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Is a Beat in Store for Royalty Pharma (RPRX) in Q3 Earnings?

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We expect Royalty Pharma PLC (RPRX - Free Report) to beat expectations when it reports third-quarter 2020 results on Nov 11. In the last reported quarter, the company delivered an earnings surprise of 19.67%.

Shares of Royalty Pharma have underperformed the industry so far this year. The stock has declined 25.3% compared with the industry’s decrease of 3.6%.

Factors to Note

Royalty Pharma has neither an approved drug in its portfolio nor a pipeline. The company earns revenues from royalties from sales of marketed drugs of several companies. These include several key drugs — Vertex’s (VRTX - Free Report) cystic fibrosis franchise, Biogen’s (BIIB - Free Report) multiple sclerosis drug, Tysabri, J&J/AbbVie’s blockbuster cancer drug Imbruvica, Gilead’s HIV franchise, Merck’s Januvia and Janumet, Pfizer’s Xtandi, Novartis’ Promacta and others.

Sales of some of these drugs like Imbruvica, Tysabri and Promacta showed strong growth during the third quarter while sales of others remained flat or declined. The impact on royalties remains to be seen when the company reports.

Moreover, approval to Epizyme’s Tazverik in June and Roche’s Evrysdi in August is likely to have brought additional revenues. The company has agreements to earn royalties on sales of these drugs.

Royalty Pharma has entered into multiple royalty acquisition agreement resulting in approximately $1.7 billion in announced transactions so far this year. Investors will likely focus on anticipated cashflow from these agreements as well as update on any new or potential royalty acquisition agreements.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Royalty Pharma this time around.  The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (60 cents per share) and the Zacks Consensus Estimate (59 cents per share) is +1.70%.

Zacks Rank: Royalty Pharma currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another Stock to Consider

Here is a biotech stock that you may also want to consider, as our model shows that it has the right combination of elements to post an earnings beat this season.

ADC Therapeutics SA (ADCT - Free Report) has an Earnings ESP of +15.58% and a Zacks Rank #2.

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