ImpactAlpha, Nov. 10 – The Gates Foundation’s $55 million equity investment last fall into a German biotech company could have big payoff: an effective vaccine for COVID-19 and a breakthrough in vaccine technology for infectious diseases more broadly.
The foundation’s investment, made months before the arrival of the novel coronavirus, was intended to steer German biotech company BioNTech and its breakthrough approach toward vaccines and immunotherapies for tuberculosis and HIV. In the race for a COVID vaccine, BioNTech provided its ‘messenger RNA’ technology platform to Pfizer, which this week reported positive early results from its COVID vaccine trial.
Messenger RNA vaccines, or mRNA, vaccines are a holy grail for vaccine developers, who have been chasing success for decades. Rather than using inactivated doses of organisms that cause disease, mRNA vaccines trigger the body to produce such antigens itself.
Think of mRNA technology as a software solution that is potentially much faster, and cheaper, than hardware. A number of companies have pursued mRNA strategies, including for COVID vaccines, but no vaccine using the technology has yet been brought to market. Alongside the investment in BioNTech, the foundation committed up to $45 million in grants to underwrite clinical trials for tuberculosis and HIV candidates and support other infectious disease projects.
The Gates Foundation’s investment predated BioNTech’s COVID-19 work and the foundation has not provided direct support to the Pfizer/BioNTech candidate vaccine. But the foundation could nonetheless realize a hefty return on its equity investment in the company BioNTech’s shares on the Nasdaq surged Monday, giving the company a market capitalization of more than $25 billion.
Any proceeds from an eventual sale of the foundation’s equity in BioNtech would be rolled back into the foundation’s programs to fund future public health and other philanthropic goals of the foundation. The publicly traded company is also backed by German billionaire twins, Thomas and Andreas Struengmann.
The Gates Foundation also owns a small stake in Pfizer dating back to 2002, along with positions in Johnson & Johnson and Merck. In March, Pfizer was one of 15 life sciences companies that joined a Gates Foundation-led consortium to accelerate the development, manufacture, and delivery of vaccines, diagnostics, and treatments for COVID-19.
In September, Bill Gates told CNBC, “The only vaccine that if everything went perfectly, might seek the emergency use license by the end of October, would be Pfizer.”
Gates Foundation officials declined to comment on its investment in BioNTech. The foundation, one of the largest private funders of public health, has laid low since becoming the target of unfounded conspiracy theories after it said in February that it would donate $100 million to coronavirus vaccine research and treatment. The foundation pledged an additional $1.6 billion to GAVI, the global vaccine alliance, which finances and coordinates efforts to immunize children against infectious diseases.
In July, Bill Gates, co-chair of the foundation, felt compelled to rebut the conspiracy theories, which were reflected in a survey that found 28% of U.S. adults believed a debunked theory that he planned to use a COVID vaccine to implant microchips in people to monitor their movements. “We need to get the truth out there,” Gates told CBS News. “I hope it’ll die down as people get the facts.”
Rather, the foundation’s ‘program-related investments’ into biotech companies are part of a strategy to “nudge” private biotechnology startups to turn their techniques toward neglected diseases (see, “Nudging biotech startups to tackle diseases of the developing world”). The Gates Foundation’s $2.5 billion set-aside for program-related investments, or PRIs, is the nation’s largest.
The foundation has invested in dozens of biotech companies, often accompanied by grants to fund specific projects. With many of the most promising approaches being pursued by private companies, the PRIs had been intended to increase the chances of a hit on vaccines and drugs for diseases such as malaria, HIV, and typhoid.
Like commercial biotech investors, Gates Foundation wants a successful hit on vaccines it is pursuing. Unlike a traditional biotech VC, which usually invests in one company it believes is the best, the foundation spreads its bets on a number of competitors in an effort to increase the probability of success.
BioNTech was one of the Gates Foundation’s more recent mRNA technology investments. In 2015, a $52 million equity investment in CureVac, another German biotech company, sought to develop the company’s mRNA platform for use in viral, bacterial and parasitic infectious diseases, including rotavirus and HIV.
The foundation has provided multiple grants to Moderna, the Seattle-based biotech working with National Institutes of Health on a COVID vaccine, to advance the company’s mRNA-based cocktail to help prevent HIV infection.
All three companies are pursuing COVID vaccines.
Equity investments can help align the interests of the companies and the foundation in ways that grants cannot, James Rosen, formerly the deputy director of PRIs at the Gates Foundation, told ImpactAlpha in an earlier interview.
“If, say, there’s a vaccine platform technology for heart disease and cancer that is also applicable to HIV, we say, ‘Let us help you with the development of the platform,’” said Rosen, now managing partner of venture philanthropy investor Three Lakes Partners. “There are incredible technologies that are housed within biotech companies.”