MITexpert

Would the Fund feature enough diversification to generate investor interest? Is there a risk that failure could be highly correlated across assets in a bio-fund pool?

And at what stage of investing will the fund be targeted?

Great question! My biggest worry is not that it won't work, but rather that it works way too well and we start to attract fraudsters who prey on desperate patients and their families. I hope we've learned some lessons from the Financial Crisis.

That's a key issue, and one of the reasons we need scientists to collaborate with financial engineers to construct well-diversified portfolios. For some diseases like Alzheimer's, it will be a challenge, but for orphan diseases, it's a no-brainer.

@JeffFrick The most compelling fund will have projects at all stages so there's even more diversification, as well as near-term cashflow from the later-stage projects. But an early stage fund could work too if we use only equity to finance it.

@AndrewWLo > That's an interesting perspective. Do see Cloud, Mobile, and BigData as significant enablers?

> When does a fund become a "Mega" Fund?

@AndrewWLo > What's the feedback from the potential Limited Partners community on this approach?

Sure, it's a pot of money used to invest in various biomedical projects all at once, and the investors get paid when the projects mature into successful drugs.

@JeffFrick The term "megafund" is really meant to indicate that the scale needs to be big enough to yield many "shots on goal" so as to increase the chances of success.

@JeffFrick When my co-authors Jose Maria Fernandez and Roger Stein and I published the first paper on this idea in 2012, LPs were skeptical; now I'm getting regular calls from them asking where they can invest!

Would investors demand assurances beyond the assets used in such a fund? If so, is there a role for government to provide limited backing or other assistance for the Fund? (Hopefully it won’t require anything like a Mega Mac.)

Certainly having government support (guarantees, tax benefits) would be helpful. For certain projects like cancer drugs, the private sector can handle much of the investment; for other diseases like Alzheimer's, government support is essential!

@AndrewWLo > What role does the US Fed Government play? NGOs? if any....

@AndrewWLo > Interesting as @Benioff spent a large amount of time at #Dreamforce talking about doing good #DF15

@AndrewWLo @benioff > But don't think his 1/1/1 plan approached $30B #DF15

A company called Malin did an IPO on the Irish Stock Exchange in March; unlike other biotech companies, this one had no projects, but simply announced its intention to put together a portfolio. They raised 330 million euros! http://bit.ly/1Dc

Stay tuned for more examples in the coming months!

@AndrewWLo > Can't wait...

> which dynamics are you thinking about?

In several ways. The biotech boom has gotten investors focused on this sector so they're now more open to new financing methods than ever before. However, macro issues like Greece and China may end up causing investors to head for the hills.

@JeffFrick My focus is on the incredible breakthroughs being made almost daily by scientists and clinicians; this dynamic tells me that we're at a inflection point in biomedicine. For the right long-term investor, the oppportunities are amazing right now.

@AndrewWLo > Can you use different metrics of success when targeting such large problems?

@JeffFrick Yes, for example, impact investors care not just about financial return, but social return. Metrics are key to spurring innovation---you can't manage what you don't measure.

@AndrewWLo > not to mention "moving backwards" things like people skipping vaccinations, enabling the return of things like polio and measles.

A few years ago, some friends and my mom were stricken with cancer and I wanted to do something to help out.

Personal motivation is always a powerful one. It's about people.

Exactly. What an amazing motivation. And unique angle to approach it through finance.

Went to the MIT CDO West presentation of "The Human Face of Big Data" last night at Intel, very powerful medical examples.
http://thehumanfaceo...

@AndrewWLo > Has this approach been used to tackle other large societal problems?

@AndrewWLo > Are their any categories of disease that represent "Low hanging fruit?"

I love this question. Is there a cross over or synergies

@AndrewWLo > at the Big Data event last night, they talked about the potential impacts of having everyone's gene sequencing available for $10. Crazy upside potential. #MooresLaw #DF15

The most effective fund will have multiple rare diseases so as to increase diversification, but I can give you a terrific example of a fund devoted just to Duchenne Muscular Dystrophy (Solid Biosciences) that's done amazing things!

@JeffFrick If that happens, we're going to see cures for certain types of cancer within a decade!

@AndrewWLo > That is certainly good news.

@CrowdCaptain Absolutely! Genetics plays a huge role in cancer, so if you can do sequencing much more cheaply and quickly, that accelerates innovation all sorts of ways. Don't forget that in silica drug development is now possible (David Shaw's company!).

Great question!

thanks Rebecca. Excited to hear Andrews thoughts

I would spend time learning more finance but also learning more about biotech and trying to bring these two disparate fields together. Scientists who want to start companies know very little finance, and vice versa---there's an arbitrage here!

great advice..off to the library now!

MBA students are the business leaders of the future; by learning more about how finance can be used in positive ways, they can change the world!

@AndrewWLo - Very interesting. Could you give an example of using finance positively to change the world?

@AndrewWLo > Are you collaborating with other institutions at MIT? More on the medical / engineering side?

It's both; like any powerful tool, financial engineering can be used or abused. That's why we need more education on these methods.

@AndrewWLo > Love that question. "Invisible Hand" is a powerful force.

How does financial engineering promote innovation and entrepreneurship?

@AndrewWLo > Every coin has two sides!

arbitrage is the low hanging fruit but innovation is a longer game imo

@CrowdCaptain the balance between the investor needs and entrepreneurs wants must be aligned to make this work