Breakingviews: Blackstone has remedy for drug R&D cash burn

“You’ve got the brains, I’ve got the brawn, let’s make lots of money.” That’s Blackstone’s proposition for drugmakers like Alnylam Pharmaceuticals. The private-equity group is sinking up to $2 billion into the biotechnology company, including buying half the firm’s rights to future revenue from a cholesterol drug still under regulatory review. It’s a way to match Blackstone’s bulging wallet with Alnylam’s hefty costs while limiting exposure to volatile equity markets.

Developing a new drug typically costs nearly $3 billion, according to a 2014 estimate by the Tufts Center for the Study of Drug Development. The size of the necessary bets is a problem for even the biggest corporations, but it’s especially challenging for smaller outfits that have lots of opportunities. And the problem compounds when equity markets turn sour.

Alnylam, for example, is commercializing drugs that function by silencing genes. It’s potentially a fertile field for both quickly developing therapies or tackling currently untreatable diseases. But it’s expensive work. The $13 billion company reported a loss of nearly $900 million last year.

Blackstone Life Sciences is investing in a late-stage therapy, the least risky but most capital-intensive phase. In this case, it’s buying half of Alnylam’s royalties in a drug called inclisiran. That works out at up to 10% of the future net sales of the drug, which is now owned by Novartis. The biotech is also receiving a $750 million loan from Blackstone’s credit group, up to $150 million more for future drug development, and $100 million from Blackstone in return for stock. The package may be enough for Alnylam to reach profitability, and at least it will not to have to go hat in hand to stock-market investors for a few years.

With the fallout from the coronavirus pandemic hammering share prices around the world, all but a sliver of Blackstone’s investment is neatly designed to avoid relying on stock valuations. Much depends instead on the success of inclisiran. Rival high-tech cholesterol-reducing drugs from Sanofi and Amgen have proved disappointing in revenue terms. Alnylam’s treatment is more convenient, requiring only two injections a year. Still, the price tag is baking in commercial success that’s far from certain.

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