Americans are, by and large, generous people. According to Giving USA 2019: The Annual Report on Philanthropy for the Year 2018, American individuals, foundations, businesses, and other corporations were able to raise an estimated $427.71 billion in charitable donations for 2018 through the generosity of Americans. Cancer charities as a group have demonstrated prolific fund-raising capabilities via a range of approaches – walks/runs for life, tree-planting events, organized lantern releases, crowdfunding, charity auctions and galas involving high-net-worth individuals and celebrities, national associations and cancer foundations of all ilk focused on cancers – are all part of the mix. The purpose of these fundraising activities is to raise awareness about cancer as a number of diseases, and more often than not, to support research in hopes of finding a “cure” to fight cancer. Charities often seek to promote cancer prevention tools and the development of cancer drugs that will improve cancer outcomes to the benefit of cancer patients.

In spite of the U.S. cancer community’s robust fundraising efforts that have engaged public giving for over 40 years, cancer stubbornly remains one of America’s biggest killers. For example, brain cancer and other nervous system cancers have roughly retained the same incidence and death rate since 1992, with incidence of 6.4 people per 100,000 and a death rate of 4.4 per hundred thousand per year. Progress in reducing incidence and death rate has been slow. 

Meanwhile, breast cancer and skin cancer have enjoyed modest improvements in outcomes in recent years. Tragically, About 42,170 women in the U.S. are expected to die in 2020 from breast cancer. Death rates have been steady in women under 50 since 2007, but have continued to drop in women over 50. Still, the overall death rate from breast cancer decreased by 1.3% per year from 2013 to 2017, with decreases thought to be the result of treatment advances and earlier detection through screening.

As for skin cancer, it is the most common cancer in the United States and worldwide. 1 in 5 Americans will develop skin cancer by the age of 70, and more than 2 people die of skin cancer in the U.S. every hour – much more work on prevention and cures remains to be done.

And for all the emphasis on lifestyle changes around smoking, lung cancer remains stubborn with new cases of lung cancer in the US for 2018 around 121,000 for men and 112,350 for women, for a total of 234,000  the equivalent of 641 lung cancers diagnosed per day.

While in the past any cancer was considered mainly to be a “developed country disease”, cancer has now become a global crisis, claiming almost 10 million lives on the planet, according to the World Health Organization, with some African countries frequently bringing cancer to the front pages of national newspapers. Global health concerns now go well beyond infant mortality or malaria and infectious diseases to increasingly include cancer as well.

The disturbing growth of cancer globally raises an obvious question:  How are monies raised from public donations actually being used to advance the war on cancer? Are our donations producing results for the American public, as the public assumes? Do we have the right mix of research and development to lead to the best research projects, approaches to cancer prevention, well-tested cancer immunotherapies, and even economic development for participants while benefiting people? Are biopharmaceutical companies optimally supported?

Let’s follow the money trail, and consider where system-level breakdowns are occurring that impede generating cures. Here, the underappreciated role of  “cancer startups” and cancer-focused biotechnology companies that are tasked to advance drug discovery and cancer-fighting solutions to market will be underscored.  

The Money Trail

When an American makes a donation to a charitable cause, part of the donor’s dollar goes to support a given organization’s overhead cost, with the rest dedicated to “the mission” of generating a cure for a given cancer. In turn, charities will pass monies on to those working on solutions or cures to different cancers. This means that charities must make strategic and operational decisions as to where investment funds go, and how much should be allocated to different researchers, or their own corporate needs. Grant giving is typically accomplished through grant committees composed of a dozen or so experienced researchers, patient advocates, and scientific investigators,  seeking research projects at notable university laboratories whose work could result in the advancement of knowledge or even a cure. 

The obvious question this raises concerns the results of the research; do we have metrics on  successful or unsuccessful results and are we getting closer to cures for various cancers?”  

