Earnings call transcript: Royalty Pharma Q2 2025 shows robust growth

Royalty Pharma (RPRX) delivered a strong performance in the second quarter of 2025, with significant growth in portfolio receipts and a promising outlook for the rest of the year. According to InvestingPro analysis, the company maintains a "GREAT" overall financial health score of 3.34/5, with particularly strong profitability metrics. The company's stock saw a modest increase in premarket trading, reflecting positive investor sentiment despite a minor earnings miss. The earnings call highlighted key financial metrics, strategic collaborations, and future guidance. Based on InvestingPro's Fair Value model, the stock appears to be undervalued at current levels.

Key Takeaways

• Portfolio receipts grew 20% to $727 million in Q2 2025.
• Full-year 2025 portfolio receipts guidance raised to $3.05-$3.15 billion.
• Groundbreaking collaboration with Revolution Medicines announced.
• Stock price rose slightly in premarket trading.

Company Performance

Royalty Pharma demonstrated robust financial health in Q2 2025, with a 20% increase in portfolio receipts. The stock has delivered impressive returns, gaining over 50% year-to-date according to InvestingPro data. This growth was driven by strategic investments and collaborations, notably with Revolution Medicines. The company continues to leverage its unique business model to maintain a high portfolio cash flow margin of 88% and trades at an attractive P/E ratio of 15.4x relative to its growth prospects.

Financial Highlights

• Revenue: $727 million in Q2 2025, up 20% year-over-year.
• Royalty receipts: $672 million, an 11% increase from the previous year.
• Cash and equivalents: $632 million.
• Operating costs: Expected to be 9-9.5% of portfolio receipts.

Earnings vs. Forecast

Royalty Pharma's actual earnings per share (EPS) for Q2 2025 fell slightly short of the forecasted $1.04. Despite this minor miss, the company's strong revenue performance and raised full-year guidance suggest a positive outlook.

Market Reaction

In premarket trading, Royalty Pharma's stock price increased marginally by 0.03% to $37.92. Trading near its 52-week high of $38.00, the stock has demonstrated strong momentum with a 22% gain over the past six months. Analyst targets compiled by InvestingPro suggest further upside potential, with the highest target at $54.00. This movement reflects investor confidence in the company's strategic direction and growth potential, despite the slight earnings miss.

Outlook & Guidance

The company has raised its full-year 2025 portfolio receipts guidance to between $3.05 billion and $3.15 billion, indicating expected growth of 9-12%. With a consistent dividend growth track record and a current yield of 2.32%, Royalty Pharma continues to reward shareholders while maintaining growth. The company plans to continue exploring innovative funding structures and expanding its focus on biopharma innovation, particularly in China. InvestingPro subscribers can access 8 additional key insights about RPRX, including details about management's share buyback activities and the company's strong profitability metrics.

Executive Commentary

CEO Pablo Legeretta described the collaboration with Revolution Medicines as "groundbreaking," highlighting its potential to set a new industry paradigm. EVP Marshall Urest emphasized the company's focus on global biopharma innovation, stating, "Our flexible model allows us to focus our time and investments on where innovation is most attractive."

Risks and Challenges

• Ongoing dispute with Vertex regarding royalty rates.
• Potential policy impacts on drug pricing.
• Market competition in biopharma royalties.
• Economic conditions affecting large-scale transactions.

Q&A

During the earnings call, analysts inquired about the structure of the Revolution Medicines deal and the potential for innovation opportunities in China. The ongoing royalty dispute with Vertex was also a topic of discussion, highlighting the competitive landscape in biopharma royalties.

Full transcript - Royalty Pharma Plc (RPRX) Q2 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by. Welcome to Royalty Pharma's Second Quarter twenty twenty five Earnings I Conference would like now to turn the conference over to George Gralfik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

George Gralfik, Senior Vice President, Head of Investor Relations and Communications, Royalty Pharma: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's second quarter twenty twenty five results. You can find the press release with our earnings results and slides to this call on the Investors page of our website at royaltypharma.com. Moving to slide three, I would like to remind you that information presented in this call contains forward looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from these statements. We refer you to our most recent 10 ks on file with the SEC for a description of these risks.

