Non-profit and industry investors propose paediatric cancer fund

European investors are seeking to unlock extra funds for new childhood cancer treatments through an innovative pharmaceutical financing project developed jointly by private investors and non-profit groups.

The “pooled fund” is designed to reduce the high costs of developing new treatments. It would do so partly by increasing the number of experimental drugs being tested, raising the chances that some will succeed. It would also reduce the risks of unsuccessful new products by bringing in capital from non-profit backers who do not seek financial returns.

The plans were outlined in an article in a recent edition of the academic journal Nature Reviews Drug Discovery. The initiative would also offer equity stakes to investors, take on debt finance and seek “advanced reimbursement agreements” with healthcare systems. The agreements would guarantee revenues for new drugs meeting agreed outcomes.

The initiative reflects the renewed focus on innovation models in medical research against a backdrop of rising costs and falling productivity for pharmaceutical companies.

Sam Daems, lead author of the article and a portfolio manager at Waterland, a Dutch private equity group, said exploratory discussions were under way with potential backers. They included the foundations of several pharmaceutical companies, medical charities and private family offices.

“We have had orienting discussions with private investors,” Daems said. “There is a clear interest and appetite.”

The aim was to launch fundraising next year for €500mn, he added.

Traditional drug companies have relatively small interest in disease areas with limited revenues, including antibiotics and “neglected” or “orphan” diseases. Such diseases are concentrated in lower-income countries or affect only small numbers of patients.

The large disease burden and high pricing of drugs for cancer mean it already receives a large share of total pharmaceutical research and development funding. But paediatric cancers have been more neglected.

Andrew Lo, a professor at MIT Sloan who was consulted on the new project, proposed a $30bn cancer “megafund” a decade ago to combine drug testing projects to diversify risk.

The idea had already inspired smaller-scale applications at companies such as BridgeBio and Roivant, he said.

“If we can change the incentives and reduce risk, the increased reward will bring more money,” Lo said.

In one example of an innovative approach to drug development, the Cystic Fibrosis Foundation used a “venture philanthropy” model to fund research and development of the drug ivacaftor. It was then licensed to and launched by Vertex, the Boston-based pharmaceutical company.

The US Food and Drug Administration, meanwhile, has awarded a number of “priority review vouchers” to offer developers accelerated regulatory review of a relatively lucrative drug in return for developing another, less profitable one.

The AMR Action Fund has pooled funding from multiple drug companies and other backers to help cover the costs of testing of experimental antibiotics, although it has warned that it still needs greater efforts by governments to pay.

A number of public-private partnerships such as the Medicines for Malaria Venture have blended philanthropic support with prototype medicines tested in co-operation with drug companies. It recently gained approval in Brazil for use of a single-dose of tafenoquine to treat malaria.

Warning about the limits of potential new approaches, Evan Seigerman, an analyst at BMO Capital Markets, said that when the end-user market was “more limited”, it was harder to justify upfront investment.

“You need the experience of the biopharmaceutical industry to develop drugs,” he said. “The people who have that are within the pharmaceutical companies.”

One pharmaceutical industry veteran said he welcomed any new initiative to develop medicines.

But he added: “This approach looks remarkably complex.”