Venture Philanthropy is on the Rise, Reaches $75M in 2007
Venture philanthropy is a term coined in the past few years to describe the funding that disease foundations provide to biopharmaceutical companies to research potential drugs and therapies in their respective diseases. Investment by U.S. disease foundations in the biopharmaceutical industry this year will be about $75 million—10 times as much as its investment in 2000, according to CenterWatch estimates.
This marks the first ever market analysis of venture philanthropy in vestment in the biotech industry. The figure should continue to rise.
These foundations believe in metrics, milestones and accountability. They don’t just want to fund drug development; they want to change it. In the biotech sector, they may have met their perfect match.
A number of factors have created the perfect environment for venture philanthropy to thrive. Disappointed by academia’s inability and lack of incentive to translate discoveries into the clinic as well as a reduced National Institutes of Health budget, foundations realized they had to bring industry into the equation or let promising research languish in the lab.
Biotechs have been staring for years into the so-called “Valley of Death”—the preclinical stage of development that presents a too high-risk investment to attract venture capitalists anymore. These companies couldn’t conduct translational research in rare diseases without external funding sources. Foundations are the only organizations willing and able to fill that funding gap now, but not without careful consideration and a firm understanding of what they want from biotechs in return.
But, disease foundations do not just give money to industry. Money doesn’t solve problems such as protocol development and patient recruitment on its own. In addition to money, disease foundations provide valuable resources and expertise to further de-risk the joint venture between them and biotech.
Five leading foundations have a venture philanthropy component. Their programs promise to be an increasingly important part of the drug development landscape in the decade to come. They are: The Cystic Fibrosis Foundation, Multiple Myeloma Research Foundation, Muscular Dystrophy Association, Juvenile Diabetes Research Foundation, and The Michael J. Fox Foundation for Parkinson’s Research.
Their work and money will have positive implications not only for patients who will benefit from the therapies that result, but also for the industry as a whole.