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NEW YORK - Royalty Pharma plc (NASDAQ:RPRX), a biopharmaceutical company with an $18.72 billion market capitalization and "GREAT" financial health according to InvestingPro, announced that its proposal to internalize its management structure received near-unanimous support from its shareholders, with 99.9% of votes cast in favor at the company’s Annual General Meeting and Special Meeting held on May 12, 2025. The move is expected to bring significant financial benefits and enhanced governance to the company.
The transition from an external manager model to an integrated corporate structure will see the Royalty Pharma executive team and employees becoming direct employees of the company. This change is anticipated to generate substantial annual cash savings, starting with more than $100 million in 2026 and growing to over $175 million by 2030. Cumulative savings over the next ten years are projected to exceed $1.6 billion. With the company currently trading at a P/E ratio of 13.54 and showing strong profitability metrics, InvestingPro analysis suggests the stock is currently undervalued relative to its potential.
The internalization transaction involves Royalty Pharma acquiring the Manager for approximately 24.5 million shares of Royalty Pharma equity, which will vest over a period of 5 to 9 years, roughly $100 million in cash, and the assumption of $380 million of existing Manager debt. The total transaction value is approximately $1.1 billion, based on the closing price of the company’s shares as of January 8, 2025.
This strategic shift is expected to enhance shareholder alignment, ensure management continuity, and simplify the company’s corporate structure. Royalty Pharma anticipates that the transaction will close in May 2025, subject to customary closing conditions and regulatory approvals.
Royalty Pharma has operated under an external management model since its inception in 1996, with a separate Manager handling all operations and personnel. Following the internalization, the company will no longer pay quarterly fees to the Manager, which were previously set at 6.5% of Portfolio Receipts and 0.25% of the value of security investments.
The transaction is also seen as a potential catalyst for expanding Royalty Pharma’s shareholder base and enhancing the company’s valuation over time. Royalty Pharma’s portfolio includes royalties on over 35 commercial products and 15 development-stage product candidates, positioning it as a significant player in the biopharmaceutical industry.
The information provided is based on a press release statement and reflects management’s current beliefs and assumptions. It should be noted that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company has demonstrated strong fundamentals with a 99.04% gross profit margin and has consistently raised its dividend for five consecutive years. For deeper insights into Royalty Pharma’s financial health and growth prospects, including 8 additional exclusive ProTips, visit InvestingPro for a comprehensive analysis report.
In other recent news, Royalty Pharma reported its first-quarter 2025 earnings, which fell short of analyst expectations. The company posted earnings per share of $0.4118, significantly below the forecasted $1.07, and revenue of $722.69 million, slightly under the expected $727.67 million. Despite missing these estimates, Royalty Pharma experienced a 17% increase in portfolio receipts, reaching $839 million, and returned a record $850 million to shareholders in the quarter. Additionally, Royalty Pharma has announced the acquisition of its external manager, a move approved by 99.9% of shareholders, valued at approximately $1.1 billion. This acquisition is expected to generate significant annual cash savings and improve corporate governance. Furthermore, the company raised its full-year 2025 portfolio receipts guidance to between $2.975 billion and $3.125 billion, anticipating 6-12% growth. Moody’s also upgraded Royalty Pharma’s credit rating to Baa2 from Baa3, reflecting improved financial stability. These developments highlight Royalty Pharma’s strategic growth initiatives and robust portfolio performance.
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