Situation

One of the greatest challenges in creating new global health therapies is that they must be safe with few or no side effects. The treatment cannot be worse than the disease, and the low-income patients receiving these critical drugs often lack access to hospital care in the event they have a bad reaction to these medicines. Unfortunately, many promising new small molecule drugs have safety risks which rule them out for global health diseases.

Since the 2002 FDA approval of Humira for the treatment of rheumatoid arthritis, monoclonal antibodies (“mAb”) have consistently shown an excellent safety profile and clinical effectiveness against historically challenging diseases. Because these types of therapies are fairly new and have a high-risk of being ineffective, research and development for mAb has typically focused on high-reward cancer or autoimmune indications rather than infectious diseases in global health. Additionally, early mAb had poor “drugability” including short half-lives that required multiple expensive injections over the course of treatment. mAb have huge global health potential, but few companies are exploring them because of early limitations and the significant financial opportunity elsewhere.

Approach

In 2011, our colleagues on the HIV and Discovery & Translational Sciences teams identified Visterra as a very promising mAb design and engineering platform. The Company was quite young, having spun out of MIT in 2007, but it had a unique approach to identifying targets for mAb. Visterra explored the physics underlying disease targets and the interaction of their individual amino acid building blocks. This was orthogonal to many other mAb development platforms and had significant potential in identifying new targets for notoriously difficult to hit or highly resistant diseases like HIV. It also offered promise in designing mAb with improved drugability.

The Strategic Investment Fund participated in Visterra’s 2012 Series A financing alongside three very well-regarded biotech venture capitalist firms. The foundation’s $6.8 million investment supported the development of Visterra’s lead universal influenza therapeutic program and initiated a new research initiative to identify promising, previously unexplored drug targets against HIV. Unfortunately, despite diligent efforts by the Visterra team, the program was not successful against HIV; the foundation and the Company agreed to cease research into this area following completion of the agreed upon scope of work in 2015.

Luckily, great teams continue to innovate and move forward, and the foundation reinvested in Visterra’s v2.0 platform to close out the Company’s Series C financing in 2017. The goal of this $10.0 million reinvestment was to support the development of an antibody drug conjugate (imagine mAb targeted missiles combined with small molecule drug payloads) and develop Fc engineering to improve mAb half-life and drugability. The theory for the latter is that increasing the time mAb are circulating in the patient’s system from a couple of weeks to a few months could repurpose mAb developed as, for example, a flu or malaria therapy into a vaccine for these and other seasonal diseases.

Results

Visterra was acquired by Otsuka Pharmaceutical in September 2018, six years after the foundation’s initial investment. In between there were highs, including the U.S. Government Biomedical Advanced Research and Development Authority awarding Visterra with an up to $204.5 million grant for clinical trials of its promising flu monoclonal antibody therapy as well as strategic partnerships with A*STAR in Singapore, Serum Institute of India and Vir Biotechnology in San Francisco. There were also lows, including two failed initial public offerings and ongoing struggles accessing venture capital as an infectious disease-focused company. Through it all, Visterra’s management team, board and investors were steadfast foundation partners focusing on good science and working with world experts to systematically interrogate the potential of the Visterra platform for global health. As part of the $430 million Otsuka Pharmaceutical acquisition, the foundation has the right to bring highly promising mAb vaccine candidates to the Visterra team to attempt to increase their half-life. Additionally, the antibody drug conjugate development program will continue.

It is still early days – by decade-long drug development timeframes – in mAb development for global health. We hope that this partnership will one day pay off in safe, effective mAb featuring extended half-lives and/or novel targets, courtesy of Visterra. But this outcome is not certain; only about 1 in 8 new preclinical infectious disease drugs is approved for the mass market. The impact of the foundation’s investment in Visterra is that we have a chance to continue to work with a strong team that is aligned with the foundation’s goals even after the Company was acquired. With enough of these chances and great partners like Visterra, the foundation will create impactful new drugs against challenging global health diseases.

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Situation

In Bangladesh, three-quarters of adults live on less than $2.50 a day and most poor households operate almost entirely within the cash economy. In 2013, only 20% of adults had a formal financial services account. This means these families must save in physical assets, such as livestock or jewelry. Cash gets spent, animals die, and jewelry can be lost or stolen. What’s more, these forms of savings earn no interest and often lose value over time. To send money to family, those without a bank account must rely on couriers or friends who carry cash by bus, which is expensive, insecure, and slow. To borrow money in an emergency, they turn to moneylenders who charge notoriously high interest rates.

Approach

Following the initial success of M-Pesa in Kenya, our Financial Services for the Poor colleagues identified mobile payments as a key strategy to broaden the reach of low-cost digital financial services for the poor. In Bangladesh, 63% of adults owned a SIM card, a key to accessing mobile money – three times the percentage that had a formal financial services account. In partnership with BRAC Bank and local serial entrepreneurs Kamal and Iqbal Quadir, the foundation provided grant funding to help establish bKash in 2010.

