The Rapidly Emerging Antiviral Drug Development Initiative, or READDI, is tackling a monster challenge with a simple mission.
“We’re trying to look into the future and create medicines against viruses we’ve never seen,” says CEO James Rosen.
The nonprofit biotech company was launched in April 2020 by founding partners UNC Chapel Hill, the Structural Genomics Consortium and the Eshelman Institute for Innovation to support the development of broad-spectrum, small molecule drugs that could be deployed in response to a future pandemic. Its co-founders include Ralph Baric, a professor at UNC Chapel Hill and a global authority on coronaviruses, noroviruses and dengue viruses.
To pay for this ambitious undertaking, READDI is creating what looks to be the first-ever investment fund with assets consisting of a portfolio of antiviral drugs that are still under development.
To explain how the math works, Rosen harkens back to the COVID pandemic when seven main products were launched, including four vaccines; three main therapeutics (Paxlovid, Remdesivir, and Molnupiravir;) plus a few monoclonal antibodies therapeutics. Vaccines are intended to limit transmission by stimulating immunity, while therapeutics are used to treat a disease.
The products generated about $250 billion in revenue over the three years following their launches.
Modeling from the CDC and others suggest a 20% chance of another pandemic in the next 10 years, and a 60% chance in the next 30 years, says Rosen. Assuming the next pandemic would result in a similar level of spending, one can back into a present value calculation of prospective future revenues.
The expected value of a $250 billion payout sometime over the next 10 years is about $50 billion; with a 60% chance over 30 years, the expected value is about $150 billion.
The question then becomes, says Rosen, what would an investor pay today for a future claim on this potential payout? “Would you invest $200 million for a $50 billion payout sometime in the next 10 years,” Rosen asks. “It’s no different than buying a share of Amazon. You don’t buy a share of Amazon for what it’s worth today. You buy it for what you expect it to be worth in the future.”
All in the families
The Amazon analogy is interesting, if imperfect. Amazon is a going concern; READDI is investing to address what have been irregularly occurring events. But organizers say this isn’t really about money. It’s about finding the solution to an increasingly high-profile public health problem: Preparing for the next pandemic.
There are about 20 virus families known to infect humans, and about 270 individual viruses in total, per the National Institutes of Health. But there are only eight families with the properties known to cause pandemics, says Rosen.
These properties include transmission over the air or through a mobile vector like a mosquito, an incubation period that allows the virus to spread asymptomatically and the ability to infect others easily. “If you can create drugs for these eight virus families, you’ve taken a seemingly infinite problem and turned it into something manageable,” Rosen says.
While this seems reasonable, it has not been tried, according to the READDI CEO. It’s expensive, for one thing. Historically, big pharma companies and other biotechs have mainly focused on creating drugs for a single disease. The problem is that “viruses are constantly emerging and mutating. Precision medicine against a constantly moving target is not the right approach,” Rosen says.
By contrast, READDI targets “common features within viruses so that you can have a single drug for every virus within a given virus family and the disease that it causes.” The idea is to concentrate on proteins and enzymes “that allow viruses to infect a cell, hijack that cell’s machinery, and then propagate to other cells.”
“[Big pharma and other biotechs] have not taken a broad spectrum approach because they believe you can’t test a drug for a disease that doesn’t exist,” says Rosen. “We slightly disagree.”
The plan is to set up conditions in which drug developers have a high level of confidence that a drug will work in a new virus, as long as it comes from the same virus family. While viruses may mutate, “virus families don’t emerge at a high rate,” says Rosen. “The likelihood of the next pandemic coming from a virus family we’ve never seen before is almost nil.”
Funding challenges
As with antibiotics, companies and governments have been reluctant to fund research on treatments with a speculative future. A report published in the National Library of Medicine in 2021, the authors wrote that, “The central problem of the empty antibiotic pipeline is not scientific but economic.”