Unfortunately, the public, i.e. those who contribute the lion’s share to cancer research, remains typically under-informed at best, or uninformed at worst, often assuming that progress is continually being made. Throughout the decades, the public has remained “polite”; the public believes that the process and players are forthright and for whatever reason, the public does not demand specifics when it comes to accountability about the allocation of donations and correlation with where their contributions are going. Transparency continues to be limited. Historically, the prevailing  “social contract” between the public and the professional community binding cancer researchers and various grant-making non-profit organizations, or even government grantmakers too, is that donations are needed, ribbons and the like are disbursed, donors feel as if they are contributing, but the process itself yields limited results, as funds in fact do not correlate with results achieved.

Does it have to be this way?

Too infrequently, research rarely if ever generates cures. Still, knowledge and discoveries are produced, but these too often do not advance into real cancer-fighting solutions. Why is this so?

What Is the Role of Cancer Research?

Research organizations, whether they be government laboratories, such as the National Cancer Institute (NCI) or university laboratories, such as Johns Hopkins University,  are dedicated to further our knowledge into cancer research, often generating peer-reviewed articles and white papers. If the research becomes a discovery that can potentially be used as a medical solution, the research institution can file for “patent protection” with the US Patent and Trade Office. In doing so, the discovery converts into an asset that can be developed into a clinical product such as a treatment or diagnostic. 

Over the last two decades, as medical research institutions have received increased levels of funding, the number of discoveries and patents filed has increased dramatically.  According to the USPTO, there are 2.6 8 million patents filed each year in the United States. Unfortunately, most of these patents are not put on commercial paths to test their clinical potential. In fact, only a fraction of university technologies is actually advancing through product development milestones. This is a huge breakdown in our biomedical system and the public is unaware.

The real reason for this is because commercializing science discoveries is not the job of researchers. This is the role of biotechnology entrepreneurs – or for-profit biotech, cancer startups, most often founded by small business owners – which constitute the backbone of the “biotechnology industry.” Biotech is a relatively new industry that emerged to service cancer research organizations.  

Biotech companies, often young bioscience startups, are in the business of “commercializing” these discoveries, creating products and services, getting them on the market, and putting them to good use by helping those in need. 

Now, even though both research organizations and biotech companies are involved in R&D, their funding tends to come from different pools. Governments lean more towards lab research, whereas private investors typically favor biotech companies. 

For instance, during the 2020 fiscal year, the Department of Health and Human Services Appropriations Act and the 21st Century Cures Act allocated $6.44 billion to the National Cancer Institute (NCI). The NCI uses these funds to issue various grants to support clinical trials, investigator-initiated research, as well as initiatives that address healthcare disparities. This type of basic lab research has always been the key to understanding the fundamentals of cancer. Over time, this data has also generated a multitude of potential solutions that would address all sorts of better cancer treatments involving personalized and targeted treatments such as gene therapies, cell therapies, monoclonal antibodies, CAR-T, immuno-therapies and other immune systems bolstering treatments.

Unfortunately, basic research can only get us so far, and even though promising ideas can get patented, most great ideas and potential innovations end up sitting on “electronic shelves” never to be developed into real clinical solutions and used effectively, as further clinical development is needed. Research institutions are not directly involved in actually turning all laboratory ideas into medicines used in the clinic. This is actually the job of a biotech company. However, there’s also a significant challenge in transforming these early discoveries into useful products, particularly when we take into account the phases of commercialization. There’s an arduous journey going from the initial discovery phase to the “proof of concept” to filing a patent with the USPTO, FDA approval for clinical trials, and finally, the exit phase. All of these are labor and time-consuming even though artificial intelligence is now assuming a greater role over time in the development process.    

This is one of the reasons why cancer treatments have, by and large, remained fundamentally unchanged over time. Chemotherapy, radiation treatments, and surgery were, for the most part, the first and last line of defense. Yet, over the past decade, biotech has been at the forefront of developing all sorts of other biomedical products and treatment paradigms used in humanity’s struggle against cancer. Various targeted therapies, genetic sequencing, personalized medicine, gene editing, and immunotherapies for cancer are only a few examples of promising biomedical products so desperately needed to win the “War on Cancer.”  But with limited funding and commercialization, the biotechnology industry does not have the means to fully develop these into game-changing cures.

