Biopharmaceutical royalty market pioneer Royalty Pharma (NASDAQ:RPRX) has a truly novel business model. If you’re interested in unusual but promising investment ideas, you really ought to check out Royalty Pharma stock.
A number of different factors make Royalty Pharma stand out. For one thing, as InvestorPlace contributor Will Ashworth points out, the company’s initial public offering (IPO), which took place in June, was this year’s biggest IPO at that time.
That fact is extraordinary by itself, but it’s even more noteworthy as most retail investors probably haven’t even heard of Royalty Pharma. Plus, as we’ll discuss in a moment, the price action of Royalty Pharma stock was rather exceptional.
Really, though, the most outstanding feature of Royalty Pharma is the company’s unique business model. It’s one of those brilliant ideas that we all wish we had thought of. But at least we can take an early position in Royalty Pharma stock now and (hopefully) enjoy strong, positive returns in the coming months.
A Closer Look at Royalty Pharma Stock
Since Royalty Pharma hasn’t been publicly traded for very long, the stock does not have a long track record. But it has fluctuated a great deal during this brief span of time, especially on its first day of trading.
The IPO of Royalty Pharma stock occurred on June 15. The shares started at $28, but they didn’t stay there for very long. In fact, the stock moved up an incredible 58.9% during its first trading session.
As often happens after an IPO, however, Royalty Pharma stock couldn’t maintain such a steep trajectory. After peaking at $56.50, the shares gradually drifted downwards over the next couple of months.
This afternoon the shares are changing hands for around $41.40, so investors who didn’t buy the stock immediately following its IPO probably made a wise decision. Now those who like Royalty Pharma can own its shares at a more reasonable price.
The Year’s Biggest IPO
It’s still somewhat baffling that 2020’s biggest IPO could fly largely under the radar. Maybe that’s because everybody’s been so busy obsessing over electric-vehicle IPOs and SPACs. In any case, Royalty Pharma offers a huge opportunity that many people are missing out on.
Unlike the stock, the company has some history. Founded back in 1996 by Pablo Legorreta, Royalty Pharma has managed to collect royalties totaling more than $18 billion.
Specifically, it obtains biopharmaceutical royalties on treatments for a broad range of conditions, including neurology, cardiology, oncology and diabetes.
Big Bankers Get Involved
These gigantic financial institutions conduct deep research before getting involved in an IPO. Their implicit stamp of approval means that Royalty Pharma is worth considering and perhaps taking a position in.
Again, the most important feature of the company is its unusual business model. Jeremy Abelson, the founder and portfolio manager of Irving Investors, explains how the company is effectively “turning a biotech company into a bond”:
“They are looking at the entire universe of proven data which allows them to make well informed decisions around which drugs will be the most commercially successful, regardless of market cycle dynamics.”
Royalty Pharma paid $650 million for a portion of the royalties from risdiplam. This groundbreaking treatment could generate much more than that for Royalty Pharma. The company is collecting royalties on numerous other treatments, making it a compelling investment.
The Bottom Line
I relish the thought of introducing traders to investment ideas they’ve never heard of. Royalty Pharma is a company like no other, and Royalty Pharma stock is still under the radar for most traders.
But given the company’s smart and unique business model, this stock might not be a hidden gem for much longer.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.