UCLA gene therapy researchers form public benefit corporation

University of California Los Angeles (UCLA) pediatric bone marrow transplant specialist Dr. Donald Kohn spent decades in a lab with his team developing stem cell gene therapy for genetic disorders, including a rare life-threatening primary immunodeficiency (PI)—adenosine deaminase severe combined immunodeficiency (ADA-SCID). The gene therapy treatment for ADA-SCID showed remarkable clinical success, and UCLA licensed the therapy to a biotech company, Orchard Therapeutics, for commercial development.

For several years, Orchard continued development and completed an additional clinical trial, but financial constraints led the company to return the program to UCLA. The researchers continued their search for a different commercial manufacturer, bolstered by the undeniable clinical success of the therapy. Of the 70 children with ADA-SCID who received the gene therapy, 100% survived and 96% experienced curative outcomes that required no additional treatments.

“That’s unbelievable. That’s remarkable. That rivals anything on the market,” explained Dr. Paul Ayoub, CEO of Rarity PBC. “So, [the issue] was never clinical. What we started to realize is nobody wanted it. Nobody wanted it because there wasn’t enough profit to be made.”

Despite its success, the lack of commercial interest warranted a new path forward. The researchers created their own entity to license the treatment—a public benefit corporation (PBC) called Rarity PBC.

A PBC is a hybrid between a for-profit and a non-profit. While it’s a for-profit company, shareholder-owned and profit-driven, the PBC is legally mandated to have a public benefit mission in its charter and spend profits in pursuit of that mission. Ayoub, along with Rarity CSO Dr. Katelyn Masiuk, both trained in Kohn’s lab, now lead the effort to bring the therapy to patients.

“The intent behind a PBC is to be sustainable, to continue to grow, to continue to make money, and return money to those that helped you get there in the first place. But those aren't the only people you're helping, right? You still are helping, in our case, healthcare institutions, patients, families, and communities in the same way we support those who invested in getting the company off the ground,” said Ayoub.

By operating as a PBC, Rarity PBC challenges the traditional biotech model by balancing financial sustainability with public benefit.

“What that ends up meaning is that the PBC must pursue its fiduciary duty to shareholders and maximize its public benefit mission,” said Ayoub.

PBC as a solution

Ayoub and Masiuk carefully considered various organizational models to determine the most sustainable path for advancing the gene therapy. While a non-profit structure was considered, they recognized that it may not generate enough funds to support gene therapy manufacturing, which costs tens of millions of dollars.

“These expenses arise from high upfront development costs, the complexity of manufacturing, and stringent regulatory requirements. Unlike traditional drugs, each therapy is often a one-time, personalized treatment, requiring specialized vector production, cell processing, and rigorous quality control,” explained Ayoub. “This high cost creates a financial bottleneck, where academic institutions can develop therapies but lack the funding to commercialize them.”

Furthermore, attracting and retaining the competitive talent necessary for this specialized field can be challenging in a non-profit setting, where compensation falls short of industry standards.

Alternatively, a traditional for-profit venture could be subject to similar market pressures that lead to program discontinuation, like before. Ultimately, the PBC model made the most sense considering the field and the product.

“Could we change the underlying structure of biotech and investment and make sure that key stakeholders are aligned with the fact that we're looking for long-term value creation?” expressed Ayoub.

“We're looking to make these gene therapies truly accessible, even in the face of ultra-rare diseases and small market sizes. We're building a company that can be sustainable, can attract competitive talent, and can actually provide these ultra-rare disease gene therapies to patients who need them most.”

Getting Rarity PBC off the ground

In November 2024, the California Institute of Regenerative Medicine (CIRM) awarded UCLA and Rarity PBC a $14.7 million grant. The grant will fund the development of commercial-grade manufacturing processes for both the lentiviral vector used in the ADA-SCID gene therapy and the patient-specific autologous stem cell products.

“We have done this at an academic level, but for FDA approval, you need to demonstrate that you can make the drug at commercial standard with consistency. The grant will also support the compilation of all pre-clinical and clinical data into the appropriate format for a Biologics License Application (BLA) submission to the FDA. This will all be managed by Rarity, which will obtain its own Investigational New Drug (IND) application and cross reference ours, once they finalize the agreement with UCLA,” explained Kohn.

The grant also allows six more children with ADA-SCID to undergo gene therapy treatment – three using the academic vector manufactured at Indiana University and three using the commercially manufactured vector. Rarity will then report the results to the FDA, comparing clinical outcomes between the academic vector and the commercially manufactured vector.

Future Rarity PBC funding

Ayoub said Rarity hopes to present data to the FDA in two to three years. Funding for the project beyond the CIRM grant could come from venture capital investors (who invest in start-ups), impact investors (who want both a financial return and positive social impact), grants, philanthropy, and private wealth management advisory firms.

Funding depends not only on finding investors and the health of the financial markets but also on the continuation of the FDA’s rare pediatric disease priority review voucher (PRV) program. The PRV program is an incentive structure to sustain the development of rare disease therapies by awarding a voucher to sponsors that successfully bring rare pediatric disease therapies to market. Sponsors can sell this voucher to large pharmaceutical companies, which use it to speed up FDA approval for their high-revenue drugs, effectively subsidizing rare disease development.

Since Rarity PBC will be licensing the ADA-SCID program from UCLA, Rarity will pursue the FDA approval for the ADA-SCID program, and, upon FDA approval, Rarity will receive the PRV and sell it to reinvest profits.

“Over time the median sale price of this voucher has increased, with the past four vouchers selling for about $150 million this past year, which is an incredible amount of money,” said Ayoub.

The challenge is that the PRV program expired in December 2024, and unless a treatment receives FDA approval before September 30, 2026, it cannot receive a PRV. Patient advocacy and medical organizations, including IDF, are urging Congress to renew the program..

“When we think about how we can continue to scale and grow past ADA-SCID, these vouchers are crucially important for us to grow the scope of our gene therapy pipeline past that of just one rare disease. It makes it very difficult to bring on more rare diseases without these incentives,” explained Ayoub.

“Rarity hopes to bring on additional similar hematopoietic stem cell-based gene therapies for other immune deficiencies or hemoglobin disorders, building on the platform for manufacturing established for ADA[-SCID]. Our goal is to provide therapies for several diseases at a price lower than the current commercial gene therapies.”

Rethinking gene therapy treatment funding

PBCs are a relatively new business model, about 15 years old, and integrating them with healthcare is an even more recent development. Ayoub views PBCs as the foundation for expanding access to gene therapy, but they are not the solution alone. For true change to happen, payers, state and federal funding institutions, government officials, charitable trusts, and grant foundations must rethink how they support access-driven therapies.

“We need to think about how we can translate the social value of these therapies into financial value. If we can do that, we increase gene therapy adoption and access,” remarked Ayoub. “I think that this is a critical time for everyone to put their heads together to see how we can work through it and we're hoping that Rarity is one step, one piece of the puzzle.”