Blackstone Life Sciences clinches royalty deal with Medtronic, Apollo-spinout Nexus Capital targets $1bn-plus for next fund, Kinderhook’s Avita sees big opportunity in pharmacy management

Blackstone invests in Medtronic and Nexus Capital targets $1 billion for new fund.

Hey, hey, everybody.

This is Sarah, filling in for Chris, who I hope is off fishing and enjoying today’s sunny skies!

Quarantine, or not, it’s almost summer out there. But with threats of new lockdowns in New York as bar patrons and businesses ignore social-distancing rules, a return to “normalcy” remains TBD.

Royalties: Blackstone Life Sciences has struck again. The life sciences arm of Blackstone has made its first ever investment in the medical devices arena – representing its second transaction incorporating a royalty monetization during the downturn.

Blackstone has agreed to invest up to $337 million in the diabetes device portfolio of Medtronic. The publicly-traded medical device giant said the investment would fund four identified diabetes R&D programs that remain undisclosed.

The funding received will reflect the R&D expenses incurred, an announcement said. Contingent on successful commercialization of the programs, Blackstone Life Sciences is set to receive royalty payments that are expected to be in the low- to mid-single digit range as a percentage of sales.

The transaction follows a multi-pronged bet by Blackstone Life Sciences that wrapped up in mid-April. Deal talks initiated around a single drug under development by Alnylam Pharmaceuticals evolved into a much more aspirational bet by Blackstone – and one of biotech’s largest private financings in history, I wrote.

Led by Blackstone Life Sciences and GSO Capital, the up-to-$2 billion financing included the royalty monetization of a medication called inclisiran, corporate debt, the purchase of Alnylam equity and funding for certain R&D activities. Inclisiran is a drug under development for the treatment of high cholesterol.

Brad Marshall of GSO, Blackstone’s credit platform, spoke to the value of investing through a royalty strategy during the downturn. I assume the same holds true for Medtronic.

If you think about a business like this, Marshall said, “your cash flows are so far in the future, meaning it’s three, four, five, six years before these drugs get commercialized. What happens in one or two quarters is somewhat inconsequential to your overall return – certainly as it relates to this one drug called inclisiran.”

PIPE: Canadian private equity firm Onex Corp has agreed to lead a $400 million convertible participating preferred equity investment in Emerald Holding, a San Juan Capistrano, California-based operator of business-to-business trade shows. Read our brief.

Top Scoops
Fresh powder: A group of former Apollo Global Management executives is targeting more than $1 billion for its next distressed and special situations fund to invest into the downturn, sources told Chris over at Buyouts.

The firm, Nexus Capital Management, is one of several high-profile emerging managers that are braving the coronavirus-wrecked markets to seek capital from nervous limited partners.
Los Angeles-based Nexus Capital is in market with Nexus Special Situations Fund III. It’s not clear when the fund hit the market. Read more.

Big aspirations: Kinderhook Industries’ newly formed Avita is on the path to becoming the largest covered entity pharmacy services company in the US, a member of the private equity firm told PE Hub.

The private equity firm last week revealed its acquisitions of Paramount Specialty Pharmacy and PharmBlue Holdings. The pair of businesses combined with PharMedQuest and Long’s Drugs – both of which were acquired last year – to create Avita.

The company has seen some impact from covid-19; it has found ways to offset that by pivoting its drug delivery model.

Check out my story to find out where Avita’s financials are expected to land in 2020.

That it’s for today. As always, hit me up at springle@buyoutsinsider.com with any tips, comments or just to say hello.