Private equity managers turn attention to life sciences sector

While much of the investment in biopharmaceuticals is coming from venture capital managers, private equity firms are quickly building up their life sciences portfolios, which invest in pharmaceuticals and companies and properties supporting pharmaceutical development and distribution.

Blackstone Group Inc. is building an entire ecosystem around life sciences across its business, said Jonathan Gray, president and chief operating officer, during the firm's Jan. 27 earnings call.

"For the past several years, we've been orienting the firm toward faster growing areas, such as life sciences and those connected to the digital economy," Mr. Gray said

"These continue to be among the best-performing sectors of the market and were the largest drivers of appreciation in our funds," he said.

Blackstone launched its life sciences business investing in the sector in the fourth quarter of 2018 when it acquired global life sciences private equity manager Clarus.

Mr. Gray said during the Blackstone earnings call that the mission of the $4.6 billion private equity fund Blackstone Life Sciences V "is to invest primarily in Phase 3 trial drugs, something that we would not do in our private equity business, have never done before."

Blackstone also invested in the sector with an investment in November in Precision Medicine Group, a company that runs drug trials and helps to turn new pharmaceutical discoveries into commercial products. Blackstone invested alongside Precision Medicine's existing investors Berkshire Partners, TPG Growth, Oak HC/FT and Vida Ventures, which also participated in the transaction.

In August, Blackstone's tactical opportunities business made a $275 million investment in Cryoport Inc., a Nashville-based company offering temperature-controlled supply chain solutions for the life sciences industry. The capital infusion financed Cryoport's acquisition of MVE Biological Solutions, which manufactures vacuum-insulated products and cryogenic freezer systems.

In addition, Blackstone recapitalized an earlier real estate fund, Blackstone Real Estate Partners VIII, selling a portfolio of life science properties to a new continuation vehicle, Blackstone BioMed Life Science Real Estate LP, which is a perpetual open‐end core-plus fund with a four‐year initial lockup period.

"The genesis for this transaction was a number of our investors in the BREP VIII fund wanted to continue to own this," Mr. Gray said.

More than 70% of the capital in Blackstone's life science real estate fund came from the existing investors, he added.

So far, the new fund has raised $8.4 billion, and Mr. Gray said that he expects the fund to raise additional capital.

"There is a potential for this to grow to be … quite large," he said.