Royalty Pharma Reports Second Quarter 2024 Results

• Portfolio Receipts growth of 12% to $608 million; Royalty Receipts growth of 11%
  
• Net cash provided by operating activities of $658 million
• Raising full year 2024 guidance: Portfolio Receipts expected to be $2,700 to $2,775 million
  

NEW YORK, Aug. 08, 2024 (GLOBE NEWSWIRE) --  Royalty Pharma plc (Nasdaq: RPRX) today reported financial results for the second quarter of 2024 and raised full year 2024 guidance for Portfolio Receipts.

“We delivered double-digit growth in Portfolio Receipts in the second quarter of 2024, ahead of our guidance for the quarter, and are delighted to raise our full year guidance,” said Pablo Legorreta, Royalty Pharma’s founder and Chief Executive Officer. “Our performance in the first half of the year extends our track record of strong growth since our IPO. We also had a very active quarter for capital deployment, announcing over $2 billion of investments across six therapies as we expanded partnerships with Cytokinetics, PTC Therapeutics and Agios. In addition, reflecting our attractive fundamental outlook, we continued to repurchase our Class A ordinary shares as part of our balanced capital allocation strategy. Lastly, as we anticipated, 2024 is proving to be an event-rich year for our exciting development-stage pipeline with positive clinical updates on two key therapies in our portfolio. Looking ahead, we continue to have a robust deal pipeline and remain highly confident in our ability to deliver attractive, compounding growth over the long-term.”

Double-digit growth for Portfolio Receipts and Royalty Receipts in the second quarter of 2024

• Royalty Receipts grew 11% to $605 million, driven by strong portfolio performance particularly from the cystic fibrosis franchise, Trelegy, Tremfya and incremental royalties on Evrysdi.
• Portfolio Receipts increased 12% to $608 million, primarily driven by the same royalties noted above.

Capital Deployment of approximately $2 billion in 2024, including cash to be paid for Voranigo (vorasidenib)

• Acquired royalties on Servier’s Voranigo, a first-in-class targeted therapy in IDH-mutant glioma.
• Purchased incremental royalties on Roche’s Evrysdi for spinal muscular atrophy.
• Provided Cytokinetics with diversified capital, adding incremental royalty on aficamten for hypertrophic cardiomyopathy.
  

Positive clinical updates for the development-stage royalty portfolio

• Johnson and Johnson announced positive Phase 3 results for seltorexant in major depressive disorder with insomnia symptoms and for Tremfya in Crohn’s disease, including demonstrating superiority versus Stelara.
  

Raising financial guidance for full year 2024 (excludes contribution from future transactions)

• Royalty Pharma now expects 2024 Portfolio Receipts to be between $2,700 million and $2,775 million (previously between $2,600 million and $2,700 million).
• 2024 Portfolio Receipts guidance includes expected year/year growth in Royalty Receipts of 9% to 12% (previous guidance of 5% to 9% year/year growth).

*See “Liquidity and Capital Resources” section. Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures calculated in accordance with the credit agreement.

Amounts shown in the table may not add due to rounding.

Royalty Receipts was $605 million in the second quarter of 2024, an increase of 11% compared to $545 million in the second quarter of 2023, primarily driven by strong growth from the cystic fibrosis franchise, Trelegy, Tremfya and incremental royalties acquired on Evrysdi in October 2023.

Portfolio Receipts was $608 million in the second quarter of 2024, an increase of 12% compared to $545 million in the second quarter of 2023, primarily driven by the same Royalty Receipts increases noted above.

Liquidity and Capital Resources

Royalty Pharma’s liquidity and capital resources are summarized below:

As of June 30, 2024, Royalty Pharma had cash and cash equivalents of $1.8 billion and total debt with principal value of $7.8 billion.

In June 2024, Royalty Pharma issued $1.5 billion of senior unsecured notes (“2024 Notes”) with a weighted average coupon rate of 5.5%. Interest on the 2024 Notes is payable semi-annually in arrears on March 2 and September 2 of each year. The first interest payment date will be March 2, 2025. As of June 30, 2024, Royalty Pharma had total debt with a weighted-average duration of approximately 13 years and an attractive weighted-average cost of debt of 3.1%.

During the second quarter of 2024, Royalty Pharma repurchased approximately three million Class A ordinary shares for $84 million. Year-to-date (through August 7, 2024), Royalty Pharma has repurchased approximately four million Class A ordinary shares for $115 million. The weighted-average number of diluted Class A ordinary shares outstanding for the second quarter of 2024 was 597 million as compared to 606 million for the second quarter of 2023.

