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Review
September 2018

New Business Models to Accelerate Innovation in Pediatric Oncology TherapeuticsA Review

Author Affiliations
  • 1MIT Laboratory for Financial Engineering, Sloan School of Management, Cambridge, Massachusetts
  • 2MIT Department of Mathematics, Cambridge, Massachusetts
  • 3MIT Department of Electrical Engineering and Computer Science, Cambridge, Massachusetts
  • 4Gritstone Oncology, San Francisco, California
  • 5Cancer Center, Children’s Hospital of Philadelphia, University of Pennsylvania, Philadelphia
  • 6Department of Pediatrics, Perelman School of Medicine, University of Pennsylvania, Philadelphia
  • 7MIT Computer Science and Artificial Intelligence Laboratory, Cambridge, Massachusetts
  • 8Santa Fe Institute, Santa Fe, New Mexico
JAMA Oncol. 2018;4(9):1274-1280. doi:10.1001/jamaoncol.2018.1739
Abstract

Importance  Few patient populations are as helpless and in need of advocacy as children with cancer. Pharmaceutical companies have historically faced significant financial disincentives to pursue pediatric oncology therapeutics, including low incidence, high costs of conducting pediatric trials, and a lack of funding for early-stage research.

Observations  Review of published studies of pediatric oncology research and the cost of drug development, as well as clinical trials of pediatric oncology therapeutics at ClinicalTrials.gov, identified 77 potential drug development projects to be included in a hypothetical portfolio. The returns of this portfolio were simulated so as to compute the financial returns and risk. Simulated business strategies include combining projects at different clinical phases of development, obtaining partial funding from philanthropic grants, and obtaining government guarantees to reduce risk. The purely private-sector portfolio exhibited expected returns ranging from −24.2% to 10.2%, depending on the model variables assumed. This finding suggests significant financial disincentives for pursuing pediatric oncology therapeutics and implies that financial support from the public and philanthropic sectors is essential. Phase diversification increases the likelihood of a successful drug and yielded expected returns of −5.3% to 50.1%. Standard philanthropic grants had a marginal association with expected returns, and government guarantees had a greater association by reducing downside exposure. An assessment of a proposed venture philanthropy fund demonstrated stronger performance than the purely private-sector–funded portfolio or those with traditional amounts of philanthropic support.

Clinical Relevance  A combination of financial and business strategies has the potential to maximize expected return while eliminating some downside risk—in certain cases enabling expected returns as high as 50.1%—that can overcome current financial disincentives and accelerate the development of pediatric oncology therapeutics.

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