What Royalty Pharma does: business model overview
Royalty Pharma, a pharmaceutical company, has carried out an IPO, which was the second largest placement in the industry. It raised $2.18 billion, making it the second-largest listing in the pharmaceutical segment.
Royalty Pharma’s IPO was ahead of the previous champion in the raised capital – Warner Music Group. Label managed to raise $1.93 billion. The pharmaceutical corporation Zoetis Inc. remains in first place.
According to representatives, Royalty Pharma planned to sell 70 million securities, but as a result of high demand it had to increase its share by 11%. During the listing process, the company’s capitalization increased to $16.67 billion.
Royalty Pharma’s sphere of activity is acquisition of biopharmaceutical royalties, and the corporation also finances new methods of treatment of various diseases. The company has existed since 1996 and during this time it has taken a high position in its segment.
Business processes in the corporation are organized on the principle of mutual fund investment, and investments can be both indirect and direct, aimed at financing new developments. Royalty Pharma cooperates with other pharmaceutical manufacturers in terms of financing research and clinical trials of drugs in the late stages of their creation or already at the stage of their launch. The company receives royalties for this. In addition, it is interested in biotech start-ups and works closely with charities, various academic institutions and foundations. The company also acquires existing royalties from original product manufacturers and undertakes mergers and acquisitions using a flexible licensing model. The company’s portfolio includes royalties for about 45 products and 4 drugs, which are under development.
In the course of its business Royalty Pharma has made profits from such well-known drugs as Imbruvica, Kalydeco, Tysabri and others. The most profitable were royalties from cystic fibrosis control drugs. Last year the profit from them was 425 million dollars.
This year was extremely successful for Royalty Pharma. Only for the first three months, it managed to increase revenue by 15%, the figure reached $500.9 million. Despite this, in the first quarter, operating profit showed a decline of 16% and reached $361.4 million. The investors are such well-known companies as Adage Capital Management, General Atlantic and others.
This transaction is of great importance for the market. It shows that American investors are increasing their interest in buying shares, and the market has already almost recovered from the fluctuations that were observed a few months ago.
