Fund of the week: Canada Pension Plan Investment Board (CPPIB)

Canada Pension Plan Investment Board has quietly assembled one of the world's largest pension-fund-operated pharmaceutical royalty portfolios while simultaneously pursuing venture investments, pharma spin-out co-investments, and life sciences real estate across the healthcare spectrum.

With net assets surpassing C$700 billion as of 2025, CPPIB has deployed over $4 billion in life sciences transactions since 2017—spanning royalty acquisitions, biotech equity, healthcare fund commitments, and real estate—positioning the fund as a preferred financing partner for biopharma companies seeking non-dilutive capital.

Unlike traditional private equity firms constrained by fund lifecycles or specialized royalty aggregators burdened by fee structures, CPPIB's patient capital model enables a fundamentally different approach to healthcare investing.

Investment Architecture and Strategic Rationale

CPPIB launched its intellectual property investment program in 2011 as a distinct strategy within Credit Investments, initially targeting royalties, patents, and trademarks across pharmaceutical and technology sectors. By 2017, the program had deployed approximately C$3 billion in IP investments globally.

John Graham, who led Credit Investments before becoming CEO in 2021, articulated the thesis: alternative assets related to intellectual property help diversify the Fund through income streams that are typically uncorrelated to broader capital markets while providing stable, long-term cash flows.

The Credit Investments division operates through five specialized teams, with the Capital Solutions group (led by Managing Director David Colla in Toronto) handling pharmaceutical royalty financing.

This team structures royalty acquisitions, mezzanine debt, and solution-oriented financing across healthcare. The organizational placement matters—royalties sit alongside credit rather than equity, reflecting their fixed-income-like cash flow characteristics despite exposure to drug commercial performance.

CPPIB's pension fund structure enables three critical advantages over competitors. First, no fund lifecycle constraints: traditional PE funds operate on 10-year cycles with defined investment and harvesting periods, while CPPIB can hold royalty streams to natural expiration. Second, patient capital alignment: the Fund invests for 75+ year CPP sustainability, matching the duration profile of pharmaceutical royalties that can span 15-20 years.

Third, scale without fee drag: at $714 billion in assets, CPPIB can deploy $200 million to $1.3 billion per transaction without management fees or carried interest eroding returns.

A hallmark of CPPIB's broader approach is partnering via co-investments. The fund frequently invests alongside specialist venture capital or PE firms and industry players, effectively tapping their domain expertise while writing substantial checks. CPPIB has been noted as by far the most active in pursuing co-investments among public pension funds.

The organization can commit hundreds of millions as a co-investor in a single deal, a scale and flexibility that sets it apart. Over 2023–25, the fund reportedly completed eleven co-investments alongside PE sponsors in a single quarter at one point, underscoring how central this model is to CPPIB's deal flow.

The Pharmaceutical Royalty and Credit Portfolio

Beyond co-investments and venture participation, CPPIB has executed significant royalty and credit transactions that form the core of its life sciences income strategy.

Keytruda: The Blockbuster Foundation

In May 2019, CPPIB completed its largest pharmaceutical royalty acquisition: $1.297 billion to purchase a partial royalty interest in Merck's pembrolizumab from LifeArc, the UK medical research charity that helped humanize the antibody in 2007. CPPIB described the investment as an expansion of its global intellectual property program—a program aimed at alternative asset streams that are largely uncorrelated with public equity markets.

The specific royalty rate remains undisclosed, but this investment provides exposure to the world's best-selling drug. Keytruda generated $29.5 billion in 2024 sales, up 18% year-over-year, accounting for approximately 45% of Merck's total revenue and commanding roughly 70% of the global PD-1/PD-L1 inhibitor market across 41 FDA-approved indications.

The investment thesis faces a definable risk horizon: key U.S. patents expire in 2028, with biosimilar developers including Samsung Bioepis, Sandoz, and mAbxience advancing Phase 3 programs for 2028-2029 market entry.

Price erosion of 40-60% is expected post-biosimilar launch. However, secondary patents extend protection for certain formulations through 2036, and Merck launched Keytruda Qlex (subcutaneous version) in October 2025, approved for 38 solid tumor indications to help maintain market share. Even at a hypothetical 1% royalty rate, CPPIB would have received approximately $295 million in 2024 alone against the initial $1.3 billion investment—suggesting near-complete principal recovery before the patent cliff arrives.

