Financing translation: Analysis of the NCATS rare-diseases portfolio

David E. Fagnan, N. Nora Yang, John C. McKew, Andrew W. Lo
2015 Science Translational Medicine  
PERSPECTIVE The portfolio of the National Center for Advancing Translational Sciences (NCATS) rarediseases therapeutic development program comprises 28 research projects initiated at the preclinical stage. Historical data reveal substantially lower costs and higher success rates but longer preclinical timelines for the NCATS projects relative to the industry averages for early-stage translational medical research and development (R&D) typically cited in literature. Here, we evaluate the
more » ... valuate the potential risks and rewards of investing in a portfolio of rare-disease therapeutics. Using a "megafund" f nancing structure, NCATS data, and valuation estimates from a panel of industry experts, we simulate a hypothetical megafund in which senior and junior debt yielded 5 and 8%, respectively. The simulated expected return to equity was 14.7%, corresponding to a modif ed internal rate of return of 21.6%. These returns and the likelihood of private-sector funding can be enhanced through third-party funding guarantees from philanthropies, patient advocacy groups, and government agencies. by guest on July 21, 2018
doi:10.1126/scitranslmed.aaa2360 pmid:25717096 fatcat:xkhqlfbb4jbm5glyr5nhvrn23a