Blackstone Inc. has raised $1.6 billion for a fund to establish new drugs and therapies, expanding its role in the life sciences industry.
The vehicle will invest in companies with products that have received regulatory approval for commercial use, said Nicholas Galakatos, head of Blackstone’s life-sciences arm. It will also invest in royalties that could be tied to drug sales. It’s the firm’s first-ever fund with this strategy.
With biotechnology stocks under pressure, the world’s largest alternative asset manager is betting it can establish a foothold during a period when fewer investors are willing to fund new drug plays.
“Many of these companies cannot raise the equity they need because the public markets are significantly down and the cost of capital is prohibitively expensive,” Galakatos said in an interview. “There is a universe of companies that fit our target.”
Blackstone’s pursuit of fast-growing companies and nascent technologies is moving the firm beyond its leveraged buyout roots. In 2018, the New York-based company bought life-sciences investment firm Clarus, which Galakatos co-founded, to jumpstart a push into biotechnology. Blackstone raised $4.6 billion in 2020 to finance the development of drugs in the final stages of regulatory approval.
With a total of $6.2 billion raised for pharmaceutical and other life sciences plays, Galakatos thinks Blackstone could advance 25 to 30 medical products and cures.
The new Blackstone Life Sciences Yield fund is set up to avoid of the risks associated with investing in the sector. Focusing on companies with FDA-approved therapies allows Blackstone is steer clear of the main roadblock in drug development — lengthy and failed clinical trials. The firm also won’t be involved in drug pricing.
Even with that strategy, however, there’s the prospect new therapies won’t be embraced by the marketplace.
“The risk is commercial adoption — whether the product has a meaningful benefit to patients so physicians will prescribe it,” Galakatos, 64, said.
Galakatos said his division is interested in RNA therapeutics, a new class of medications based on ribonucleic acid. Messenger RNA vaccines were used against Covid-19 during the pandemic. Blackstone has invested in a company developing therapeutics that work by interfering with processes involved in the production of disease-causing genes.
The life-sciences unit is also open to making further investments in cancer and cardiovascular disease treatments. In late 2021, Blackstone invested in Harmony Biosciences Holdings Inc., which developed a drug to cure sleepiness caused by narcolepsy.
With a Ph.D in organic chemistry from MIT, Galakatos was an unlikely private equity investor. A former head of molecular biology research at Ciba, the company that became Novartis AG, he was asked to visit Silicon Valley to study venture capital. He first had to look up venture capital in the dictionary.
Even though he’s a dealmaker now, he said he still approaches the business like a scientist.
“We use the science as the centerpiece,” he said.