DRI Capital

DRI Capital Inc.
Private equity
Industry health care, private equity
Founded 1992 (1992)
Headquarters Toronto, Canada
Key people
 Behzad Khosrowshahi
(Chairman and CEO)
Ali Alagheband, Craig Shepherd and Andrea Sotak, managing directors
AUM Increase US$2 billion (2013)
Number of employees
 35 (2013)
Website www.dricapital.com

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.[1] It specializes in purchasing robust and predictable royalty streams from established pharmaceutical drugs, providing a consistent and diversified revenue stream to investors.[2] In 2013, the firm closed a third fund of $1 billion. As of June 30, 2013, the firm had purchased 41 royalty streams from 29 different leading pharmaceutical products.[3]

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 drug in question. That royalty stream can go to scientists, universities or drug 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 drug 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.[4]

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.[5]

History

The company was founded in 1992 as Drug 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.[6]

In 2002 Drug 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, Drug 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, Drug Royalty's new owners replaced then-president Jim Webster with Behzad Khosrowshahi, the eldest child and only son of Hassan Khosrowshahi.[7][8][9]

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.[10] In 2006, the firm closed its first managed fund totaling $800 million, Drug Royalty I, consisting of $240 million of equity and $560 million of debt.[11][12] In 2007 it announced that it was retiring the name Drug Royalty Corporation in favour of DRI Capital.[13] In April, 2010, DRI Capital announced the closing of Drug Royalty II with US $701 million of equity commitments from a global pool of institutional investors.[14] Later that same year, DRI created and closed the Drug 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 Drug Royalty II.[15] In 2013, DRI closed its third managed fund, Drug Royalty III, with current equity commitments of US $1 billion from a global pool of institutional investors.

Portfolio of Investments

One typical investment saw DRI acquire royalty rights to the lupus drug, Benlysta (belimumab) from Biogen Idec Inc. for $18.3 million. Biogen had licensed belimumab from GlaxoSmithKline PLC in 2008. The deal meant that GSK now pays royalties to DRI rather than Biogen.[16] As of June 2013, DRI Capital has invested in 41 royalty streams from 29 different drugs.[17] These drugs include:

References

  1. ↑ Krista Foss (Sep 1, 2003). "Gentleman Pharmer: His father made a fortune on the Future Shop chain. Now Behzad Khosrowshahi hopes to multiply it by investing in drug-royalty rights". National Post Business magazine. p. 41.
  2. ↑ Krista Foss (Sep 1, 2003). "Gentleman Pharmer: His father made a fortune on the Future Shop chain. Now Behzad Khosrowshahi hopes to multiply it by investing in drug-royalty rights". National Post Business magazine. p. 41.
  3. ↑ Pamela Taulbee (2013-09-09). "DRI Capital Gets $1.45B for royalty investments". The Deal Pipeline.
  4. ↑ Krista Foss (Sep 1, 2003). "Gentleman Pharmer: His father made a fortune on the Future Shop chain. Now Behzad Khosrowshahi hopes to multiply it by investing in drug-royalty rights". National Post Business magazine. p. 41.
  5. ↑ Joseph Haas (Sep 9, 2013). "DRI Capital To Pursue Phase III Assets With Some Of Its Third Royalty Fund". The Pink Sheet Daily.
  6. ↑ http://www.twst.com/interview/2405
  7. ↑ "Drug Royalty chief resigns". The Globe and Mail. May 28, 2002. p. B7.
  8. ↑ http://www.privateequityinternational.com/article.aspx?article=68295
  9. ↑ http://www.lexpert.ca/magazine/big-real-estate-deals/inwest-subsidiary-to-bid-for-drug-royalty-shares-266/
  10. ↑ Krista Foss (Sep 1, 2003). "Gentleman Pharmer: His father made a fortune on the Future Shop chain. Now Behzad Khosrowshahi hopes to multiply it by investing in drug-royalty rights". National Post Business magazine. p. 41.
  11. ↑ Brian Gormley (Aug 22, 2006). "Private-Equity Firms Gear Up For Royalty Funds Redux". Dow Jones News Service. Retrieved 16 September 2013.
  12. ↑ Griffith, Erin (Mar 30, 2010). "DRI Crosses Fundraising Target, Doesn't Stop". PEHub. Retrieved 19 September 2013.
  13. ↑ "Drug Royalty Corporation Changes Its Name to DRI Capital". Biotech Week. October 24, 2007.
  14. ↑ http://www.privateequityinternational.com/article.aspx?article=68295
  15. ↑ "San Diego commits more to drug royalties". Private Equity International. Nov 26, 2010. Retrieved 19 September 2013.
  16. ↑ Joseph Haas (Sep 9, 2013). "DRI Capital To Pursue Phase III Assets With Some Of Its Third Royalty Fund". The Pink Sheet Daily.
  17. ↑ Pamela Taulbee (2013-09-09). "DRI Capital Gets $1.45B for royalty investments". The Deal Pipeline.
  18. ↑ Joseph Haas (Sep 9, 2013). "DRI Capital To Pursue Phase III Assets With Some Of Its Third Royalty Fund". The Pink Sheet Daily.

External links

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