Andrew Lo, an MIT finance engineering professor, when he floated idea of funding new drug development with CDOs -- collateralized drug obligations. The CDOs would be able to invest in a series of drug development projects that would pay returns if they resulted in successful treatments reaching the market.
The idea would be for investors to put up $50 B to $100 B to fund 150 drug projects over 10 years. Hopefully, this would be another funding mechanism and would relieve pressure on getting all the funding from government sources, weakened VC networks and Big Pharma itself.
Naysayers may point out that the CDO concept didn't work out too well for housing and mortgages -- but Lo counters that he forsees a big funding gap for drugs in the coming years and that this would mean a drop in new treatments.
Lo says, "If there's a cancer bubble, I can live with that." I don't know if CDOs are viable but I like the novel thinking to bring an idea like that to the table for consideration. See Fierce Biotech.
Posted by Bruce Lehr May 4th 2012.