The Strategic Investment Fund entered the picture in 2014. Early that year, we provided bKash with scaling capital to help it broaden its distribution into rural and low-income areas and help grow the business to sustainable cash flow. The foundation’s support included an $11 million Series A Preferred Equity investment and a $4 million grant focused on developing new products and services specifically for low income people. The foundation also took an active role to support strong governance for the Company.

Results

bKash’s accelerated entry into less profitable and harder to serve geographies and customer segments resulted in significantly more low-income people using mobile money services. Between 2013 and 2017, the percentage of adults in Bangladesh with access to mobile money accounts has increased from 23% to 45%. During this time, the number of low income people using a digital financial services account within the past 90 days has roughly doubled for both low-income women (from 4 million to 8 million) and low-income men (from 7 million to 13 million) largely through the growth in mobile payments and bKash.

Lessons Learned

Growth equity can rapidly scale an impactful product or service that has achieved product-market-fit and accelerate its adoption by low-income people. Long-term investment instruments like equity also work well with companies that will be critical partners for many years, particularly when partnered with active board support either directly or through jointly-recruited independent directors.

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Situation

The foundation’s Agricultural Development team is deeply committed to empowering farmers in sub-Saharan Africa and South Asia with assets and innovations that allow them to harness the power of commercial markets to obtain what every family seeks: a steady income, nutritious food, stable communities, and education for their children. Access to markets for agricultural products is important for translating increased farm productivity to increased incomes for the smallholder farmer. Without markets, farmers have little reason to invest in their farms. The coffee you buy is likely grown by a family farmer and then purchased by a local coffee cooperative which processes it and resells it to a multinational distributor/retailer. Many of these cooperatives are small, informal and have limited history of financial performance. These factors constrain these organizations’ access to capital which slows their growth, thereby limiting smallholder farmers’ access to markets and reducing families’ incomes.

Approach

In 2009, our colleagues on the Agricultural Development team identified Root Capital as a high-potential partner to provide loans to critical aggregating organizations (like cooperatives) in Africa. Root Capital was selected because it had a strong track record of financing the growth of coffee-producer cooperatives and other agribusinesses in Latin America. The non-profit lender was beginning to enter the Sub-Saharan Africa market, and the Strategic Investment Fund provided a $10 million loan commitment, disbursed over time, to be on-lent to high-impact agribusinesses that provided access to markets for low-income farmers. The loan was supplemented by a $4 million grant for operating and permanent lending capital and to offset any future write-offs in the portfolio (effectively, the “equity” on Root Capital’s non-profit balance sheet).

Results

Root Capital successfully repaid the loan from the foundation upon the note’s maturity in early 2016. During the seven-year term of the investment, Root Capital’s assets grew from $27 million to $115 million and the non-profit broadened its investor base to include commercial banks, government agencies, strategic partners and a broad swath of double-bottom-line investors. The team grew out its Africa lending infrastructure from one office to seven locations across the continent. Loans from its Sub-Saharan Africa portfolio grew from 10% to 30% of Root Capital’s total disbursements. Most importantly, the non-profit helped cooperatives and other agribusinesses to grow and reach more smallholder farmers. In Africa, Root Capital’s loan recipients purchased $105 million of agriculture commodities from 404,487 farmers in 2015, up from $11 million of purchases from 69,071 farmers in 2010.

Lessons Learned

Asking successful partners to grow aggressively and enter new markets or take on new problems comes with opportunities and challenges. The potential impact of these collaborations is significant and supporting the partner with the right mix of investments, grants (or other appropriately subsidised capital) and organisational support is critical to helping the partner achieve its potential. For more lessons learned, see: https://ssir.org/articles/entry/tough_love.

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Situation

The single best way to strengthen families and improve the well-being of communities across the world is to empower women and girls. By providing women with options for family planning, including access to safe and affordable contraceptives, we can help families grow healthy and strong. Globally, 214 million women and girls who do not want to get pregnant have an unmet need for modern contraception. In 2012, the global community came together at the London Summit on Family Planning and committed to an ambitious goal: that by 2020, an additional 120 million women and girls will have access to and use contraception. While we’ve made significant progress—38.8 million more women are using contraception today than in 2012—we need to accelerate progress to achieve that goal as a milestone on the path to universal access by 2030.

For women who choose them, contraceptive implants can be an effective option. And although there is high demand for long-acting reversible contraceptives (LARCs), including implants, many women in developing countries do not have access to them.

Approach

To improve access to family planning, the Gates Foundation strategic investing team sought to increase the availability and affordability of contraceptive implants. At the time of the London Summit, contraceptive implants represented just a small percentage of contraceptive use, due to high prices and variable demand.

