Why did two private equity firms with more than $460 billion under management want a little old gene therapy biotech called bluebird bio? We wanted to know.
An investor was hunting for new names to add to his “basket of busted biotech” companies when a deal caught his eye. The Carlyle Group, a private equity firm with $453 billion in assets under management, was buying bluebird bio for just under $50 million. And the firm was doing it with another major PE outlet, SK Capital Partners, which has $10 billion under management.
Why? The investor wondered at first. But then he clicked add to cart, setting off a month-long investment in the cell therapy biotech that would earn him a decent return for a small amount of work.
Adding to the intrigue of this deal, a second buyer, Ayrmid, came forward with a seemingly better offer. Ayrmid is the parent company of fellow cell therapy biotech Gamida Cell, which would be a much more understandable match for bluebird’s assets. And yet, bluebird seemed to strong-arm the offer away, requesting financing immediately on a day when the markets were closed. “Warren Buffet couldn’t have gotten financing that day,” the investor said.
The private equity deal came to a close and the investor moved on. “Of course, the fact that I got cash makes me a lot less curious,” the investor, who asked to remain anonymous to speak candidly about his process, quipped to BioSpace.
But here at BioSpace, we were still curious.
Throw Out the Playbook
The bluebird deal may be a symptom of something that has been creeping along the edges of the industry for a few years: “The PE-ization of pharma,” as PitchBook Senior Biotech Analyst Kazi Helal put it in an interview. Private equity has been omnipresent in pharma-adjacent specialties like contract research organizations, contract manufacturers and service providers. These deals have modeled the typical private equity playbook, where the firms buy a company and make changes to squeeze out profit, sometimes merging them with others and eventually flipping them in a short timeframe.
But actual drugmakers have been harder to crack. Roel Van den Akker, pharma and life sciences deals leader at PwC, said biopharma missed the PE rush about 5 to 10 years ago because there’s too much binary risk involved in the industry.
But that has changed. The markets have been brutal, and many biopharmas have struggled to stay afloat despite promising science or, as in bluebird’s case, therapies already on the market. This has provided an opening for PE firms, Helal said. “A lot of these folks are seeing opportunity now in biotech and distressed assets, and it’s hard to pass off.” At the same time, biotechs really need a bailout and so PE-type deals are seeming pretty good to executives at the moment.
Jason Foster, CEO of Oribiotech, predicts that more PE will enter traditional biotech after playing in the CDMO space for several years. He spoke to the trend during a panel discussion on cell and gene therapy manufacturing at the BIO Convention in Boston last month.
“These are smart players with a lot of capital, and they get paid to be counter cyclical, contrarian,” Foster said.
Bluebird is one of a very small handful of biopharma firms that have seen private equity interest in recent years. Another example is Anthos Therapeutics, a cardiovascular focused biotech that was launched witha former Novartis asset and funding from the private equity firm Blackstone Life Sciences in 2019. Then, in February of this year, Novartis apparently wanted its old drug back and so bought Anthos for $925 million upfront, with a total potential value of $3.1 billion.
Then, just last week, cardiovascular genetic medicines biotech Lexeo Therapeutics announced $40 million in private equity financing that will be used to spin out a new entity focused on cardiac genetic diseases. Perceptive Xontogeny Venture Funds and venBio Partners supported the raise.
The Lexeo and Anthos deals are more typical of PE firms, where they participate in a “VC-type of deal, just by a PE shop,” Helal said. According to S&P Global Market Intelligence, PE deals in biotech peaked in 2021—the same year venture capital in the sector skyrocketed—with 1,196 total transactions and nearly $50 billion in aggregate transaction value. Helal said that PE firms in this timeframe switched tracks and participated in fundraisings just like venture capital firms. “During COVID it made more sense to VC than PE, per se,” Helal said.
In 2024, PE activity dropped to 777 total deals and just over $20 billion in total value. S&P’s data include all types of deals, from whole company transactions to funding rounds, and does not break out therapeutics companies.
