Blackstone raises three-quarters of targeted $4.6 billion life sciences fund

(Reuters) – Private equity firm Blackstone Group Inc (BX.N) has secured $3.4 billion from investors for its first fund dedicated to investments in the life sciences sector, targeting $4.6 billion in total, a regulatory filing showed on Thursday.

The fund is one of the biggest such funds in the sector. The raise underscores investors’ strong appetite for the lucrative returns associated with the development of high-impact drugs, as well as their tolerance for risk given that a therapy’s success is far from certain.

Under its new president and chief operating officer, Jon Gray, Blackstone is seeking to diversify its investments beyond its traditional private equity, real estate, credit and hedge fund investments.

Only few private equity firms have had the stomach to place bets on drug development. Bain Capital and KKR & Co Inc (KKR.N) are other buyout firms with dedicated healthcare funds.

Blackstone seeks to mitigate the risks associated with drug development by funding relatively late-stage programs, which tend to be more capital-intensive but less risky than earlier phases of drug development.

Blackstone entered the life sciences industry by buying established investment firm Clarus in 2018, which had launched four funds dedicated to the sector. Blackstone’s new fund is dubbed Blackstone Life Sciences V.

Since it set up a life sciences unit, Blackstone has unveiled a joint venture with Novartis AG (NOVN.S) to develop a novel heart treatment and invested $400 million in a bladder cancer gene therapy in partnership with drug company Ferring.