16 BARRON’S February 22, 2021
Blackstone’stotal $600 billion in
managed assets, and doesn’t yet make
much of a dent on revenue or profit.
But that could well change over the
next few years, giving fresh fuel to the
company’s shares. The stock, recently
about $70, is up 30% in the past six
months, keeping pace with the S&P
500 Financials index.
Blackstone,best known for taking
companies private and for some of the
biggest real estate deals in history—
Gray built the real estate business be-
fore becoming president—has made life
sciences one of its “conviction” plays,
alongside warehouses, cloud comput-
ing, and content creation. When the
firm sets its mind on something, it often
wins big. Blackstone’s$3 billion stake
in dating appBumble(BMBL) in 2018
is now worth about $14 billion after the
recent IPO.
If Blackstone succeeds in life sci-
ences, the company could not only lift
its own fortunes but also provide a
road map for other big investors in the
increasingly prominent field.
There’s no better illustration of the
strategy than Blackstone’snearly $
billion investment inAlnylam Phar-
maceuticals(ALNY) around the time
of the Covid outbreak last year. The
Cambridge, Mass., company develops
RNA-based drugs much likeMod-
erna(MRNA) andPfizer(PFE) and
BioNTech(BNTX) in their innovative
Covid-19 vaccines. However, Alnylam
uses it to treat other diseases.
Alnylam was already working with
Novartis(NVS) to develop choles-
terol-fighting drug inclisiran, but it
needed more money to develop other
RNA treatments, and the stock and
bond markets were in a shambles.
In April,Blackstone,already the
landlord of Alnylam’s lab, stepped in
with $1 billion for half of the inclisiran
sales royalties. It bought $100 million
of Alnylam shares, invested $150 mil-
lion in its cardiometabolic-disease
therapies, one of which showed posi-
tive Phase-3 clinical trial results last
month, and made a $750 million loan.
In short,Blackstone’s approach isall-
encompassing, as landlord, scientific
partner, investor, advisor, and lender.
T
he team at BlackstoneLife Sci-
ences, or BXLS, has seen 99
drugs come to market. Private
equity overall has boosted its
presence in healthcare over the past 12
years. In 2008, PE investments to-
taled $59.1 billion, according to Pitch-
Book. Last year, they came to $137.
billion, down from its 2019 peak of
$185.2 billion.
The investment idea began to ger-
minate at Blackstone a decade ago.
Back then, the firm didn’t invest in lab
space, which many in real estate con-
sidered 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 of-
fice tenants. But science and medicine
were rapidly growing. Research was
exploding in genomics, immunothera-
pies, and precision medicine, and de-
mand for lab space was soaring.
Blackstonesaw an opening. “We
started to think that life science as an
office subsegment might outperform
the broader office market,” says Kath-
leen McCarthy,Blackstone’sglobal
co-head of real estate.
In 2016, Blackstone purchased San
Diego–based BioMed Realty Trust,
which is now valued at $20 billion. It
is now the biggest private lab landlord
in the country, with a 16 million-
square-foot commitment that’s part of
Blackstone’sreal estate division.
Life sciences makes up 7% of the
real estate portfolio. The properties
tend to be located in hot lab markets
such as San Diego, Seattle, San Fran-
cisco, Cambridge, Mass.—where half
the space is leased to companies re-
searching a vaccine or treatment for
Covid-19—and the U.K.’s Cambridge.
Next came the need for scientific
expertise, which is where life-sciences
investing firm Clarus came in.Black-
stone bought it in 2018, acquiring an
existing $900 million portfolio of in-
vestments and top management such
as Nicholas Galakatos, who is now the
global head of the life-sciences group.
It normally takes five to six years
and some $2.6 billion to get drugs
from trials through regulatory ap-
proval to pharmacy counters, accord-
ing to a Tufts University research re-
port. Drug companies don’t 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 tellsBarron’s.
BlackstoneLife Sciences raises
money to invest in late-stage therapies
that might otherwise languish. The
group’s 43 employees include Barry
Gertz, former head of global clinical
development atMerck(MRK), and
Paris Panayiotopoulos, a former CEO
of Ariad Pharmaceuticals.
Galakatos, a former drug-company
executive with a Ph.D. in organic chem-
istry, has done deals with companies as
large as Pfizer and medical-device giant
Medtronic(MDT) to start-up biotechs,
using patent-licensing arrangements
Blackstone Has Life
Sciences Covered
As a landlord, investor, and lender, the private-equity giant is pushing hard
at a critical time. It could be a road map for other life-sciences investors.
“It’s building
to beaker to
bedside.”
Blackstone
President
Jon GrayT
he pandemic put life sci-
ences in the headlines, but
Blackstone Grouphad
been quietly building a
multibillion-dollar stake in
the business for the better
part of a decade.
Last year alone, the publicly traded
private-equity giant (ticker: BX) in-
vested some $16 billion in life sciences,
its biggest investment theme for the
year. The firm 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. And it
has emerged as a leading landlord of
laboratory space.
“It’s building to beaker to bedside,”
BlackstonePresident Jon Gray tells
Barron’s.
The business is still a small part of
By LIZ MOYER
Blackstone Group..........................
(BX / NYSE)
Source: FactSet2017 ’18 ’19 ’20 ’$6050403020Illustration by Thomas Fuchs