Paul Capital Healthcare does $100m pharma deal

Pharmaceutical companies are looking to alternative forms of financing for research and marketing in the market downturn, according to Paul Capital partner Ken Macleod.

Paul Capital’s healthcare team will provide more than $100 million in financing to biopharmaceutical company UCB in exchange for payments from revenue lines of certain “non-core” products.

UCB is a bio-pharmaceutical company that manufactures and markets drugs to fight various diseases.

Paul Capital, well known particularly as a player in the private equity secondaries market, has had a healthcare financing team for about 10 years.

The firm declined to discuss details about the healthcare team’s funds or specific details of the financing deal, including the products from which the firm will derive its payments. However, Ken Macleod, a partner with Paul Capital Healthcare, did say the deal speaks to a broader trend.

“What we’re seeing here is the interest of larger pharmaceutical companies in leveraging their portfolios to


access capital without turning to the debt or equity markets,” said Macleod. “This is an example of a company recognising they’ve got a revenue stream from products which are non-core to the company.”

Paul Capital Healthcare takes a “commercial risk” when investing in a company, which helps the firm differentiate itself from traditional lenders, Macleod said. “We share in the success or failure of the commercial products.”

While the market downturn has created opportunities for a business like Paul Capital Healthcare as an alternative source of capital for pharmaceutical businesses, Macleod noted the deal with UCB was done as the financial markets are beginning to open up.

“We've successfully completed transactions in both up and down markets,” he said. “In difficult financing environments, companies become more willing to look beyond the equity and debt markets, and that creates additional opportunities for us.”

Paul Capital Healthcare has more than $1.6 billion in equity capital commitments and debt facilities under management. The unit’s funds have collectively invested more than $1 billion in the pharmaceutical, biotechnology and medical device sectors.

The division focuses on “commercial stage” investment opportunities and provides companies, academic institutions, universities and investors with capital. The healthcare team is led by Walter Flamenbaum, Lionel Leventhal, John Leone, Macleod and Jean-Piere Naegeli.