In the first half of 2021, a record number of private companies entered stock markets in the US, marking a multifold increase from the same period of 2021. The IPO market has been extremely active for quite some time and the trend is expected to continue for the rest of the year. In what could be a move that complements the medical IPO spree, Healthcare Royalty, Inc. has decided to go public.
47 Mln shares
Connecticut-based Healthcare Royalty operates as a royalty acquisition firm with a focus on growth assets and emerging companies in the healthcare sector. In a statement submitted to the Securities and Exchange Commission earlier, the management revealed plans to offer around 46.9 million shares and to list on the Nasdaq Global Market under ticker symbol HCRX. In a more recent submission, the company set the IPO price in the range of $15 to $17 apiece. At the mid-point of the price range, the offering would generate $750 million, valuing the company at $3.4 billion.
The lead book-runners for the offering are Goldman Sachs & Co., Citigroup, and Credit Suisse. The proceeds from the offering, along with funds raised earlier, will primarily be used for corporate reorganization and for debt financing to pursue royalty acquisitions. As per the reorganization agreement, prior to the IPO, the legacy HealthCare Royraly Partnerships will be merged into Investments LP HoldCo, with the latter as the surviving limited partnership.
On Growth Path
In fiscal 2020, the company recorded a net investment income of $228.8 million, which is up 29% from the prior year. Total royalty receipts jumped about 60% to $405.1 million. At $370.6 million, full-year adjusted EBITDA was up 65%. Last year, Healthcare Royalty had launched a $1.8-billion fund to purchase royalties in diagnostics, medical products, and drugs.
The company has deployed a total of about $4.7 billion across 76 royalty-related transactions involving 79 products since its inception in 2006. A few years later, it underwent a major transformation through an organizational restructuring with a focus on institutionalization of the business, infrastructure, and in-sourcing of scientific and regulatory expertise.
The management’s growth strategy is focused on tapping into opportunities created by the explosive growth of the pharmaceutical industry in recent years. It is estimated that investments in medical research are development would reach $233 billion by 2026, while the global prescription drug sales are seen more than doubling to about $1.2 trillion in the next three years.
As the company prepares for its Wall Street debut, parallels are being drawn between its offering and that of Royalty Pharma which went public a year ago in a successful IPO. The fact that analysts are generally bullish on the prospects of Healthcare Royalty, which secured positive credit ratings from leading rating agencies recently, adds to expectations that the upcoming IPO might match that of the rival firm.