Insider Muscle On This Growth & Income Biotech

There weren’t any of our favorite insider buy types last week. Typically, we are on the hunt for purchases where the buyer has a track record of being on the right side of the trade or flips from a seller to a buyer. Without finding either, we went straight Chief Executive Officer (CEO) muscle.

Royalty Pharma plc (RPRX) Chief Executive Pablo Legorreta bought a little more than $4.8 million last week. It was his second purchase in May. The prior buy was a touch above $7.67 million. Together, the pair of purchases exceeded $12.5 million. (1)

Royalty Pharma is a biopharmaceutical company specializing in acquiring and managing royalty interests in pharmaceutical products. Royalty Pharma is one of the largest buyers of biopharmaceutical royalties, with a diversified portfolio of assets that spans a wide range of therapeutic areas and includes some of the most successful drugs on the market.

The company’s primary business model revolves around acquiring royalty interests in approved pharmaceutical products or late-stage clinical candidates. Instead of developing and commercializing drugs itself, Royalty Pharma provides upfront capital to biopharmaceutical companies in exchange for a percentage of future product sales or milestone payments. This approach allows Royalty Pharma to generate a steady stream of revenue from established drugs without taking on the risks associated with drug development.

Product Highlights

  • RPRX boast 35+ approved Therapies
  • 14 “Blockbuster Therapies with more than $1 Billion in Sales
  • 12 in Development Stage Therapies

Some of the Arroved Therapies include: (2)

  • Spinraza – Biogen – Spinal Muscular Atrophy
  • Trelegy -GSK – Asthma
  • Orladeyo – Bio Cryst – Hereditary Angiodema
  • Tremfya – Johnson & Johnson – Arthritis

Although Wall Street expects RPRX’s earnings and sales to dip next year, it has a robust one-year price target of $51.53. (3) Goldman Sachs analyst Chris Shibutani rates the company a “Buy” with a price target of $58. (4) Shibutani shared, “Having deployed $1.6bn of capital year-to-date, the company’s pipeline continues to strengthen, and the balance across the company’s portfolio of development-stage and commercial opportunities continues to reflect the robust opportunity set as innovation trends across the industry remains strong, and the financing environment for companies in the emerging biotechnology spaces continues to be challenging…” The stock last traded at $32.38. Additionally, Royalty Pharma currently pays an annual dividend of $0.80 for a yield of 2.47%.

OVERALL: Royalty Pharma plc (RPRX) could offer investors an attractive combination of price appreciation and dividend income. However, with sales forecasted to slip to $2.74 billion in 2024 from $2.87 billion this year and earnings per share (EPS) expected to dip from $4.13 in 2023 to $3.93 next year, (5) the way to the one-year price target could be choppy.

RPRX is only appropriate for growth and income investors with above-average risk tolerance and a time horizon of at least 18 months.


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