UK rapid diagnostics company Mologic will convert into a social enterprise after being acquired by a group of philanthropic funds and investors, in what experts predict may become an increasingly popular trend.
The British biotech Mologic will entirely reinvest any profits into widening global access to affordable medical technology after being acquired in a deal worth at least €35M (£30M). Following the takeover, Mologic will become part of Global Access Health (GAH)—an altruistic initiative led by George Soros’ Economic Development Fund (SEDF) and supported by the Bill and Melinda Gates Foundation.
The move to become a social enterprise — a company focused on social goals over profit — is unusual in the biotech industry. However, the concept is becoming more prominent amid growing recognition of global health inequalities during the Covid-19 pandemic and the role biotech can play in addressing them. In addition, investors are increasingly drawn to sustainable and responsible investment practices that recognize the importance of environmental, social, and corporate governance.
“Mologic’s transition into a social enterprise is a deliberate, logical, and natural step for a company focused on delivering affordable diagnostics and biotechnology to places that have been left underserved by the relentless pursuit of profiteering,” Mologic CEO Mark Davis said in a public statement.
“Mologic becoming a social enterprise represents a new chapter for our company that advances a model prioritizing access to novel technologies for neglected diseases, escalating epidemics, and the next pandemic,” said Mologic’s Medical Director, Joe Fitchett.
“We expect this model can be successfully adopted to boost access for other medical countermeasures for epidemics such as drugs, vaccines, and medical oxygen.”
The acquisition includes both Mologic and its non-profit sister entity Global Access Diagnostics, which was founded partly with support from SEDF. The fund purchased all existing Mologic shares, including those held by two private investment managers.
Mologic will now seek to plug gaps in the delivery of diagnostics to low-income areas and communities. The company currently develops lateral flow and rapid diagnostic technologies that include tests for dengue fever, bilharzia, river blindness, and Covid-19.
Mologic’s transition is a sign of movement within the biotech community, as companies seek to balance a need for profitability and social accountability. In the case of pharma giant Novartis, this has involved moving away from traditional ways of evaluating the success of its investments.
The Novartis Social Business division is making investment decisions that give equal importance to both social and financial returns. It has applied this principle to developing heat-stable treatments for bacterial infections in children from low- and middle-income countries.
Novartis is also aiming to add social responsibility aspects to its malaria program in the form of the Novartis Malaria Initiative, operated by its generics and biosimilars division Sandoz. The project has been running for over a decade and aims to eliminate malaria through access, treatment, R&D, and capacity building.
For biotech entrepreneur Robert Luo, social responsibility is literally woven into the fabric of the products of his company, Mi Terro. The US-based firm seeks to address the 1.3 billion tons of food waste and 78 million tons of plastic packaging waste generated in the world each year. Mi Terro upcycles agricultural byproducts and surplus food to create t-shirt textiles from excess or spoiled milk at dairy farms and compostable, plant-based packaging film.
“In my opinion, there will not be a distinction between [a] social enterprise and normal company,” he told me. “All companies should bear social and environmental responsibilities.”
SEDF’s CEO Sean Hinton acknowledged that Mologic’s transition was complex and required them to innovate in terms of finance, structure, and governance.
“We were lucky to find a talented and visionary team, like-minded philanthropic investors, and venture capital shareholders who understood that the true potential of this business could only be realized through this transaction,” Hinton told me.
But the situation could become more common, according to Janke Dittmer, Partner at European investment firm Gilde Healthcare, which was not involved in the deal.
“For diagnostics or biotech companies to be acquired by a non-profit or impact investor is still a relatively rare occurrence. However, given the amount of capital flowing into social enterprises and impact investing, this will likely increase,” he predicted.
Dittmer said that hybrid funds are being set up with both a financial and impact mandate, together with philanthropic venture funds that invest alongside traditional life science and healthcare venture capitalists today.
“As companies and investors in this domain mature, I can imagine dedicated buyout funds emerging with a specialization on impact investing in diagnostics and biotech. The coronavirus pandemic has highlighted how important the contribution from venture-financed enterprises in diagnostics and biotech are for public health.”
Cover image from Elena Resko.