Something similar applies to antivirals, says Rosen. “We don’t have a science problem. We have a business challenge.
“The way to capture that ($50 billion) value is by creating an antiviral investment fund,” he says. The money would help underwrite research and early-stage trials, and invest in drugs for the fund or options on the future value of the drugs. The fund itself would trade on the value of a portfolio of therapies that could “treat every virus we ever expect to see with pandemic potential,” he says.
“By owning a share you create a liquid asset in what would otherwise be viewed as illiquid.” And the investment could help prevent a future pandemic.
Owning equity would not mean waiting around for that next catastrophe. Other viruses could be treated by drugs in the portfolio, including Eastern Equine Encephalitis, spread by mosquitoes. There was an outbreak of Mpox in Africa earlier this year. There is dengue fever, a one-time tropical disease that is increasingly showing up in the U.S. While none has risen to a pandemic level, the diseases present potential applications for small molecule drugs being developed by READDI and its partners.
Other monetizable steps also exist, with successful advances in therapies adding value to the portfolio. The drugs are subject to the same phased FDA approval process as any other therapy. Larger pharma companies could also step in to buy promising treatments.
Collectively, these events should create volatility in the shares, and trading opportunities for investors. Catastrophe bonds are an example of a financing vehicle that provides funds to ensure against prospective hurricanes and other disasters. As of September, about $45 billion in capital was deployed in that market, according to the trade publication Risk & Insurance.
READDI is hoping to raise as much as $200 million with the fund and $2 billion in total to produce two Phase-2 ready compounds across the eight identified virus families. Beyond private investment, it is looking at securing finances from philanthropies and governments. “We want to open all channels to R&D money,” is how Rosen puts it.
Managing risk
Measuring and managing risk has been a preoccupation of civilizations for millennia. Many pioneering developers of probability theory were gamblers, with mathematicians following close behind. From Thomas Bayes to Jakob Bernoulli, they laid the foundation for modern risk management. In his 1996 book, “Against the Gods: The Remarkable Story of Risk,” Peter Bernstein writes that, “The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than the whim of the gods and that men and women are not passive before nature.”
The READDI fund would be another way to spread risk. Will investors be interested? The early indications are promising. Rosen says that READDI has discussed a possible listing on the London Stock Exchange. High-ranking executives there told him that if he gathers a pipeline of drugs, “then you absolutely can put a fund wrapper around it and trade it freely on an open exchange.”
Heather Wyckoff, an investment funds lawyer at Alston & Bird in New York, says, “You can set up a fund to do almost anything where people are pooling money together and pursuing any type of strategy.” The investors are, she says, “signing up for the ability of the (fund) manager to pick those opportunities that are likely to be valuable.”
READDI is pitching the idea to investors, including sovereign wealth funds in Singapore, South Korea, and Saudi Arabia and reinsurers, who could use it to hedge against future pandemic-related claims. In May, Rosen made a workshop presentation to the Milken Institute that included officials from J.P. Morgan, Fidelity, John Hancock, Alphabet (Google), and 35 other organizations. “There was probably something like $10 trillion of investment capital (in the room),” he says.
When READDI launched in April 2020, the program goals cited raising “$125 million to generate five new drugs with human safety and dosing data in five years to be ready for the next pandemic.” To put this in perspective, Covid 19 began marauding around the globe in January 2020 and countries began to shut down in March. Vaccines would not appear until the summer of the following year. There was an urgent need to do something.
The landscape has shifted since then. Rosen says READDI has made “tremendous progress” in the interim, working with collaborators at more than three dozen research institutions around the world and generating a pipeline with more than 30 “high-quality projects.” They are in touch with “almost everybody who’s doing this kind of work.”
North Carolina is at the epicenter of this global effort. With its multiple clinical research organizations, pharmaceutical manufacturing capabilities, and university-driven research base, the state is well-positioned to play a big role.
“We have this end-to-end capability within the state. It’s a perfect place for READDI.” ■