All forward looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward looking statements. Non GAAP liquidity measures will be used to help you understand our financial results, and the reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. And with that, please advance to slide four. Our speakers on the call today are Pablo Legeretta, Founder and Chief Executive Officer Marshall Urest, EVP, Head of Research and Investments and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Marshall will provide a portfolio update and Terry will review the financials.

Following concluding remarks on Pablo, we will hold a Q and A session in which we will also be joined by Chris Height, EVP, Vice Chairman. And with that, I'd like to turn the call over to Pablo.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Thank you, George, and welcome to everyone on the call. I am delighted to report a successful quarter of execution against our vision to be the leading partner funding innovation in life sciences. Slide six summarizes our strong business momentum in the second quarter. In terms of the financials, we delivered 20% growth in portfolio receipts, our top line to $727,000,000 and 11% growth in royalty receipts to $672,000,000 This was ahead of the guidance we provided last quarter for portfolio receipts of 700,000,000 to $725,000,000 due to the strength of our diversified portfolio. Turning to capital allocation, we purchased another 8,000,000 shares in the second quarter, taking our total share repurchase this year to $1,000,000,000 At the same time, in the second quarter, we deployed capital of just under $600,000,000 on value creating royalty transactions.

Looking at our portfolio, we completed the acquisition of our external manager, which combined our leading royalty portfolio with our valuable investment platform to become an integrated company, an important milestone in our evolution. In addition, we announced a groundbreaking collaboration with Revolution Medicines, which we believe represents a new funding paradigm for innovative biotech companies. Under this agreement, we will provide up to $2,000,000,000 of flexible funding anchored by a synthetic royalty on the exciting Phase III oncology therapy, Daraxonrezib. We also received encouraging clinical news on several portfolio therapies, including positive Phase III results for Gilead's Fraudelvy in first line metastatic triple negative breast cancer. Lastly, we are pleased to raise our full year 2025 top line guidance.

We now expect portfolio receipts to be between $3,050,000,000 and $3,150,000,000 which represents growth of around nine to 12%. We're also improving our guidance for full year operating and professional costs to a range of 9% to 9.5% of portfolio receipts compared with around 10% previously. This reflects immediate cost savings of our internalization transaction. Teri will provide further guidance of the significant savings in operating and professional costs for the remainder of the year and beyond. Consistent with our standard practice, our guidance is based on our current portfolio and does not include the benefit of any future transactions.

Slide seven shows our consistent track record of average double digit growth since our IPO. As I noted earlier, we delivered 11% growth in royalty receipts in the second quarter. This takes us to 11% growth in the 2025, which supports our confidence in delivering our updated full year guidance. I would also highlight that we have delivered this impressive track record of consistent growth, irrespective of the economic and financial markets' backlog. This really demonstrates our ability to execute successfully and consistently against our strategy in the growing market for biopharma royalties.

With that, I will hand it over to Marshall.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Thanks, Pablo. I want to focus today on our innovative partnership with Revolution Medicines. Slide five gives a high level view of our deal. We will provide up to $2,000,000,000 in long term funding that will help the company aggressively pursue clinical development and commercialization of its practice changing therapy, doraxonerasib, in RAS mutant pancreatic and lung cancers. Of this amount, dollars 1,250,000,000.00 is comprised of synthetic royalty funding, including $250,000,000 we've already paid upfront.

The remaining $750,000,000 is senior secured debt that becomes available over time beginning with FDA approval. Royalty Pharma expects to generate an internal rate of return in the teens with peak potential annual royalties in excess of $170,000,000 We in the street see diraxonrasib as a multi blockbuster based on stellar Phase I efficacy, and we anticipate the first Phase III readout in second line metastatic pancreatic cancer in 2026. At a broader level, we think this will serve as a blueprint for a new funding approach that allows the most innovative biopharma companies to access large scale capital while keeping full control of pipeline development and global commercialization and retaining full strategic optionality, thus capturing more value for shareholders. Pablo used the term groundbreaking to describe this partnership, and it's indeed getting lots of attention across the industry. Now let's turn to Slide 10 to take a closer look at the detail.

What's really powerful about this agreement is both the scale and the flexibility. It is a true win win for both Revolution Medicines and Royalty Pharma. The royalty structure on doraxonerasib provides an attractive risk reward for both of us, with additional funding becoming available upon clinical and regulatory progress as well as sales thresholds. Importantly, for our partner, most of this additional funding is optional and comes at a successively lower cost of capital. On top of that, we'll receive royalties on a second pipeline therapy, Zolgensma, once it is approved in an overlapping indication.

