Getting Your Gates

How one company used the growing nonprofit funding pot to jump-start its development program, and how you can do the same.

By | November 1, 2006

<figcaption> Credit: © DANIJEL MICKA</figcaption>

In the 1980s, Toronto-based Polydex Pharmaceuticals was developing dextran products, including a high-viscosity cellulose-dextran compound intended for developing Polaroid film. The film company, however, eventually chose to use another chemical. Some years later, research showed that dextran-based compounds were an effective contraceptive that also killed the herpes and gonorrhea viruses as well as HIV. Polydex CEO George Usher had a hunch that the cellulose-dextran compound stored in his warehouse might work. Usher tracked down initial funding from a now-defunct nonprofit organization to do animal studies, and the results looked promising.

Over the past five years, nonprofit funding organizations have greatly increased their presence in drug R&D.

The company already had the infrastructure and expertise in working with dextran-based products, and the compound had initially been developed as an industrial product, so production costs had been tightly managed. But the company had only $2 million in annual sales and was in no position to fund additional studies. "What part of 'money' don't you understand?" Usher quipped to the scientists who were pestering him to back more testing. The market Polydex was looking at did not spell blockbuster or even a profitable niche, so venture capital funding or a partnership with Big Pharma did not seem a likely route. Government agencies such as the US Agency for International Development (USAID), the Foundation for the National Institutes of Health, and the Canadian and European governments had grants earmarked for potential products that could be distributed cheaply in developing countries to slow the spread of HIV and other sexually transmitted diseases. These programs, however, are subject to the waxing and waning of government funding. Usher saw another way.

Over the past five years, nonprofit funding organizations have greatly increased their presence in drug R&D, says Chris Earl, CEO of BIO Ventures for Global Health (BVGH), a nonprofit organization based in Washington, DC, that creates incentives for drug companies to target diseases of developing countries. BVGH was spun out of the Biotechnology Industry Organization and is supported in part by the Bill and Melinda Gates Foundation and the Rockefeller Foundation. "Some markets are better than you might think, if you have a valuable, affordable drug," he says. "There has been a revolution in the amount of money for the developing world in the past five or ten years." Other organizations similar to BVGH have also emerged that have nonprofit money available to for-profit companies. Taken together, these collaborations are called product development partnerships (PDPs).

Usher teamed up with CONRAD, formerly the Contraceptive Research and Development Program, an Arlington, Va.-based nonprofit dedicated to finding new ways to prevent pregnancy and sexually transmitted infections in developing countries. Its funding comes mainly from the Gates Foundation and USAID. CONRAD is helping Polydex to develop Ushercell, its cellulose-dextran-based microbicidal prophylactic. Ushercell is now in Phase III trials in India and Africa, and CONRAD will have contributed approximately $40 million to its development, trial monitoring, and manufacturing. Without this partnership, Polydex could never have afforded to take its drug to human trials. Moreover, the drug probably would have stalled during drug development, because Polydex had no expertise in human clinical trials. "I could spell FDA, but that's about it," says Usher.

In their agreement, CONRAD allowed Polydex to maintain all commercial and intellectual property rights to Ushercell. In return, Polydex has given a written promise to offer Ushercell to developing countries at a miniscule profit margin. "Usually we try to have a nonexclusive license in the developing world," says CONRAD CEO Henry Gabelnick. "For most of our other products, we do have rights to the intellectual property." But Polydex was clear that maintaining IP rights was a make-or-break issue, and CONRAD was flexible; the deal still ensured developing countries would be protected from soaring prices. CONRAD is also helping Polydex navigate the intricacies of regulatory government agencies, including the FDA and African and Indian government offices.

Four Tips for a Winning Proposal

Nonprofits and their inter­mediaries have varying funding models, but some common approaches can increase chances for a successful proposal.

1. Conduct significant fact-finding in your chosen area of R&D to understand the needs and issues of third-world development projects you are targeting. While you may be using this type of project ultimately as a stepping stone to for-profit goals, the solutions you are proposing must reflect a practical knowledge of third-world needs. "I went to Africa and saw the destruction of HIV," says Polydex CEO George Usher. He adds that he started to understand the cultural issues and how Ushercell could be a practical solution.

2. Stress speed in your approach to R&D, and what your company will do to expedite the process. "The bottom line is that we want the groups who can do it the fastest and most efficiently ... and we will pay them to do it," says Zeda Rosenberg, CEO of the International Partnership for Microbicides.

3. Include specific goals rather than broad aims, and make sure the project is milestone-driven, as you would for a partnership proposal with another biotech or pharma company. "We were used to NIH-style grants with specific aims and areas of exploration," says Jack Newman of Amyris. "Having specific milestones provides insight and clarity to the project."

