The Long-term Opportunities for Advancing New Studies (LOANS) for Biomedical Research Act – HR 7539 – would help advance much-needed treatments and cures for a broad range of diseases and conditions into clinical trials without significantly impacting the taxpayer burden.

Many promising treatments — including those for eye diseases, cancer, diabetes, and Alzheimer’s disease — never advance into clinical trials, because companies and venture capital firms only invest in emerging therapies once they’ve shown efficacy in human studies. These stalled treatments are said to fall into “The Valley of Death.”

The LOANS Act addresses this gap in investment by creating a unique financial instrument that would mobilize the financial capital of long-term investors to provide low interest loans to companies at the cutting edge of developing treatments and cures across the spectrum of disease and disability. Importantly, these loans would have minimal impact on taxpayers, because they must be repaid by the therapy developer.

Packages of loans to scientific projects receiving FDA clearance would be sold in BioBond issuances of no more than $10 billion per year for three years, backed by a limited federal guarantee to encourage private investors to enter a field essential to public welfare. Statutory language ensures that no single disease group or researcher is favored, and prioritization will be given to clinical trials conducted by women and racial or ethnic minorities.

An array of taxpayer protections is built in from the start, and any small upfront costs will be quickly reimbursed to the taxpayers. The program will use bonds that are based on debt, not equity interests such as those sought by high-risk venture capital funds. This approach increases protections for taxpayers by: (1) requiring any company lent funds under the program to repay or sacrifice its prized intellectual property and other assets; (2) housing idle funds in the bond in Treasury securities that earn income; and (3) ensuring that every dollar repaid goes first to reduce the taxpayer guarantee. Administrative start-up costs would be recovered from BioBond sales or other fees, not borne by taxpayers.

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