Investing in a Cure for Cancer

Soon after a successful operation to treat his prostate cancer, the billionaire investor James Stowers, Jr., was asked by his doctor whether he would be willing to help with the purchase of a $10,000 piece of medical equipment.

Mr. Stowers, founder of the mutual-fund company American Century Investors here, bristled at the request.

“I personally don’t like giving money to the Cancer Society or anybody else and having it instantly spent,” says the 75-year-old Kansas City native, a lifelong pennypincher who regularly brings his lunch to work. “I don’t mind giving them money if they invest it and spend the income from it, but I don’t want them to just spend the money.”

While Mr. Stowers rejected his doctor’s appeal, he did not reject the idea of helping others who suffer from cancer.

He and his wife, Virginia — whose breast cancer, doctors say, is in remission — have in the past five years put $340-million into an endowment to support the Stowers Institute for Medical Research, a state-of-the-art facility now under construction here that they hope to turn into one of the biggest medical-research institutes in the country. When the Stowerses die, most of their fortune — estimated at about $1-billion — will be left to the institute.

Meanwhile, the couple hope to increase the size of the institute through shrewd investments, plus donations from other philanthropists. They have created the Stowers Institute for Resource Development, a charity that will act as a fund-raising arm for the institute and solicit gifts from other donors.

To construct the medical-research institute’s headquarters, which are scheduled to open next year, the couple obtained a $125-million tax-free municipal bond. The bond allows Mr. Stowers to devote his money entirely to building the institute’s endowment through investments that, he believes, will earn a far higher rate of return than what the institute will have to pay its bond holders. And it enables him to stick to his goal of not spending his money instantly.

With the money that the investments generate, the couple hope that the institute will be able to support some of the most innovative research in the fields of genetics and “whole systems” biology — an approach to biology that incorporates lessons from other scientific disciplines such as physics and computer science.

“If you get a lot of disciplines — biologists, engineers, and computer scientists — together for five seconds and have them focus on the same thing, there’s more likelihood of getting results,” says Mr. Stowers.

The couple have thrown themselves into the minutiae as well as the big issues of building a new facility, finding the right institutional mission, setting an appropriate research agenda, and attracting scientists to work with them.

Although Mr. and Mrs. Stowers both have medical backgrounds — Mr. Stowers studied medicine before choosing to become a businessman and Mrs. Stowers was a nurse — both say the institute has been an enormous new responsibility.

“It’s a second career,” says Mr. Stowers, who works nearly eight hours a day as the institute’s president, on top of duties as chairman of the board of his company. Mrs. Stowers serves as the institute’s vice-president.

By starting a medical-research institute, the Stowerses are joining a small but growing pantheon of wealthy business leaders who have suffered from diseases and now are spending lavishly to support research to cure those ailments.

Michael Milken, the former junk-bond financier, is underwriting Cap Cure, a foundation for prostate-cancer research. Jon Huntsman, the chemical-industry billionaire, is spending $100-million to create the Huntsman Cancer Research Institute, in Salt Lake City. And Russ Berrie, the toy maker in Oakland, N.J., is spending millions to try to improve diabetic care.

Some skeptics worry that the trend portends a dangerous mixing of business executives, who are wed to results, and scientists, who need the luxury of time and space to achieve scientific breakthroughs. They fear that scientists concerned about pleasing their benefactors will compromise standards of excellence for the sake of quick results. Other critics question whether the wealthy just want to attach their family’s name to the prestige of scientific breakthroughs.

The Stowerses and scientists closely affiliated with the couple’s institute are quick to dismiss such criticism.

Leroy Hood, a leading biologist who chairs the Stowers Institute’s Scientific Advisory Board, says he has been able to be candid with his patrons about his need for a lot of money and time to come up with significant results.

“The Stowers don’t always understand the scientific world — the need for perfection,” he says. “But they are willing to yield to my arguments for excellence.”

Mr. Stowers says any suggestion that he is acting out of egoism, not altruism, is wrong: “Some may say, ‘Well, they’re trying to build a monument.’ We are not trying to build a monument. We are trying to do every single thing we can to attract the very best scientists and conduct only top-quality research that will benefit everybody.”

While Mr. and Mrs. Stowers have focused much of their attention on the science that the research institute will explore, they are also putting Mr. Stowers’s financial experience to work.

Mr. Stowers is investing all of the institute’s holdings in stock funds offered by American Century in the hopes that they will balloon significantly. While many philanthropic foundations and endowments invest in a mix of stocks and bonds to avoid being overly dependent on the whims of the stock market, Mr. Stowers insists that “the safest place over time to have your money in is ownership of the most successful companies in the world.”

The experience of his company, which was formerly called Twentieth Century Mutual Funds, has proven that to be the case, he says. In the past 25 years, he notes, mutual funds that invested in companies with growing earnings — so-called growth-income mutual funds — enjoyed an average annual growth rate of 15 per cent or higher. If the institute’s endowment can repeat that success, Mr. Stowers estimates that its worth — including money from his estate — will approach $30-billion in 25 years. If so, it would rival the country’s largest medical-research organization, the Howard Hughes Institute for Medical Research, in Chevy Chase, Md., which has an endowment worth $11.4-billion.

