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

  1. working
  2. drugs
  3. generates
  4. financial
  5. dollars
  6. invest
  7. approval
  8. markets
  9. venture
  10. capital
  11. liquidate
  12. 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

ngrams of length 2

collocation frequency
financial engineering 3
work stream 3
andrew lo 2
early stages 2
blue bottles 2
million dollars 2
cash flow 2
equity holders 2

Important Words

  1. approval
  2. big
  3. billion
  4. bonds
  5. buy
  6. capital
  7. capitalists
  8. cash
  9. created
  10. debt
  11. dollars
  12. drugs
  13. empty
  14. engineering
  15. equity
  16. figure
  17. figured
  18. financial
  19. flow
  20. fund
  21. gain
  22. generates
  23. give
  24. helpful
  25. holders
  26. imagine
  27. interest
  28. invest
  29. issues
  30. kind
  31. liquidate
  32. lot
  33. markets
  34. math
  35. megafund
  36. money
  37. nice
  38. pay
  39. people
  40. phase
  41. philanthropies
  42. portfolio
  43. problem
  44. process
  45. return
  46. rid
  47. risk
  48. sell
  49. solving
  50. start
  51. starts
  52. stuff
  53. time
  54. traditionally
  55. transaction
  56. trials
  57. venture
  58. working