Investing in Brain Cancer - Part 4
Patient Advocacy Groups, Foundations & Family Offices
There are many ways to make an “investment” in brain cancer, but only some of them involve the deployment of capital into organizations seeking to develop new therapies. Patient support, advocacy and navigation are critical to the overall journey of a brain cancer patient, caregivers and family.
It takes several horses to pull the wagon, so we celebrate the great work of all groups working on brain cancer. We, however, focus our efforts on investing to build treatment leverage for the broadest possible ROI for patients. In the end, this approach seems to be the most effective way to help as many people as possible.
With now more than 200 MissionGBM families actively engaged with us (and growing), we have yet to find a way to create more than 24 hours in each day, so we choose to emphasize the areas in which we can make a difference. Continue reading to see how we think the most impact can be produced.
Patient Advocacy Groups & Foundations
Most organizations in this category tend to be 501(c)(3) non-profit entities, which come into being often as a result of a Founder whose family has been affected by the disease in question. The Founder is passionate, driven, resourceful and does not take “No” for an answer – all of which are characteristics of a classical entrepreneur. These are our kind of people. But there are limitations.
What are the chief limitations of a 501(c)(3) entity?
Non-profit groups tend to rapidly evolve their focus to be fundraising machines. Search “Form 990 [insert your favorite non-profit here]” and follow the links to review the required Form 990 that all 501(c)(3) entities must file in the US (Private Foundations file a Form 990-PF). Funding is required to pay employee compensation, operations, fundraising and professional fees, which tend to gobble up a substantial proportion of the Contributions and Income. That does not leave much for research or investment funding, often no more than 10-25% of the annual top line, which in absolute terms translates to $2-10 million in aggregate spread over multiple grants or investments. Grants tend to be a few thousand dollars to as much as $1 million. Helpful, but not very impactful, and best targeted at early stage basic research. How does an organization upgrade its throw weight? By turbocharging fundraising, of course. Spend more on marketing; add a few Board members who are high net worth individuals expected to make sizeable donations; or mount an interminable lobbying effort with government agencies.
Non-profit groups struggle to attract business-oriented executives with a proven track record of results. Because the organizations usually have modest Income and Balance Sheets, it is not possible to pay the market rate for executives with a track record of producing business results even if the Founder is a successful entrepreneur or business owner. As a result, the organization often is populated by well-intentioned people who just have not “been-there-and-done-that” in the business environment. The language of business and investment is foreign; the relationships are not in place; and the use of methods familiar in the business world, but unconventional in the non-profit world are lacking.
Bottom Line: Foundations have an important role to play, but it mainly involves patient advocacy, support, navigation, messaging and lobbying. Successful investing attached to a foundation requires the more business-like model of Venture Philanthropy (see below).
Venture Philanthropy as a Path Forward
Venture philanthropy is an effective model that has been emerging over the past 20-30 years. A few non-profit organizations have been successful at establishing investment operations with enough capital and executive talent to produce results in terms of approved therapeutic agents which have fundamentally changed patient lives. Two organizations stand out (we had active venture philanthropy relationships with both in their early days).
Cystic Fibrosis Foundation (CFF). Back in the 1990s, the former CEO of the CFF was frustrated with the BioPharma industry’s reluctance to engage in the development of novel medicines for CF. A Venture Philanthropy model was created under which a non-profit organization (the CFF) provided $40 million funding to a for-profit Biotech company (Aurora Biosciences; acquired by Vertex Pharmaceuticals) in order to de-risk the extraordinarily risky process of drug development, especially for a rare disease with a modest number of patients. Fast forward almost 30 years and the results have been spectacular. Vertex has gained approval for multiple new CF drugs that have improved patient’s lives all over the world. Research and investment in CF is rocketing forward. In exchange for going at risk with its investment into Aurora/Vertex, the CFF reasonably secured royalty rights should the funding result in commercial medicines. In 2014, the CFF sold its royalty rights for CF treatments developed by Vertex to Royalty Pharma for $3.3 billion. In 2020, the CFF sold additional royalty rights for up to $650 million in payments. The money has been deployed to further advance R&D in CF.
