A new lifeline: how family offices are funding unmet medical needs
21 November 2023 | 3 minutes
There is a lengthy list of medical conditions that lack an available therapy. In many cases, there simply is no effective treatment. For other conditions, a conventional therapy lacks broad efficacy. For example, many cancer therapeutics are marginally effective, or not effective at all, in a large segment of the patient population. In addition, numerous drugs, such as antibiotics, lack broad-spectrum efficacy or require reformulation.
"These conditions are known as unmet medical needs and the individuals suffering from them can be left in a difficult position without much hope of treatment," says UK life sciences partner Susanna Stanfield. "The economic reality of these conditions is often that their potential treatments do not offer the attractive returns that grab the interest of major pharmaceutical companies or venture capital investors."
However, these areas are increasingly receiving funding from (ultra) high net worth individuals, and that's where family offices come into the picture. In the broadest sense, a family office is a private advisory firm that manages the wealth and investments of high-net-worth individuals or families. Examples of well-known family offices include Bezos Expeditions (established by Amazon founder Jeff Bezos), Soros Fund Management (businessman and philanthropist George Soros) and Cascade Investment (the Gates family).
Proximity to the source of capital
James Shaw, global head of the Withers tech team, explains: "The concept of 'proximity to the source of capital' means that the further you are from the source of capital, the more likely it is that decisions made about the use of it are based on financial return, as opposed to ethical values. A basic example of this would be engaging a fund manager who invests on your behalf and you pay them a management fee. At this end of the sliding scale the fund manager is motivated to seek the highest financial return, without considering ethical values unless instructed otherwise."
James continues: "Conversely, the closer you are to the source of capital then you may be less financially-motivated and more impact-driven. The investment strategies of family offices are often intertwined with philanthropic interests due to the personal experience and circumstances of the family. For instance, familiarity with particular medical conditions. In this way, family offices can drive progress towards potentially transformative cures for illnesses and diseases, helping to bridge the funding gap by leveraging their capital to address unmet medical needs."
Robust investments in healthcare
It's no secret that current macro-economic conditions have been challenging, with private investments down from 2021. Family offices have not been immune to these conditions, with their investments in venture capital falling from a record $136.9 billion in 2021 to $65 billion in 2022, according to data collected by SVB Capital. 1
Despite this overall downturn, investment in healthcare has remained robust. 2 A survey by Campden Wealth indicates that three out of four family offices invested in healthcare in 2022, and 39% of these planned to increase their investment in 2023. 3 The Kessler family offers an example of the role that family office capital can play in promoting innovation to tackle an unmet medical need, in this case for skin cancer. Its investment in Iovance Biotherapeutics supported a cancer immunotherapy company whose most advanced experimental treatment is for melanoma. 4
Other notable family office investments can be found in the area of longevity medicine, a branch of medicine aiming to slow down the aging process. The Lauber family are investors in this area through their Korify family office, while Amazon founder Jeff Bezos is reported to be a key backer of Altos Labs, with the mission of using cellular rejuvenation programming to reverse disease, injury and the disabilities that can occur throughout life. 5
Aside from directly tackling diseases and illnesses, family offices are making significant contributions to the creation of research and innovation hubs. For example, the Noé Group have invested in campuses and laboratory spaces in Europe, including a €30 million real estate investment in Madrid in early 2023 that will comprise laboratory space. 6 In the UK, Noé's group portfolio also includes data centres such as the Kao Data Campus in Harlow, which houses the Cambridge-1 supercomputer.7
Harnessing AI for healthcare innovation
Within the healthcare space, a key recent trend has been the use of artificial intelligence (AI) in the drug discovery process. Family offices have actively invested in AI-driven drug discovery companies, supporting computational biology start-ups, research, therapeutic development for rare diseases and more. Highworth Research estimates that about a fifth of family offices have invested in healthcare or biotech in the past two to three years. 8
The Lauber family office have heavily invested in healthcare through its healthcare-focused fund Korify Capital, where around 70% of its investments are in biotech. The intention is to support companies such as Gameto, which is applying cell-based therapies to areas such as fertility treatment and menopause-linked health problems. 9
"Pharmaceutical companies have forged innovative partnerships with AI-driven start-ups to harness the potential of AI for drug discovery," says US life sciences partner Tom Meyers. "Family offices' investments can enable these partnerships. For example, the family office of brothers Thomas and Andreas Strüngmann, founders of drug maker Hexal AG, is the biggest shareholder in BioNTech (supporting the company with over €136.5mn seed investment), the German vaccine maker which partnered with Pfizer to produce one of the world’s most widely-used Covid-19 vaccines. As generative AI continues to rise in prominence, we expect family offices to invest further in these areas as well as in specialty niches that typically do not receive substantial funding."10
Broadening the innovation landscape
The changing role of family offices in impact-driven innovation is reflective of shifts in the wider investment landscape and demonstrates the central role that they can play in addressing unmet medical needs. High and ultra-high-net worth families increasingly recognise that their capital can drive positive societal impact while also delivering financial returns. By backing innovators in areas of unmet medical need, family offices have expanded their investment portfolios while simultaneously shaping a better future for patients suffering from orphan conditions. While the investment landscape is still challenged by the global economy, we expect family offices to increasingly bridge the gap between philanthropy and asset management.
A new era of funding innovation in life sciences: The rise of family offices
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2. SVB Capital Report: Family Offices Investing in Venture Capital January 2023, p.8
3. Stephen Van de Wetering, April 2023, https://www.empaxis.com/blog/family-office-trends
6. https://capreon.com/news-insights/capreon-the-no%C3%A9-group-s-real-estate-investment-arm-announces-a-30-million-investment-in-madrid and https://www.ft.com/content/20d69b46-11fd-4904-8d6c-86927a3f4cd5