OrbiMed closes second healthcare credit fund on $924m

Fast fundraise for healthcare credit strategist, despite regulatory block on European investment.

New York-based OrbiMed has reached a final close of $924 million on its second healthcare royalty and credit opportunities fund, OrbiMed Royalty Opportunities II, the firm announced last week. The successor fund, which follows on from its fully invested $600 million debut credit fund, attracted investments from a range of LPs in North America and Asia, W. Carter Neild, a partner at OrbiMed told PDI.

European investors, which invested in the last fund and the firm has established relationships with, were unable to commit to the strategy because the fund is not AIFMD-compliant, said Neild. OrbiMed is unlikely to cut through the red tape to come into line with the new European regulatory requirements because it has raised plenty of capital from investors beyond Europe. 

Investors include endowment, foundation, pension and other institutions, the statement said. OrbiMed committed $24 million of its own capital to the strategy.

The fund will take a flexible approach to investment. It will focus on providing debt and acquiring royalty streams, but can also allocate a portion of its investments to equity. Healthcare companies can combine debt financing and royalty structures, managing director, Tadd Wessel, explained.

On the debt side, OrbiMed can provide senior and junior financing with convertible debt and high-yield bonds on the table too, continued Wessel. The fund has a 12-year base term, so the fund offers debt maturities of up to ten years. Debt margins range from the single digits and upwards, depending on the facility and structure, said Wessel.

The investment period is expected to be around three or four years, though the LPA allows for longer, the executives said. The fund can commit between $20 million and $150 million per transaction, though in tandem with other OrbiMed funds, it can increase that limit.

The fund is restricted to healthcare investments but is open to supporting both sponsor-backed and independent firms and has no geographical restrictions on its investments. Along with financing, the firm aims to support its borrowers with its strategic and operational resources, said Wessel.

The fund was launched into the market last June, said Neild. “We are particularly excited to welcome a dozen leading medical research and healthcare institutions as investors. OrbiMed looks forward to a strategic, collaborative relationship with them going forward,” he said in the statement.

New York-headquartered OrbiMed also has offices in San Francisco, Shanghai, Mumbai and Herzliya. It has around $14 billion in assets under management.