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Investing in neglected diseases

The Global Health Investment Fund successfully tackles neglected global health problems

Investing in research and development for neglected tropical diseases

The Global Health Investment Fund (GHIF) is unique in that it is the world’s only social impact fund that addresses the pressing global health problems of neglected diseases whilst generating sustainable financial returns. Five years after it was first established the Fund has a successful portfolio of investments that prove that it is possible to do both.

The burden of neglected tropical diseases

When Hurricane Matthew struck Haiti in 2016, water and sanitation systems were heavily damaged and the risk of infection from diseases like Cholera dramatically increased as people were forced to drink polluted water.

Cholera, is one example of many so-called neglected tropical diseases (NTDs) that GHIF is designed to address. Others include malaria, tuberculosis, river blindness, sleeping sickness and many more. An estimated one billion people worldwide are thought to be affected, and these diseases are often the result of poverty, but also drive people further into poverty since they impact on child survival rates, educational development, agricultural production and household income.

Despite this burden of disease, pharmaceutical and medical companies have so far had little incentive to develop vaccines to tackle these challenges since there is little money to be made because the people at most risk from these diseases have limited ability to pay for prevention or treatment. This is why those diseases are generally referred to as “neglected”.

The ‘10-90 gap’

Poor water and sanitation in Haiti increased cholera risks

Although 90% of preventable deaths from NTDs occur in developing countries, only 10% of global medical research is spent on developing drugs, vaccines and diagnostics for them. The pharmaceutical and life science industries generally concentrate research and development (R&D) on diseases with a strong commercial market in high-income countries because of the risks involved: high fixed costs and long lead times are incurred in developing new drugs and there’s often a high failure rate before securing approval for their use. As a result, a paltry 1% of new chemical compounds registered between 2000 and 2011 were approved for diseases of poverty, and most of these were funded through philanthropic grants.

The aim of the GHIF, , is to try to meet this funding gap by providing affordable financing to support the development of drugs, vaccines, and other products or services to address the global health challenges that disproportionately affect poorer countries - but at the same time, to bring a reasonable financial return to investors.

Funding the fund

The GHIF was established in 2012 with US $ 108 million investment capital. A variety of investors, contributed to the Fund’s initial working capital for investments: In addition to KfW, these include The Children’s Investment Fund Foundation, Grand Challenges Canada, J.P. Morgan, GlaxoSmithKline, Merck & Co, the Pfizer Foundation, the International Finance Corporation, Storebrand and Axa IM.

The German Federal Ministry for Economic Cooperation and Development (BMZ) played a pioneering role in capitalising the Fund, which was the first of its kind. BMZ entered into a financing agreement with the Global Health Investment Corporation (GHIC) a Delaware-based non-profit corporation established to manage the Fund. Under this agreement, the German government provided 10 million Euros - roughly 10% of the Fund’s capital – to be channelled through KfW Development Bank on a non-returnable basis. According to Andrea Obaseki, KfW’s former project manager in charge of the Fund who now sits on the Fund’s Charitability Oversight Committee, the most important consideration for KfW is social impact, not the financial return on investments– although that is obviously important too. The challenge is to identify potential investments that will bring social impact AND some financial return.

A novel approach to addressing market failures

The dual aim of the Fund is to find innovative funding solutions to health problems that have a huge impact on people’s lives, but receive little investment. The catalyst is financial, but it also aims to have a measurable social impact by finding innovative solutions to funding neglected tropical diseases.

In order to achieve this, the GHIF has adopted a unique dual approach to addressing previous market failures, by providing incentives for investors to commit R&D funds to neglected diseases by offering them attractive rates of return and minimising potential losses. At the same time, the Fund compensates for the limited purchasing power of the poor, by ensuring that, in return for the Fund’s support, investment partners commit to making their products available to those that need them most for an agreed period of time, in sufficient quantity and at an affordable price.
Blending of philanthropic and commercial cultures yields exceptional performance results
“The fund is also the first of its kind because of the mix of private and public capital and investors involved,” says Saskia Berling, KfW’s current project manager. Three different types of funding are brought together: There are institutional investors such as KfW, private companies such as pharmaceutical and insurance companies, and philanthropic organisations and individuals. They all have different interests and outlooks, but “to get them sitting round one table with one goal in mind is unique,” says Andrea Obaseki.