Venetoclax: Hematology-Oncology Cornerstone

In July 2017, CPPIB acquired a partial royalty interest in the BCL-2 inhibitor marketed as Venclexta by AbbVie and Genentech, providing $250 million upfront plus $75 million in milestone payments to the Walter and Eliza Hall Institute in Australia.

Venetoclax has become foundational therapy in chronic lymphocytic leukemia, acute myeloid leukemia, and small lymphocytic lymphoma. AbbVie reported $2.54 billion in 2024 venetoclax revenue, up 13% year-over-year, with consistent double-digit growth maintaining the drug's position as a cornerstone hematology-oncology treatment.

BridgeBio Acoramidis: The Synthetic Royalty Model

In January 2024, CPPIB partnered with Blue Owl Capital to provide BridgeBio Pharma with $1.25 billion in non-dilutive financing ahead of FDA approval for acoramidis, an oral treatment for transthyretin amyloid cardiomyopathy. CPPIB's specific participation included a $200 million synthetic royalty financing commitment plus $150 million participation in a $450 million term loan refinancing (alongside Blue Owl's $300 million loan contribution).

The synthetic royalty structure provides instructive detail on CPPIB's approach:

The 1.9x cap on invested capital implies a targeted IRR structure. If acoramidis achieves peak sales projections of $1.5-2 billion and the royalty reaches its cap within 5-6 years, this implies an IRR of approximately 15-18% on the royalty component.

Acoramidis received FDA approval as Attruby on November 22, 2024, with pricing at $244,500 annually. The drug subsequently received EU approval as BEYONTTRA on February 10, 2025, triggering a $75 million milestone payment. Japan approval is expected in H1 2025 with associated $105 million in regulatory milestones. As of February 2025, commercial launch metrics showed 1,028 unique patient prescriptions from 516 prescribers, with BridgeBio ending Q4 2024 with $681 million cash.

The drug competes directly with Pfizer's tafamidis, which generated $5.45 billion in 2024 sales. Acoramidis demonstrates superior clinical characteristics—achieving ≥90% TTR stabilization versus 50-60% for tafamidis, with cardiovascular mortality hazard reduction of 44-49% versus 30%.

BridgeBio targets 30% market share in newly diagnosed patients, with analysts projecting $324 million in 2025 sales and potential peak sales of $1.5-2 billion. The ATTR-CM market overall is expected to grow from approximately $6 billion in 2024 to $12-20 billion by 2032, driven by improved diagnosis rates in a global patient population of 250,000-500,000.

Leqvio: The Most Recent Royalty Addition

CPPIB's most recent royalty acquisition, disclosed in August 2025, involved $300 million to acquire a partial interest in royalty payments tied to Novartis's inclisiran from Alnylam Pharmaceuticals. Alnylam receives tiered royalties of 10-20% on global Leqvio sales under its licensing arrangement with Novartis.

The siRNA cholesterol-lowering therapy achieved $754 million in 2024 sales (with quarterly revenue approaching $200 million by mid-2024), up 112% year-over-year, with analysts projecting approximately $3.4 billion by 2030.

The FDA approved a label update on July 31, 2025 enabling first-line use as monotherapy, removing the previous statin combination requirement—a significant expansion that should accelerate adoption. This transaction adds a major pharma cash-flow asset to CPPIB's growing IP portfolio, diversifying the fund's returns via stable drug royalty income.

Pharma Credit and Structured Investments

Beyond pure royalty acquisitions, CPPIB has expanded its pharmaceutical credit strategy through related structures.

Blackstone Life Sciences Yield (2021, ongoing): CPPIB committed $300 million to this fund investing in royalty streams on FDA-approved products and structured credit opportunities with biotechnology, pharmaceutical, and MedTech partners. The vehicle continues deploying capital through 2025, providing CPPIB diversified exposure to life sciences credit beyond its direct royalty acquisitions.

Cohance Lifesciences/Suven Pharma (August 2024): CPP Investments provided a $250 million credit facility supporting the merger of two Advent International-owned Indian pharmaceutical CDMOs (contract development and manufacturing organizations). This represents CPPIB's credit-first approach to life sciences exposure through debt structures, extending its pharmaceutical financing beyond royalties into manufacturing infrastructure.

