To raise public awareness of cancer and money for treatment and potential cures, millions of people bike, walk, run, and buy products adorned with images of colored ribbons. Now, MIT finance professor and hedge fund manager Andrew W. Lo has another idea about how to further the cause — by harnessing the power of financial wizardry. Lo wants to create a “megafund” that would raise billions of dollars for early-stage research in cancer drugs.
Lo — who was named one of Time Magazine’s 100 Most Influential People in the World for 2012 — is talking about getting the world’s biggest investors to get behind a $30 billion fund that would kick-start research and development of cancer drugs. As he explained it to the Globe, a pool of super investors would put their money into this oncology fund, in exchange for a percentage of future royalties or proceeds from sales of intellectual property. He predicts that even if just a few of the treatments work to reduce the disease, equity investors could earn returns of 7 to 10 percent.
Apart from the benefits for investors, this approach could also help researchers work around the financial barriers to bringing new treatments to market. The cost of developing groundbreaking new drugs is stiff enough that even pharmaceutical companies with seemingly vast resources may focus instead on small improvements to familiar treatments. The difficulty of making bigger advances will only increase if deficit-reduction plans slash government-funded cancer research, on which private efforts often build.
Lo’s megafund, an idea he first pitched in a paper published in the journal Nature Biotechnology, addresses this dynamic. “Only with massive scale can you reduce the risk of this early-stage research,” he says. It’s encouraging to see financial creativity being put to such good use.
Lo’s interest in cancer research has a very personal inspiration. When he lost his mother to lung cancer, he felt helpless to do much about it. But from helplessness springs hope. He has come up with a way to put his special affinity for numbers to work in a positive — and investor-friendly — way to fight cancer in all its insidious forms.