full transcript
From the Ted Talk by Roger Stein: A bold new way to fund drug research
Unscramble the Blue Letters
So we did this math, and we figured out, OK, well, you need about 80 to, say, 150, or something like that, dugrs. And then we did a little more math, and we said, OK, well, that's a fund of about three to 15 billion dllraos. So we kind of created a new problem by solving the old one. We got rid of the risk, but now we need a lot of capital, and you can only get that kind of capital in the capital markets. vernute capitalists and philanthropies don't have it. But we have to figure out how to get people in the caatpil metraks, who ttlonilradiay don't iesvnt in this, to want to invest in this stuff. So again, faaicninl engineering was helpful here. Imagine the megafund starts empty, and what it does is it issues some debt and some equity, and that gearetnes cash flow. That cash flow is used, then, to buy that big portfolio of drugs that you need, and those drugs start wkriong their way through that approval process, and each time they go through a phase of aovarppl, they gain value. Most of them don't make it, but a few of them do, and with the ones that gain value, you can sell some, and when you sell them, you have money to pay the interest on those bonds, but also to fund the next round of trials. It's almost self-funding. You do that for the course of the transaction, and when you're done, you latuqdiie the portfolio, pay back the bonds, and you can give the equity holders a nice return.
Open Cloze
So we did this math, and we figured out, OK, well, you need about 80 to, say, 150, or something like that, _____. And then we did a little more math, and we said, OK, well, that's a fund of about three to 15 billion _______. So we kind of created a new problem by solving the old one. We got rid of the risk, but now we need a lot of capital, and you can only get that kind of capital in the capital markets. _______ capitalists and philanthropies don't have it. But we have to figure out how to get people in the _______ _______, who _____________ don't ______ in this, to want to invest in this stuff. So again, _________ engineering was helpful here. Imagine the megafund starts empty, and what it does is it issues some debt and some equity, and that _________ cash flow. That cash flow is used, then, to buy that big portfolio of drugs that you need, and those drugs start _______ their way through that approval process, and each time they go through a phase of ________, they gain value. Most of them don't make it, but a few of them do, and with the ones that gain value, you can sell some, and when you sell them, you have money to pay the interest on those bonds, but also to fund the next round of trials. It's almost self-funding. You do that for the course of the transaction, and when you're done, you _________ the portfolio, pay back the bonds, and you can give the equity holders a nice return.
Solution
- working
- drugs
- generates
- financial
- dollars
- invest
- approval
- markets
- venture
- capital
- liquidate
- traditionally
Original Text
So we did this math, and we figured out, OK, well, you need about 80 to, say, 150, or something like that, drugs. And then we did a little more math, and we said, OK, well, that's a fund of about three to 15 billion dollars. So we kind of created a new problem by solving the old one. We got rid of the risk, but now we need a lot of capital, and you can only get that kind of capital in the capital markets. Venture capitalists and philanthropies don't have it. But we have to figure out how to get people in the capital markets, who traditionally don't invest in this, to want to invest in this stuff. So again, financial engineering was helpful here. Imagine the megafund starts empty, and what it does is it issues some debt and some equity, and that generates cash flow. That cash flow is used, then, to buy that big portfolio of drugs that you need, and those drugs start working their way through that approval process, and each time they go through a phase of approval, they gain value. Most of them don't make it, but a few of them do, and with the ones that gain value, you can sell some, and when you sell them, you have money to pay the interest on those bonds, but also to fund the next round of trials. It's almost self-funding. You do that for the course of the transaction, and when you're done, you liquidate the portfolio, pay back the bonds, and you can give the equity holders a nice return.
Frequently Occurring Word Combinations
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financial engineering |
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work stream |
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andrew lo |
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early stages |
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blue bottles |
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million dollars |
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cash flow |
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Important Words
- approval
- big
- billion
- bonds
- buy
- capital
- capitalists
- cash
- created
- debt
- dollars
- drugs
- empty
- engineering
- equity
- figure
- figured
- financial
- flow
- fund
- gain
- generates
- give
- helpful
- holders
- imagine
- interest
- invest
- issues
- kind
- liquidate
- lot
- markets
- math
- megafund
- money
- nice
- pay
- people
- phase
- philanthropies
- portfolio
- problem
- process
- return
- rid
- risk
- sell
- solving
- start
- starts
- stuff
- time
- traditionally
- transaction
- trials
- venture
- working