4. Include input from people in different functions throughout your company. This will not only give the proposal a well-rounded science, business, and operational focus, but also get your staff thinking about other in-house programs that could be leveraged with this type of funding. Items considered in proposals, says John Wecker, director of immunization solutions at the Program for Appropriate Technology in Health, include the reputation of the company, its economic viability, and its scientific and technological capabilities.

Other companies have also taken the leap into nonprofit. Amyris Biotechnologies, based in Emeryville, Calif., used an agreement with the nonprofit pharmaceutical company One World Health - via $42.6 million in funding from the Gates Foundation - to develop an antimalarial drug for developing countries. The drug, called artemisinin, is a product of synthetic biology. The company has designed microbes to make the active form of the drug and can scale up production to get hundreds of grams of very pure compound at a fraction of what it costs to laboriously extract the chemical from wormwood, its natural source.

"We work with partners to ensure availability and affordability. The key is that the end products reach people." -John Wecker

Such a strategy is appealing to nonprofit organizations. "We work with partners to ensure availability and affordability.­ The key is that the end products reach people," says John Wecker, director of immunization solutions at the Program for Appropriate Technology in Health (PATH), a nonprofit based in Seattle. Amyris used the funding to build its drug development platform and improve its technologies - crucial elements in developing artemisinin. The company will see its drug distributed in developing countries, a laudable goal that boosts the morale and focus of an already good place to work, says Jack Newman, director of research at Amyris. The company retains the R&D experience as well as the rights to the technology, and it will use them to create products intended for the US market.

Gates Gatekeepers

Institute for OneWorld Health
San Francisco
Seeks: 1) Drugs for dysentery, cholera, and other diarrheal diseases; 2) expert scientific volunteers to help design clinical trials and drug testing. The institute funds an average of one to two development projects per year in amounts ranging from $250,000 to $14 million.
Contact: Initial letters of inquiry require a three-page summary of the proposed project. For information:
"We are not set up like a venture fund," says James Hickman, vice president of communications. "Once we identify technology or product leads from industry or universities that would benefit the developing world and fit into our portfolio, we seek the philanthropic funding necessary to accomplish the project."
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Program for Appropriate Technology in Health (PATH)
Seeks: 1) Discovery and/or preclinical and clinical development of specific pneumococcal vaccine candidates; 2) collection and characterization of pneumococcal­ strains or sera; 3) four-year projects to improve maternal and newborn health, either by household/community involvement or the proposal of a theme-based intervention in India.
Contact: To view requests for proposals, go to
"When we partner with small biotechs or large pharmaceutical companies we sometimes provide financial support or cost-sharing to run clinical trials," says John Wecker, director of immunization solutions at PATH. "Sometimes, we give money to small biotechs developing a new approach for a new drug or vaccine," he adds.
more >>

Global Alliance for TB Drug Development
New York City, Brussels, Cape Town
Seeks: Partners to develop compounds with novel mechanisms of action and demonstrated efficacy that work against validated targets in tuberculosis. New treatments should be effective against drug-resistant TB strains as well as compatible with antiretroviral treatment for HIV. The TB Alliance is also interested in projects that advance the science of TB drug development.
Contact: Zhenkhun Ma, R&D,
more >>


Avatar of: Mark D Perkins

Mark D Perkins

Posts: 1

November 8, 2006

The interesting article "Getting Your Gates" outlined the increasingly powerful role that the non-profit sector, especially Gates-funded PDPs, are playing in drug development, including with small, innovative companies. This is also true in the area of diagnostics. The Foundation for Innovative New Diagnostics (FIND), has moved with Gates funding to accelerate the development, evaluation, or use of improved diagnostics for infectious diseases in developing countries. Financial support from FIND, along with a clear understanding of developing world markets, makes feasible the development of innovative products that may have looked financially marginal. At the same time, novel IP management and costing strategies ensure the affordability of the products for impoverished sectors of society in disease endemic countries.
Avatar of: Michael Pollock

Michael Pollock

Posts: 5

November 28, 2006

Gonorrhea is caused by a bacterium, not by a virus. Conflation of bacteria and viruses is very common in the general public, but I am surprised to see it here.\n\n
Avatar of: Mable Orndorff

Mable Orndorff

Posts: 1

November 28, 2006

Thank you, Michael Pollock, I was just getting ready to add that comment and correction. Gonorrhea is a bacterium, whereas Herpes and HIV are viruses.\n\n

November 29, 2006

Our sharp-eyed readers are of course correct; Neisseria gonorrhoeae is a bacterium, not a virus. The Scientist regrets the error, and we will publish a correction in our next issue.

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