Cantor Fitzgerald has initiated coverage on Innoviva, Inc. (NASDAQ:INVA), citing the company’s unique business model centered around royalties and healthcare assets.

The company receives royalties from GSK plc (NYSE:GSK) for popular asthma and COPD products, including Relvar/Breo and Anoro, with combined sales of over $2 billion in 2023. “We believe their manufacturing complexity provides further protection from potential competitors,” Cantor analyst writes.

Cantor projects around $1.1 billion of 5-year projected royalty revenues from GSK and initiates Innoviva with an Overweight rating.

The analyst says Breo and Anoro have exceeded expectations, even during challenging times such as the COVID-19 pandemic. They are experiencing growth in markets outside the U.S., with primary patents valid until 2025 and secondary patents extending to 2030 and 2033.

The company’s critical care and infectious disease platform generated over $70 million in revenues last year and is growing. Cantor adds that given the market dynamics and reimbursement challenges, these products are difficult for companies to sell individually.

The company plans to expand Innoviva Specialty Therapeutics’ product portfolio through organic and inorganic growth opportunities.

Innoviva’s lead pipeline product is zoliflodacin, a potential oral drug for uncomplicated gonorrhea, and the company is on track to submit an FDA marketing application in early 2025.

Zoliflodacin could achieve over $500 million of annual peak sales in the U.S.

Cantor says, “Although INVA has not publicly discussed exactly what it will do with its cash, we would not be surprised if the company considers a roll-up of another underappreciated industry like it did with Innoviva Specialty Therapeutics.”

Price Action: INVA shares are up 1.61% at $16.42 at last check Tuesday.

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