In what is a sign of investor exuberance in the midst of the pandemic, Royalty Pharmaspecialized in acquiring royalties from licenses and patents (royalty streams)sold 2.18 billion dollars of its shares in the largest initial public offering in the EU stock market of 2020, with which its shares gained 60% at the start of its operation.
The placement in the Nasdaq signals the successful transition in the investment operations of the billionaire mexicano Pablo Legorreta Creel: from a very opaque model of private capital to an entity with sale of shares to the public and that is quoted in the Nasdaq. The company sold 77.7 million shares at an initial price of 28 dollars per each, with a market value of Royalty Pharma reached 16,700 million dollars (mdd).
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When starting their quotations on Tuesday, June 16, 2020, Royalty Pharma’s shares were quoted at 45 dollars, with which the company reached a value of 26,800 billion.
With this operation, there are calculations that indicate that Legorreta Creel, who stayed with 10.5% of Royalty Pharma’s paper, would have a fortune of more than 2,810 million dollars, enough to occupy the eighth place in the ranking of billionaires presented by Forbes México in the edition of April 2020, for the fortunes of families Servitje Montull (2,600 billion) y Robinson Bours (2,570 billion)
Legorreta, a former investment banker, is a pioneer who reinforced the idea of investing in royalty streams of pharmaceutical products. He founded Royalty Pharma in 1996 as a private capital vehicle that buys parts of the royalties of innovative medicines such as Humira, Lyrica and Imbruvica, years before these products will reach their peak in sales.
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There will be medicines that generate thousands of millions of dollars each year, if they are marketed by large pharmaceutical companies such as Pfizer, AbbVie and Johnson and Johnson. Sin embargo, Royalty Pharma also took its share because it had acquired participations in royalty streams from between 1.5% to 18% in dozens of medicines. In recent years, Royalty Pharma also acquired royalty streams of medicines that were found under clinical development, with what in itself became a direct source of capital for innovation.
The major part of the money obtained in the IPO will be used for Royalty Pharma to invest in more royalty streams of medicine Sin embargo, some of the long-term investors of Legorreta also managed to sell 17.7 million shares in the OPI. In fact, the OPI represents the largest event in liquidity in a stock market operation in which what is sought is buying and not selling assets in the last 24 years.
With this operation, Legorreta will also obtain a capital vehicle permanently in public operations to inject resources into which it is already the major acquiring firm of royalty streams of biofarma del mundo products.
Legorreta will have to face the challenge of convincing brokers that Royalty Pharma should have a valuation as high as that of biotechnology companies and not as that of an investment vehicle.
The placement in the Nasdaq generated a value of less than 16,900 million dollars, which indicates a fair calculation of its investment assets. Sin embargo, the company’s first sales operations indicate that Legorreta is moving in the right direction. RP Management, the financial advisor that controls Legorreta, will continue to pay 1% of the assets it oversees annually and a performance premium of 6.5% in cash adjusted receipts.
Legorreta studied industrial engineering at the Universidad Iberoamericana in Mexico City before joining the famous investment bank Lazard Frères, where he made mergers and acquisitions in Paris and New York.
He founded Royalty Pharma in 1996 and consolidated it as the leading company in the acquisition of intellectual property in medical and biotechnology products.
Likewise, he is the founder and president of Alianza Médica para la Salud, a non-profit organization that empowers doctors and health workers in Latin America to improve medical care in the region.
By Nathan Vardi and with information from Forbes Staff