Patient Capital Praises Royalty Pharma Risk-Reward in Q3 Letter

Patient Capital Management, a Baltimore-based firm, identified Royalty Pharma plc (NASDAQ: RPRX) as a key contributor to its Patient Opportunity Equity Strategy in a third-quarter 2026 investor letter. The fund stated that it continues to favor the risk-reward profile of the biopharmaceutical investment company, which specializes in acquiring royalty interests and funding industry innovation.

The strategy outperformed the S&P 500 in the latest quarter, gaining 4.32% compared to the index's 2.30%. Year-to-date, the fund is up 14.93% against the S&P 500's 12.75% gain. Patient Capital noted that the market shows resilience despite rate increases presenting risks and opportunities. The firm views the current market as part of a long bull run extending since March 2009, with the S&P compounding at 16.9% per year.

In the letter, Patient Capital described Royalty Pharma as a master capital allocator that dominates the market for large deals. The fund cited a return on capital in the high teens and earnings growth in the low-to-mid-teens. Based on these metrics, Patient Capital argued that Royalty Pharma's 16.7x multiple on 2027 owners' earnings remains attractive. The firm expects earnings to grow in the mid-teens for the next few years in most environments.

Royalty Pharma shares closed at $56.93 per share on October 09, 2026, reflecting a market capitalization of $32.74 billion. The stock posted a one-month return of -3.10%, while shares gained 61.46% over the past 52 weeks. In its commentary, Patient Capital noted that Royalty Pharma and United Healthcare (UNH) are significant contributors for the year, adding ballast to the portfolio.

The fund's portfolio is concentrated in its top 10 holdings, reflecting a disciplined approach to valuation and risk management amidst market volatility. While investor skepticism lingers due to rising valuations and the complexities of the AI revolution, the firm sees potential in strong corporate earnings. The strategy prioritizes analyzing price expectations and assessing risks related to AI durability and computing capacity supply and demand.

Data indicates that 47 hedge fund portfolios held Royalty Pharma at the end of the second quarter, an increase from 42 in the previous quarter. Despite acknowledging the potential of Royalty Pharma as an investment, Patient Capital stated that certain AI stocks offer greater upside potential and carry less downside risk.