Venture and Growth-Stage Investments

While royalty deals provide steady income, CPPIB has also shown willingness to back promising biotech companies at earlier stages—though with mixed results that have prompted strategic recalibration.

Organizational Evolution

CPPIB's Growth Equity team, formed in 2021 by combining Thematic Investing and Venture Capital units, takes a fundamentally different approach than its royalty program—partnering with specialist managers rather than building deep in-house biotech expertise.

Leon Pedersen (previously Head of Thematic Investing and architect of the "Innovations in Health Care" strategy) became Managing Director & Head of Growth Equity, with Paul McCracken promoted to Managing Director with specific responsibility for healthcare innovation investments.

At the May 2025 Fiduciary Investors Symposium, McCracken stated: "Healthcare is very ripe for investing and has been for a long time. It's huge, it's growing fast, it has historically, both in public and private equity, been a category where specialists have reaped excess returns." This indicates strategic continuity in CPPIB's healthcare approach despite portfolio recalibration.

Direct Biotech Investments

Hexagon Bio (February 2023): CPPIB joined a $77.3 million Series B round for the California-based drug discovery startup that operates an interdisciplinary platform mining microbial genomes for new therapeutics. CPPIB's participation alongside specialist VCs including The Column Group and Two Sigma Ventures signaled its appetite for cutting-edge science.

In December 2025, Hexagon formed a multi-million-dollar joint venture with Corteva to develop nature-inspired crop protection solutions—its first agricultural partnership—while also pivoting toward discovering novel payloads for antibody-drug conjugates (ADCs) in oncology.

Sana Biotechnology (2020): CPPIB was an early investor in the cell- and gene-therapy company that raised over $700 million in its initial financing. After Sana's February 2021 IPO, shares declined approximately 83% from the $25 IPO price. However, the company has shown recent progress: in November 2024, Sana announced a strategic refocus onto Type 1 diabetes and B-cell mediated autoimmune diseases while suspending oncology programs.

Positive first-in-human data emerged from Uppsala University Hospital showing survival of HIP-modified pancreatic islet cells without immunosuppression—published in the New England Journal of Medicine in March 2025. The FDA granted Fast Track designation for SC291 (CD19 CAR-T) in relapsed/refractory lupus in December 2024. Sana raised $105 million in August 2025 and maintained $152.5 million cash at year-end 2024.

Seaport Therapeutics (October 2024): CPPIB participated in a $225 million oversubscribed Series B led by General Atlantic alongside T. Rowe Price, Foresite Capital, and Goldman Sachs Alternatives.

Seaport is a clinical-stage biopharmaceutical company developing neuropsychiatric medicines using its proprietary Glyph drug delivery platform, with lead candidate SPT-300 targeting major depressive disorder. The company was spun out from Karuna Therapeutics.

insitro (2021): CPPIB led a $400 million Series C for the machine learning-driven drug discovery company founded by Daphne Koller. insitro uses AI and high-throughput biology to identify drug targets and develop therapeutics, representing CPPIB's interest in AI-enabled life sciences platforms.

Chi-Med (2021): CPP Investments made a $100 million public equity investment in Hutchison China MediTech, a Hong Kong-listed innovative biopharmaceutical company focused on discovering and developing targeted oncology and immunology therapies.

Dechra Pharmaceuticals (Q3 FY2024): CPP Investments acquired approximately £40 million (~C$69 million) for roughly 1% stake alongside EQT in this UK-based veterinary pharmaceutical company—its first identified animal health investment.

Alinamin Pharmaceutical (FY2025): CPPIB invested JPY 11.5 billion (C$105 million) for a 7% stake alongside MBK Partners in this Japan-based developer and manufacturer of over-the-counter drugs and health supplements, demonstrating geographic expansion into Asian healthcare.

AI-Enabled Life Sciences via Radical Ventures

Through additional commitments of $150 million ($75 million each to Radical Growth I and Radical Fund IV), CPPIB gained exposure to AI-enabled life sciences companies including Aspect Biosystems (3D bioprinting for regenerative therapies) and Intrepid Labs (AI-powered drug formulation). Total Radical Ventures commitment now exceeds $280 million across cycles.

