Gates' $$ in Big Pharma

[Eugene Coyle <eugenecoyle@xxxxxxx>]

[The Wall Street Journal]

May 17, 2002

[Image]HEALTH
       Gates Foundation Buys
       Stakes in Drug Makers

       By DAVID BANK and REBECCA BUCKMAN
       Staff Reporters of THE WALL STREET JOURNAL

       The Bill and Melinda Gates Foundation has
       purchased shares in nine big pharmaceutical
FOUNDATION'S MOVES
       companies valued at nearly $205 million -- an
       investment likely to attract attention more for
       its symbolism than its size.                           ¥ Gates
Fights

Malnutrition With
       The foundation, the nation's largest with an           Cheese,
Ketchup and
       endowment of $24.2 billion from Microsoft Corp.        Other
Fortified Food
       Chairman Bill Gates and his wife, already is a         Items3
       major force in international health issues,            05/09/02
       contributing $555 million in 2000 alone to
       global health programs. The organization has           ¥ Gates
Brings His
       emerged as a prominent voice in the debate over        Business
Sensibilities
       how to supply cheaper drugs for AIDS and other         to Efforts
to
       diseases to poor countries. At times, it has           Vaccinate
the World's
       assumed the role of a broker between poor              Poor4
       nations and drug companies.                            12/03/01

       Now, as an investor in Merck & Co., Pfizer             ¥ The
Gates Foundation
       Inc., Johnson & Johnson and others, the Gates          Answers
Plea of Annan
       foundation has a financial interest in common          With $100
Million
       with makers of AIDS drugs, diagnostic tools,           Pledge5
       vaccines and other drugs. The stock purchases
       are a new type of investment for the                   06/20/01
       foundation: In the past it held primarily bonds [Image]
       and other nonequity investments.                       ¥ Gates
Foundation
                                                              Seeks to
Bring Vaccine
       Joe Cerrell, a spokesman for the Seattle-based         to Africa
With
       Gates foundation, says the stock investments,          Incentives
for Drug
       reported this week in a Securities and Exchange        Firms6
       Commission filing, are independent of the              05/31/01
       foundation's programs. The stocks were chosen
       by Michael Larson, a money manager who has
       considerable discretion in selecting
       investments for the foundation and for Mr.             COMPANIES
       Gates personally, through an entity called             [Image]
       Cascade Investment LLC. Mr. Larson, through a          [Image]
       spokesman, declined to comment about the                   Dow
Jones, Reuters
       rationale.                                             Microsoft
Corp. (MSFT)

PRICE       55.31
       The foundation's investments in "Big Pharma"
CHANGE      -0.43
       could spur controversy, given Mr. Gates'               U.S.
dollars1:55 p.m.
       staunch support of strict intellectual-property
       protections for drugs in poor countries. Mr.
       Gates' stance on intellectual property is
as                          [Image]
       important to Microsoft's software business
as                         [Image]
       it is to drugmakers.                                        * At
Market Close

[Image]
       "The impression people have, because of the
       types of projects Gates has funded and because of his Microsoft
background,
       is that he has an ax to grind on the intellectual-property
front," says James
       Love, director of the Consumer Project on Technology, who works
with African
       officials to obtain low-cost drugs.

       Poor countries have sometimes threatened to seize patents in
order to produce
       affordable generic drugs for sick citizens, making the field of
       intellectual-property law a flash point between pharmaceutical
companies and
       poor countries. At a meeting in Africa last year, Mr. Love says
he was struck
       by fears of officials from Botswana and elsewhere that pressing
for access to
       generic drugs could jeopardize their chances for contributions.
"They thought
       it would alienate the Gates foundation and they thought that was
a problem,"
       Mr. Love says.

[Image]A report issued last year by the Commission on Macroeconomics and
Health,
       chaired by economist Jeffrey Sachs, made a strong defense of
       intellectual-property protection as critical to continued
investment in drug
       research and development. The Gates foundation was a major
sponsor of the
       commission.

       Other people involved with the issue say medical progress in poor
countries
       depends on incentives for drug makers, and the Gates foundation
is balancing
       the tradeoffs responsibly. "For every major killer of the poor,
we need
       better drugs, better diagnostics and better vaccines," says
Richard Feachem,
       director of the Institute for Global Health at the University of
California,
       San Francisco. "That means massive investments in research and
development.
       Much of that has to come from Big Pharma and biotech companies."

       The foundation's Mr. Cerrell dismisses as "speculative" the
suggestion of
       conflict between financing drugs and investing in stocks. He adds
that
       pharmaceutical makers "play an important part in meeting our
goals of
       providing equity and access and lifesaving vaccines and other
advances in
       medicine to those who need it most."

       Managing the foundation's multiplying ties with the drug industry
could get
       tricky. For example, through its funding for the Global Alliance
for Vaccines
       and Immunizations, the foundation pays for purchases of vaccines
from some of
       the same pharmaceutical makers in which it now owns shares.

       A Gates foundation representative sits on the 18-member board of
the Global
       Fund to Fight AIDS, Tuberculosis and Malaria, which is expected
to become a
       major buyer of drugs to fight those diseases. The foundation has
pledged $100
       million to the fund, which has so far collected $2.2 billion.

       UC's Mr. Feachem, recently appointed to head the Geneva-based
fund, argues
       that its massive buying power could create a strong "pull factor"
spurring
       drug makers to develop inexpensive products. "For the industry,
that would
       lead to the development of a high-volume, low-margin market,
which could be a
       win for them as well," he says.

       Mr. Gates has forged other ties with the industry. Last year,
Microsoft named
       Raymond Gilmartin, chief executive of Merck, to its board. Mr.
Gates worked
       with Mr. Gilmartin to launch the vaccine fund and also helped
Merck with a
       program to supply discounted AIDS drugs in Botswana, where one in
three
       people is infected with HIV.

       The foundation's stock holdings include just two other stocks:
Cox
       Communications Inc. and Waste Management Inc. The spokesman for
Mr. Larson,
       the money manager, confirms that the drug investments represent a
significant
       increase in the foundation's equity holdings, though they
represent less than
       1% of its total portfolio.

       Write to David Bank at david.bank@xxxxxxxx and Rebecca Buckman at

       rebecca.buckman@xxxxxxxx

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