• Drug development, both a lucrative and a risky segment. Royalty Pharma plc (NASDAQ: RPRX) offers a middle ground for its investors.

  • The Company was founded in 1996 and went public in June last year.

  • It helps fund expensive clinical trials for a promising new drug in a typical transaction.

  • In return, drug-making companies pay a predetermined portion of that drug’s revenue after commercialization.

  • The Company owns rights to drugs sold by Johnson & Johnson (NYSE: JNJ), AbbVie Inc (NYSE: ABBV), Pfizer Inc (NYSE: PFE), Gilead Sciences Inc (NASDAQ: GILD), and Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX).

  • While the most significant drug companies typically narrow their focus by therapeutic category, Royalty can generate revenue from oncology, rare diseases, HIV, and diabetes.

  • That isn’t to say Royalty shares are immune from the challenges of the drug industry, writes Wall Street Journal.

  • Any changes to tax policy or drug-pricing regulations could impact Royalty Pharma shares.

  • The stock trades at about 15 times last year’s cash flow. So far this year, cash flow is up 25% from 1H of 2020.

  • Expectations of solid performance in the years ahead could be a reality.

  • Price Action: RPRX shares are up 1.75% at $38.92 during the market session on the last check Tuesday.

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