Royalty Pharma Enters the Market With a Bang

Health and Healthcare

Published: June 16, 2020 12:36 pm

Royalty Pharma PLC (NASDAQ: RPRX) entered the market with a bang on Tuesday. The shares went out well above the expected price: at $44.25, after pricing at $28 per share. The company originally wanted to price its 77.68 million shares in the range of $25 to $28. The selling shareholders are offering about 17.68 million shares, and there is an overallotment option for an additional 11.65 million shares from the company. At the $28 price point, the entire offering was valued up to roughly $2.5 billion.

The underwriters for the offering are JPMorgan, Morgan Stanley, BofA Securities, Goldman Sachs, Citigroup, UBS Investment Bank, Evercore ISI, Cowen, SunTrust Robinson Humphrey, BBVA, DNB Markets, Scotiabank, TD Securities, AmeriVet Securities, Blaylock Van, Cabrera Capital Markets, R. Seelaus, Ramirez, Siebert Williams Shank & Tigress Financial Partners.

Royalty Pharma is not a pharmaceutical company in the traditional sense. It has assembled a portfolio of royalties that entitles it to payments based directly on the top-line sales of many of the industry’s leading therapies, including Imbruvica, Januvia, Kalydeco, Trikafta, Truvada, Tysabri and Xtandi.

This company funds innovation in the biopharmaceutical industry, both directly and indirectly: directly when it partners with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators.

In a recent SEC filing, Royalty Pharma detailed its finances as follows:

In 2019, a total of 22 therapies in our portfolio each generated 2019 end-market sales of more than $1 billion, including seven therapies that each generated 2019 end-market sales of more than $3 billion. In 2019, we generated operating cash flow of $1.67 billion, Adjusted Cash Receipts of $2.11 billion and Adjusted Cash Flow of $1.64 billion. Between 2012 and 2019, we grew our Adjusted Cash Receipts at a compound annual growth rate (CAGR) of 11%.

The company intends to use the net proceeds from this offering to acquire royalties, as well as for working capital and general corporate purposes.

Shares of Royalty Pharma were last seen up more than 62% at $45.26, in a range of $43.29 to $46.22 on the day thus far. More than 15 million shares had moved as of 12:30 p.m. Eastern.