title: Financing drug discovery for orphan diseases.
abstract: Recently proposed 'megafund' financing methods for funding translational medicine and drug development require billions of dollars in capital per megafund to de-risk the drug discovery process enough to issue long-term bonds. Here, we demonstrate that the same financing methods can be applied to orphan drug development but, because of the unique nature of orphan diseases and therapeutics (lower development costs, faster FDA approval times, lower failure rates and lower correlation of failures among disease targets) the amount of capital needed to de-risk such portfolios is much lower in this field. Numerical simulations suggest that an orphan disease megafund of only US$575 million can yield double-digit expected rates of return with only 10-20 projects in the portfolio.
authors.affiliation: MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; MIT Operations Research Center, Cambridge, MA, USA.
authors.forename: David E
authors.initials: DE
authors.lastname: Fagnan
authors.affiliation: MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; Whitehead Institute for Biomedical Research, Cambridge, MA, USA.
authors.forename: Austin A
authors.initials: AA
authors.lastname: Gromatzky
authors.affiliation: MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; State Street Global Exchange, New York, NY, USA.
authors.forename: Roger M
authors.initials: RM
authors.lastname: Stein
authors.affiliation: MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA.
authors.forename: Jose-Maria
authors.initials: JM
authors.lastname: Fernandez
authors.affiliation: MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, MA, USA; MIT Operations Research Center, Cambridge, MA, USA; MIT Computer Science and Artificial Intelligence Laboratory, Cambridge, MA, USA. Electronic address: alo@mit.edu.
authors.forename: Andrew W
authors.initials: AW
authors.lastname: Lo
mesh_terms: D000818:Animals; D002202:Capital Financing / Q000191:economics* / Q000379:methods; D002986:Clinical Trials as Topic / Q000191:economics / Q000379:methods; D055808:Drug Discovery / Q000191:economics* / Q000379:methods; D005653:Fund Raising / Q000191:economics* / Q000379:methods; D006801:Humans; D009965:Orphan Drug Production / Q000191:economics*; D035583:Rare Diseases / Q000188:drug therapy / Q000191:economics*