Amounts may not add due to rounding.

• Adjusted EBITDA (non-GAAP) was $560 million in the second quarter of 2024. Adjusted EBITDA is calculated as Portfolio Receipts minus payments for operating and professional costs.
• Portfolio Cash Flow (non-GAAP) was $574 million in the second quarter of 2024. Portfolio Cash Flow is calculated as Adjusted EBITDA minus interest paid or received, net. This measure reflects the cash generated by Royalty Pharma’s business that can be redeployed into value-enhancing royalty acquisitions, used to repay debt, returned to shareholders through dividends or share purchases, or utilized for other discretionary investments.

Refer to Table 4 for Royalty Pharma’s reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure, net cash provided by operating activities.

Royalty Pharma announced new transactions of up to approximately $2.0 billion in the second quarter of 2024, which includes upfront payments and potential future milestones. Capital Deployment reflects cash payments during the period for new and previously announced transactions. Capital Deployment was $951 million in the second quarter of 2024, consisting primarily of the acquisition of royalties on frexalimab, the acquisition of additional royalties on Evrysdi, as well as the expanded strategic funding collaboration with Cytokinetics. Royalty Pharma will also pay Agios $905 million following the FDA approval of Voranigo (vorasidenib).

The table below details Capital Deployment by category:

Amounts may not add due to rounding.

Recent Transactions

During 2024, Royalty Pharma announced new transactions of up to approximately $2.0 billion. Announced transactions amount reflects the entire amount of capital committed for new transactions during the year, including potential future milestones.

Recent transactions include:

• In June 2024, PTC Therapeutics exercised its option to sell approximately half of its royalty retained on Roche’s Evrysdi, an approved product for the treatment of spinal muscular atrophy, for approximately $242 million. This option arose from the Evrysdi royalty transaction with PTC that was announced in October 2023, in which Royalty Pharma acquired additional royalties on Evrysdi for $1 billion. PTC has an option to sell the remainder of its retained royalty on Evrysdi for up to approximately $250 million, less royalties received, until December 31, 2025.
• In May 2024, Royalty Pharma announced a transaction to acquire a royalty interest in Voranigo (vorasidenib) from Agios Pharmaceuticals for an upfront payment of $905 million. The transaction was contingent upon FDA approval which was subsequently granted on August 6, 2024.
• In May 2024, Royalty Pharma expanded its strategic funding collaboration with Cytokinetics, Incorporated (“Cytokinetics”) to provide up to $575 million, including $250 million in upfront payments, in exchange for royalties and fixed payments.
• In May 2024, Royalty Pharma acquired royalties and milestones on frexalimab, which was owned by ImmuNext, Inc., for approximately $525 million, including estimated transaction costs. Royalty Pharma is entitled to receive royalties on annual worldwide net sales of frexalimab and milestones related to the achievement of certain commercial and regulatory events. Frexalimab, which is in development by Sanofi, is a second generation anti-CD40 ligand monoclonal antibody. Frexalimab is being evaluated in Phase 3 clinical studies for the treatment of multiple sclerosis and is in Phase 2 clinical studies for systemic lupus erythematosus and Type 1 Diabetes.

The information in this section should be read together with Royalty Pharma’s reports and documents filed with the SEC at www.sec.gov and the reader is also encouraged to review all other press releases and information available in the Investors section of Royalty Pharma’s website at www.royaltypharma.com.

Key Developments Relating to the Portfolio

The key developments related to Royalty Pharma’s royalty interests are discussed below based on disclosures from the marketers of the products.

2024 Financial Outlook

Royalty Pharma has provided guidance for full-year 2024, excluding transactions and borrowings announced after the date of this release, as follows:

The above Portfolio Receipts guidance includes expected Royalty Receipts growth of 9% to 12% in 2024.

Royalty Pharma’s full-year 2024 guidance reflects a negligible estimated foreign exchange impact to Portfolio Receipts, assuming current foreign exchange rates prevail for 2024.