As medical-research organizations, both the Stowers Institute and Howard Hughes must distribute 3.5 per cent of their assets each year to support medical research. That is less than the 5 per cent that grant-making foundations must distribute each year. The lower rate suits Mr. Stowers, who at this point is primarily interested in building the institute’s endowment as quickly as possible.

Aside from relying on investment earnings, the Stowerses are courting other donors to support their institute’s work. They acknowledge that it can be difficult to obtain donations for an institute that is so closely identified with one family — and which appears to have been promised plenty of money already.

One fund-raising technique that they hope will help make donors feel that their gifts are truly appreciated comes from Mr. Stowers’s experiences informing his mutual-fund customers of their financial progress. Donors of $1,000 or more will receive what the Stowerses call “Hope Shares,” which entitle the donors to receive annual statements that show how much their “shares” in the institute have grown, based on the institute’s returns from investments.

“We want people who give to be remembered forever for what they do,” Mr. Stowers says.

To figure out how best to run the research institute, Mr. and Mrs. Stowers have spent the past five years meeting with numerous scientists and examined existing medical centers — especially the Howard Hughes Institute.

One thing they quickly concluded was that even though they wanted the size of their institute to be on a par with Hughes, they didn’t want it to operate in a similar manner.

The Maryland institute does not have a central facility where its research is conducted. Instead, it pays for all of the research expenses of Howard Hughes scientists, who work from universities or other institutions across the country. This year it is spending about $500-million to underwrite the expenses of 318 scientists working on a variety of research topics, including AIDS and genetics, at 72 locations.

After meeting with the leaders of Howard Hughes, Mr. Stowers and his wife realized that “we don’t want our scientists to be doing anything they want to do,” he says. The couple chose instead to build a central facility and also decided that they would try as hard as possible to insure that their researchers all stayed coordinated in their approach to research on “whole systems” biology.

The man who helped them learn about that approach was Dr. Hood, who holds a chair endowed by Microsoft founder Bill Gates at the University of Washington. The Stowerses say that as soon as they met Dr. Hood, they realized that they shared his philosophy of science.

Dr. Hood, the chairman of the Stowers Institute’s Advisory Board, was one of two scientists who invented a machine that can identify the sequences of human DNA far more quickly than manual methods. That machine is a key element of the Human Genome Project, the international project to decode human DNA, and a big reason for recent hopes that scientists will soon be able to look at human genes and find links to specific diseases — and possibly cures for those illnesses, including cancer.

The research facility that is now being built under the Stowerses direction will have the capacity to house about 50 principal scientists, in teams of about 10 researchers each. It will boast $25-million worth of new equipment, as well as creature comforts like a fireplace in the library, common snack areas, a health club, and cascading fountains.

The couple are striving to attract people like Dr. Hood and build a world-class facility partly because they know they have an uphill battle to attract top scientists to work in Kansas City, which is not considered a center for medical research. Dr. Hood admits: “The challenge we’re having is convincing very young capable people with the right vision to come to Kansas City and an unknown entity.”

Observers from other research institutes are closely watching the progress of the Stowers Institute.

David A. Clayton, senior scientific officer at Howard Hughes, who oversees all of its scientific investigators, is watching to see how the new institute fares at the tough job of recruiting scientists. He points out that Howard Hughes’s advantage over the Stowers Institute is that scientists can stay in academe and continue to teach.

Many scientists want to “participate in the training of future generations of scientists,” he says. “I won’t say all scientists would be equally committed to that, but most I know are dedicated to imparting something to the next generation.”

The Stowerses hope that their contributions to cancer research will someday be so successful that they will help to eliminate the disease. Their battle to fight cancer has been one that has engaged the entire family.

Not only did Mr. Stowers successfully fight prostate cancer 13 years ago, and Mrs. Stowers defeat breast cancer, but the couple’s daughter Kathleen, 41, is in the midst of her own fight against breast cancer — and is undergoing the same treatments that have been able to prolong her mother’s life.

Such painful experiences are clearly a big part of the reason that the couple have dedicated their fortune to conducting research to end cancer. But even before the battles with disease, Mr. Stowers says, he had decided that he would not leave the bulk of his estate to his four children.

While the Stowerses have made significant stock gifts to their children over the years, they worried that leaving too much to the children would do more harm than good, creating what Mr. Stowers calls “psychological cancer.”

Mrs. Stowers says she fears that if her children were to receive too big a windfall, “they would get the idea that they don’t have to work, that they don’t have to give anything to humanity except spend their money.”

“And I just think that’s a big mistake,” she adds. “What kind of inspiration is it for them to go out and do something every day if they each have $300-million in their bank account?”