8 Most Undervalued Healthcare Stocks to Buy According to Analysts

2. Royalty Pharma Plc (NASDAQ:RPRX)

Price Target Upside: 41.60%

Royalty Pharma Plc (NASDAQ:RPRX) is a funder of innovation in the biopharmaceutical industry and a buyer of biopharmaceutical royalties. Through small and mid-cap biotech firms to multinational pharmaceutical companies, it works with innovators from academic institutions, research hospitals, and non-profits. By working with businesses to co-fund late-stage clinical studies and new product launches in exchange for future royalties, the company directly funds industry innovation. In addition, it indirectly funds innovation by purchasing current royalties from the original creators. The portfolio of Royalty Pharma Plc (NASDAQ:RPRX) comprises royalties in more than 35 marketed drugs, such as Pfizer’s Nurtec ODT, Novartis’ Promacta, AbbVie and Johnson & Johnson’s Imbruvica, and Johnson & Johnson’s Tremfya.

At the upper end of its guidance range, the company’s fiscal year 2024 portfolio receipts came to $2.8 billion. This represents a 13% increase, much beyond its original forecast of 5% to 9%. Royalty Pharma Plc (NASDAQ:RPRX) anticipates $2.9 billion to $3.05 billion in portfolio receipts in 2025. Its portfolio now includes four development space treatments and royalties on AD medication.

The FDA has approved Tremfya for ulcerative colitis, Cobenfy for schizophrenia, and Voranigo for brain cancer, among other favorable developments for the company’s portfolio. In addition to $230 million for share repurchases, it invested $2.8 billion to expand its holdings. A fresh $3 billion share repurchase plan was recently approved by its Board, and the business plans to buy back $2 billion of its shares in 2025.

Patient Capital Opportunity Equity Strategy stated the following regarding Royalty Pharma plc (NASDAQ:RPRX) in its Q2 2024 investor letter:

“While Royalty Pharma plc (NASDAQ:RPRX) is in the healthcare space, it is more like an investment firm that buys royalty assets in the healthcare space. The company has an extremely strong track record, running the business for over 20 years as a private fund before bringing it public. The market opportunity for external royalty funding has only grown as early-stage start-ups need funding and legacy players are looking to lower their debt levels. We think Royalty Pharma is perfectly positioned as the partner of choice. The company is disciplined, maintaining deal internal rate of returns (IRRs) in the low-teens despite the higher interest rate environment. We think as the company continues to deliver as a public company, the market will start paying attention.”