Webinar, Panel
Venture Philanthropy in Action: A Case Study of EB Research Partnership and ProQR
Milken InstituteKristin Schneeman, Michael Hund, Alex Silver, Daniel de Boer, Mark de Souza, Esther Krofa
- Event Scope: A 2020 webinar by Faster Cures and the TRAIN initiative focused on "Venture Philanthropy in Action," featuring a case study of the EB Research Partnership (EBRP) and ProQR Therapeutics regarding Epidermolysis Bullosa (EB).
- Participants: Moderated by Michael Hund (CEO, EBRP); panelists included Alex Silver (Chairman, EBRP), Daniel DeBoer (CEO, ProQR), and Mark D'Souza (Chairman, Wings Therapeutics).
- Strategic Definition: EBRP defines venture philanthropy strictly as investing in for-profit enterprises to de-risk intellectual property (IP) in exchange for a financial return, rejecting the traditional nonprofit "grant-only" model.
- Problem Identification: The model originated from a "mistake" where EBRP funded early-stage IP that was sold to a commercial partner without the nonprofit receiving any financial upside despite being the validating capital.
- Scale of Impact: Since 2010, EBRP has raised over $40 million, funded 80+ projects, and catalyzed 30+ clinical trials (including three Phase III), aiming to accelerate timelines by years.
- Case Study Timeline: A relationship formed between EBRP and ProQR led to a spin-out in late 2019/early 2020, establishing Wings Therapeutics in approximately two to three weeks to manage an EB-specific program.
- Deal Structure: Wings Therapeutics was formed as a dedicated entity with EBRP, ProQR, and management holding equity; the structure included royalties tied to milestones for ProQR and future financing rounds.
- Key Success Factors:
- Mindset: Adopt a "forgiveness, not permission" approach; reject industry inertia and non-standard nonprofit tax-status thinking.
- Assets: Ensure the program targets IP that is patentable and has a defined commercial market.
- Capacity: Larger nonprofits often negotiate better terms; however, expertise in investment structuring and strong legal counsel are critical prerequisites.
- Flexibility: Structures must adapt to partners (universities, public/private companies), utilizing equity, guaranteed returns, or royalties as needed.
- Core Objective: The primary "return" on investment is time—accelerating drug development from years to months to extend the lives of patients with rare diseases.
- Pitfalls to Avoid:
- Cultural Resistance: Expect pushback from those unfamiliar with nonprofits acting as investors; explain the business logic clearly.
- Academic Friction: University tech transfer offices may lack experience with equity/de-risking deals and require patience.
- Partner Vetting: Screen for for-profit partners who may view nonprofits as "unsophisticated" and attempt to exploit them.
- Legal Advice: Nonprofits should invest in paid, specialized legal counsel for venture deals rather than relying on pro bono resources, as legal documents protect the organization's interests when "good feelings" fail.
- Board Governance: EBRP explicitly avoids taking board seats on portfolio companies to remain neutral, avoid day-to-day management burdens, and prevent financial consolidation issues on donor reports.
- Investment Terms:
- Startups: Equity is the preferred structure for new companies.
- Universities: Royalty sliding scales based on funding percentage are standard.
- Corporate Partners: Guaranteed ROI (e.g., 3x to 5x return) or milestone payments are common for later-stage assets.
- Funding Strategy: The social mandate to cure the disease must never be compromised by the financial return mandate; terms should be competitive to incentivize talent rather than adversarial to extract maximum value.
- Scalability: The model is replicable if organizations establish a robust grant funnel, independent scientific advisory boards, and networks of like-minded commercial partners.
- Future Outlook: EBRP has formed four new companies in the last year, indicating a continued shift toward capitalization and commercialization of rare disease therapies.
- Networking: Opportunities are often found at biotech partnering conferences (e.g., BIO, J.P. Morgan) where patient organizations and biotech firms meet, emphasizing the need for continuous relationship building.