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Q&A: Nick Galakatos on
“A Differentiated Approach to Life Sciences Investing”

April 21, 2025

We recently spoke with Dr. Nick Galakatos, Global Head of Blackstone Life Sciences, to learn about his differentiated approach to life sciences investing, strategy for mitigating risk and outlook for the sector. [ 1 ]

April 21, 2025

What is life science investing? 

Nick Galakatos: Life science typically spans the fields of biotechnology, pharmaceuticals, and medical devices.  From an investment standpoint, this means financing the discovery and development of innovative medicines and medical devices that can have a significant impact on patients.
 
Over the past two decades scientific, engineering and technology breakthroughs have driven unprecedented progress in the understanding of human disease. These advances have resulted in novel medicines and vaccines, including gene therapies, RNA vaccines, and innovative medical devices.  At the same time, technologies such as artificial intelligence and machine learning are increasingly deployed to make the complex process of discovery and development more efficient. Yet, despite this progress, FDA approved treatments account for less than 10% of rare diseases. [ 2 ] This is primarily because our understanding of human biology remains incomplete, and drug development is complex, time consuming, costly, and risky.

On average, it takes 12 to 15 years from discovery to regulatory approval of a new drug [ 3 ] and it can cost up to $4B. [ 4 ] While we are hands-on investors and may help design and run trials or participate on a governance board overseeing trial development, there are no shortcuts to FDA approval. The rigorous approval process requires a robust demonstration of both efficacy and safety.
 
The capital to finance development comes primarily from the R&D budgets of the large pharmaceutical and medical technology companies, and from the public markets that support emerging biotechnology companies. [ 5 ] Collectively, the life sciences industry invests $300B annually in research and development, making it the most capital-intensive R&D sector. [ 6 ] Despite this substantial investment, a funding gap of more than $170B remains, resulting in insufficient funding for one third of  products in development. [ 7 ] This large addressable market is where Blackstone Life Sciences believes its capital and expertise can have an impact.

How is Blackstone’s approach to life science investing different?

NG: The simplest way to describe our approach is that we fund products, not companies. We seek to deliver attractive value at lower risk through strategies like funding the late-stage development of innovative core products from highly credible counterparties. We aim to generate returns that are mostly market and interest rate uncorrelated by capturing value directly from the products we fund, rather than from exposure to equity. [ 8 ]
 
We seek to mitigate risk  in several ways. We carefully select products that inherently have a lower development risk. For example, we may fund expanding the use of an approved cancer drug to treat related cancers. To further manage risk, we typically work on products that reside within the world’s largest pharmaceutical and medical technology companies, companies with extensive resources and development experience. The average market cap of our collaborators is over $90B. [ 9 ]
 
Finally, many of our investments are tied to success milestones, which we believe is an effective tool to manage risk by enabling us to discontinue funding if progress does not proceed as expected.  This strategy has helped Blackstone Life Sciences achieve an 85% success rate of bringing products from Phase III trials to approval, while the industry average is 48%. [ 10 ] Also, and importantly, this risk mitigation approach has substantially limited Blackstone Life Science’s investment loss ratio. [ 11 ]
 
By risk-sharing and structuring investments to be dependent on product success, Blackstone Life Sciences has been able to expand the R&D budgets of our collaborators while also offering earnings relief during the clinical trial and approval process. We have worked with many of our collaborators for many years, establishing deep relationships built on trust. The result is rich, mostly proprietary, and high-quality deal flow of opportunities.
 
We believe that Blackstone Life Sciences pursues a differentiated approach to life sciences investing that seeks to benefit investors and collaborators and make critical medicines that otherwise might be left undeveloped or underdeveloped, available to patients.
 

How has Blackstone built an edge in selecting winning products?  

NG: Our team is what makes it all happen. The Senior Managing Directors and Operating Partners have average investing careers of 20 years. All have had leadership responsibilities in operating companies prior to joining us, experience that is required for successful product development. It is a team rooted in the deep understanding of science and product development. Twenty-one team members have either a medical degree or a PhD and together have helped develop 200 biopharmaceutical and medical technology products. The full team is based in Cambridge, MA, the global hub of biopharma.
 
Our ability to deploy capital at scale combined with deep medical expertise and hands-on operational leadership, makes us a partner of choice for many of the world’s premier pharmaceutical, biotechnology and medical technology companies. We have collaborated with Pfizer, Moderna, Medtronic, Sanofi, Novartis and other premier global companies to help get products approved, and into the hands of physicians and eventually patients. Our partners trust us with their products and rely on our expertise. We utilize our network of experts to fully understand the impact for patients, the market potential and risks involved.
 
In my experience, it is unusual for an investment firm to be actively involved in design and execution of clinical trials. Extensive domain expertise, many years of experience, specialized knowledge, relationships forged over decades and a history of bringing products to market, give us a seat at the table. We believe that it is precisely these factors that have contributed to our success.

Why is now a good time to invest in life sciences? 

NG: Life sciences is an innovation business. Scientific breakthroughs happen when inventions occur, they are not generally timed to the markets.
 
In our opinion, there has never been a more innovative period in the history of medicine and device development. Advances in technology, including AI, have led to changes in research and development of oncology, immune disorder and brain disease therapies, many utilizing gene editing that was theoretical not too long ago. 
 
In this new era in medicine, the industry pipeline is filled with more products than capital available to advance them. Promising treatments are left to languish in development and the needs of many patients remain unmet. This is a particularly acute problem when the markets are volatile, and companies face earnings pressure.
 
