Royalty Pharma Q1 2025 slides: double-digit growth drives raised guidance

Royalty Pharma Plc (NASDAQ:RPRX) reported strong first-quarter results on May 8, 2025, showcasing double-digit growth across key metrics and raising its full-year guidance. The company’s shares were up 1.53% in premarket trading at $33.25, continuing their positive momentum after gaining nearly 2% in the previous session.

Executive Summary

Royalty Pharma delivered impressive Q1 2025 results with Portfolio Receipts of $839 million, representing 17% year-over-year growth. This performance was driven by a 12% increase in Royalty Receipts to $788 million, complemented by $51 million in milestone and contractual payments. The company maintained its efficient business model with an Adjusted EBITDA margin of 87.9% and Portfolio Cash Flow margin of 72.8%.

"We’ve maintained our double-digit growth trajectory since our IPO, demonstrating the strength and resilience of our business model," said Pablo Legorreta, Founder & Chief Executive Officer, during the presentation.

As shown in the following chart of quarterly royalty receipts, the company has maintained consistent growth momentum since going public:

Based on the strong Q1 performance, management raised its full-year 2025 guidance for Portfolio Receipts to $2,975-$3,125 million, representing growth of 6-12% year-over-year, up from the previous guidance of $2,900-$3,050 million (4-9% growth).

Strategic Initiatives

Royalty Pharma continued to expand its portfolio through strategic investments in promising therapies. A key highlight was the R&D funding partnership with Biogen (NASDAQ:BIIB) for litifilimab, a potential treatment for lupus. Under this agreement, Royalty Pharma will provide up to $250 million in funding over six quarters in exchange for mid-single digit royalties on worldwide sales and regulatory milestone payments.

The partnership structure and potential returns are illustrated in the following slide:

Management highlighted the significant market opportunity for litifilimab, noting the approximately 600,000 U.S. patients with lupus and the $2.4 billion market for approved lupus biologics in 2024. The company expects litifilimab to achieve blockbuster status, with Phase 3 results anticipated in 2026 and 2027.

Another promising addition to the portfolio is ecopipam for Tourette syndrome, acquired in January 2024 for $49 million upfront plus $44 million in potential milestones. The treatment demonstrated positive Phase 3 results in February 2025, with significantly lower relapse rates compared to placebo.

The following slide details the efficacy results from the Phase 3 trial:

"Ecopipam represents the first new medicine for Tourette’s in over a decade, addressing a significant unmet need in this patient population," noted Marshall Urist, EVP and Head of Research & Investments.

Detailed Financial Analysis

Royalty Pharma’s financial performance in Q1 2025 demonstrates the company’s efficient operating model and strong cash generation capabilities. The detailed breakdown of financial results shows how the company converts its royalty receipts into substantial cash flow:

The company’s growth was primarily driven by strength in its base business, which contributed $104 million in additional royalty receipts year-over-year, more than offsetting the $21 million impact from royalty expiries.

As illustrated in the following breakdown of growth drivers:

Royalty Pharma maintained a strong balance sheet with $1,088 million in cash and cash equivalents as of March 31, 2025. The company monetized its MorphoSys Development Funding Bonds in January 2025 for $511 million, further enhancing its financial flexibility. With $7.8 billion in investment grade debt, total leverage of 2.9x, and net leverage of 2.5x, the company has significant capacity to pursue additional investments.

The following slide illustrates the company’s financial position and cash movements:

Capital Allocation Strategy

Royalty Pharma demonstrated a balanced approach to capital allocation in Q1 2025, returning significant capital to shareholders while continuing to invest in future growth. The company repurchased approximately 23 million shares for $723 million during the quarter and distributed $127 million in dividends, including a 5% increase in the quarterly dividend.

The company’s capital allocation framework prioritizes investments in biopharmaceutical royalties while maintaining a commitment to shareholder returns:

This approach has enabled Royalty Pharma to consistently deploy capital toward high-potential opportunities while returning excess cash to shareholders. Since 2022, the company has demonstrated a strong track record of meeting or exceeding its capital deployment targets:

Forward-Looking Statements

Looking ahead, Royalty Pharma provided updated guidance for full-year 2025, reflecting confidence in continued growth:

The company expects Portfolio Receipts of $2,975-$3,125 million, representing growth of 6-12% year-over-year. Operating and professional costs are projected to be approximately 10.0% of Portfolio Receipts, with interest payments of around $260 million.

Several key catalysts are expected in 2025, including Phase 3 safety results for TEV-’749 in schizophrenia, Phase 3 results for ecopipam in Tourette syndrome, and Phase 1/2b results for trontinemab in Alzheimer’s disease.

The company also announced an upcoming Investor Day scheduled for September 11, 2025, in New York City, where senior executives will provide updates on the company’s long-term strategy and growth outlook.

This strong Q1 performance represents a significant improvement from Q4 2024, when the company missed earnings expectations with EPS of $0.3531 versus a forecast of $0.9849. The turnaround suggests that management’s strategic initiatives and portfolio expansion efforts are beginning to yield positive results, positioning Royalty Pharma for sustained growth throughout 2025.

Full presentation:

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