However it also makes for a complex governance structure since there are a multiplicity of stakeholders: GHIC as the Managing Member has legal ownership, the Investors provide the working capital, and the Bill and Melinda Gates Foundation and the Swedish International Development Agency provide a minimum level of loss guarantee. “All the hard work took place at the beginning, when the Fund was first established, and we had to set out clear investment and management rules to ensure that we were all on the same page,” says Glenn Rockman, one of the Fund’s four managers based in New York. Checks and balances were put in place from the beginning in the form of both a traditional investment committee that looks at potential investments/risks, and the social impact or /Charitability Oversight Committee.

No other Fund has a similar external social impact committee with veto rights over investments. “We don‘t just pay lip service to the concept of social impact – each investment is pro-actively reviewed and held to account,“ says Andrea Obaseki, who now sits on the committee.
Although there were initial anxieties about whether there would be “a big enough investment universe”, says Glenn Rockman, five years the original fund has now more or less been fully invested. A lot of work has gone into building up personal and industry connections in order to find the right investment opportunities. As a result, says Glenn, the Fund has “performed in an exceptional way”: Not only have there been no big losses, the wide portfolio of investments made to date have resulted in returns far in excess of the original minimum 2% and average 5% targets set.


Lives touched, lives saved – the example of Cholera

One of the most innovative and successful investments made so far by GHIF has been in partnership with a South Korean pharmaceutical company EuBiologics Ltd, to produce an oral cholera vaccine suitable for use in resource-poor settings.

In 2014 there was a significant unmet need for oral cholera vaccine, with demand of 20 million doses or more, but only 2-4 million doses produced each year and there was little competition. The vaccines were also produced in glass vials, making them difficult and expensive to transport. The GHIF decided to invest approximately US $5 million in EuBiologics to ensure that more cholera vaccines would be available and affordable for health ministries in resource-poor countries and non-profit organisations working in challenging settings such as refugee camps, natural disaster responses and regions with poor water and sanitation systems.

As a result, the cholera vaccine shortage has effectively been solved: Global supply for public health use has increased seven fold to nearly 30 million doses a year. Millions of doses of the GHIF-backed vaccine have now been delivered in countries such as Haiti after Hurricane Matthew, Sierra Leone, Somalia, and Nepal, and, according to the GHIF’s midterm review, the expected impact will be 100,000 deaths averted between 2015 and 2030. More Cholera vaccines have been deployed in the last two years than in the previous 15 years combined.


A win-win situation

Chart showing increase in annual manufacturing capacity for oral cholera vaccines following GHIF investment in EuBiologics Ltd

Prices are also coming down - from $1.85 per dose in 2015 to $1.30 per dose in 2018 – a reduction of 30%, which allows limited MOH budgets to purchase even greater volumes. And a switch from glass to plastic vials has made the vaccine significantly easier and cheaper to deliver in the remote locations that are often the most vulnerable to cholera-related illness and death.

GHIF’s initial investment in EuBiologics Ltd also resulted in higher than expected financial returns for investors, so it has been a win-win situation.


Building on a successful track record

As GHIF celebrates its five-year anniversary, there is much to celebrate. The cholera vaccine has proved a big success, and other projects in the Fund‘s innovative portfolio of investments show big potential too, including a potentially game-changing cure for river blindness, vaccines for chikungunya and infant tuberculosis, as well as anti-snake venom.

In addition to managing the existing GHIF portfolio for maximum impact and commercial success, KfW and other investors in the Fund are also looking towards the future to consider how they can now scale up the model in Phase Two and further expand its impact and potential. KfW has already committed to providing a further 10 million Euros for this next phase - “the first direct investment ever from KfW in global public health,” says Saskia Berling. She hopes the track record of the Fund thus far will convince others that it is not only a good financial investment but makes sound ethical sense too.

Further information

Ruth Evans, March 2018


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