In 2012, the foundation joined with public and private sector partners to begin working with countries, donors and suppliers to develop strategies to increase access to contraceptive implants. Along with the Clinton Health Access Initiative, the foundation evaluated factors to determine how to reduce prices and expand access and uptake of implants.

To address the problem, we chose a volume guarantee to stabilize demand for suppliers and lower cost for purchasers. In volume guarantee investments, the foundation guarantees a certain volume of sales over a specified period of time—allowing suppliers to optimize manufacturing and focus on investing in production in order to reduce the cost of critical products, such as contraceptive implants.

The foundation engaged partners to provide financial backing in the effort: the government of Norway, the Swedish International Development Cooperation Agency, and the Children’s Investment Fund Foundation served as guarantors, while USAID, and the U.K. Department for International Development supported implementation. Both Bayer and Merck agreed to reduce prices in return for purchase commitments over six years.

Results

In the first five years of the agreement, more than 42 million implants have been distributed to the world’s poorest countries. The combined guarantees will generate nearly $500 million in procurement savings over the term of the investment. Both Bayer and Merck have also committed to extend the pricing for an additional five years beyond the guarantee commitment term, increasing access and improving affordability. The growth in demand will be further supported by the entrance of an additional quality-certified supplier in the market, Shanghai Dahua.

Lessons Learned

Volume guarantees can be an effective investment tool to sustainably lower costs and expand access to critical commodities, such as contraceptive implants, vaccines and other life-saving drugs. With any investment, close consultation with partners and strong collaboration can make all the difference. The effort to reduce contraceptive implants benefited from supportive partners in the public and private spheres leveraging their unique strengths to form an international commitment to address the problem.

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Situation

Each year, a preventable but devastating illness causes thousands of avoidable deaths in the world’s poorest communities. Cholera is an acute diarrheal disease characterized by infection of the intestine. Second only to pneumonia, diarrheal illnesses are the leading cause of worldwide child mortality. The disease affects as many as 4 million people every year and results in over 100,00 deaths worldwide.

According to the U.S. Centers for Disease Control and Prevention (CDC), most diarrheal deaths can be prevented by simple, low-cost interventions—but access to treatment remains a problem for those most vulnerable to cholera. Investing in solutions to tackle public health crises like preventable diarrheal death is at the heart of the foundation’s global health efforts.

Approach

Our strategic investment team worked closely with the foundation’s Enteric and Diarrheal Diseases (EDD) team to better understand the size and scope of cholera and its impact. After consulting with our EDD colleagues, we began to evaluate potential investments that could spur innovative solutions, including leveraging external sources of financing to complement the foundation’s resources.

Among the foundation’s key partners is the Global Health Investment Fund (GHIF), which the strategic investment team launched in 2012 to “crowd-in” commercial investment capital for global health research and development. Backed by a diverse group of both traditional and mission-driven investors, GHIF is a social impact investment fund that supports the development of drugs, vaccines, and diagnostics for diseases that disproportionately impact low- and middle-income populations.

When it came to the cholera challenge, we were immediately impressed by GHIF’s market analysis which identified in 2014 that there was significant unmet need for affordable vaccines. Historical manufacturing capacity, which was limited to fewer than 4 million doses per year, fell far short of the GHIF’s estimated annual demand of over 20 million doses per year for these life-saving products. Further, the existing vaccine was offered in heavy, fragile glass vials, and a lack of competition made the vaccine expensive for many of the countries that needed it the most.

Our EDD team introduced GHIF to EuBiologics, a small bio-pharmaceutical company headquartered in South Korea that had received support from the foundation and its partners to develop a cholera vaccine. After completing their review of the company’s ability to both address the cholera challenge and deliver an attractive financial return, GHIF led a $7.5 million round of private financing for EuBiologics, enabling the production of an improved oral cholera vaccine. The improved vaccine (Euvichol-Plus®) can be manufactured less expensively than the incumbent vaccine and is packaged in lightweight plastic tubes for easier distribution. Euvichol-Plus® is now widely available to public health ministries and nonprofit organizations working to control the disease in resource-limited settings, including refugee camps, natural disaster recovery efforts, and areas with underdeveloped water and sanitation systems.

Results

The partnership with GHIF and EuBiologics has been very successful. The price of oral cholera vaccine fell from $1.85 per dose in 2015 to $1.30 per dose in 2018, which represents a 30% cost reduction for budget-constrained public and nonprofit buyers. The cost reduction and plastic tube presentation have been transformative in expanding delivery of the vaccine to areas most susceptible to cholera.

Lessons Learned

Not only did the investment provide a direct benefit to the communities affected by cholera, it proved to be financially successful for our private sector partners, encouraging future investment in improving other life-saving products. GHIF recently realized a healthy financial return on its equity investment in EuBiologics after the company went public on South Korea’s KOSDAQ stock exchange.

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