We’ve spent the past year developing Molecule, a software protocol that will provide a new distributed ownership structure for drug development. It will unite researchers, biotechs, investors and patients in public marketplaces that democratize research capital allocation and create novel collaboration and data sharing incentives. Our ultimate goal is to improve efficiency and enable new, sustainable business models in an industry that is challenged by a decline in innovation and rising drug prices. — By Titian Steiger & Paul Kohlhaas.
With this article, we are announcing the first version of our platform that is scheduled to go live on the Ethereum mainnet in Q4 2019. With Molecule Catalyst, we will launch an incentive-driven funding system for basic research. We are working with leading research institutes in their respective fields whose work ranges from early testing of entirely new molecules up to real clinical trials of potential therapeutics. Our launch projects are in the areas of:
- Rare and neglected diseases,
- Biogerontology and
- Psychedelic studies.
Challenges with Funding Early Drug Discovery
First some context. In the current system, basic research in early-stage drug development is almost exclusively funded by public money. Yet, it is often this early stage that drives innovation and where valuable intellectual property (IP) is first developed that can be commercialized privately later on.
A recent study has shown that funding from the National Institutes of Health (NIH) contributed to published research for all 210 new drugs that were approved by the FDA between 2010 and 2016. On the other side, US taxpayers that provide this capital cannot get involved in the selection process and have no exposure to the generated upside. The short clip below puts things into perspective.
Moreover, applying for public grants is a time-consuming process and often proposals are denied since contributions from these funding sources have been stagnating and become increasingly competitive. As one of our advising researchers put it, “we spend 80% of our time writing grant applications and 20% doing the actual research”. Furthermore, study selection tends to skew towards more traditional projects that take fewer risks and agencies often require proof-of-concept studies as part of submissions which makes it enormously difficult for experimental ventures to get off the ground.
To overcome these hurdles, many researchers are starting to reach out to the public to directly fund their work. Consequently, crowdfunding has emerged as a potential solution for the lack of research investment. Platforms like experiment.com, Consano, and lifespan.io managed to connect scientists with supporters and raise significant amounts for their undertakings. In this approach, the focus of securing funding shifts from being about status measured by publications to the ability of exciting individuals about your research cause. This forces scientists to actively engage with the public and opens crucial feedback loops for persons of interest to steer direction with their personal investments. In this sense, crowdfunding can act as a tool to democratize research spending that directly benefits society by bringing more people into science.
Of course, this approach also comes with its fair share of challenges and is not suitable for all research areas. Nevertheless, we believe that our technology stack can improve existing approaches and provide a novel funding solution for early-stage, experimental research in drug discovery that will ultimately lead to innovations benefiting patients and not only company profits.
Bringing Decentralised Finance into Research
Molecule Catalyst enables researchers to create globally accessible funding campaigns for their research projects. It leverages token bonding curves for continuous fundraising, curation of research ideas and incentivizing engagement with the supporting community. Moreover, this presents a first step in making a previously illiquid asset, like early-stage intellectual property, fractionally-tradeable on the Ethereum blockchain.
Let’s briefly outline how users will be able to interact with the system:
- Launching a campaign creates a publicly accessible bonding curve market that mints and burns an ERC20 token directly representing stakes in the research project.
- Interested backers can support initiatives by sending DAI, an asset-backed stablecoin pegged to the US dollar, to the respective smart contract. Relying on an open cryptocurrency allows anyone to participate in the network and does not exclude interested parties from supporting projects they feel passionate about based on local regulations.
- A first portion of the contribution is directly forwarded to the research group while the remaining one is kept in a communal depot that guarantees a minimum price for the project tokens.
- In exchange for the donation, users receive project tokens. These holding can at any time be redeemed for DAI according to the price set by the bonding curve.
- Researchers can share updates and results that draw new supporters into their markets.
New Incentive Experiments
If interest in the campaign grows and more donations come in, the project tokens increase in value and early contributors can redeem them for higher prices and recuperate parts of their initial backings. This incentivizes funders to promote campaigns within their own networks and removes parts of the pressure for gaining traction from researchers.
Since funding campaigns on Catalyst are not one-off events but continuous, researchers benefit from publishing results as soon as they are available. This creates new incentives to open and publish research results when they become available, rather than waiting for lengthy publishing cycles. Instead of needing to raise large lump sums that will lead to results in the far future, our system encourages quick data sharing to excite and convince new supporters. This introduces an unprecedented trust-building layer to crowdfunding.
Even though our long-term plan is geared towards distributing rights in actual IP assets, in this initial version, the project tokens themselves represent the value of the curve collateral, a memento of the project as well as potential to purchase into future IP that is generated by one of these projects. In this scenario, the pricing functionality of the bonding curves becomes less relevant but the token price can still act as a measure for the popularity of the funding campaign. High prices mean that current stakeholders believe in the project’s potential and thus the value of their collateral holdings increases which indirectly curates the project for new, potential backers.
Campaigns are closed once final conclusions have been reached or the lack of incoming funding is detected over longer periods of time. Market trading is deactivated and the remaining collateral will be redistributed to the token holders.
Conclusion & Outlook
Molecule Catalyst will be the first application that opens up research financing to the masses by utilizing the Ethereum network and DeFi. Leveraging the unique capabilities of token bonding curves creates incentive-driven micro-economies around individual research initiatives that democratize research spending and lead to a more patient-focused drug discovery process. This system will allow us to test stability and fundraising functionalities of bonding curves, engage with concrete users and create value for the scientific community while working out standardized legal frameworks for partial IP reassignment — the next phase in our product roadmap.
We are currently polishing the last bits of code and plan to kick-off user testing within our community at the end of September and launch of the Alpha application on Ethereum mainnet will follow in Q4 2019. Simultaneously, our scientific team is working with many research labs and institutional partners across the globe to identify promising projects in the areas of rare diseases, the therapeutic potential of psychedelics and novel compounds to combat aging and promote longevity. More details on the selected projects will follow soon.
We would love to hear your input and feedback. Follow us on social media for future updates or get in contact and be part of our first testing rounds!