Oaktree closes on $2.3 billion Life Sciences Lending Fund

Tipped as largest such credit fund, it works with 'thoughtful management teams' to craft non-equity financing.

Oaktree Capital Management has closed its Life Sciences Lending Fund, and related vehicles, on $2.3 billion. This is the largest life sciences credit fund ever, adding to the money at work in a field that includes growing demand for research and development as well as the expansion of commercial infrastructure.

Roughly 40 percent of the fund has been deployed since it launched in September 2021, according to a spokesman. This is Oaktree’s first fund dedicated to the life sciences.

Its first close took place in October 2022 on $614 million. Oaktree declined to comment on that number. Oaktree says that the final close significantly exceeded the target, although it is not specific about what the target amount was.

Armen Panossian, head of performing credit at Oaktree, said that, while the life sciences sector is traditionally funded largely by equity, “thoughtful management teams and investors are increasingly realising that structured debt and other alternative financing structures such as royalties can play an equally important role in enabling innovative life sciences companies to achieve their growth objectives.”

According to a source familiar with the matter, the fund has a global range. Three-quarters of its investments are in North America, because the life sciences market in North America is simply a huge attractive target. But the other quarter are elsewhere: chiefly in mainland Europe and the United Kingdom.

This person also said that most of the investments of the fund are first-lien secured debt.

Oaktree said that the fund focuses on lending to high-growth subsectors, such as and medical devices. It also looks for specific attributes of the portfolio companies, for example, innovations that target difficult-to-treat medical conditions, or strong intellectual property and to state-of-the-art manufacturing facilities.

Oaktree has $172 billion in assets under management as of the end of the first quarter 2023. Its private credit platform, created in 2001, manages approximately $24 billion, including its 17Capital NAV based financing business.