Royalty Pharma (RPRX): Assessing Valuation After Bold $4 Billion in New Deals and Funding Moves

Royalty Pharma (RPRX) just made some bold moves that have investors leaning in a little closer. In September, the company completed a $2 billion senior notes offering, giving it more firepower to go after long-term royalty assets and sign new deals. In addition, Royalty Pharma announced a $2 billion synthetic royalty agreement with Revolution Medicines, targeting a late-stage oncology drug. Together, these headline acts signal that Royalty Pharma is betting big on future growth through an expanded portfolio, and the market is watching closely.

These deals land during a year when the company’s momentum has been steady, despite a dip over the past month. Looking at the bigger picture, Royalty Pharma has delivered a 34% return over the past year, with year-to-date performance up 40%. While its three- and five-year returns are negative, the recent string of strategic investments hints at a push for a turnaround. With ongoing adoption of royalties in biotech and a growing focus on data-driven dealmaking, Royalty Pharma is setting itself up for long-term portfolio expansion.

After these two game-changing moves and a strong run this year, does Royalty Pharma still offer investors meaningful upside, or has the market already factored in future growth?

Most Popular Narrative: 19.2% Undervalued

According to the most widely followed narrative, Royalty Pharma is currently undervalued by about 19% based on future earnings growth, profit margins, and other risk factors.

The emergence of new, capital-intensive therapies for chronic and life-threatening conditions (notably oncology and rare diseases), combined with an aging population and the growing prevalence of chronic illness, is creating sustained demand for innovative drugs. This expanding R&D pipeline increases the number and value of potential royalty deals for Royalty Pharma, supporting long-term revenue and earnings growth.

What is the real engine behind this confident valuation? Analysts are betting on a surge in future revenues, a portfolio fueled by medical innovation, and a financial model designed to rival industry heavyweights. Want to discover what bold assumptions about future earnings, growth rates, and margins could push Royalty Pharma’s fair value higher? The story is deeper than the latest deals. See how consensus views may surprise you.

Result: Fair Value of $44.86 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing legal disputes and increased competition in the royalty space could jeopardize revenue growth and challenge assumptions behind Royalty Pharma's current valuation.

Find out about the key risks to this Royalty Pharma narrative.

Another View: What Does Our DCF Model Say?

Looking at Royalty Pharma from a different angle, the SWS DCF model also finds the company's shares to be undervalued. However, it is important to consider whether both methods rely on the same optimistic assumptions or if one might be overlooking deeper risks.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Royalty Pharma for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Royalty Pharma Narrative

If you have a different perspective or want to dig into the details yourself, it takes just a few minutes to shape your own view. Do it your way

A great starting point for your Royalty Pharma research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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