NEW YORK – Blackstone Group, the publicly traded private-equity giant, was featured in Barron’s on Feb. 19 for investing in life sciences over the last decade, and especially last year when the firm “invested some $16 billion in life sciences, its biggest investment theme for the year.”
Blackstone Group “has poured money into a broad range of drug companies and device makers, biopharma start-ups, and cutting-edge research, through equity investments and loans,” Barron’s reported, adding that “it has emerged as a leading landlord of laboratory space.”
Blackstone President Jon Gray told Barron’s, “It’s building to beaker to bedside.”
“The business is still a small part of Blackstone’s total $600 billion in managed assets, and doesn’t yet make much of a dent on revenue or profit,” Barron’s reported, noting that “that could well change over the next few years, giving fresh fuel to the company’s shares” and “the stock, recently about $70, is up 30% in the past six months, keeping pace with the S&P 500 Financials index.”
“If Blackstone succeeds in life sciences, the company could not only lift its own fortunes but also provide a road map for other big investors in the increasingly prominent field,” Barron’s reported, adding that “the team at Blackstone Life Sciences, or BXLS, has seen 99 drugs come to market.”
“Private equity overall has boosted its presence in healthcare over the past 12 years,” Barron’s reported, noting that “in 2008, PE investments totaled $59.1 billion, according to PitchBook. Last year, they came to $137.4 billion, down from its 2019 peak of $185.2 billion.”
“The investment idea began to germinate at Blackstone a decade ago,” Barron’s reported, noting that “back then, the firm did not invest in lab space, which many in real estate considered an out-of- favor subsector, in which landlords invested a lot of money to equip spaces for tenants that were riskier than run-of-the-mill office tenants, but science and medicine were rapidly growing,” and “research was exploding in genomics, immunotherapies, and precision medicine, and demand for lab space was soaring.”
Blackstone “saw an opening,” Barron’s reported.
“We started to think that life science as an office subsegment might outperform the broader office market,” Kathleen McCarthy, Blackstone’s global co-head of real estate, told Barron’s.
“In 2016, Blackstone purchased San Diego–based BioMed Realty Trust, which is now valued at $20 billion,” Barron’s reported, adding that “it is now the biggest private lab landlord in the country, with a 16 million-square-foot commitment that is part of Blackstone’s real estate division.”
“Life sciences makes up 7% of the real estate portfolio,” Barron’s reported, noting that “the properties tend to be located in hot lab markets such as San Diego, Seattle, San Francisco, Cambridge, MA- where half the space is leased to companies researching a vaccine or treatment for COVID-19- and the UK’s Cambridge.”
The need for scientific expertise led Blackstone to buy life-sciences investing firm Clarus in 2018, “acquiring an existing $900 million portfolio of investments and top management such as Nicholas Galakatos, who is now the global head of the life-sciences group,” Barron’s reported.
Greek-American Dr. Galakatos earned his PhD in Organic Chemistry from MIT and performed his post-doctoral studies at Harvard Medical School. He earned his undergraduate degree at Reed College.
“It normally takes five to six years and some $2.6 billion to get drugs from trials through regulatory approval to pharmacy counters, according to a Tufts University research report,” Barron’s noted, adding that “drug companies do not want to risk investing all that money and still fall short, so they look for partners to hedge their risk.”
“And there are more products in the pipeline now that need funding,” Galakatos told Barron’s.
“Blackstone Life Sciences raises money to invest in late-stage therapies that might otherwise languish,” Barron’s reported, noting that “the group’s 43 employees include Barry Gertz, former head of global clinical development at Merck, and Paris Panayiotopoulos, a former CEO of Ariad Pharmaceuticals.”
Panayiotopoulos was born in Greece, but left at a young age and attended high school and college in London, Boston Business Journal reported.
Galakatos, a former drug-company executive, “has done deals with companies as large as Pfizer and medical-device giant Medtronic to start-up biotechs, using patent-licensing arrangements whenever possible to get drugs to market,” Barron’s reported.
The pandemic “has demonstrated more broadly the importance of science in solving major global problems,” he told Barron’s.
“In 2019, Galakatos’ team worked with Novartis to form Anthos Therapeutics, a company developing therapies for high-risk heart patients,” Barron’s reported, adding that “the same year, Blackstone and Swiss-based Ferring Pharmaceuticals formed a new company called FerGene, with a $570 million investment, to develop and bring to market a bladder-cancer drug— some $400 million of which came from Blackstone.”
Blackstone also “lends through its credit funds and invests through its tactical funds in businesses that support the drug industry,” Barron’s reported, noting that “last year, the Blackstone Tactical Opportunities fund invested $275 million in CryoPort, a cool-storage logistics company that has become front-and- center in the race to get COVID vaccines into human arms,” since “the Moderna and Pfizer vaccines require freezing temperatures.”
“And in November, Blackstone put some $2.3 billion into Precision Medicine Group, which runs late-stage trials and coordinates drug-approval processes,” Barron’s reported, adding that “there are seemingly unrelated investments that could be useful with its life sciences portfolio.”
“For example, Blackstone’s $18.7 billion deal in 2019 for GLP’s U.S. logistics assets, such as e-commerce warehouses,” Barron’s reported, noting that “storage and logistics are a vital part of getting medicines to the public.”
JMP Securities analyst Devin Ryan told Barron’s, “They have information they can connect together that no other firm has. It gives them the ability to be a step ahead in a large addressable market.”
As Gray told Barron’s, “We see what’s happening. Medicine will be more customized, more and more therapies will be created targeting more and more individual treatments. So this whole ecosystem will grow.”