New focus on medical technology and research has put charities at the forefront of global science innovation. This article explores the options, potential benefits and key considerations for charities considering increasing their involvement in this area.
An increase in innovative, medical research by charities
Over the past several years, we have seen some charities intensifying their grant funding on scientific and healthcare innovation. Some have turned to social investment into health focused start-ups, and others have collaborated with other charities or with non-charitable partners to support cutting-edge research. Larger charities have even established their own medical research/technology and venture capital arms.
The creation of unique ecosystems consisting of partnerships, combining innovation and funding have put UK research at the forefront of the global life sciences sector. Funded by public, corporate, philanthropic and venture capital sources, charity-based partnerships are helping the UK life sciences industry drive forward innovation and help support life-changing, medical breakthroughs.
Key considerations for supporting innovative research
The trustees of any charity considering grant-making or social investment to support innovative medical research would need to be satisfied that this would be:
- in a subject, or directed towards establishing an outcome, which was of value and calculated to promote (in a meaningful and direct way) the charity’s objects;
- undertaken with the intention that the useful knowledge acquired from the research will be disseminated to the public; and
- such that the private benefit attributable to the charity’s involvement is no more than incidental to the public benefit delivered.
If grant support fulfils the above tests, then the trustees could pursue it. Equally, the trustees could, as an alternative to grant-making, consider social investment options to support innovative medical technology or research. The Charity Commission’s guidance material ‘Charities and investment matters: a guide for trustees (CC14)’ outlines the key considerations in this regard.
For charities whose objects and/or powers do not allow for the provision of such support, it may still be possible for the trustees to invest in innovative healthcare related companies. This is because all charities, subject to any restrictions/qualifications in their governing documents, are able to invest in such companies if doing so could properly be justified as offering the best financial return within the level of risk considered to be acceptable (see CC14 for more details on this).
For larger charities considering establishing medical technology arms as a means of advancing their objects, it is important to consider the potential tax implications of non-primary purpose trading (see the Charity Commission’s guidance material ‘Trustees trading and tax: how charities may lawfully trade (CC35)’ for more details). Equally, it is important to consider how risks to the charity itself (and its assets) can and should be managed, for example by ring-fencing in a trading subsidiary (see chapter 4 of CC35).
What are the advantages of medical research partnerships?
Charities partnering with like-minded charities, not-for-profit organisations, public bodies and/or cutting-edge private enterprises to support innovative medical research can not only result in scientific break-throughs (for the benefit of a charity’s beneficiaries and the world), but can also allow a charity to achieve a scale of impact that would otherwise not have been possible. The efficiency of such an interdisciplinary approach is cited by both the National Institute for Health Research and the Medical Research Council.
LifeArc is the Medical Research Council’s own charity, and they already have a 25-year legacy of collaborating on diagnostics and therapies. They focus on ‘translation’ – progressing work from early lab-based findings through to the development of products and treatments that benefit patients. This led them to identify promising treatments that had stalled in development.
To address this, they created SpringWorks, a joint venture with Pfizer, Bain Capital and OrbiMed with the specific goal of advancing development of these promising, yet stalled treatments. This approach highlights another advantage to founding a medical research arm: charities often lead the way in early-stage research, especially in rare diseases. This is key, as it effectively de-risks projects for later-stage investors and opens up potential new income streams. While there is potentially some ‘private benefit’ in this for the subsequent investors, this is often considered incidental given the substantial public benefit to be gained. Some charities familiar with this approach are Cancer Research UK (CRUK) and Parkinson’s UK.
In 2002, CRUK founded Cancer Research Technology, bringing several disparate research ventures together under one roof. Since then, they’ve focused on growing their research by growing their partnerships. It’s a strategy that’s allowed them to bring new drugs and treatments to market, including Temozolomide, now a first-line treatment for the most common adult brain tumor, and which was licensed to Schering-Plough for $1 billion in 2009.
Part of CRUK’s strategy overlaps with that of SpringWorks: CRUK are also funding research into promising therapies that had been de-prioritised by pharmaceutical and biotech companies. Not only can this help complete early-stage research, it’s also a great example of a charity being able to fill the need where private ventures lose interest.
In 2017, Parkinson’s UK set up its innovative Parkinson’s Virtual Biotech, which is its drug discovery and development arm. As a virtual biotech, it’s funding is not tied up in office space, laboratories or staff. Instead, its key focus is to plug the funding gap in drug development and fast-track the development of new treatments for people with Parkinson’s.
As legal adviser to Parkinson’s UK, Withers helped shape its virtual investment model and advised on its strategic deployment of capital through partnerships and collaborations with universities and industry. Withers advised on one of its notable collaborations with Sheffield University, a partnership that is hailed as the first of its kind and lead to the creation of a spin-out company, Keapstone Therapeutics.
Keapstone Therapeutics builds on the pioneering research undertaken at Sheffield University and has an international collaboration with the European Lead Factory to identify drug candidates with potential to slow or prevent the progression of Parkinson’s. Director of Research at Parkinson’s UK, Arthur Roach said: “by seeking early collaboration with a University in the creation of a spin-out biotech company, we were able to investigate and start developing potential Parkinson’s treatments with an intensity that is unprecedented for a charity.”
Indeed the projects in Parkinson’s Virtual Biotech are diverse in their scope and range from very early stage to clinical trial stage whilst others look to repurpose existing drugs. Some are treatments that address the progression of the disease, while others deal with the symptoms, such as Parkinson’s hallucinations and dyskinesia.
However, it’s not just the very largest charities that can benefit from partnerships. There are examples of charities with annual incomes around the £2m level who have become leading global investors in particular research fields as a result of successful partnerships.
Using partnerships like this can allow charities to punch way above their weight.
How we can help
Withers is uniquely placed to support charities across the globe drive forward scientific innovation and research in order to help benefit beneficiaries and people around the world. Our market leading Charities & Philanthropy experts work together with our Life Sciences specialists in ‘Withers tech’ to create a unique legal offering to our clients. We have a successful track record of supporting charities such as Parkinson’s UK on successful partnerships, transferring technology and launching spin-out companies from leading universities, research institutions and tech accelerators.
If you are thinking about ways to support scientific innovation and research, including through entering a medical research partnership, please get in touch.
Withers tech is a global venture capital and technology legal practice serving disruptors and innovators in the technology and life sciences sectors.
 Social investment is the application of funds by a charity with a view both to (1) directly furthering a charity’s purposes and (2) achieving a financial return for the charity.