Life Sciences Private Equity
Which firms are the best for life sciences in the private equity space? Would love to get the perspective of anyone currently in this space and where they see things going in the next few years in the life sciences?
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Not in the LS space but I know Blackstone is def a major player in it and is looking to further expand.
Also not in the space but Bain has spending a lot of time there recently
Can someone explain how the investment model of life science PE (like blackstone) actually works? I’m assuming they don’t do LBOs like regular PE bc of the lack of stable cash flows but not exactly sure how they do it then
Seems to be minority/growth and royalties as best I can tell.
Can you PM me - also interested in going into the space
Also interested
following
Blackstone basically invests across the capital structure of established life sciences firms with main focus being product financing (i.e royalty). They usually find a drug target usually in PhaseII/III that they believe has a high probability of success or a high untapped market. The capital they invest is deployed only when different milestones are achieved e.g drug moves to next phase, or preliminary data suggesting that the drug is likely to succeed. Then they take royalties (top line) provided that drug target gets approved and reaches the clinic. On top of product financing, they might do vanilla equity financing or bring GSO in to provide some sort of secured/ unsecured line of credit. Finally, they acquire products and proceed with company formation bringing on their own selected executives to run the company or form strategic alliances with large-cap pharma companies to bring specific drugs to market.
Would I need a phd or something in biology to work for a life sciences fund like this? What about an mba? Or would experience in life science investment banking be enough?
Depends. If it’s Bx most people do but no absolutely essential. Place like Bain Cap you don’t
Bain capital and KKR HC Strategic Growth (not as life sciency but still invest some biotech firms) do much more vanilla equity financing and because of that, they usually focus on very late stage companies or large drug platforms. This is in contrast to the Bx model who falls more in the same category as Royalty Pharma/ HC Royalty Partners kind of model.
I see - thanks for these insights, really helpful to know the intricacies between each firm in the space! As a follow up on comp (if you know), I’m curious if these places pay VP+ ppl MFPE type salaries (I.e. crazy carry that vests over many years), or if pay structure is just not as much since there’s no LBOs and leverage like traditional PE.
From second hand discussions, I know that they pay the same for Snr Assoc. In terms of carry, I am not sure. It’s hard to say because if they are purely paying out of profits they make from royalties you can imagine that it’s not a buy and sell business like LBOs but more of a fixed income business where profits come in every year for around 8-10 years (or as long as the patent lasts). However, if I had to guess I would think they pay in the same way as they do with their other businesses. At the end of the day, life sciences strategies seem to be much more of a diversification startegy as compared to their pure PE businesses. More and more large cap PE firms are entering the space: BXLS, Bain Cap, Carlyle (abingworth), EQT (eqt life sciences previously LSP). As mentioned before quite different strategy for each.
I actually work with the finance team at a biopharm company.
Learning how to do the FP&A analysis for the clinical team currently, it can be quite interesting.
There are major players, but many only invest in clinical 1/2 trials. Clin. 3 trials are monstrous in size/spending. Currently working with close out studies costs and balances, along with info on total costs between several studies.
Feel free to PM.
I’m on the fence whether I should go into Accounting degree - CFA or CPA to lateral to investments or do CS major to develop database for analysis tools. I basically know the market and breakdown after a few weeks of exposure.
Thoughts?
Ph3 trials are very capital intensive and that’s why it’s pretty much a one man’s game currently. In the past, only large pharma companies could run them. Bx identified this gap in the market and that’s how they developed their current strategy.
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