Royalty Pharma gets more competition as a private equity firm launches $725M royalty-buying fund
Pablo’s got some peers.
Twenty-five years after Mexican billionaire Pablo Legorreta started buying up future royalties on approved drugs — and eight months after he turned that into a record-setting $2.2 billion IPO for Royalty Pharma— another firm is raising large sums to do the same thing. Sagard Holdings, the Canadian investment firm, raised $725 million for a new fund, known as Sagard Healthcare Royalty Partners, that will purchase royalties in drugs, diagnostics and medical products.
Sagard joins a small clutch of well-heeled investment firms that have tried to follow on Legorreta’s success. Last year, Blackstone dropped $2 billion on Alnylam for a chunk of stock and half their royalties on inclisiran, a Novartis drug that is expected to be a blockbuster. Also in 2020, Healthcare Royalty Partners raised a new $1.8 billion fund for the same purpose. And the year before, OrbiMed launched their third such pot, this one valued at $1.2 billion.
The fund — led by David MacNaughtan, a longtime investor who led business development at Paladin Labs before it was bought out by Endo — has already disclosed a couple of its deals. In August, Athenex announced that it had sold Sagard a small portion of its royalty rights to an oral version of the chemotherapy paclitaxel for $50 million. The drug is now at the FDA under priority review for metastatic breast cancer.
The deal provides an example of the approach MacNaughtan will look to take in an increasingly competitive space. Rather than the large deals Royalty Pharma has become famous for — the firm famously spent $3.3 billion for the Cystic Fibrosis Foundation’s royalties on Vertex’s CF drugs — they will look to spend between $25 million and $100 million.
“We are focused on the smaller to mid-sized end of the market,” MacNaughtan told Endpoints News. “Where we would differ from Royalty Pharma — they’re looking for billion dollar transactions.”
Part of that means deals with smaller companies and drugs like Athenex and their oral chemotherapy. But it also means going after drugs that have not yet been approved, where the risk and reward is greater, and trying to find people and entities up and down the drug development timeline — such as early academics — who might hold royalties and might be willing to sell for a good deal.
There, they’ll be competing directly with Royalty Pharma, which does both. In particular, Royalty has moved increasingly into unapproved medicines over the past few years and, in doing so, shown a willingness to execute deals that begin to dip toward the range Sagard is targeting. Last month, they bought royalties for a depression drug from Minerva Neurosciences for $60 million, with $95 million promised in milestones.