The big deal of the week is on tap for tomorrow night. Royalty Pharma (RPRX) is offering $1.855M at the mid-point of the $25-$28 range for a market value of ~$16B.
This one may not be a sexy as our last huge healthcare hit, Schrodinger (SDGR), but this one stands to be a very solid long-term investment. Institutions have already indicated they have strong demand.
RPRX buys out drug royalty interests from all the players in the drug development space. This includes academic institutions, biotechnology companies and global bio-pharmaceutical companies. It’s similar to a private equity company operating in this specialty market.
Over the decades the firm has evolved the model to go beyond an outright buyout of an existing royalty stream to facilitate late-stage clinical trials and new product launches in exchange for future royalties. This is a very attractive option in many situations where equity financing is unavailable or undesirable.
For example take Memorial Sloan Kettering. They are a client and because they are able to sell their future royalty streams to RPRX they can take that capital and reinvest in new innovations - greatly accelerating their ability to tackle new problems based on their past success. In other words it’s a way to increase the “velocity” of innovation funding in the new drug development space.
Investors in RPRX will get exposure to growth in dividends and distributions from the royalty portfolio. The financials and multiple share classes make the financial analysis difficult until we see this company report a few quarters. However given their structure, industry position, management team and diverse model - this one will find a home in our long-term portfolio.
Other deals this week: (all for Thursday night)
Forma Therapeutics (FMTX) - Developing drugs for blood diseases and cancers. Still in Phase I. Range is $16-$18 for a ~$670M market value. Jefferies and Leerink.
Repare Therapeutics (RPTX) - Preclinical stage developer of gene therapies for solid tumors. $16-$18 range with Morgan Stanley and Goldman on the cover. (!) ~$600M market value.
Progenity (PROG) - These guys will put you to sleep with their roadshow but it’s a solid deal with a broad array of products for prenatal and disease screening. The range is $14-$16 for a ~$725M market value. Odd bankers though - Wells Fargo and Piper Sandler.
Genetron Holdings (GTH) - Another cancer diagnostics company in China. These are very interesting stories. This one is worth another listen. The deal is fairly small at ~$160M but the market value will be just over $1B in the $11.50 - $13.50 range. Credit Suisse and CICC are leading. If we get more on this one we’ll send out another email. It’s also worth taking a second look at a very similar company that came public last year.
The Candyman
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