There was also a report in mid-June that a private equity firm had backed a Turkish professor’s research at Harvard University—potentially a test case as the famed school deals with the fallout from severe research funding cuts by the Trump administration. İş Private Equity provided $39 million in funding in that transaction, as reported by STAT News.
While Carlyle has healthcare assets, it has not traditionally dabbled in biopharma, Helal said. He speculated that firms now dipping into the sector may simply have a newer person on staff who is interested in biotech pushing to do an experiment in this perfect environment. Van den Akker said that large, sophisticated PE firms now have “pools of capital” that can focus and provide structured capital solutions specifically for biotechs. They are much more conditioned to face risk than traditional PE have been.
For anyone familiar with the typical PE playbook, both Helal and Van den Akker warn that the entry into biopharma is unlikely to look the same. For instance, PE firms typically have a three- to five-year engagement period with a company before selling. Biotech development timelines are much longer than that, so PE firms will need to adjust their expectations.
“A long-term horizon in PE doesn’t really mesh well,” Helal said. That’s why they have long kept to tools, manufacturing and diagnostics, he added. For therapeutics, PE firms will have to wait for an asset to move to the next stage to get a return on its investment when it sells the drug developer to another company.
PE firms are also known for consolidating assets into one mega-company—which is something the biotech industry is ripe for with so many distressed pipeline assets out there at cash-strapped companies. Helal flagged gene editing and cell therapy companies as particularly vulnerable in this moment.
“Let’s say you get your bluebird, you get two other distressed AAV companies, you make one mega company, and then you take ten shots at goal and hopefully one hits, and you develop that. That’s a very typical PE strategy,” Helal explained. “But that’s also very expensive.”
But Van den Akker is not so sure biotech is poised for a big PE “roll up wave,” where one firm buys four or five companies in a buyout spree. Instead, they will be more targeted and strategic. With that said, Van Den Akker didn’t completely write off the idea, instead saying these firms will be thoughtful about how they approach collecting multiple assets. “These are very bright operators that smell dislocation and can operate around that. If there is a situation where that could work, they’ll jump on it,” he said. He likened the PE entry into biotech to precision medicine in oncology.
Foster agreed. Ultimately, he said, PE will likely focus on single-product company acquisitions in biopharma, with the hope that “there’s a manufacturing play or a CMC play or an automation play that could change the economic profile of approved products.”
If those solutions come from other companies held by a PE firm, there could even be infrastructure synergies, Foster added. Could bluebird’s cell therapies be distributed via one of Carlyle’s healthcare companies, for example?
Helal has given this idea some thought but doesn’t see it working given the immense regulatory burden that biotechs must navigate. This model fits better for, say, an AI company that’s bought by a PE firm that can implement the technology across hospitals in its portfolio.
For therapeutics, Helal said that investors he’s spoken to are focused on later-stage assets with proven technologies—which sounds a lot like bluebird.
Biotech Darling
While PE aims its crosshairs at biopharma, the future of bluebird is up in the air. Carlyle, SK Capital and bluebird did not return requests for comment on this story. But Helal has some thoughts on where the once “darling” of the gene therapy space might end up—and there’s one certainty: “Some value is gonna be made from the assets.”
One way to go would be to focus on bluebird’s approved therapies—Lyfgenia, Skysona and Zynteglo—with the more labor-intensive clinical assets left on the cutting room floor. In a more “optimistic case,” Helal said, the PE firms might sell off the intellectual property for the clinical assets.
One thing is for sure, the cell therapies work and have been proven to be safe, Foster said. Whoever ultimately ends up with bluebird’s assets will have to resolve the commercial challenges that the company’s executives failed to overcome.
And maybe, just maybe, private equity could finally be the one to figure it out.
“The Carlyle purchase of bluebird is super interesting, because you’ve got a very smart financial sponsor who sees something in that asset,” Foster said. “They paid very little for it, and it was a $10 billion asset at one time. . . . But there is obviously a lever or two that they see that they can pull.”
Editor’s note: This story includes reporting from Jef Akst at BIO.