Another challenge is that investors focus on only certain types of healthcare technologies. In the case of cancer, immuno-oncology represents about half or more of the investments made. More worrying is the fact that early-stage investing has also fallen from 46% of all deals globally in 2015 to 35% of the deals in 2017.

It’s true that the majority of biotech innovations likely will fail in achieving the desired treatment. This high failure rate, coupled with the amount of capital needed, the necessity to “prove principle” that the discovery can work in humans, as well as the 6-to-8 year average timeframe for a return on investment, pushes most institutional investors to avoid biotech innovations, especially during their concept or riskier startup phases. This leads to a funding deficit known in the biotech industry as the “the Valley of Death” – a place where dozens, hundreds, or thousands of potentially great cancer innovations find their end to the detriment of the worldwide community. While COVID-19 is not cancer, our lack of preparedness with a vaccine or reliable testing is emblematic of how getting ahead of the curve is crucial. With cancer, despite the many billions already spent, we remain doggedly behind the curve on too many cancers, to the point where it is no longer newsworthy, even with millions impacted annually.

Of course, cancer startups can look for, and occasionally obtain, funding in several different areas, such as non-dilutive funds and equity. Below are several examples where small biotech companies can look to get investors on their side. 

Non-Dilutive Funds

Unlike dilutive (equity) funding, non-dilutive investment is a type of fundraising that doesn’t require entrepreneurs to give up part of the ownership and control of their startup. A way of looking at it is to say that non-dilutive funding is a form of “free” money. In other words, it doesn’t require entrepreneurs to “dilute” their companies while still being able to advance their technologies. These types of funds come either in the form of grants or loans. Generally, grants are offered to biotech companies from the government, such as Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR), but also from nonprofit, philanthropic the Leukemia & Lymphoma Society, or the Avon Foundation.  

The essential role of philanthropy in supporting biotech cannot be understated. According to Margaret Anderson, executive director for FasterCures, “for some diseases, nonprofit funding models are virtually the only source of capital for innovative, risk-taking research.” Traditionally, biotech funding focused predominantly on state and governmental grants. However, these tend to be small and somewhat rare. Therefore, the alignment between nonprofit philanthropy and biotech R&D makes complete sense as it can fill in the funding gaps when it comes to high-risk, high-return biotech startups. 

Non-dilutive funding tends to provide founders with a higher chance of receiving funds since those providing the investment are less interested in equity or generating a personal return on investment. What they are looking for, first and foremost, long-term commitments to enable sustainability in the translational research-to-product development phase. It’s also very attractive since it retains value for start-ups, and helps attract other investors. Be it in the form of a grant or a loan, founders are better positioned to get their technologies to the point where other, financially able partners can be found. 

When it comes to innovative cancer startups, some non-dilutive funding options include:

• Governmental Programs – Many biotech startups apply for federal grants in an attempt to get their projects off the ground. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, for instance, are coordinated by the Small Business Administration (SBA) and have received $2.5 billion annually from the US government. They are the largest source of early-stage, high-risk federal funds aimed toward biotech startups. Funding is offered either as grants or contracts, while recipients need to meet certain research and development (R&D) requirements set by the US government. The projects funded need to have the potential for commercialization.
• State and County Grants – In addition to federal funding, biotech startups can also take advantage of local programs. For instance, the largest early-stage funding contributor for bioscience economic development at a state level is the Cancer Prevention and Research Institute of Texas (CPRIT). In 2019, the CPRIT provided over 1,380 grants in support of cancer research and product development, having an annual disposable $3 billion in bond funding. 
• Business Plan Competitions – In addition to the possibility of getting funding for your cancer startup, business plan competitions can also help you expand your network of connections, partners, and potential clients. They can also help you acquire new talent, receive feedback on your business plan and strategy, as well as expose you to the right audience. The Launch NY competition, for example, will award a total of $5 million in prizes, with the top award being $ 1 million. 
• Charitable Crowdfunding – In recent years, crowdfunding has begun to become a fundraising option for various projects and startups to get off the ground. By 2025, the overall crowdfunding sector is expected to surpass $300 billion  – and here, the biotech industry arguably cannot afford to miss out. While this model is typically employed by companies that can pre-sell their consumer products, the life science sector has an important fundraising opportunity offered to it if it can navigate the terrain. 

