“As the new IPO cycle gets going, the brokers like to put their best foot forward, and that’s Royalty Pharma,” the “Mad Money” host said. “I’d like this one a lot more if it pulls back, but honestly, I think it’s worth putting on a small position up here because the long-term story’s so compelling.”
Royalty Pharma, which listed on the Nasdaq exchange Tuesday, priced at the top end of $28 per share to raise $2.175 billion in its offering.
The biopharmaceutical royalties company’s IPO is the priciest thus far this year, beating out Warner Music‘s $2 billion offering earlier this month, and the second priciest on record for a pharmaceutical business. ZoomInfo, Shift4 Payments, Vroom and Azek are among other companies to recently go public, despite the coronavirus pandemic’s impact on the market. After a brutal first half of 2020 when the travel and vacation industry was practically halted, Airbnb may attempt its highly anticipated IPO later this year as the market and economy focus on a recovery.
Shares of Royalty Pharma debuted at $44 on the market and rose 1% on the day. The stock price matured another 9% to close at $48.61 on Wednesday.
“I wish I’d told you to get a piece of this” deal ahead of time, Cramer said, but “I think the story is so compelling that it’s worth putting on a small position even up here. Then if the stock cools off, you can back up the truck and buy more.”
The New York City-based firm, now valued by Wall Street at $29.3 billion, is “not your normal pharma company,” Cramer said, that runs research and development labs.
Royalty Pharma invests in companies with promising drug candidates to help drugmakers bring their products to market, from which it collects royalty payments.
Cramer highlighted that Royalty has a stake in nearly two dozen billion-dollar drugs, including Vertex Pharmaceuticals‘ treatments for cystic fibrosis, Biogen‘s therapy for multiple sclerosis, AbbVie‘s oncology products and Gilead Sciences‘ HIV prophylactic.
The host also said society is in a “golden age of medical research,” echoing words of Royal Pharma CEO Pablo Legoretta.
“Put it all together and Royalty Pharma seems like the perfect way to play biotech, with the same sort of upside that comes from speculating in these smaller players, but less risk because the portfolio’s diversified across the entire industry,” Cramer said.