DuraXunraseb consensus models show over $7,000,000,000 in worldwide sales by 02/1935, which translates to as much as $170,000,000 in peak annual royalties to Royalty Pharma. The full details of this transaction are shown in the appendix of this presentation. The credit facility further scales the capital available to Revolution Medicines. It's tranche based on achievement of product approvals and sales thresholds, so it grows as the company grows. We have the flexibility to syndicate some or all of this six year loan with other investors.

Slide 11 gets to the core of why there is so much excitement surrounding doraxoneurasib. The unmet need in pancreatic cancer is profound. According to the American Cancer Society, the five year survival is just thirteen percent, and it's now the third leading cause of cancer related death in The US. The opportunity is substantial with around fifty six thousand new pancreatic cancer patients diagnosed each year, and for most, chemotherapy is the only option. Assuming success in phase three, Revolution Medicine would have a significant first to market advantage.

We see a similar dynamic in non small cell lung cancer where chemotherapy is the only option for second line treatment for most patients. Here, Revolution Medicine is currently enrolling a phase three study in the second and third line setting with primary completion expected by the 2027. As I also noted, if development in other RAS driven tumors succeeds, we also benefit. To summarize, we think doraxoneurasib can transform care for RAS mutant cancers, especially in metastatic pancreatic cancer, where patients desperately need new options. It's a high impact program with significant commercial potential, and we are proud to be a part of it.

With that, I'll hand it over to Terry.

Terry Coyne, EVP, Chief Financial Officer, Royalty Pharma: Thanks, Marshall. Let's move to Slide 13. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 11% in the second quarter, reflecting the strength of our diversified portfolio. The key drivers were the strong performances of Voronego, Trelegy, Evrysdi and Tremfya.

In addition, we benefited from a one time payment of approximately $50,000,000 in milestones and other contractual receipts, which was anticipated within our prior guidance. This resulted in portfolio receipts, our top line of $727,000,000 which was growth of 20%. As we move down the column, operating professional costs equated to 12.9% of portfolio receipts. This included approximately $35,000,000 of one time expense related to the internalization transaction. Excluding this item, the ratio would have been just over 8% of portfolio receipts within our historical range.

Net interest was a small positive of $8,000,000 in the quarter, reflecting the semiannual timing of our interest payment schedule with payments primarily in the first and third quarters and the interest we received for the cash on our balance sheet. Moving further down the column, we have consistently stated that when we think of the cash generated by the business to then be redeployed into value enhancing royalties, we look to portfolio cash flow, which is adjusted EBITDA less net interest paid. This amounted to $641,000,000 in the quarter, equivalent to a margin of around 88%. This reflects a high underlying level of cash conversion and once again underscores the efficiency of our business model. Capital deployment in the quarter was $595,000,000 This primarily included the $250,000,000 upfront for Revolution Medicine, a $200,000,000 manufacturing milestone payment related to adspiladrin and R and D funding for litafilimab.

Lastly, our weighted average share count declined by 35,000,000 shares largely as a result of our share buyback program. Slide 14 provides more detail on the evolution of our top line in the second quarter. Royalty receipts, which we consider our recurring cash inflows grew by 11%, helped by the strength of our diversified portfolio, which I highlighted earlier. I would also note that one of the drivers this quarter was Bornigo, which was $26,000,000 in royalty receipts after being launched by Servier only last August. We are excited to see the profound impact it is having for glioma patients as it quickly becomes one of our top royalties and is on track to rapidly become a blockbuster.

Portfolio receipts, which grew by 20% in the quarter, benefited from the onetime payment that I described earlier and is slightly ahead of the range we guided to for the quarter. This takes our top line growth for the first six months to 18% and supports our confidence in delivering another strong year of growth. Slide 15 shows that we continue to maintain significant financial capacity to execute our strategy. In total, we have access to approximately $3,400,000,000 through a combination of cash on our balance sheet, the cash our business generates and access to the debt markets. At the end of the second quarter, we had cash and equivalents of $632,000,000 In terms of our borrowing position, we have investment grade debt outstanding of $8,200,000,000 Our leverage now stands at around three times total debt to EBITDA or 2.7 times on a net basis.

