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Blackstone pulls out all the stops to customize $2bn bet on Alnylam

Hammering out the terms of a multi-pronged deal is no easy feat amid a crisis that requires virtual communication across multiple businesses. 

Deal talks initiated around a single drug under development by Alnylam Pharmaceuticals evolved into a much more aspirational bet by Blackstone Group – and one of biotech’s largest private financings in history, an executive at the firm told PE Hub

Around 30 people around the firm came together to pull off the up to $2 billion transaction announced earlier this week, said Brad Marshall, a senior managing director with GSO Capital Partners, Blackstone’s credit platform

Led by Blackstone Life Sciences and GSO, the financing included the royalty monetization of a medication called inclisiran, corporate debt, the purchase of Alnylam equity and funding for certain R&D activities.

“It hit a lot of targets for us in the sense that it’s a large company, a leader in their space and they needed a large-scale solution to get this deal done,” Marshall told PE Hub

That’s hard to replicate at other firms, he said. “There are very few people that can put a lot of those pieces together. You had real estate. You had life sciences. You had credit. And we brought in folks that are used to investing in equity.” 

If you like it, build it

Hammering out the terms of a multi-pronged deal is no easy feat amid a crisis that requires virtual communication across multiple businesses. 

Interestingly, the deal talks with Alnylam didn’t start out quite as complex. Conversations in the early phases were of the nature of a potential $1 billion financing, a source close to the deal told PE Hub.

The various Blackstone platforms also weren’t involved on the first day.  

Blackstone Life Sciences initially met Alnylam based on its desire to pursue either a debt-backed royalty deal supported by inclisiran, a drug under development for the treatment of high cholesterol, or secure full monetization of that royalty stream, GSO’s Marshall said.  

As a lender, GSO didn’t think a single-drug asset was prudent and initially passed on the drug-backed deal, but when Blackstone Life Sciences decided to pursue a royalty monetization, the teams went back to the drawing board, Marshall said.   

GSO looked at the $13 billion-plus market cap company more broadly, and said, “we could get a lot of comfort around a more diversified collateral package which included the commercialized drugs,” Marshall said, referring to Onpattro and Givlaari. “So that’s what we did.” 

Besides the rest of the inclisiran monetization that Blackstone Life Sciences didn’t buy and its commercialized drugs, additional elements incorporated into the deal – the real estate component, equity investment and partnership to develop future drugs – added further appeal, he said. 

That led the various Blackstone teams to collaborate and come up with a broader financing package that would bridge the company to future profitability, he said, ultimately increasing the check size.  

“From a capital standpoint, obviously when we do our work on a company and we like that opportunity, we want it to be as big as possible,” Marshall said. “One, because there are very few people that can provide the same type of solution, but also, you do the same amount of work whether it’s $100 million or $1 billion.” 

The result 

The finalized transaction included the following: $1 billion in committed payments led by Blackstone Life Sciences to acquire 50 percent of its royalties and commercial milestones for inclisiran; up to $750 million in a first lien senior secured term loan led by GSO; up to $150 million from Blackstone Life Sciences for development of Alnylam’s cardiometabolic programs vutrisiran and ALN-AGT; and finally, the $100 million purchase of Alnylam common stock.

There was also a real estate component. Alnylam, an existing tenant of Blackstone Real Estate company BioMed Realty, is in discussions with BioMed to expand its footprint in Cambridge, Massachusetts, the announcement said. 

Market Insulation

Blackstone’s conviction in the future of Alnylam is notable for reasons beyond its complexity, coming at a time during which many large-scale deal talks have been paused amid covid-19.  

Alnylam also is unique as it remains largely insulated from economic volatility.  

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.

“What’s really cool about this deal — we’re in such a tough environment and this company is saving lives,” the investor added. “It’s nice to be on the other side of that.”  

Broadly, one of few impacts to biotech companies such as Alnylam amid the pandemic is a slowing of certain clinical trials for drugs requiring people, but the impact is minimal.

Thus, deal terms did shift around over the last five months or so, the unnamed source said; but that’s a far cry from businesses that have gone to to zero revenue overnight with no clear sight ahead.  

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