Financing drug development via adaptive platform trials

Abstract

We propose a new approach to funding disease-specific drug development via a variation of the adaptive platform trial. This trial is designed to test a portfolio of drug candidates in parallel, with the cost of the trial partially covered by investors who receive payments from a royalty fund of the candidates in exchange for investment. Under realistic assumptions for cost, revenue, probability of success, drug sales, and royalty rates, investors may expect a return of 28%, but with a 22% probability of total loss. Such return distributions may be attractive to hedge funds, family offices, and philanthropic investors seeking both social impact and financial return. Return distributions palatable to mainstream investors may be achieved by funding multiple platform trials simultaneously and securitizing the aggregate cash flows.