We also have undrawn financial capacity from our $1,800,000,000 revolver. Lastly, as you heard earlier, under our dynamic capital allocation framework, we continue to take advantage of the fundamental disconnect in our share price and repurchased shares in the quarter, taking our total repurchase activity to $1,000,000,000 for the first six months. We also grew our dividend and continued to deploy capital on attractive royalty deals. In total, we returned $1,260,000,000 to shareholders in the first six months, a record for Royalty Pharma. On Slide 16, we are raising our full year 2025 financial guidance.

We now expect portfolio receipts to be in the range of $3,050,000,000 to $3,150,000,000 Let me walk you through our assumptions. Starting with portfolio receipts, we are expecting growth of around 9% to 12%, up from 6% to 12% previously based on the strong momentum of our diversified portfolio. This takes into account the recent launch of Promacta generics as well as a range of scenarios for the launch of Elliptrex and the impact of Medicare Part D redesign. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisitions. Turning to operating costs.

Payments for operating and professional costs are now expected to be approximately 9% to 9.5% portfolio receipts in 2025, down from 10% in our previous guidance. Keep in mind that in the first half of this year, operating and professional costs were greater than 12% of portfolio receipts, driven by the one time expenses related to the internalization and the sale of the MorphoSys development funding bonds. Collectively, these items are expected to impact full year costs by approximately $70,000,000 or a little more than 2% of portfolio receipts. We expect operating and professional costs to be between 5% to 6% in the second half of the year as we begin to realize the full benefits of the internalization. Interest paid in 2025 is now expected to be around $275,000,000 with around $126,000,000 to be paid in the third quarter and $8,000,000 in the fourth quarter.

This guidance includes the additional quarterly interest expense for the debt assumed as part of the internalization but does not take into account interest received on our cash balance, which was $21,000,000 in the first half. In summary, we have delivered a strong second quarter and first half, which puts us on track to deliver another full year of excellent financial performance in 2025 as reflected in our raised guidance. Now before I hand it over to Pablo, I should also note that we did not receive from Vertex the full royalty to which we are entitled on a Lift Truck, specifically the royalty related to deuterated ivacaftor. As we have previously stated, we believe we are entitled to a royalty of 8% on sales of a Lift Truck. However, Vertex only paid us a royalty of 4%.

As a result, we commenced the dispute resolution process contemplated by the agreements relating to our royalties on Vertex's cystic fibrosis products. That process is subject to confidentiality obligations, and so we do not expect to provide any updates until the matter is resolved, which we anticipate by around the 2026. We continue to receive our full royalties on TRIKAFTA, KALYDECO, SYMDEKO and ORKAMBI. And with that, I would like to hand the call back to Pablo.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Thanks, Teri. To conclude, I am delighted with our strong performance so far in 2025. We have again delivered double digit growth and we've entered into a groundbreaking partnership and acquired our royalty in one of the most exciting oncology assets in clinical development. On top of this, we significantly increased the return of capital to our shareholders and we're now an integrated company with all the benefits that it brings to our shareholders and our people. On slide 18, I want to highlight an important event in partnership with MIT that took place in the second quarter and reflects our role in advancing the healthcare ecosystem.

In June, we sponsored our fifth annual Accelerating Bio Innovation Conference. The aim of this three day conference is to facilitate discussions on translational science and drug development and to connect diverse parties in the biopharma ecosystem. This year, we had a tremendous turnout of nearly three fifty life sciences executives, including 127 CEOs, 79 scientists, and four Nobel laureates. The audience was balanced between industry, academia, and investment professionals. As with our previous conferences, the feedback we received was hugely positive and sets Royalty Pharma up well for future dialogue with many of the leading innovators in biopharma.

This is another example of our win win approach and keeps us front of mind for those seeking a partner to fund their innovation. On my final slide, I want to remind you of our coming Investor Day on September 11. We have an exciting agenda, which will provide you with a comprehensive deep dive into our plans to drive shareholder value creation in the large and growing market for funding biopharma innovation. We think it's a truly unique and compelling story, and we hope you can join us. With that, we would be happy to take your questions.

We will now open up

George Gralfik, Senior Vice President, Head of Investor Relations and Communications, Royalty Pharma: the call for questions. Operator, please take the first question.

Conference Operator: Okay. Thank you. The

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: first question comes

Conference Operator: from Chris Schott with JPMorgan. Your line is open.

