Can Financial Engineering Cure Cancer?

As our understanding of the science of disease has progressed, biomedical innovation has become more risky, lengthy, and expensive. These characteristics have the perverse effect of discouraging private-sector funding just when such funding is needed most. One solution to this conundrum is to apply new financing methods such as portfolio theory and securitization to de-risk large portfolios of basic biomedical research and translational medical projects. Such "megafunds" may require tens of billions of dollars to achieve sufficient risk reduction, but at those levels of funding, average risk-adjusted returns to investors become more attractive because of the increased likelihood of success. The scale of megafunds will also allow for debt financing, which is currently unavailable to most biotech startups and venture capitalists because of their high levels of risk. Debt markets are considerably larger and more patient than private or public equity markets, hence such financing can support longer-term innovation and truly transformative R