title: 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.
authors.affiliation: Operations Research Center, Massachusetts Institute of Technology (MIT), Cambridge, MA 02142, USA. Sloan School of Management and Laboratory for Financial Engineering, MIT, Cambridge, MA 02142, USA.
authors.forename: David E
authors.initials: DE
authors.lastname: Fagnan
authors.affiliation: National Center for Advancing Translational Sciences, U.S. National Institutes of Health, Rockville, MD 20850, USA.
authors.forename: N Nora
authors.initials: NN
authors.lastname: Yang
authors.affiliation: National Center for Advancing Translational Sciences, U.S. National Institutes of Health, Rockville, MD 20850, USA.
authors.forename: John C
authors.initials: JC
authors.lastname: McKew
authors.affiliation: Operations Research Center, Massachusetts Institute of Technology (MIT), Cambridge, MA 02142, USA. Sloan School of Management and Laboratory for Financial Engineering, MIT, Cambridge, MA 02142, USA. Computer Science and Artificial Intelligence Laboratory and Department of Electrical Engineering and Computer Science, MIT, Cambridge, MA 02139, USA. AlphaSimplex Group, LLC, Cambridge, MA 02142, USA. alo-admin@mit.edu.
authors.forename: Andrew W
authors.initials: AW
authors.lastname: Lo
mesh_terms: D002138:Calibration; D061889:Healthcare Financing; D006801:Humans; D035583:Rare Diseases / Q000191:economics*; D012109:Research Support as Topic / Q000191:economics; D057170:Translational Research, Biomedical / Q000191:economics*