April 28, 2016
UBS, MPM Seek Big ‘Impact’ in Cancer Drugs with $471M Fund
By Marie Powers, BioWorld Today, April 28, 2016
UBS Wealth Management is getting into the cancer game.
The financial services giant, which has joint headquarters in Basel and Zurich, Switzerland, raised $471 million to close the UBS Oncology Impact Fund, thought to be a first-of-its-kind initiative aimed at developing curative therapies for various types of cancer.
One of the world’s largest global wealth managers, UBS is partnering with longtime biopharma venture investor MPM Capital, which will manage the fund. Investments will target early stage oncology companies, mostly emerging from academic research labs, with the goal of accelerating molecules of interest through proof-of-concept studies. Through a royalty arrangement, a portion of sales from each successful cancer drug supported by the impact fund will go toward additional research with an equal amount supporting expanded access to cancer care for patients in the developing world.
In response to interest from clients and from the global community, UBS already had undertaken an initiative to move impact investing into the mainstream. The financial services firm contributed to the G8-affiliated Social Impact Investment Task Force (now the Global Social Impact Investment Steering Group) and to World Economic Forum reports on mainstreaming impact investing. UBS also integrated impact investing into its sustainable investing reports and white papers.
Oncology was selected as the first indication of interest for an impact fund thanks to a supportive regulatory environment and compelling need, according to Mark Haefele, global chief investment officer at UBS Wealth Management. Haefele had a keen interest in seeing transformative therapies emerge in oncology after losing his mother to cancer nearly two decades ago. But about 18 months ago, UBS principals began looking more closely at the global impact of cancer and talking in earnest about the investment thesis in oncology.
UBS focuses on certain long-term investment themes, including urbanization, population growth and aging. Cancer cut across all three, Haefele said, citing World Health Organization estimates that 14 million people will be diagnosed and 8 million will die from cancer this year, with 60 percent of the diagnoses and 70 percent of the deaths occurring in the emerging world.
Globally, cancer drug development also has matured into a $100-billion industry with a growth rate of more than 10 percent annually – higher in certain sectors such as immunotherapy – yet per capita health care spending in the emerging world remains roughly half that of developed regions.
“Health care spend grows as people in emerging societies become wealthier, indicating to us that the growth rate for these drugs and the associated revenues would be well in excess of global [gross domestic product] growth for a significant period to come,” Haefele explained.
Innovative oncology drugs that demonstrate efficacy in controlled trials and show the potential to cure even late-stage patients have a good track record of approval from the FDA and EMA and quickly gain value in the marketplace, he added.
“It was clear that this is a really good time to start investing in the oncology space,” Haefele told BioWorld Today. Thanks to insights gleaned from the human genome that were being applied to cancer immunotherapy R&D, “in the time since my mother was diagnosed and died, we’ve learned more about cancer than we had known throughout human history.”
‘THIS IS AN AMAZING TIME TO INVEST IN ONCOLOGY’
UBS selected MPM as its partner based on its track record of partnering with universities, identifying interesting drug assets, helping to form start-ups and then selling those ventures to larger biopharmas. During initial meetings with academic researchers in Boston, the collaborators struck upon the notion of making an impact not by finding a magic bullet to cure cancer but by targeting the cure of “cancers” – some of the hundreds of forms of the disease, many driven by genetic variations.
MPM may invest on behalf of the Oncology Impact Fund on its own or as part of a syndicate but will always do so in conjunction with a stake by BV2014, its $400 million venture fund, according to Ansbert Gadicke, MPM co-founder and managing director. The intention is for the impact fund to maintain a sufficient stake in a company so that, when the investment is sold, 1 percent of the royalties from any approved drugs that emerge from the deal will go to impact projects – half toward basic cancer research and the other half to the UBS Optimus Foundation to provide access to cancer care in the developing world.
“We see the impact fund as complementary to our venture fund,” which invests almost exclusively in early stage biotech companies, Gadicke told BioWorld Today. “Oncology is our largest area of focus currently, mainly because we look for technologies that offer major advantages over current therapy. Today, we see most of those dramatic advances happening in oncology.”
MPM has an impressive list of exits, including two holdings cited by Gadicke – Idenix Pharmaceuticals Inc. and Pharmasset Inc. – that went for billions to Merck & Co. Inc. and Gilead Sciences Inc., respectively, to expand their pipelines of nextgeneration hepatitis C virus (HCV) drugs. (See BioWorld Today, Nov. 22, 2011, and June 10, 2014.)
The type of curative approach those companies were applying to HCV therapies now seems possible in cancer, Gadicke maintained, noting that some biopharmas are demonstrating that long-term remission or cure is achievable in certain forms of cancer.
In particular, “immuno-oncology is a key area for this fund because we see a dramatic impact for patients,” he acknowledged. “When we find projects that show similarly major impacts on patients in other areas of oncology, we’ll consider those for investment, as well.”
Technologies that offer incremental gains measured in a few months rather than years will likely be off the table, however.
The Oncology Impact Fund already has disclosed two investments. Oncorus Inc. is developing a cancer immunotherapy platform, while TCR2 Therapeutics is engineering T cells for cancer therapy using a differentiated approach from chimeric antigen receptor, or CAR, T cells and from T cells engineered to express defined T-cell receptor (TCR) alpha/beta chains. Both start-ups are based in Cambridge, Mass.
A third investment is based in Europe but details have not been disclosed.
Although most companies in the impact fund are expected to be start-ups, later-stage private biopharmas and public firms may be considered for the portfolio, provided their focus remains on demonstrating proof of concept for a cancer platform or agent. The evergreen fund is expected to make 10 to 15 investments over the next five years. Each holding is expected to exit, on average, in three to four years, according to Gadicke.
Although he declined to specify the impact fund’s potential stake in individual companies, Gadicke said MPM’s venture fund typically invests approximately $20 million over the life of each portfolio company. MPM partners with two or three syndicate partners to launch companies with kitties of about $30 million to $50 million.
If the impact investment model is validated by the oncology fund, UBS may expand the concept into other indications such as neurodegenerative diseases. In fact, interest from wealth clients was so strong – the majority of money was raised in the Asia-Pacific region – that UBS could have raised the target but wanted to keep the fund at a manageable size and begin making investments.
“This is not philanthropy,” Haefele said, noting the strategy represents a unique offering for wealth clients. “This is a performance-plus approach, which is designed to generate returns in the space but with the extra piece of societal impact.”
“We believe this is an amazing time to invest in oncology,” Gadicke added. “If you went to a cancer conference five years ago, you didn’t hear the term ‘cure.’ If you go to a cancer conference today, you hear lots and lots of presentations where people talk about curing patients.”