The company will target an initial annual dividend of 6% of the issue price per ordinary share under the initial issue and will seek to grow the dividend in line with the CPI. It will also target a net total shareholder return in excess of 10% of the issue price per ordinary share under the initial issue per annum over the medium term.
The closed-ended investment company will use the proceeds of the issue to acquire a diversified portfolio of healthcare royalty assets, and intends to be substantially invested shortly following admission, which is expected to take place on or around 23 March along with the commencement of trading.
Investments will be made primarily in the US and Europe, across various therapeutic categories and product types including biologics, small molecule pharmaceuticals or medical devices. The company will not invest more than 20% of its gross assets in any single healthcare product, and it does not intend to invest more than 35% of its gross assets in any single therapeutic category.
The company’s manager, HealthCare Royalty Management, has identified circa 370 eligible opportunities over the 30 month period ended December 2015, representing around $25bn of potential transaction volume, according to the statement. Healthcare Royalty Management has private funds with close to $3bn of committed capital.
“The company will be seeded by an initial portfolio of ten assets, with the cash flows coming from some of the world’s largest healthcare companies, including Pfizer and GlaxoSmithKline, in connection with a diversified set of products used to treat conditions such as infertility, ‘hard to manage’ pain, HIV and vaccines,” said Clarke Futch, managing partner of HealthCare Royalty Management.
It expects the prospectus to be published and the issue to open on or around 25 February, with the issue closing on or around 17 March. Jefferies International Limited is acting as sole sponsor, global coordinator and bookrunner in relation to the IPO.
Global pharmaceutical sales, of which royalties are a derivate, exceeded $1trn in 2014, according to the IMS Health Market Prognosis report, published in May 2015. IMS Institute for Healthcare Informatics predicts future sales prospects for the industry to remain strong with a CAGR of 4-7 % through to 2020, in its “Global Medicines Use in 2020”, published in November 2015.
Royalty financing offers a non-correlated return profile as returns are based on pharmaceutical sales and not equity markets or corporate earnings.
Todd Davis, managing partner of HealthCare Royalty Management, said: “We estimate that healthcare royalty transactions have grown at a compound annual growth rate of 26% over the last 15 years. We believe this growth can only continue, driven by an increasing acceptance of royalty finance as an alternative source of funding, the growing trend of larger pharmaceutical companies to in-license and further exciting advances in the sector.”
