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Financing translation: analysis of the NCATS rare-diseases portfolio.

Abstract
The portfolio of the National Center for Advancing Translational Sciences (NCATS) rare-diseases 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 potential risks and rewards of investing in a portfolio of rare-disease therapeutics. Using a "megafund" financing 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 modified 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.
AuthorsDavid E Fagnan, N Nora Yang, John C McKew, Andrew W Lo
JournalScience translational medicine (Sci Transl Med) Vol. 7 Issue 276 Pg. 276ps3 (Feb 25 2015) ISSN: 1946-6242 [Electronic] United States
PMID25717096 (Publication Type: Journal Article, Research Support, N.I.H., Intramural, Research Support, Non-U.S. Gov't, Review)
CopyrightCopyright © 2015, American Association for the Advancement of Science.
Topics
  • Calibration
  • Healthcare Financing
  • Humans
  • Rare Diseases (economics)
  • Research Support as Topic (economics)
  • Translational Research, Biomedical (economics)

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