Royalty Pharma plc

Royalty Pharma’s Q4 and full-year performance saw a significant increase in earnings, with Q4 at $29 million and full year at $97 million. The company recently acquired the rights to royalties on Trelegy, a single-device triple combination inhaled therapy approved by the FDA. The acquisition was complex, involving multiple parties, Innoviva, Theravance, and GSK. But Royalty Pharma’s strong industry connections and adeptness were able to purchase the complete royalty stream for a total upfront payment of $1.31 billion, along with the possibility of earning up to $300 million in potential sales. Royalty Pharma anticipates that the acquisition will bolster its future expansion and generate returns that align with its target returns for authorized treatments in the high single to the low double-digit range. Royalty Pharma also acquired royalties on Gavreto, a precision oncology medicine marketed by Roche in certain territories outside the U.S. and Greater China, and is expected to have an appealing royalty rate ranging from the high teens to the mid-20s percent on sales. Royalty Pharma expects both acquisitions to be important contributors to the company in the long term. We give the company a ‘Buy’ rating with a revised target price.