Total interest paid is based on the semi-annual interest payment schedule of Royalty Pharma’s existing notes and is anticipated to be approximately $160 million in 2024. Interest paid is anticipated to be approximately $79 million in the third quarter of 2024 with a de minimis amount being recorded in the fourth quarter of 2024. The projection assumes no additional debt financing in 2024, including no drawdown on the revolving credit facility. In the second quarter of 2024, Royalty Pharma collected interest of $14 million on its cash and cash equivalents, which more than offset interest paid. In 2025, Royalty Pharma anticipates interest paid to be approximately $260 million, reflecting the aforementioned issuance of $1.5 billion of 2024 Notes.

Royalty Pharma today provides this guidance based on its most up-to-date view of its prospects. This guidance assumes no major unforeseen adverse events and excludes the contributions from transactions announced subsequent to the date of this press release. Furthermore, Royalty Pharma may amend its guidance in the event it engages in new royalty transactions which have a material near-term financial impact on the company.

Financial Results Call

Royalty Pharma will host a conference call and simultaneous webcast to discuss its second quarter 2024 results today at 8:00 a.m., Eastern Time. Please visit the “Investors” page of the company’s website at https://www.royaltypharma.com/investors/events to obtain conference call information and to view the live webcast. A replay of the conference call and webcast will be archived on the company’s website for at least 30 days.

About Royalty Pharma plc

Founded in 1996, Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry, collaborating with innovators from academic institutions, research hospitals and non-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. Royalty Pharma has assembled a portfolio of royalties which entitles it to payments based directly on the top-line sales of many of the industry’s leading therapies. Royalty Pharma funds innovation in the biopharmaceutical industry both directly and indirectly - directly when it partners with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators. Royalty Pharma’s current portfolio includes royalties on more than 35 commercial products, including Vertex’s Trikafta, GSK’s Trelegy, Roche’s Evrysdi, Johnson & Johnson’s Tremfya, Biogen’s Tysabri and Spinraza, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Novartis’ Promacta, Pfizer’s Nurtec ODT and Gilead’s Trodelvy, and 16 development-stage product candidates.

Forward-Looking Statements

The information set forth herein does not purport to be complete or to contain all of the information you may desire. Statements contained herein are made as of the date of this document unless stated otherwise, and neither the delivery of this document at any time, nor any sale of securities, shall under any circumstances create an implication that the information contained herein is correct as of any time after such date or that information will be updated or revised to reflect information that subsequently becomes available or changes occurring after the date hereof.

This document contains statements that constitute “forward-looking statements” as that term is defined in the United States Private Securities Litigation Reform Act of 1995, including statements that express the company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results, in contrast with statements that reflect historical facts. Examples include discussion of Royalty Pharma’s strategies, financing plans, growth opportunities and market growth. In some cases, you can identify such forward-looking statements by terminology such as “anticipate,” “intend,” “believe,” “estimate,” “plan,” “seek,” “project,” “expect,” “may,” “will,” “would,” “could” or “should,” the negative of these terms or similar expressions. Forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to the company. However, these forward-looking statements are not a guarantee of Royalty Pharma’s performance, and you should not place undue reliance on such statements. Forward-looking statements are subject to many risks, uncertainties and other variable circumstances, and other factors. Such risks and uncertainties may cause the statements to be inaccurate and readers are cautioned not to place undue reliance on such statements. Many of these risks are outside of the company’s control and could cause its actual results to differ materially from those it thought would occur. The forward-looking statements included in this document are made only as of the date hereof. The company does not undertake, and specifically declines, any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except as required by law.

Certain information contained in this document relates to or is based on studies, publications, surveys and other data obtained from third-party sources and the company’s own internal estimates and research. While the company believes these third-party sources to be reliable as of the date of this document, it has not independently verified, and makes no representation as to the adequacy, fairness, accuracy or completeness of, any information obtained from third-party sources. In addition, all of the market data included in this document involves a number of assumptions and limitations, and there can be no guarantee as to the accuracy or reliability of such assumptions. Finally, while the company believes its own internal research is reliable, such research has not been verified by any independent source.

For further information, please reference Royalty Pharma’s reports and documents filed with the U.S. Securities and Exchange Commission ("SEC") by visiting EDGAR on the SEC's website at www.sec.gov.

Portfolio Receipts

Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments. Portfolio Receipts is defined as the sum of Royalty Receipts and Milestones and other contractual receipts. Royalty Receipts includes variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to Royalty Pharma.

Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to legacy non-controlling interests, that are attributed to Royalty Pharma. Portfolio Receipts does not include proceeds from equity securities or proceeds from purchases and sales of marketable securities, neither of which are central to our fundamental business strategy.

