Financing drug discovery for orphan diseases

David E Fagnan; Austin A Gromatzky; Roger M Stein; Jose-Maria Fernandez; Andrew W Lo

doi:10.1016/j.drudis.2013.11.009

Financing drug discovery for orphan diseases

Drug Discov Today. 2014 May;19(5):533-8. doi: 10.1016/j.drudis.2013.11.009. Epub 2013 Nov 20.

Authors

David E Fagnan¹, Austin A Gromatzky², Roger M Stein³, Jose-Maria Fernandez⁴, Andrew W Lo⁵

Affiliations

¹ MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; MIT Operations Research Center, Cambridge, MA, USA.
² MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; Whitehead Institute for Biomedical Research, Cambridge, MA, USA.
³ MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; State Street Global Exchange, New York, NY, USA.
⁴ MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA.
⁵ MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; MIT Operations Research Center, Cambridge, MA, USA; MIT Computer Science and Artificial Intelligence Laboratory, Cambridge, MA, USA. Electronic address: alo@mit.edu.

PMID: 24269746
DOI: 10.1016/j.drudis.2013.11.009

Abstract

Recently proposed 'megafund' financing methods for funding translational medicine and drug development require billions of dollars in capital per megafund to de-risk the drug discovery process enough to issue long-term bonds. Here, we demonstrate that the same financing methods can be applied to orphan drug development but, because of the unique nature of orphan diseases and therapeutics (lower development costs, faster FDA approval times, lower failure rates and lower correlation of failures among disease targets) the amount of capital needed to de-risk such portfolios is much lower in this field. Numerical simulations suggest that an orphan disease megafund of only US$575 million can yield double-digit expected rates of return with only 10-20 projects in the portfolio.

Publication types

Review

MeSH terms

Animals
Capital Financing / economics*
Capital Financing / methods
Clinical Trials as Topic / economics
Clinical Trials as Topic / methods
Drug Discovery / economics*
Drug Discovery / methods
Fund Raising / economics*
Fund Raising / methods
Humans
Orphan Drug Production / economics*
Rare Diseases / drug therapy
Rare Diseases / economics*