Medical research is an important sector in the UK and globally. So how does a medical research charity operate successfully in our unstable economic environment? We looked at the case of Raft, a highly innovative and entrepreneurial charity, and how they got their product, Smart Matrix®, to clinical trial stage…without government funding.
Research and development is an important contributor to economic success and wellbeing in the UK. Medical research, in particular, plays a highly significant role in economic growth and human development.
As the report Medical Research: What’s it Worth (2008) argued, because the economic funding structure of medical research is complex, establishing its exact net worth and contribution is a long methodological process. However, they argue that in cardiovascular research alone, the gains to Gross Domestic Product (GDP) show the best estimate of the rate of return is as high as 30%.
In other words, medical research offers a great return on investment as well as delivering palpable human benefits. And if you are a medical research charity, finding inventive ways to finance medical research is critical. And that’s exactly what Raft (Restoration of Appearance and Function Trust), a UK-based medical charity, did, by creating a product and marketing it through a subsidiary, channelling the benefits back to Raft.
What does Raft do?
Raft is a medical research charity working in the field of tissue regeneration. It aims to ‘give people who have suffered severe tissue damage (e.g. skin or bone) through accident, disease or birth abnormality access to pioneering new treatments that will significantly improve their quality of life, independence and dignity.’
Raft focuses on areas of clinical need, uniting the input of surgeons and scientists to find new solutions to medical or surgical problems in the area of tissue regeneration. Raft does not receive government funding and relies on donations from individuals, grant making foundations and companies to develop its research.
Raft is headed up by Chief Executive, Leonor Stjepic. Leonor believes in running the charity along business lines rather like a social enterprise so that they can become self-sustaining in the future. An example of how this approach has evolved for Raft is her drive to set up Smart Matrix Limited in 2012.
Smart Matrix®
Smart Matrix® is a biological scaffold designed to speed up the healing process for full thickness wounds, that is, wounds where both the top and bottom layer of skin are damaged either through surgery (for example, the removal of skin tumours, burns, accident, and so on).
Smart Matrix® works by ‘encouraging the growth of skin cells and new blood vessels, critical to healthy inner skin formation and repair.’ It mimics the natural process of healing in the body, but with much larger wounds that the body cannot cope with itself.
Smart Matrix® was developed specifically to address the disadvantages of the current treatments used in severe burns. Large area severe burns need the use of a scaffold that allows for dermal repair. However, the majority of existing treatments require applying a skin graft on top of the scaffold, which is usually done in a two-stage procedure. In the case of large area burns applying a skin graft becomes an impossible task.
A scaffold that allows healing without the need for a skin graft would offer a significant advantage over currently used treatments. Such a scaffold could also be used for treating acute full thickness skin wounds other than burns, such as those obtained after skin cancer removal.
Leonor Stjepic, Chief Executive of Raft, said that “the body can’t heal a wound larger than a 2p coin by itself. It leaves an open wound, which is prone to infection. These kinds of wounds eventually need a skin graft. But Smart Matrix® offers the potential of working without grafts and with a much shorter and less complicated wound management process.”
Investment and clinical trials
By establishing a separate company for this product, Leonor was able to attract private investors who would benefit from any eventual sale of the product, while RAFT retained the royalties that would translate into a steady income for the charity. A win-win for everyone.
But getting Smart Matrix® onto the medical market, of course, involves clinical trials. Raft set up a separate company and made use of the Enterprise Investment Scheme; a government sponsored scheme that aims to encourage research and development by offering tax relief. It offers 30% tax relief on investment and 35% return if the trial fails. If successful, profits incurring from market launch is not taxed.
The next step was to get investment. The new company planned around inward investment of £2 million over six months. Instead, they levered in £2.6 million in three months, enough to launch their first clinical trial in 2014.
Leonor says: “It wasn’t that I was surprised we could raise the money. We all knew we had a strong medical product. It was the speed and enthusiasm of people with no medical knowledge, but an understanding of how this could make a real impact on people’s lives.”
Results of the first clinical trial
The results of the trial were, in the words of Leonor, “unexpected but in a good way. Not only did we find the product regenerated the dermis (the inner layer of the skin), it also regenerated the epidermis, meaning that no skin graft was needed.” She added that “the time spent in hospital could be dramatically reduced because only one operation might be needed.”
Looking forward
Uniquely, Leonor was not only running the company but also running the charity at the same time. Although not daunted by the long hours she needed to work, it left little time for anything else. So in January 2017, a new CEO for Smart Matrix Ltd was appointed, and Leonor steps away formally at the end of March 2017. She is already working on the next phase of development for RAFT.
RAFT is working on a natural breast implant, an implant made from natural products found in the body that will encourage the body to make a new breast.
RAFT also has a project to grow bone inside of the body, with the ultimate aim of being able to regrow a new hip instead of needing a hip replacement. They also want to improve the treatment of hard to heal fractures so that patients won’t need a painful bone graft. The first stage of that work will also be ready for clinical trial in 2018.
There are issues ahead, according to Leonor: “The not-for-profit sector is in a challenging stage, with trust levels down, funding tight and philanthropy changing and I want RAFT to be ready.”
But asked what she is most proud of, Leonor hesitated before finally saying “Of course, I’m proud of what we have achieved at RAFT and Smart Matrix Ltd, and I couldn’t have done it without a great team and board at both. Personally, though, I think there is still more I can achieve. The thing I am most proud of is probably something I haven’t done yet.”
Leonor Stjeptic, CEO of Raft, is winner of Business Worldwide Magazine’s CEO Awards 2017 in the categories of ‘Most Innovative CEO’ and ‘Nonprofit Organization (NPO) Sector UK.’