As investors search for new investment vehicles to create value due to ever-increasing competition in the financial markets, the ability to identify sources of potential value creation by addressing society’s most pressing economic needs has attracted significant attention. Collaboration between experts in finance and technology has emerged as a fertile arena for such value creation. However, the traditional approach to investing in technology, namely venture capital funds, has often underperformed relative to passive investment strategies such as the S&P 500, often due to lack of sufficient diversification and capital efficiency.
McGill Desautels faculty member Anisha Ghosh, Associate Professor of Finance, Desmarais Faculty Scholar, and former Academic Director of the Honours in Investment Management (HIM) program, undertakes research at the intersection of finance, economics and statistical inference. Her research interests include the development and application of novel learning and statistical inference algorithms to solve problems associated with the valuation of risky assets, portfolio management, and risk management.
Building upon her research, Professor Ghosh has co-founded, in collaboration with the global chemical and pharmaceutical conglomerate PMC Group, Inc, the diversified biotechnology company, CCM Biosciences (CCM Bio). CCM Bio, which recently announced its launch from stealth, has raised more than US$25M in financing, including Series A1 and A2 rounds, at a multi-hundred-million-dollar valuation. CCM Bio is a biotechnology company dedicated to discovering and developing novel drugs, including small molecules, gene therapies, biologics, and nanomedicines. The company applies portfolio management principles from Ghosh’s financial economics research to drug and diagnostic programs developed using the chemistry, biochemistry and biophysics acumen of PMC Group, one of the fastest growing chemical companies in the United States. The U.S. Congress’ House Committee on Science, Space, and Technology described PMC Group, which collects annual revenues on the order of US$1B, as a domain leader in the country’s manufacturing sector alongside General Motors and Procter & Gamble.
While traditional biotechnology companies typically focus on a single type of drug modality or disease area, CCM Biosciences is highly diversified, advancing a portfolio of more than 10 drug programs spanning multiple disease and diagnostic areas. Many of these programs originated from CCM Biosciences' proprietary drug discovery platforms applied to several types of drug modalities. Ghosh oversees the choice of drug programs comprising the company's portfolio, as well as the allocation of capital among them based on modern quantitative methods for asset management. Ghosh's research in asset pricing and portfolio management has been published in leading journals like the Journal of Finance and Review of Financial Studies and has been the subject of invited lectures at leading venues ranging from the National Bureau of Economic Research to the Institute for Quantitative Research in Finance. In addition, Ghosh has co-authored papers with scientists at CCM Bio that are published in journals including Nature Publishing Group and Elsevier journals, and co-invented patented technologies used for ultrahigh-throughput drug discovery using modern learning and statistical inference techniques applied to large chemical and biological datasets.
“Professor Ghosh collaborated with executives at PMC Group to conceptualize the structure of CCM Bio and launch the company,” says James F. Mountain, Chief Financial Officer of PMC Group and CCM Bio. “By extending the company’s business model beyond chemical development and manufacturing services, she has enabled the reinvestment of cash flows into risk-mitigated proprietary molecular development.”
Ghosh adds, "CCM Biosciences applies an operating company structure to management of portfolios that are traditionally housed in separate decentralized portfolio companies funded by venture capital firms. Our structure makes them more capital efficient and more flexible in responding to new data from uncertain biological systems. CCM’s cost-effective approach to reaching the current stage in its lifecycle offers a unique story against the backdrop of heavily funded, albeit risky, biotech companies."
While the corporate structure of an operating company managing a diversified portfolio of proprietary drug assets has some precedent in the market as an alternative investment strategy, and has been studied by financial economists, nearly all such companies are focused primarily on the acquisition of assets from other biotechnology and pharmaceutical companies and managing the allocation of capital across those assets. CCM Bio differs fundamentally by recognizing that even that market for quality, licensable assets will become saturated with investors, thereby depleting the available supply. Furthermore, many unmet medical needs are associated with drug targets for which there are no existing drug assets. As such, the company’s drug programs are based primarily on new drug leads discovered using state-of-the-art screening and data analysis algorithms applied to unaddressed targets. This approach provides a massive proprietary supply of drug assets in areas such as the diseases of aging, highly drug-resistant cancer targets, and nonsense mutations that account for 10 per cent of all genetically-inherited diseases. Prior to Dr. Ghosh’s work, financial economists had not established the methods needed to accurately value such disruptive drug programs at preclinical stages of development, which are required to guide the allocation of capital across such programs.
