October 4, 2018 / 7:18 PM / 12 days ago

UPDATE 1-Blackstone buys Clarus to bulk up in life sciences

(Adds comments from interview with Blackstone executive; adds details on life sciences strategy)

By Joshua Franklin

Oct 4 (Reuters) - Blackstone Group LP said on Thursday it has agreed to acquire life sciences investment firm Clarus, in an effort by the world's largest alternative asset manager to scale up its investments in healthcare.

Terms were not disclosed.

The push into life sciences is one of Blackstone's new strategic initiatives under Jon Gray, who was promoted to president and chief operating officer earlier this year. Blackstone already manages $439 billion across alternative assets such as private equity and real estate, and is looking for ways to grow further.

"This is a platform we will build on in the life sciences area," Blackstone's global head of private equity, Joe Baratta, said in a telephone interview.

The acquisition kicks off Blackstone Life Sciences, which is the New York-based firm's effort to put more money into research funding where its sees a gap due to the retreat by larger pharmaceutical companies under earnings pressure.

Blackstone will initially have two investment areas: partnering up with major pharmaceutical companies to help fund elements of research and development programs they do not want to focus on; and growth equity investments that typically fund growing companies past the venture capital stage of fundraising.

Clarus, based in Cambridge, Massachusetts, has raised $2.6 billion since its founding, according to Blackstone.

Clarus is currently investing out of a $900 million fund, and the successor fund is expected to be "meaningfully larger," Baratta said, without giving an exact number.

With Clarus, Blackstone is targeting top-quartile private equity and venture capital-like returns, Baratta said. In private equity, the average global top-quartile fund posted a net internal rate of return of around 20 percent, according to industry tracker Preqin.

Blackstone has in the past made acquisitions to expand quickly, as with its purchase a decade ago of GSO Capital Partners, which became its credit investment arm, and Strategic Partners in 2013, for its business of buying and selling stakes in private equity funds.

"Both GSO and Strategic Partners are a model for this business, Clarus," Baratta said.

Blackstone expects to close the deal in the fourth quarter. Nick Galakatos, co-founder of Clarus, will become the head of Blackstone's life sciences unit.

Blackstone owns financial data provider Refinitiv, a former Thomson Reuters Corp division, which is a client of Reuters News. (Reporting by Joshua Franklin in New York; Additional reporting by Aparajita Saxena in Bengaluru Editing by Leslie Adler)

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