UK 19:04 Friday, 23 October 2026
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Healthcare Royalty Trust was planning a stockmarket listing to raise £200-300 million promising investors that by buying royalty streams in pharmaceuticals that were already being marketed it could generate annual returns for investors of 10% of which 60% would be paid out as dividends. Really?
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Comments
DGL
Excellent analysis – this one always smelled dodgy
alcira16247
Tom
Royal Healthcare Trust have set themselves challenging targets but given the records and experience of the lead management teams in this very specialized field of investment, I think, investors can feel comfortable that they are able to fulfil the promises in the IPO prospectus.
Certainly if Royal can match the returns of any of the five funds presently under management in the US, then it could well turnout as a good investment…… fingers crossed…… anyway, surely it couldn’t turnout any worse of an investment than M & G Recovery Fund…… could it?
Alquemie
The principals are ex-Paul Capital. Enough said.
shares321
Drug sales typically start small (at the time of investment) and over time field sales teams visiting docs/hospitals expand the total sales. In addition, drugs once initially approved then have expansion of indications. So it is quite reasonable for ROI to be improved from the initial investment price.
Stuart Kaplan
It is also quite reasonable for better treatments, with fewer side effects for instance, to rapidly make a ‘new’ drug ‘old’. The risks are certainly not all on the upside.
Alquemie
The seed portfolio is a mix of end of lifecycle big pharma products (patent expired or close to in key markets) and innovative niche products. The former are characterised by annually declining sales (pricing pressure, generic and branded product competition) while the latter, if successfully marketed, are limited in scope by size of the accessible patient population and vulnerable to displacement by more effective innovative products.
Best scenario is static or modestly declining revenues and they are are going to have to spend large on acquiring new assets to fill the gap, let alone meet their projected return.
Charles Hayes
Although I am a little concerned with the delay of this IPO, on top of a major omission in the initial offering document(s) (the Management fee structure), I am afraid to say that the article is pretty poor. The offering prospectus runs to a large number of pages and the information therein would answer a number of the points raised. Phrases such as “one wonders” or “one suspects” is hardly a substitute for some degree of research, and the estimate of the cost of running the fund is wholly inaccurate. It is well known that Royalty Trusts are pretty efficient, and in this case, the management would not be spending all their working hours on this trust as they are also running four or five others of a very similar nature. Their major compensation comes from a 15% performance fee after the trusts itself has earned 6%.
What is more, and this was not referred to at all in the article was that the same management had earned such returns from their other funds – typically around 14%. What has been stated is that the portfolio of 10 seed patents for this fund will generate £55mm per annum to start with, some of which pays the 6% dividends and the remainder will be used to source new patents. The targeted 10% return (rather than just the 6% dividend) arises from securing patents that have a sufficiently long average life. This is the investment thesis and, for now, one which the management have been very successful in exploiting.
Trading might be tough on April 4th, but for the long term, this has some great attributes as it is the first such Trust available in the UK (so I am told) and is likely to have a very low correlation with other risk assets. Interesting to note that it is very similar in form to the fairly recently IPOd Empiric Property REIT, and also brought by the investment bank Jefferies. This suggests that products of this type have been requested by their client base in the face of significant doubts about the likely performance of mainstream stocks and bonds.
alcira16247
Tom
The following statement received this morning from my broker :-
Thank you for your interest and order within the recent IPO for Health Care Royalty Trust Plc. We have received notification that due to unfavorable market conditions the Company has decided not to proceed at this time with its IPO proposition