Spinal Muscular Atrophy Foundation (SMAF). The SMAF was founded in 2003 by the parents of a child with SMA. Both parents came from successful careers on Wall Street, and understood the language, relationships and methods of business. Like the CFF, the SMAF knew that it had to form partnerships with the BioPharma industry focused on targeted investments to re-risk the development of medicines for SMA. Over the past 20 years, more than $150 million has been invested by the SMAF on basic, translational and clinical R&D. Multiple life-changing new therapeutic agents have been approved and more are on the way in pipelines worldwide. In 2021, the Harvard Business School published a case study describing the work of the SMAF. The Founders and executives of the SMAF are generous with their time in terms of speaking with dozens of groups each year seeking advice about best practices in the Venture Philanthropy arena. MissionGBM has been delighted to connect a few family offices and ultra-high net worth individuals interested in brain cancer investing to the SMAF in order to better understand the Venture Philanthropy model.
For context, it is proper to point out that both CF and SMA are far less biologically complex diseases than just about all brain cancers. In CF and SMA, there are only a few affected proteins, which are controlled by a limited number of genes. The proteins are either damaged or missing, and their function or absence can be corrected by targeted delivery of a therapeutic agent. Neither disease is proliferative or invasive, and the affected cells are more homogeneous than is observed for brain cancers.
Bottom Line: Venture Philanthropy works and should be explored more broadly in brain cancer investing. Transformational progress will be observed over many years, and will require sustainable effort from a business-oriented organization.
Family Offices
Early in my career, I learned that every ultra-high net worth (UHNW) individual or family office has a close family member affected by a terrible disease. Neurodegenerative, auto-immune, neuropsychiatric and cancer diseases top the list. Having obtained wealth via business success, the scions frequently wish to attack the diseases by establishing an entity to fund R&D in the area of interest. What happens next is a matter of ego versus a focus on data and results.
Everyone has an ego, and sometimes a successful, wealthy person assumes that success in one area seamlessly transfers to another area in which the person has no experience or track record of success - say human biology and drug development, for example. Moreover, personal fortunes often are derived from businesses that do not require a decade of investment, rigorous data collection and analysis, and regulatory approvals before a dime of product revenue can be generated. It can be frustrating for UHNW individuals to feel a loss of control or lack of understanding in an area, especially when the clock is ticking on the advancing disease of a family member. We get it; we spend every day with critically ill brain cancer patients all over the world.
Most individuals realize that they need to surround themselves with top talent who have the needed skills and a track record in the disease of interest. The most thoughtful people understand that a judicious application of the business skills that created their fortune can be combined with the capabilities of selected experts to create an organization that operates in a business-like manner regardless of whether the family name is featured on the letterhead. We have confidence in such people, and work with them every day. We do not accept compensation for our work. Instead, we tell them that we will freely contribute our time, expertise and worldwide relationships to create, identify and diligence worthwhile investments in brain cancer. And we will write checks when the opportunity is compelling. This tends to get their attention and establish credibility. It is also the right thing to do. Finally, you will never see our names plastered on anything.
Regarding scale of family office/UHNW investments relative to the capital required to develop new therapeutic agents: This is a big money game. Between $50-100 million is required to bring a single basic discovery into the clinic, and gather a reasonable amount of early stage clinical data. And then it really gets expensive. Even billionaires capable of contributing >$100 million (sometimes annually) pause when they understand the situation. We advise our colleagues to do what we do, which is to focus on seeding and supporting those opportunities that have a thoughtful and efficient plan to gather important translational data in support of building an investable profile that will appeal to Institutional Capital and ultimately the public markets. Success is never guaranteed, but the probability of success is raised under such an approach.
Bottom Line: We are supporters of those family offices who wish to focus on investing to build translational science into investable profiles attractive to Institutional Capital. We believe that such investors are the bedrock of transformational progress in attacking many diseases, including brain cancers.
A Word About Universities and Brain Tumor Centers
When we are approached by family offices and UHNW investors regarding brain cancer, we advise that they meet with leading universities and brain tumor centers, if for no other reason than to understand how such organizations operate and what their objectives truly are. The vast majority of the time we are treated to tales of the organization’s Development Officer proposing a donation of $50 million within 30 minutes of the start of the first meeting. What will we get for our $50 million? A Center with your name on it and a selection of unspecified research programs with unspecified translational objectives, which will be detailed later after the funds are wired. Trust us. Occasionally, these experiences are relayed to us via a mobile phone call in which it is difficult to hear over the sound of turbofan jet engines spinning up at the FBO as the aircraft prepares for an earlier than scheduled departure. Same as it ever was.