How can we close the cancer funding gap?

Cancer affects almost everyone. At current rates, one in two men and one in three women will develop the disease at some point in their lives. However, opportunities for financing cancer research are relatively plentiful. By addressing some of the relevant funding gaps, investors can alleviate the personal and social suffering inflicted by cancer and give themselves a chance of earning a significant long-term return.

In recent years, we've witnessed significant breakthroughs in developing treatments. The HPV vaccine, for instance, is making rapid progress in eliminating cervical cancer among teenage girls. And because cancer is a life-threatening illness, regulators tend to be more flexible in their approach. Last year, the US Food and Drug Administration issued its fastest ever approval for a cancer drug. Over the long term, demand is also likely to grow as the world population ages.

Nevertheless, cancer treatments face two key financing obstacles. The first obstacle concerns affordability – particularly in emerging markets, where average incomes are lower. One solution is to spend a portion of pharmaceutical revenues on funding access to treatment. With public financing in emerging markets coming under increasing pressure, there are also opportunities for private investors to step in and offer separate for-profit solutions.

The second obstacle is connected with developing treatments. Today, several pharmaceutical and biotechnology companies are testing novel cancer drug candidates in late-stage clinical trials – many of which we believe will be on the market over the next two years and ultimately have multi-billion-dollar sales potential.

However, studies have highlighted that the quarterly earnings cycle, real-time pricing, and constant scrutiny of corporate performance from shareholders have encouraged pharmaceutical companies to focus on projects with clearer and more immediate payoffs at the expense of more speculative but potentially transformative and lucrative research.

As a result, funding for the riskiest segment of the drug-development process – the translational phase between basic research and human clinical trials – is severely limited. For example, the aforementioned study revealed that only $6-7 billion was spent on translational efforts, while $48 billion was spent on basic research, and $125 billion was spent on clinical development that same year.

Long-term investors can help overcome these financial and social obstacles by embracing impact investing, or investment strategies that aim to achieve a social impact as well as a competitive financial return. By agreeing to commit capital for multi-year periods, investors can help plug intermediate gaps in the drug development process. They can also seek to earn a venture capital-style profit in cases where the relevant drugs are brought to market. Moreover, they can commit to reinvesting a portion of revenues in improving access to treatment in emerging markets and elsewhere.

For ultra-high net worth investors, impact investing is a particularly attractive solution. Ultra-wealthy individuals have more spare capital than average as well as fewer potential short-term cash flow needs. As a result, they can afford to lock up more capital in longer-term opportunities. In particular, impact investing gives them a chance to earn a long-term return at the same time as aligning their portfolios with their personal values and social concerns.

For ultra-wealthy individuals, donating money to fund cancer treatments is not a new activity. However, impact investing helps them direct a greater portion of their for-profit portfolios towards this urgent public cause. For cancer sufferers and their families, this is likely to be a welcome development.

Learn more about the 2016 class of Young Global Leaders.