I want to reveal to you how you could potentially get a cut of one of the biggest drug deals in history.
Every year, big pharma pulls in some serious cash.
Within the top ten leaderboard by revenue in 2019, Johnson & Johnson (JNJ) pulled in $82.06 billion, Pfizer (PFE) raked up $51.75 billion, Merck & Co. (MRK) a whopping 46.84 billion, and AbbVie $33.27 billion.
Those are just a few of the big American pharma companies that develop and distribute drugs on an enormous scale.
But there are many others— Abbott Laboratories (ABT), Bristol-Myers Squibb (BMY), Thermo Fisher Scientific (TMO), Amgen (SMGN), Gilead Sciences (GILD), Eli Lilly & Co (LLY)— the list goes on.
The revenues from these companies amount to some really serious cash and make the pharmaceutical industry one of the biggest industries by revenue.
$1.3 trillion big. Those are the total revenues of the U.S. Big Pharma in 2019 alone — almost a third of the $4.45 trillion the U.S. government spent that year, to put things into perspective.
But here’s the thing when it comes to drug companies… developing drugs is really darn expensive.
A 2020 study estimated that the average cost of bringing a new drug to market was $1.3 billion.
With so much money at stake, and the likelihood of a successful development so low, going long on your trades in pharmaceutical stocks can be hit or miss.
That’s why today I want to show you how you could get a piece of these drug companies— without touching a single biopharmaceutical stock.
By trading a brand new IPO that collects royalties of big pharmaceutical companies, you could also collect some serious cash.
Already, the company held the biggest IPO of 2020, with shares soaring 60% on the opening day alone.
Royalty Pharma (RPRX) just managed to pull off one of the biggest IPO stunts I’ve seen in my trading career.
The company sold a whopping $2.18 billion of stock, making it the nation’s biggest initial public offering of 2020.
Not only that, the company saw its stock soar by 60% on its initial day of trading.
For a pharmaceutical company, RPRX is truly unique in that it has absolutely no interest in developing or selling any drugs directly— for now at least.
RPRX is in the business of helping other biopharmaceutical companies, however.
They give big drug companies wads of cash to help them develop drugs, all in exchange for a percentage of the sales those drugs bring in.
So far, RPRX has hauled in some big time wins on drugs they’ve funded the development for.
They’re the world’s largest purchaser of biopharmaceutical royalties and the top funder of drug innovation in the industry.
So naturally, they’re continuing to collect some major payments on some of the most successful drug therapies in the industry, including Imbruvica, Januvia, Kalydeco, Trikafta, Truvada, Tysabri, and Xtandi.
A great example was the royalties that RPRX now has access to through a drug developer called Vertex Pharmaceuticals (VRTX).
In 2014, RPRX bought $3.3 billion in royalties through VRTX to help develop a cystic fibrosis treatment.
After first-quarter sales of this VRTX’s cystic fibrosis drug shot through the roof by 77% to an annualized $6.1 billion, RPRX was rolling deep.
RPRX is able to collect low-to-mid single digit percentages on deals like this for many years to come— in the case of VRTX, as far as 2037.
So What’s Behind The Magic of RPRX?
Well, for one, there’s billionaire Pablo Legorreta.
The man’s a legend.
He’s managed to transform RPRX from a vague investment operation with a private equity focus into an impressive publicly listed powerhouse on the Nasdaq.
As a former investment banker, he basically pioneered the idea of investing in royalty streams of big drug companies.
RPRX started in 1996 as a private equity company that bought pieces of revenue in bigtime drugs like Lyrica, Humira, and Imbruvica before they became hugely popular.
When these drugs in turn were marketed by top tier pharmaceutical companies like Pfizer, Abbvie, and Johnson & Johnson, RPRX hit the lotto as a result of the 1.5% to 18% royalty streams it had invested in.
Even royalties on the low end of that range have led to massive revenues for RPRX over time.
The company currently sits at an outstanding $26.2 billion valuation.
I’m Watching RPRX as a Potential Momentum Play
Much of the IPO excitement around RPRX has likely been fueled by the pandemic.
We all know by now that healthcare companies — biotechnology and biopharmaceutical companies especially— are where the majority of the action is in the IPO market at the moment.
The coronavirus has caused an unprecedented shift in willingness of companies to go public throughout the last 4 months.
So naturally, demand for this RPRX has been very strong.
The size of the offering was increased from 70,000,000 million shares to 77,680,670 shares.
The money that RPRX has raised in the IPO will allow the company to invest in more royalty streams.
Of course, the success of RPRX going forward will depend greatly on its ability to continue picking good drug development companies to purchase royalties in.
But I’ve got a good feeling about Legorreta.
His company could remain hot in this market environment for many months to come.
We’ll just have to wait and see if traders think that RPRX deserves the valuation of a high-growth biotech or merely an investment vehicle.
For now, I’m keeping a close eye on RPRX and I will alert my premium IPO Payday subscribers if I decide to jump in.