Nothing Ventured

One of my hobby horses has been the possibility of a “BMGF Ventures Fund” emerging from the slow-as-molasses program-related investment (PRI) efforts of the Bill & Melinda Gates Foundation.  To recap, PRIs are IRS-sanctioned investments or loans that a charity may make in/to other organizations, like companies and investment funds, that are aligned with its mission.  The Gates PRI program started in 2009 and now has $1 billion to invest in “revenue-generating enterprises” in health and education (Gates PRI).  After hearing a presentation by a Gates PRI officer at BIO 2012 last spring, I wrote about my disappointment (“BIO Bits”), noting that the program:

  • Had no clear investment philosophy or criteria;
  • Offered no way for interested parties to submit business plans for consideration like many of the VC firms;
  • Seemed not to have professional management;
  • Had made only one investment to date ($10 million into Liquidia, a company with a nanotechnology platform applicable to vaccines but no global health focus); and
  • Seemed not to be taking an active role in the companies in which it invests (e.g., taking a real, not an observer, seat on the company board).

The good news since then is that another PRI officer, Julie Sunderland, wrote in a blog post last June that more PRI will be going into biotech companies, but the “scale-up” would be over the “next couple years” (Gates Foundation blog).  More recent good news is that the Gates made PRIs in two more biotech companies in the second half of 2012, so its rate of investment doubled between 2011 and 2012.  The foundation invested an undisclosed share of a $30 million C round  in Genocea, a vaccine development company using a T-cell antigen generation platform (Genocea press release) and was a co-investor with another company in a $13 million A series for Visterra, a company that uses “network analysis of proteins” to generate antibody drugs aimed at infectious disease (Visterra press release).  [Although some sources have stated that a company called Atreca received a Gates PRI, I’m pretty it was a research grant (Atreca press release).]

I also noticed that the Gates may be starting a “Global Health Investment Fund” (GHIF) using its PRI budget.  According to a venture philanthropy advisory firm, Impact IQ, the GHIF is “seeking to raise $100 million to invest in technologies to tackle tuberculosis, malaria, HIV, diarrhea and maternal and infant mortality,” offers a 2% return plus 80% beyond the 2%, and has a novel “downside protection” clause (Impact IQ blog).  It also appears that fund’s management company is Lions Head, a UK investment bank rather than a VC firm (Lions Head projects).  Since active bio/medtech venture capital firms invest at least $12 million into four start-ups annually (Timmerman Xconomy), I’d say the Gates PRI program is still in low gear and needs to ramp up if it wants be a significant source for funding and a push for global health in the biotech industry.

So if I worked for the PRI program (for which there is a very small chance since I have no one has replied to my application to the position posted in December [Senior Program Officer]), what opportunities would I recommend the Gates throw a few millions at?  Here are few listed by increasing levels of risk.

In the existing-early-stage-company category are:

  • Vaxxas (Vaxxas) which is developing a “nanopatch” delivery system for vaccines which I wrote about recently (“Vax Patch”), the rationale being that the system has a high potential for cost savings in manufacture and deployment and needs a few critical tests in humans for proof-of-concept; and
  • NKT Therapeutics (NKT) of nearby Waltham, MA, which is developing drugs to target “natural killer T-cells” to reverse inflammatory conditions like sickle-cell anemia (SCA), the rationale being that SCA is a neglected disease of children in Africa (see my post, “Virtual Reality Biotech Reprise” ) and the company has a candidate monoclonal antibody ready for clinical studies and is run by two capable managers I know from my days at Wyeth and GlycoFi.

In the existing-company-ripe-for-a-buy-out-and-reboot category are:

  • Medicine in Need (MEND) which has a promising nanotech approach to thermo-stable vaccines but I think has run through its funding and has AWOL management (see my post, “Ringing in Another Year” ); and
  • Millennium Biotechnology, Inc., based in Hendersonville, NC, whose owner is selling its line of RDTs (rapid diagnostics tests) for global  diseases like dengue, Chagas, and typhoid and some RDT manufacturing equipment, could be a nice turn-key buy.

In the raw-startup-company category, there are two opportunities I have noted:

  • “PharmaCheck” which is a prototype device for field evaluation of drug quality (good or finding counterfeit drugs) that is being developed by Prof. Muhammad Zaman at Boston University (MassHighTech article), the rationale being that the inventor just got a grant for testing and, if the technology works on many drugs, it may have dual market use; and
  • the “V-Chip” which is a pretty cool diagnostic system using mini-wells and channels etched in glass with a visual readout and under development by its inventors, Prof. Lidong Qin and colleagues at The Methodist Hospital Research Institute, Houston, Texas (Fierce Med Devices article and Nature Communications), the rationale being the technology needs much product design and development that the inventors can’t do and the University of Texas Medical Branch (a likely co-owner) is a signatory of the equitable access statement promulgated by the Association of University Technology Managers (Nine Points statement) and should be pleased to have a licensee for global health applications.

If so inclined, send your checks and preferred investment(s) to me and I’ll be in touch.

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