Also known as donation-based crowdfunding, this technique of raising funds is to ask a relatively large number of individual donors to donate relatively small amounts. Causes, Chuffed, and CrowdRise are several platforms that focus predominantly on nonprofits. 

One leading example, Music Beats Cancer, is also a crowdfunding platform that focuses on groundbreaking innovations aimed at revolutionizing cancer treatment. It partners with musical artists who help raise funds and awareness for promising cancer innovations that would, otherwise, end up in the aforementioned “Valley of Death.” Its mission is to increase the total number of cancer-fighting technologies that make it into the product development stage, to ultimately impact those most in need.  

Equity Financing

Unlike the examples provided above, equity financing does not require you to pay the money back to the investor. Instead, you will be ceding part of your organization’s ownership and control in exchange for the funding received. Biotech startups that require some degree of flexibility might benefit from this type of funding, particularly if it comes from the following sources:

• Friends and Family Investors – Typically, these investors are close and personal connections in the form of friends and family members. They can make a convenient source of initial funding, anywhere between $10,000 to $150,000. As an entrepreneur, founders may feel tempted to accept money from such investors without following all the formalities that go with other financing methods. Though easier, this can lead to potential conflicts down the line. It’s advisable to document each investment carefully to maintain clarity. 
• Angel Investors – Unlike venture capital (VC) investors, business angels usually offer a more “patient” form of capital, meaning that there’s not nearly the pressure to obtain an ROI in a certain amount of time. Even though the amounts are not as high as with VC funding, angel investing will often require less time to acquire. That said, the biotech sector and life sciences, in general, may have a harder time accessing angel investor funds. Many angel investors are in fact attracted by the potentially high levels of returns, as well as the social impact these startups can have. Places such as the Angel Capital Association and the US Angel Investment Network are good places to exchange ideas and information on the topic. 
• Impact Investors – Unlike the other examples, impact investing does not entirely focus on the financial returns as it is more on the beneficial social and environmental impacts it can generate. As such, impact investors actively search companies, nonprofits, and startups that operate in the healthcare, renewables, education, sustainable agriculture, and life sciences sectors. According to the US SIF Foundation’s 2018 Report on US Sustainable, Responsible, and Impact Investing Trends, over $12 trillion have been invested based on sustainable investing strategies. 

What’s even more promising is that this trend is only accelerating, particularly in terms of life sciences. Several impact investor platforms include Motif, SVX, Rabbleworks, and Hedgeable. Impact investing can also take on the form of grants. For example, the Cancer Research Institute (CRI) and the Focused Ultrasound Foundation (FUSF) have partnered up to develop new focused ultrasound (FUS) and cancer immunotherapy treatments. Both organizations are funding a grant program to support projects addressing research that will help develop new drug/device combination therapies. These grants are for $200,000 and are payable over two years.

• Venture Capital –  By and large, the main investors for biotech are still institutional venture capital (VC) firms or venture funds. However, VC funding tends to come with several restrictions, mainly in terms of the time limit. With several exceptions, most VCs that specializes in life sciences have a 5-to-7 year limit before they see a return on investment. After this time, their first priority is to sell the company, something that’s not always in the best, long-term interest of the company. 

In terms of what areas investments are focused today, immunotherapy accounts for around 62% of all cancer therapeutics deals invested in by VCs. Roughly 39% of cancer therapeutics deals that VCs invested in were co-investments. In other words, two or more VCs invested in the same biotech company. In 2016, for instance, Moderna Therapeutics (a biotech company that creates therapeutic and preventive cancer vaccines) raised $474 million from Flagship Pioneering. Several other major VC firms that are most active in the cancer space are OrbiMed Advisors, MPM Capital, and New Enterprise Associates. What’s more, MPM Capital partnered up with the American Association for Cancer Research in 2019 to offer grants from the AACR-MPM Transformative Cancer Research Grants Program.