Royalty Pharma (RPRX) Bernstein Insights: Healthcare Leaders and Disruptors - 2nd Annual Healthcare Forum summary

Business overview and strategy

• Largest buyer of biopharmaceutical royalties globally, with a 30-year track record and over 50 products in the portfolio.

• Achieved a 12% CAGR in royalty receipts and consistent mid-teens unlevered IRRs since IPO.

• Deployed $14 billion in capital since IPO, with $4 billion returned via buybacks and repurchases.

• Maintains a highly selective investment approach, focusing on product quality and importance over sector trends.

• Flexible investment model allows participation across 60 therapeutic areas and both approved and unapproved products.

Market dynamics and competitive positioning

• Biotech innovation and industry fragmentation create ongoing opportunities for royalty transactions.

• Unique evergreen business model lowers cost of capital and enables long-term, large-scale investments.

• Competitive advantages stem from scale, structure, and decades of accumulated assets, making replication difficult.

• Welcomes competition to foster a vibrant royalty marketplace, but maintains a unique position.

Investment process and risk management

• Reviews hundreds of opportunities annually but invests in only a select few (8 out of 440 in 2024).

• Prioritizes high-conviction, late-stage or approved products, with about 40% of investments pre-approval.

• Builds specialized teams for each transaction, leveraging internal generalists and external experts.

• Structures deals to share risk with partners, including adjustable royalty rates for underperformance scenarios.