Bill & Melinda Gates Foundation Gets $86.7 Million Windfall After Taking a $5 Million Stake in Anacor Three Years Ago

Bill & Melinda Gates Foundation Gets $86.7 Million Windfall After Taking a $5 Million Stake in Anacor Three Years Ago May 19, 2016
By Mark Terry, Breaking News Staff

The recent acquisition of Palo Alto, California-based Anacor Pharmaceuticals for $5.2 billion by Pfizer (PFE), netted investors a nice windfall. One of those investors, it turns out, is the Bill & Melinda Gates Foundation.

The Bill & Melinda Gates Foundation awards about $4 billion every year, focusing on global development, global health, policy and advocacy, or, as the foundation says, “improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty.” In addition to those grants, the foundation also has a pool of approximately $1.5 billion that it uses for “program-related investments.” Those investments include equity stakes in companies, loans, and other incentives.

“We’re fighting with one hand behind our backs if we’re only trying to do this by partnering the traditional way with the nonprofit sector,” Andrew Farnum, director of the investment program at the Bill & Melinda Gates Foundation, told Bloomberg. “Some of the best technologies are found in the private sector.”

In 2013, the Gates Foundation was looking at Anacor, which was working on drugs that had antimicrobial properties. Anacor had Kerydin, a drug for toenail fungus, and has crisaborole, a non-steroidal topical treatment for eczema, which has a PDUFA date of Jan. 7, 2017.

Since the Gates Foundation has a vested interest in drugs for neglected infectious diseases, it decided to invest in Anacor. It invested a 2 percent equity stake in the company, and also paid Anacor $17.7 million. Anacor agreed to broaden its work into tuberculosis and two parasitic diseases, river blindness and elephantiasis. Anacor also would develop a library of boron-based compounds that target neglected diseases that other researchers and health officials could access through the foundation.

As Bloomberg writes, “It was the Gates Foundation’s first investment in a publicly traded company for charitable purposes. The fund later increased its payment by $4.4 million and extended the agreement from three years to four, while Anacor took on research into another parasitic disease, called cryptosporidiosis.”

In late 2015, the Gates Foundation sold off most of its holdings in the company, keeping about 1 percent. The foundation’s stake, after the sale, is about $86.7 million, approximately 17 times its original $5 million investment.

The research agreement on neglected diseases continues until April 2017, and the possibility of a sale was written into the deal.

“We look forward to working with the Gates Foundation further through Anacor’s agreement,” said Joan Campion, a spokeswoman for Pfizer , in an email to Bloomberg.

Farnum indicated that the proceeds from the investment will go back into the foundation’s pool for future programs. So far, the foundation has invested about $1 billion in 47 investments, 18 of which are equity stakes or convertible debt. Risky investments are part of the strategy, because the return on investment isn’t just money, but to help the foundation reach its broader goals.

“We are going to have some great successes and frankly we’ll have a larger number of failures,” Farnum told Bloomberg. “We have a very high appetite for risk, we think it’s a competitive advantage of the foundation.”

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