A recently-announced major investment into the life sciences sector by a Middle East sovereign wealth fund made headlines. But family offices have been quietly working in the space for years. And the latest developments show how important these custodians of "patient capital" are.
(An earlier version of this article appeared in WealthBriefing, sister news service to this one. While the original news angle is a UK one, the subject matter is global, and North American family offices are significant players in areas such as life sciences investing, so we hope readers find these insights of value.)
Alastair Graham is founder of Highworth Research, the database of single family offices with which this news service is exclusive media partner. Last year we broke ground with the story of the family office linked to the BionTech/Pfizer vaccine breakthrough. Recent moves by sovereign wealth funds have caught headlines but as, Graham notes, family offices have been involved in the space for years. (See a previous example of his writing on the topic.)
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On March 24 the UK government and an Abu Dhabi sovereign wealth fund, Mubadala Investment Company, announced a “sovereign investment partnership” in life sciences with the UK, with an initial capital contribution from Mubadala of £800 million ($1.1 billion) and with a further £200 million coming from the UK.
The investment by two state-owned institutions is potentially high risk but there are mitigating factors, not the least being the interest by government in sponsoring the life science sector for public health reasons. Additionally, there is an encouraging commercial background. According to EY, the biotech industry has a predicted growth rate of 15-20 per cent per year. More than 700 biotech companies are listed on stock markets internationally, so exit routes are available.
Moreover, when a patent expires on a conventional pharmaceutical drug, generic copies can be produced at massive price discounts. This is not the case with biotech drugs. When a biotech drug goes off-patent, it is much more complex to produce what is known as a “bio-similar”, and in the US the manufacturer has to put any “bio-similar” through clinical trials. This is of great interest to an investor because it means that the commercial life of a successful biotech drug could be much longer than that of a conventional pharma drug.