Portfolio Receipts is calculated as the sum of the following line items from our GAAP statements of cash flows: Cash collections from financial royalty assets, Cash collections from intangible royalty assets, Other royalty cash collections, Proceeds from available for sale debt securities and Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts, which represent contractual distributions of Royalty Receipts, milestones and other contractual receipts to RPSFT and the Legacy Investors Partnerships.

Use of Non-GAAP Measures

Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. Management believes that Adjusted EBITDA and Portfolio Cash Flow are important non-GAAP measures used to analyze liquidity because they are key components of certain material covenants contained within Royalty Pharma’s credit agreement. Royalty Pharma cautions readers that amounts presented in accordance with the definitions of Adjusted EBITDA and Portfolio Cash Flow may not be the same as similar measures used by other companies or analysts. These non-GAAP liquidity measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of Royalty Pharma’s results as reported under GAAP.

The definitions of Adjusted EBITDA and Portfolio Cash Flow used by Royalty Pharma are the same as the definitions in the credit agreement. Noncompliance with the interest coverage ratio, leverage ratio and Portfolio Cash Flow ratio covenants under the credit agreement could result in lenders requiring the company to immediately repay all amounts borrowed. If Royalty Pharma cannot satisfy these covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA and Portfolio Cash Flow are critical to the assessment of Royalty Pharma’s liquidity.

Adjusted EBITDA and Portfolio Cash Flow are used by management as key liquidity measures in the evaluation of the company’s ability to generate cash from operations. Management uses Adjusted EBITDA and Portfolio Cash Flow when considering available cash, including for decision-making purposes related to funding of acquisitions, debt repayments, dividends and other discretionary investments. Further, these non-GAAP liquidity measures help management, the audit committee and investors evaluate the company’s ability to generate liquidity from operating activities.

The company has provided reconciliations of these non-GAAP liquidity measures to the most directly comparable GAAP financial measure, being net cash provided by operating activities in Table 4.

Royalty Pharma Investor Relations and Communications

+1 (212) 883-6772
ir@royaltypharma.com

Amounts may not add due to rounding.

Amounts may not add due to rounding.

Amounts may not add due to rounding.

Royalty Pharma plc
Description of Approved Indications for Select Portfolio Therapies
Table 5

Notes

(1)   Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments. Portfolio Receipts is defined as the sum of Royalty Receipts and milestones and other contractual receipts. Royalty Receipts includes variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to Royalty Pharma (“Royalty Receipts”). Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that are attributed to Royalty Pharma. Portfolio Receipts does not include proceeds from equity securities or marketable securities, both of which are not central to our fundamental business strategy.

Portfolio Receipts is calculated as the sum of the following line items from our GAAP statements of cash flows: Cash collections from financial royalty assets, Cash collections from intangible royalty assets, Other royalty cash collections, Proceeds from available for sale debt securities and Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts, which represent contractual distributions of Royalty Receipts, milestones and other contractual receipts to RPSFT and the Legacy Investors Partnerships.

(2)   Adjusted EBITDA is defined under the credit agreement as Portfolio Receipts minus payments for operating and professional costs. Operating and professional costs reflect Payments for operating and professional costs from the GAAP statements of cash flows. See GAAP to Non-GAAP reconciliation in Table 4.

(3)   Portfolio Cash Flow is defined under the credit agreement as Adjusted EBITDA minus interest paid or received, net. See GAAP to Non-GAAP reconciliation in Table 4. Portfolio Cash Flow reflects the cash generated by Royalty Pharma’s business that can be redeployed into value-enhancing royalty acquisitions, used to repay debt, returned to shareholders through dividends or share purchases or utilized for other discretionary investments.

(4)   Capital Deployment is calculated as the summation of the following line items from our GAAP statements of cash flows: Investments in equity method investees, Purchases of available for sale debt securities, Acquisitions of financial royalty assets, Acquisitions of other financial assets, Milestone payments, Development-stage funding payments - ongoing, Development-stage funding payments - upfront and milestone less Contributions from legacy non-controlling interests - R&D.

(5)   Other products primarily include Royalty Receipts on the following products: Cimzia, Crysvita, Emgality, Farxiga/Onglyza, IDHIFA, Lexiscan, Nesina, Prevymis, Soliqua and distributions from the Legacy SLP Interest, which is presented as Distributions from equity method investees on the GAAP statements of cash flows.

(6)   The table below shows the line item for each adjustment and the direct location for such line item on the GAAP statements of cash flows.