It also creates tremendous opportunity. We are fortunate to be in the position to help alleviate such pressures with scale capital and operational expertise. Our mission of bringing innovative medicines to patients by drawing on our skills and resources has resonated with investors.

Nicholas Galakatos

“In my opinion, there has never been a more innovative period in the history of medicine and device development.”

Nick Galakatos, PhD

Global Head of Life Sciences

Important Disclosures

The views expressed in this commentary are the personal views of Nick Galakatos and do not necessarily reflect the views of Blackstone Inc. (together with its affiliates, “Blackstone”). All information in this commentary is believed to be reliable as of the date on which this commentary was issued and has been obtained from public sources believed to be reliable. No representation or warranty, either express or implied, is provided in relation to the accuracy or completeness of the information contained herein. The views expressed reflect the current views of Nick Galakatos as of the date hereof, and neither Nick Galakatos, nor Blackstone undertake any responsibility to advise you of any changes in the views expressed herein.

Investment concepts mentioned in this commentary may be unsuitable for investors depending on their specific investment objectives and financial position. Tax considerations, margin requirements, commissions and other transaction costs may significantly affect the economic consequences of any transaction. Concepts referenced in this commentary can and should be reviewed carefully with one’s investment and tax advisors.

Blackstone and others associated with it may have positions in and effect transactions in securities of companies mentioned or indirectly referenced in this commentary and may also perform or seek to perform services for those companies. Blackstone and others associated with it may also offer strategies to third parties for compensation within those asset classes mentioned or described in this commentary. Investment concepts mentioned in this commentary may be unsuitable for investors depending on their specific investment objectives and financial position.

Tax considerations, margin requirements, commissions and other transaction costs may significantly affect the economic consequences of any transaction concepts referenced in this commentary and should be reviewed carefully with one’s investment and tax advisors. All information in this commentary is believed to be reliable as of the date on which this commentary was issued and has been obtained from public sources believed to be reliable. No representation or warranty, either express or implied, is provided in relation to the accuracy or completeness of the information contained herein.

This commentary does not constitute an offer to sell any securities or the solicitation of an offer to purchase any securities. This commentary discusses broad market, industry or sector trends, or other general economic, market or political conditions and has not been provided in a fiduciary capacity under ERISA and should not be construed as research, investment advice, or any investment recommendation. Past performance does not predict future returns.

All information as of March 2025 unless otherwise indicated.
Source: FDA Rare Disease Cures Accelerator, accessed March 2025.
Source: Nature Portfolio, “AI’s potential to accelerate drug discovery needs a reality check,” October 10, 2023.
Source: Nature Portfolio, “AI’s potential to accelerate drug discovery needs a reality check,” October 10, 2023.
Sources: Evaluate Pharma and Morgan Stanley Market Update Presentation to Blackstone Life Sciences, January 2024.The annual funding gap is Blackstone Life Sciences estimate of the gap between the annual spread between the demand for medicine and device development capital and the supply of capital from Biopharma and MedTech companies through R&D budgets.
Source: Evaluate Pharma. $300B is the 2023 global R&D number of Life Sciences Industry.
Sources: Evaluate Pharma and Morgan Stanley Market Update Presentation to Blackstone Life Sciences, January 2024.The annual funding gap is Blackstone Life Sciences estimate of the gap between the annual spread between the demand for medicine and device development capital and the supply of capital from Biopharma and MedTech companies through R&D budgets.
A small percentage of our deals could include equity investments in our counterparties. Note that other investments may additionally include equity kicker investments that are ancillary to the primary investment. There is no assurance that any Blackstone Life Sciences or any other Blackstone strategy will effectively hedge inflation.
Source: Capital IQ. Average market capitalization of each counterparty at the time of the initial investment weighted by percent of capital invested in Blackstone Life Sciences’ most recent fund.
As of February 1, 2025. Based on Phase III drug developments analyzed between 2010–2024. In deriving the Phase III success rate, Blackstone uses the same methodology as Evaluate Pharma, neither of which methodology incorporates data relating to approval for MedTech products. In determining the success rate, both Blackstone and Evaluate Pharma consider a drug’s approval by the US FDA or the EMA to each count as a separate, independent approval and a drug’s approval in each new indication to also be considered an approval when calculating the success rate. This methodology will result in a higher success rate than would otherwise result if only one of the aforementioned types of approval were used when calculating the success rate. For purposes of calculating the success rate, Blackstone does not include any Phase III trials that were never initiated. A trial is considered “initiated” when the first patient is enrolled in a clinical trial. For the avoidance of doubt, Blackstone considers suspended, abandoned, or never completed trials as “failures” when determining the success rate. Whereas Evaluate Pharma’s review period is as of January 1, 2000 – January 1, 2025, Blackstone Life Sciences’ review period is from 2010 to 2024, which coincides with the period beginning when Blackstone Life Sciences, made its first investment in a Phase III drug trial. Evaluate Pharma’s data represents their most recently available data. There are risks and limitations to comparing Blackstone Life Sciences’ shortened period of review to Evaluate Pharma’s longer and different period because market conditions, including among others macroeconomic factors and regulatory and policy considerations, as well as other factors beyond Blackstone Life Sciences’ control, change regularly and could adversely impact the likelihood of approval, thereby negatively impacting the industry’s and Blackstone Life Sciences’ success rates in a given time period. These and numerous other factors may adversely affect the success rates, and thus success rates in one time period are not directly comparable to success rates of drugs evaluated in different time periods.
Source: Capital IQ. Average market capitalization of each counterparty at the time of the initial investment weighted by percent of capital invested in Blackstone Life Sciences’ most recent fund.