CF Foundation 'Supercharged' by $3.3 Billion Sale of Drug Royalty Rights
The Cystic Fibrosis Foundation (CFF) announced “an unprecedented acceleration and expansion of its research, care and patient programs for the CF community” made possible by the $3.3 billion CFF received from selling the Foundation’s royalty rights to CF treatments developed by Vertex Pharmaceuticals Inc., according to a November 19, 2014 news release. In the news release, CFF’s President and CEO describes the $3.3 billion sale to Royalty Pharma as “a transformational moment for the Foundation and the entire CF community” and says, “These new resources will allow us to supercharge our efforts to help all people with CF live long, healthy and fulfilling lives today and work to find a cure.” CFF maintains that nearly every CF drug available today was made possible because of CFF’s support and cites the $3.3 billion sale as “the most recent and significant example of the Foundation’s successful venture philanthropy model, through which the organization provides upfront funding for pharmaceutical companies to help reduce the financial risk of developing drugs to treat CF,” per the news release.
The royalty rights payment to CFF, a health charity earning Top-Rated status from CharityWatch, is huge. To put the $3.3 billion that CFF received from Royalty Pharma in perspective, it represents about 18 times CFF’s consolidated cash budget of approximately $180 million in 2013.The November 19 news release notes that the funds CFF receives from royalties “are reinvested to accelerate further drug discovery and advance its mission to find a cure.” Also cited by CFF is its “proven track record of using royalties to create a robust pipeline of potential therapies that target CF from every angle.” CFF collected approximately $257 million in royalty revenue in 2013 per its audited consolidated financial statements.
In addition to increasing research funding, CFF states in the news release that it plans to strengthen the specialized care and support provided to people with CF and their families at the 120+ Foundation-accredited care centers in the U.S., and that resources will be expanded to help people with CF afford expensive medications and manage health care coverage. Although CFF appears to have a plan in place for spending its royalty income, CharityWatch anticipates that the $3.3 billion received from Royalty Pharma in 2014 will considerably increase CFF’s asset fund balance, which was approximately $598 million at December 31, 2013 according to CFF’s consolidated audit. This presents the possibility that we may downgrade CFF for having large asset reserves in upcoming years. Therefore, even though CFF’s President and CEO says in the news release that CFF still needs the support of donors to realize its goals and that it plans to invest its funds “in the wisest way possible,” CharityWatch will be seeking budget and spending plans from CFF to determine if it is serious about spending its billions to fund research or other programs to help people with CF over the next several years, or if instead, it will just sit on this huge sum of money. In light of the $3.3 billion being such a massive cash infusion, however, CharityWatch realizes that it may be unreasonable to expect CFF to spend significant amounts in the short-term and will consider this when performing our future ratings of CFF.