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One US Listed Healthcare Stock Under Investors' Radar: Royalty Pharma PLC

Aug 19, 2021 | Team Kalkine
One US Listed Healthcare Stock Under Investors' Radar: Royalty Pharma PLC


Royalty Pharma PLC

Royalty Pharma PLC (NASDAQ: RPRX) is a buyer of biopharmaceutical royalties, and the portfolio consists of royalties on around 45 therapies.

RPRX will pay a quarterly dividend of USD 0.17 with respect to Q3 FY21 on 15 September 2021, with an ex-dividend date of 19 August 2021

Investment Highlights – Buy at USD 39.09

  • Post releasing Q2 FY21 results, RPRX had increased the full-year 2021 guidance for adjusted cash receipts ranging from USD 2.08 billion to USD 2.12 billion. Earlier, it was expected to fall between USD 1.94 billion and USD 1.98 billion.
  • The key performance indicators like adjusted cash receipts & adjusted EBITDA had shown a modest growth during Q2 FY21 as compared to Q2 FY20.
  • On the liquidity front, RPRX has a current ratio of 9.53x, higher than the industry median of 2.73x during Q2 FY21.
  • From a technical standpoint, the MACD line remained above the signal line, indicating an upside potential in the stock price.
  • Moreover, the 20-days exponential moving average price of USD 38.43 is supporting the upside potential in the stock price.

Key Risks

  • The failure to adapt to changing consumer needs could impact sales and profit.
  • The Company has a significantly higher debt when compared with the industry.
  • The increased number of Covid-19 cases in the US might hamper the growth prospects of RPRX.

Q2 FY21 Financial Highlights for the three months period ended 30 June 2021 (as of 11 August 2021)

 (Source: Company Result)

  • The adjusted cash receipts had shown a marginal increase of about 3% during Q2 FY21.
  • Driven by the recently acquired assets, the total income & other revenues had shown a decent growth of around 9% to USD 555 million during Q2 FY21.
  • RPRX had cash & cash equivalents of around USD 2.00 billion as of 30 June 2021.

One Year Share Price Chart

 (Source: Refinitiv; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)


The Company had strengthened the business model to gain significant market share in the rapidly growing biopharma royalty funding market with announced acquisitions worth USD 4.7 billion. Moreover, the Company expects payments for operating & professional costs to remain around 9% to 10% of adjusted cash receipts in 2021. Meanwhile, the Company had exhibited its funding capabilities as it entered a strategic funding partnership with MorphoSys. The stock made a 52-week High and Low of USD 53.23 and USD 34.80, respectively.

Considering the improved guidance, consistent dividend payments, and valuation conducted above, we have given a "BUY" stance on Royalty Pharma PLC at the closing market price of USD 39.09 (as on 17 August 2021) with a lower-double digit upside potential based on 17.49x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.