Strategic Recalibration

By 2024–25, CPPIB was reassessing its growth equity strategy amid uneven outcomes. After a flurry of deals in 2021–22, the pace of new direct investments slowed. The Growth Equity team saw some portfolio stars—Databricks and KoBold Metals climbed to multibillion-dollar valuations—but also disappointments like Sana's stock decline.

This prompted CPPIB to shift toward a more selective approach, with a new Growth Equity head appointed in 2025 and some assets moved out of the group.

CPPIB began leaning more on third-party venture managers for deal flow while focusing its direct efforts on a handful of high-conviction opportunities. Senior management emphasized that the fund's appetite for growth deals remains intact despite the turbulence—CPPIB is refining how it invests in early-stage life sciences, not pulling back entirely.

Major Co-Investments and Pharma Spin-Outs

CPPIB has made headlines teaming up with prominent partners on late-stage biotech investments and spin-outs, deploying its patient capital model alongside specialist PE expertise.

BMS/Bain Capital NewCo

In July 2025, CPPIB joined forces with Bain Capital to back a major pharma spin-off from Bristol Myers Squibb. BMS and Bain announced the creation of a new standalone biotech company focused on immunology, with CPPIB committing $40 million as part of the $300 million financing round led by Bain.

The newly formed company acquired five autoimmune disease drug programs from BMS's pipeline—assets that BMS decided to externalize—including afimetoran, a late-stage lupus drug (TLR7/8 inhibitor in Phase II), and BMS-986322, a mid-stage psoriasis therapy (TYK2 inhibitor with positive Phase II results), plus three earlier-stage programs.

BMS retained approximately 20% equity and will receive milestones and royalties if these drugs succeed, but day-to-day development shifts to the new company.

By co-founding and funding the immunology company alongside Bain, CPPIB aims to replicate the playbook that yielded substantial wins in prior pharma spin-outs. Bain's Life Sciences team had previously executed similar spin-out deals with Pfizer assets—notably creating Cerevel Therapeutics (neuroscience drugs) and SpringWorks Therapeutics (oncology rare-disease drugs).

Those bets paid off: Cerevel went public and was acquired by AbbVie for $8.7 billion in 2024, returning an estimated 4-5x invested capital. As BMS's executive noted, these assets have significant potential, and the new company structure will drive their development to ensure greater impact for patients.

Healthcare Services Co-Investments

Advarra (June 2022): CPP Investments co-invested alongside Blackstone in this leading provider of life sciences R&D compliance and technology solutions, valued at approximately $5 billion. Advarra provides IRB (institutional review board) services, clinical trial management, and regulatory compliance solutions to pharmaceutical and biotech companies—infrastructure critical to drug development.

ModMed (Q1 FY2026): CPP Investments committed $100 million alongside Clearlake Capital in this leading provider of specialty-specific SaaS solutions for ambulatory medical practices, expanding healthcare IT exposure.

Real Chemistry (Q1 FY2026): CPPIB invested $193 million alongside New Mountain Capital in this healthcare marketing and communications company, demonstrating interest in pharmaceutical services beyond drug development.

Broader Healthcare Co-Investments

Beyond pharma spin-outs, CPPIB continues to make co-investments in established healthcare companies. In 2023, CPPIB committed $150 million to GTCR's fund (which targets mid-market buyouts in sectors including health care) and €400 million to EQT's latest fund (EQT X) which pursues large deals in health and tech. These fund commitments frequently come with co-investment rights, meaning CPPIB can directly invest alongside GTCR or EQT in specific acquisitions.

In Asia, CPPIB co-invested with Carlyle in 2022 to acquire HCP Global, a cosmetic packaging firm serving top skincare brands—not a drug company per se, but part of the life-science supply chain.

Healthcare-Focused Fund Commitments

CPP Investments has made substantial commitments to healthcare-focused private equity funds, providing diversified exposure beyond direct investments:

The TPG Healthcare Partners II commitment represents CPPIB's continued relationship with TPG's healthcare-dedicated vehicle following an earlier $90 million commitment to Fund I in 2019. The Avista secondary deal included two fund interests plus two healthcare co-investments, structured as a stapled transaction.

