.

In addition to the idea of setting up film industry-style investment vehicles, the report suggests applying charitable funds to attract investors. While a diversified pool of drugs under development for Alzheimer’s disease may have only moderate scientific risk, there is too much financial risk to qualify as an investment vehicle. But with the backing of a charitable foundation the credit quality of the pool could be increased, opening up funding to a significantly larger group.

The report also suggests tapping into the emerging market for IP backed loans or securities, and the creation of instruments which are indexed to the value of IP.

Billions in bonds

And there is a proposal that drug development companies could follow the lead of eight EU governments, which in May this year issued bonds worth $4 billion for immunisation programmes in Africa and Asia, offering pledges of future donors as collateral.

Drug development could be funded also in exchange of future royalties. This mechanism has been adopted by a number of smaller biotech companies.

“In the current financial environment, good ideas with the potential to cure disease are nearly impossible to find,” the report notes. “The biotech industry is undergoing a painful shake up that could impede, if not derail, the advancement of treatments and cures.”