Why nonprofits fund companies that do drug research

Science has made paralyzed rats walk, cured mice of cancer and eliminated Alzheimer's in more lab rodents than you can count. Human patients? Not so much. "There's frustration that developments from academic labs don't get picked up by (drug and biotech) companies," says Dayton Coles, board member of the Juvenile Diabetes Research Foundation.

Fed up with breakthroughs that fill journals rather than medicine chests, private foundations and charities that have traditionally funded academic scientists have started doing the once-unthinkable: writing checks for millions of dollars to for-profit companies. It's a sign of desperation. One reason there have been so few drug breakthroughs lately is that the profit motive actually works against the development of new pharmaceuticals. Drug companies suffer from blockbuster-itis, the belief that only billion-dollar almost-sure things need apply for development. As a result, even the most brilliant discovery may not be translated into a drug unless it has 10-figure sales potential. Also, short time horizons on the part of venture capitalists, who generally want to see their biotech bets pay off in three years, don't mesh well with the lengthy drug-development process. Enter the charities. Earlier this month, JDRF announced that it was giving $2 million to MacroGenics Inc., a Rockville, Md., biotech, for a phase-2/3 clinical trial of an antibody that might slow progression of type-1 diabetes.

This week the Michael J. Fox Foundation announced that it had awarded Sangamo $950,000 to apply its gene-regulation research to slowing Parkinson's disease. In March, Families of Spinal Muscular Atrophy, founded by parents of children with this rare disease, ponied up $402,500 to help Paratek Pharmaceuticals, Inc., Boston, develop a drug for the disease.

Charities realize that writing checks to for-profits might not be what their donors had in mind. "We debated whether it was right for our money to go to a company that might make a profit," says JDRF board member Michael White. "We're not unconcerned about that. But we've invested so much in discovery, what we need now is to take these things to market. We're taking on the role of 'venture philanthropists.'"

Courtesy of the Wall Street Journal