Life Sciences Real Estate

CPPIB has allocated significant capital to life sciences real estate infrastructure, recognizing the growth of biotech hubs and demand for specialized laboratory facilities.

Greystar Life Sciences Joint Venture

The CPP Investments-Greystar Life Sciences Joint Venture, established in July 2021 with $1.2 billion equity commitment (90% CPPIB stake), represents the primary vehicle for lab and office real estate development in the United States.

74M Project, Somerville, Massachusetts: The joint venture's flagship development is a 468,000 square-foot purpose-built lab and office tower at 74 Middlesex Avenue in Assembly Square, near the East Cambridge life sciences cluster. Construction commenced mid-2022, topped out May 2023, with completion targeted for Spring 2024. The facility targets LEED Platinum, WELL Platinum, WiredScore Platinum, and SmartScore certifications, positioning it as a premier destination for biotech tenants in the Greater Boston area.

Spear Street Capital (2022): CPPIB provided a $421 million whole loan for redevelopment of an office complex into life science facilities in Watertown, Massachusetts—another Boston-area life sciences corridor—demonstrating willingness to provide both equity and debt financing for laboratory real estate.

Competitive Positioning Against Pure-Play Royalty Companies

CPPIB's direct approach contrasts sharply with specialized royalty vehicles that dominate the market.

Royalty Pharma holds approximately 60% of royalty origination deal value with a $20 billion market cap. The company deployed $2.8 billion in 2024 across eight new therapies including synthetic royalties on frexalimab and Cobenfy. Portfolio receipts reached $2.8 billion with 13% year-over-year growth.

Critically, Royalty Pharma completed management internalization in May 2025 at approximately $1.1 billion, eliminating a 6.5% of portfolio receipts quarterly management fee. Projected savings exceed $100 million in 2026, $175 million by 2030, and $1.6 billion cumulative over ten years—validating CPPIB's structural advantage, as the pension fund never faced such fee drag.

DRI Healthcare Trust provides a Canadian-domiciled option with $505 million market cap and 28 royalty streams on 21 products including Eylea, Omidria, and a position in Keytruda. Total royalty income reached $190 million in 2024, up 45%. DRI announced its own $49 million management internalization in May 2025, projecting $200 million in cumulative savings over 10 years—further evidence that external management structures erode value in royalty portfolios.

XOMA Corporation operates as a small-cap royalty aggregator with 120+ royalty and milestone rights, having doubled its asset count in 2024. The lifecycle approach spans pre-commercial through commercial assets. Total income reached $28.5 million in 2024, reflecting the earlier-stage nature of XOMA's portfolio.

HealthCare Royalty Partners, a private fund manager with approximately $3 billion AUM, was acquired by KKR in July 2025. HCRx operates a traditional PE model with estimated 1.5-2% management fees and 20% carried interest—fee structures that materially erode returns on assets with typical 10-15% gross IRRs.

Investment Structure Innovations

CPPIB's pharmaceutical deals employ structures unavailable to or uneconomic for specialized royalty companies.

Synthetic royalty creation: Unlike traditional royalty acquisitions from academic institutions or previous royalty holders, CPPIB creates new royalty streams directly with drug developers. The BridgeBio transaction created a royalty where none previously existed, providing the company non-dilutive capital while giving CPPIB economic interest in commercial success.

Royalty-plus-credit combinations: The BridgeBio transaction illustrates CPPIB's ability to provide comprehensive financing solutions. The $200 million royalty sat alongside a $150 million term loan participation, giving BridgeBio $350 million from CPPIB alone. This combination appeals to companies seeking single-relationship financing partners.

Capped return structures: The 1.9x cap on BridgeBio royalty payments provides risk management for the drug developer while giving CPPIB predictable return parameters. This contrasts with Royalty Pharma's typically uncapped synthetic royalties, which offer greater upside but may be less attractive to biotech management teams concerned about dilution of commercial success.

Credit-first pharma exposure: The Cohance/Suven merger loan and Blackstone Life Sciences Yield commitment demonstrate CPPIB's ability to gain pharmaceutical exposure through debt structures when equity or royalty opportunities are not available or attractive.

