Drug makers turning to nonprofits for cash
Disease foundations hand over millions to boost research
In addition to raising venture capital and launching stock offerings, Massachusetts biotech companies are increasingly turning to another source of funding to support early drug research: nonprofit foundations dedicated to fighting serious diseases.
For instance, the Cystic Fibrosis Foundation, said it has awarded more than $300 million to for-profit companies over the past decade to help develop cutting-edge therapies for the debilitating disease, including $192 million in the Boston area. Cystic fibrosis, which ravages the lungs and digestive system, affects roughly 30,000 people in the United States.
Epix Pharmaceuticals Inc. plans to say today that the foundation will give it as much as $37.7 million, in addition to about $12 million it has already received, to help the Lexington company discover new cystic fibrosis drugs. The money is contingent on Epix's meeting certain goals.
Other foundations are following suit. For example:
Overall, disease foundations invested roughly $75 million in the biotech industry last year, up from $7 million in 2000, according to CenterWatch Monthly, an industry publication.
"It's becoming a significant method of funding," said Robert Coughlin, president of the Massachusetts Biotechnology Council, which is brainstorming ways to help bring more foundations and biotech companies together.
Like most other disease foundations, the Cystic Fibrosis Foundation originally steered its research awards to academic and nonprofit researchers to conduct basic research. But it needed drug companies to start developing actual therapies to treat the disease.
That wasn't happening, though, partly because cystic fibrosis affects relatively few people.
"We thought we had good targets, but the companies weren't interested. They wanted to go after big diseases," said the foundation's president, Robert Beall.
Even companies that might be interested in treating rare diseases weren't pursuing cystic fibrosis drugs because it is so difficult to raise money for early drug discovery work.
Most investors prefer to wait until a company can offer some preliminary evidence that it's on the right track before pouring in tens of millions of dollars into a fledgling research program.
Beall decided to give companies money to do that early, basic research - jump-starting their research programs.
Beall said the investment has already shown results. The Cystic Fibrosis Foundation estimates it has helped to produce more than 30 potential drugs. And just two weeks ago, Cambridge-based Vertex Pharmaceuticals Inc. reported promising - though early - results for a cystic fibrosis drug it has helped to develop with foundation funding, called VX-770.
Once companies start showing results, disease-research advocates say, firms can usually raise the rest of the money on their own to bring a drug to market.
The Cystic Fibrosis Foundation, for example, gave Vertex $79 million to help find drugs to treat cystic fibrosis. But Beall said Vertex is willing to spend a significant amount of its own money to conduct further trials to prove VX-770 is safe and effective. While the foundation didn't receive any stock for its investment, it did gain the right to some royalties if the drug becomes successful.
Coughlin, who has a 5-year-old son with cystic fibrosis, said the work is important because it gives families like his hope. "Unfortunately, cures are bought. It costs a lot of money to get ideas from the bench to the bedside," said Coughlin, who has personally raised money to help find a cure for cystic fibrosis.
In the case of Epix, the biotech has already used money from the Cystic Fibrosis Foundation to create and analyze three-dimensional models of the defective protein that is believed to cause the disease in more than 80 percent of patients. Epix now plans to use the additional foundation money to start identifying possible drugs to thwart the illness.
Epix's chief executive, Michael Kauffman, said the company's imaging technology gives it an edge. "It's a lot easier to make a key to fit a lock if you know what the inside of the lock looks like," he said.
But is foundation money any better or worse than venture capital money?
"The flip answer is that all money is green," Kauffman said. "But it really depends on the quality of the partnership. We've been very happy with the Cystic Fibrosis Foundation."
Todd Wallack can be reached at twallack@globe.com.
