DRI Capital
DRI Capital Inc. is a Toronto-based healthcare royalty fund manager, a type of private equity fund. Its CEO is Behzad Khosrowshahi, the eldest child and only son of Hassan Khosrowshahi. It specializes in purchasing robust and predictable royalty streams from established pharmaceutical drugs, providing a consistent and diversified revenue stream to investors. In September 2013, the firm closed a third fund of $1.45 billion. As of June 30, 2013, the firm had purchased 41 royalty streams from 29 different leading pharmaceutical products.
Investment strategy
To compensate the people who originally developed the intellectual property that led to the creation of the drugs that they sell, pharmaceutical companies pay AbOUT $10 billion annually in the form of royalties. The royalties typically consist of some percentage of the revenues created by the [...] in question. That royalty stream can go to scientists, universities or [...] development companies. The business of DRI Capital and other firms like it is based on buying the right to be paid that royalty stream from the original rights holder in exchange for an up-front lump-sum payment. The transaction is beneficial to both sides of the deal. For example, the biochemist who originally developed the [...] in question may want to diversify the inherent risk of his investment portfolio. If the rights holder is a university, there May Be a need for liquid capital to fund the construction of a library or other building. In turn, the transaction benefits a firm like DRI Capital because it's able to provide its investors with a reliable and steady revenue stream.
For much of its history, DRI Capital targeted revenue streams from drugs with FDA or EMA approval that offer strong efficacy and that are used to treat very serious, chronic conditions. The company also is attracted to assets with strong patent or exclusivity protections against competition. Beginning with its third fund in 2013, DRI Capital CEO Behzad Khosrowshahi said that the firm also plans to consider investments in drugs that are in Phase III trials.
History
The company was founded in 1992 as [...] Royalty Corporation by Alan Grieve, the company's first president and CEO. In its first fiscal year of operation it went public on the Toronto STOCK Exchange and purchased a royalty interest in the pioneering British biotech firm, Cambridge Antibody Technology Limited.
In 2002 [...] Royalty Corporation became the object of a takeover battle between Cambridge Antibody Technology and Inwest Investments Inc., a Canadian holding company owned by Hassan Khosrowshahi and family. Inwest had recently sold its controlling interest in the Future Shop to Best Buy. On March 11, 2002, [...] Royalty Corporation announced that it had accepted an all-cash bid of $133 million to take private the publicly traded company from a wholly owned subsidiary of Inwest Investments Ltd. Four weeks later, [...] Royalty's new owners replaced then-president Jim Webster with Behzad Khosrowshahi, the eldest child and only son of Hassan Khosrowshahi.
Since he assumed leadership of the company in 2002, Behzad Khosrowshahi has quickened the firm's pace. He placed 20 bids on royalty streams in his first year at the helm. In 2006, the firm closed its first managed fund totaling $800 million, [...] Royalty I, consisting of $240 million of equity and $560 million of debt. In 2007 it announced that it was retiring the name [...] Royalty Corporation in favour of DRI Capital. In April, 2010, DRI Capital announced the closing of [...] Royalty II with US $701 million of equity commitments from a global pool of institutional investors. Later that same year, DRI created and closed the [...] Royalty II Co-Investment Fund, a US $225 million vehicle involving European and U.S. public pension plan investors, such as the San Diego County Employees' Retirement Association, which committed $25 million to the Co-Investment Fund on top of the $25 million it previously invested with [...] Royalty II. On September 9, 2013, DRI Capital announced the final closing of its third private equity fund, [...] Royalty III, with US $1.446 billion of equity commitments from a global pool of institutional investors.
Portfolio of Investments
One typical investment saw DRI acquire royalty rights to the lupus [...], Benlysta (belimumab) from Biogen Idec Inc. for $18.3 million. Biogen had licenced belimumab from GlaxoSmithKline PLC in 2008. The deal meant that GSK now pays royalties to DRI rather than Biogen. As of June 2013, DRI Capital has invested in 41 royalty streams from 29 different drugs. These drugs include:
- Cubicin (daptomycin)
- Enbrel (etanercept)
- Myozyme (Alglucosidase alfa)
- Remicade (infliximab)
- Sensipar (cinacalcet)