Performance and Outlook

Over 2023–2025, CPPIB's forays into pharma and biotech demonstrate a broad and dynamic portfolio. In this three-year span, CPPIB invested in everything from AI-driven drug discovery startups to royalty interests in commercial-stage drugs to immunology spin-outs with pharma giants to life sciences real estate. The deals were global—spanning North America, Europe, and Asia—and often done in partnership with top-tier life sciences investors.

This diversified approach means CPPIB is not over-concentrated in any single therapeutic area or business model. Instead, it has built a mosaic of exposures: some early-stage, some late-stage; some equity, some credit; some direct, some through funds. The aggregate trend is clear: CPPIB views health and life sciences as a strategic pillar and has put substantial capital to work—over $4 billion in life sciences transactions since 2017.

Risk-adjusted returns favor royalty structures over public biotech equity. Pharmaceutical royalties provide downside protection through cash flows from approved, commercial-stage drugs with established market positions; lower volatility as royalty streams correlate with drug sales rather than biotech sentiment cycles; duration matching as 10-20 year royalty streams align with pension liability profiles; and uncorrelated returns driven by clinical outcomes and physician adoption rather than macro factors.

CPPIB's overall private equity and growth portfolio has remained resilient—the fund earned approximately 8% net return in FY2024, with the private equity portfolio earning a 14.8% annual return over the five years ending 2023.

The Chief Actuary of Canada projects that the CPP Fund needs to earn roughly 3.7% above inflation over the long run to meet its obligations. CPPIB has comfortably exceeded that in the past decade—achieving about 10% annual net returns over 10 years—thanks in part to strong performance in private equity and credit.

The pharma and biotech deals are intended to be high-alpha plays that boost those overall returns. A successful biotech investment can deliver IRRs in the high-teens or higher, far above CPPIB's baseline target. CPPIB has signaled it has deep capabilities in life sciences and is eager to provide flexible, highly customized capital solutions—including royalty financings—to the sector.

The fund's Active Equities and Private Equity departments have continued to add billions in dollar value-added above benchmark, even through volatile markets. The portfolio's risk profile has evolved toward commercial certainty: three of four major royalty assets—Keytruda, venetoclax, and Leqvio—generate revenue from approved, growing drugs. Acoramidis represents calculated commercial-stage risk with FDA and EU approval now secured and Japan approval expected.

Strategic Considerations

Looking forward, CPPIB faces two strategic questions. First, deal sourcing: Royalty Pharma controls 60%+ of origination value through decades of relationship-building with academic institutions and biotech companies. CPPIB must determine whether to build competitive sourcing capability or accept co-investment positioning alongside specialized players.

Second, Keytruda's 2028 patent cliff represents meaningful portfolio concentration risk—the $1.3 billion investment will face biosimilar-driven value erosion within three years, creating reinvestment pressure. The launch of Keytruda Qlex provides some defense, but biosimilar competition will still materially impact royalty streams.

The pharmaceutical royalty market remains under-penetrated, representing less than 5% of total biopharma capital needs. With drug development costs exceeding $2 billion per approval and biotech companies seeking non-dilutive alternatives to equity financing, CPPIB's patient capital model positions it as an attractive partner for the next generation of royalty transactions.

CPPIB has established a differentiated position through three reinforcing advantages: permanent capital eliminating fund lifecycle constraints, zero fee drag versus 4-7% for external managers, and scale enabling participation in $1+ billion transactions. The recent management internalization trend at both Royalty Pharma and DRI Healthcare validates CPPIB's structural model—fee elimination is worth $1.6 billion and $200 million respectively to those companies over ten years.

Compared to traditional private equity, CPPIB's approach is differentiated by patient capital and creative structures. It does not need to flip companies in a few years; it can support a biotech through multiple phases of growth. It also is not confined to plain equity—the use of synthetic royalties, credit facilities, co-control stakes, and real estate investments shows CPPIB's ability to tailor deals to each opportunity. This flexibility has made CPPIB a valued investor in the global health sector, effectively serving as a bridge between the worlds of high finance and cutting-edge biomedical research.

Disclaimer: The author is not a lawyer or financial adviser. This article is for informational purposes only and does not constitute investment advice, legal advice, or a recommendation to buy or sell any securities.