People waiting in line for COVID testing in Dhaka, Bangladesh. Mamunur Rashid/shutterstock
People waiting in line for COVID testing in Dhaka, Bangladesh. Mamunur Rashid/shutterstock

There’s no question that COVID-19 revealed deadly gaps in both the world’s diagnostics capacity and the market’s ability to produce safe, affordable individual testing—particularly in developing parts of the world.

Without adequate testing, healthcare writ large can’t track the spread of disease in real time and hope to contain hot spots. And despite the essential nature of rapid testing’s role in global recovery, production capacity largely resides in higher-income countries.

The question, then, is what to do about it. The field of impact investing recently provided one innovative solution.

Open Society Foundations’ investment arm, the Soros Economic Development Fund (SEDF), led a consortium of social impact investors and traditional funders in the $41 million acquisition of Mologic Ltd., a U.K.-based leader in the science and technology of lateral flow testing and rapid diagnostics.

The transaction created a new social enterprise, Global Access Health (GAH), which can now fully focus on a problem that for-profit enterprise failed to address: expanding access to state-of-the-art medical technology in lower and middle-income countries, or LMICs, through decentralized research, development and manufacturing.

Besides SEDF, the buyout from owners Calculus Capital and Foresight Group LLP was backed by the Bill & Melinda Gates Foundation and other philanthropists.

An expanding practice

Impact Investors collaborated early on to combat both COVID-19 and inequity through the Global Impact Investing Network’s (GIIN) R3 Coalition, which launched last March. Short for Response, Recovery and Resilience, the collaboration attracted partner networks like the European Venture Philanthropy Association (EVPA) and the U.S. Impact Investing Alliance, and leading foundations like Open Society, Ford and MacArthur.

Immediate goals included filling financing gaps, surfacing promising health interventions and providing access to capital for high-impact opportunities. The industry initiative is managed by GIIN, whose 2020 Impact Investor Survey showed that rather than curbing the practice, assets under management grew by 17% during the initial year of COVID, from $52 billion to $98 billion.

Idea to execution

Sean Hinton, CEO of SEDF and co-director of Open Society Economic Justice Program, explained that Mologic crossed their radar when colleagues took a closer look at vaccines, diagnostics and treatments in the face of COVID. Where were the real challenges on access? When were the marginalized really suffering? How might impact investment tools help?

They found that, “on the diagnostics front, we are not good at getting people access to the kind of tools for their circumstances.” With a focus on scaling, manufacturing and distribution, SEDF talked to people the team identified as having deep expertise, using a singular mindset of the broadest possible distribution.

One of those was Mologic, a leading player with a cost-delivery of under a pound, which the SEDF team knew via Gates’ involvement in the diagnostics space. Gates previously funded Mologic’s work with a $27 million grant to reach roughly the same goals as Global Access Health: developing a high-volume manufacturing process for diagnostic tests for deployment in LMICs, now and in the future.

Local and flexible

Currently, Mologic has an existing relationship with Institute Pasteur Dakar in Senegal, and is producing COVID tests under contract with the U.K. government. Its current manufacturing model delivers high-volume, low-cost diagnostic test kits that can be “switched as needed” to target areas of need, including small-batch production to detect neglected tropical diseases like Ebola — interventions that would not otherwise be commercially viable.

The company’s Chief Scientific Officer Paul Davies originated, along with his father, the now ubiquitous Clearblue pregnancy test, launched in the late 1980s. The company still specializes in rapid lateral flow tests, which are intended for use in asymptomatic people, which deliver quick results.

Since then, it has developed a number of commercial products aimed at women’s health and respiratory illness. On the R&D side, achievements include diagnostic developments in neglected tropical diseases that attracted significant support from donors like the Bill & Melinda Gates Foundation.

At the vanguard

The SEDF-led conversion is at the vanguard of impact investing, and may well represent the first time a U.K. for-profit company has transitioned to a social enterprise. It’s also the first time SEDF has used this model.

In the Financial Times, Hinton describes the transaction as a “buyout for good” that takes ROI-driven venture capital out of the equation, while continuing business operations.

Now that the conversion is complete, Global Access Health is free to reinvest profits in the business of producing low-price, high-quality testing products through decentralized manufacturing, aligning product and need. Through GAH, the company’s diagnostics technology will first be licensed to manufacturers in two locations in the Global South: West Africa and South Asia. Others will follow.

Structure and governance

Hinton compared the structure that resulted from the buyout to Wellcome Trust, the philanthropic leader in global health that was created by the proceeds of a for-profit entity, and is mandated to invest its profits in advancing health outcomes through scientific research and the study of medicine.

As a limited by guarantee company, Global Access Health became the sole owner of Mologic. The social enterprise will not have shareholders—only members. Operations will be sustained in two ways: profits from its commercial businesses, and long-term grants and loans directed by members.

Global Access Health will be led by a seven-member fiduciary board with responsibility for representing members on strategic direction, with the support of a separate advisory board with regional and public health expertise. GAH will also oversee a separate fiduciary board focused on operations, which company leadership will answer to.

SEDF hopes the project’s success will catalyze further participation from similar investors, who are prepared to bring catalytic capital to global scale, and prioritize societal benefits over financial returns.

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