Chris Schott, Analyst, JPMorgan: Hi, great. Thanks so much for the questions. I just had two here. Maybe first coming to the back to the Revolution Medicines deal. I'm just interested in your capacity to do these type of deals.

I know it's a smaller initial upfront, but could be a sizable amount of capital with obviously very attractive returns if it all works out. So should we think about this as kind of more like one off type of transactions? Or could we think about royalty doing kind of a wider range of these kind of end to end type of structures like this? My second question was on China innovation and how royalty is thinking about this. It seems like we're seeing a larger and larger percent of the industry's early stage pipeline coming from China.

How do you think about this from a royalty perspective? So specifically, do these companies have the same royalty opportunities you've seen with maybe more traditional U. S. Or European biotechs? And as a company, do you have the resources to diligence and develop relationships with some of these emerging, companies?

Thank you.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Chris, thank you for your excellent questions. And I'm going to take the first one, and I'll ask Marshall to take the second one. So, with respect to the Revolution Medicine transaction, it's incredibly exciting for us. And, as we shared with investors, when we closed the deal in our press release, We believe this is groundbreaking. It's a new paradigm for us, for the industry, for exciting biotech companies seeking funding.

Because it really puts royalty pharma as a very viable alternative to a big pharma partnership where companies typically give up a very significant portion of the economics. It could be fiftyfifty shared economics with a big pharma partner. Often big pharmas also take a much larger share of the ex US economics because they have worldwide distribution and, you know, they they when they're discussing discussing transactions with biotechs, they present that as a as a, you know, advantage they have. Also what happens in this big pharma partnerships is that you now have a partner that will have opinions and maybe in terms of how to develop the drug, and maybe their opinions do not coincide with the opinions of the biotech's management. And it becomes complicated.

So, what's so interesting about this is that, we provided funding at scale, up to $2,000,000,000 for this very exciting product and this great company with a fantastic management team that, you know, puts us, creates this win win partnership with this company. But to more precisely, you know, just touch on one of your questions is, can we do more of this? And absolutely we can. We're actually having active discussions with many other potential partners. Obviously, when something like this happens, people notice and they realize that they could be another revolution medicines.

And we do have the capacity to do many more. We have the capacity to analyze these deals and negotiate them. And we're very excited about this. And I don't see this as a one off. Obviously, take time and for us to agree on terms with partners, It requires a lot of things that have to fall in place.

But I do expect that we will see more of this in the coming years. And it's something that Railform is extremely well positioned to do based on our scale, cost of capital, and also knowledge. One very last thing that I will mention is that we've invested a lot of money over the last, you know, five, six, seven years in data. And one of the things that we're doing is, data that we acquire and then use it to analyze our investments, but also on a data analytics team, that is extensive. And, you know, it's great people that we've gathered.

And we're using that for our own benefit, but also, sharing that with our partners. And again, something that differentiates Royal Oak Pharma from other capital providers. So I'll turn it, now over to Marshall, to answer your second question.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Hey, Chris. Good morning. Thanks for the question on China. So, no, it's a great question. And it probably won't surprise you to hear that something we've been focused on for a while now.

You know, I think we are really excited to see the new product development and the kind of globalization of biopharma innovation. And what's happening in China is exciting, and we are definitely focused on it helping us to grow the royalty pharma business. And I think it's a great example of how our open and flexible business model allows us to shift and focus on innovation wherever it happens around the world. And so, you know, a a couple of points to make. I think one is, definitely, we're excited to see this as a whole new source of, you know, both royalty creation and new royalties for us to, potentially invest in in the future.

But then also, you know, there's definitely gonna be opportunities over time to work directly with companies, with companies there like you've seen us do like like you're seeing us do here in in in The US and Europe. So we're definitely excited about that. And like I said, we've been focused on it for a while, and we're already actively engaged in developing relationships there and potential investments there. So I think it's a place you'll continue to see focus from us in terms of in terms of, you know, new new opportunities and, you know, something that we're excited to see as a as a part of our business in the future.

Conference Operator: The next question will come from Terence Flynn with Morgan Stanley. Your line is open.

Terence Flynn, Analyst, Morgan Stanley: Hi, thanks for taking the questions. Congrats on all the progress. I had two. The first is there's been a growing focus on the bladder cancer market given a number of innovative drugs that have been launched and are launching. I know you guys have some exposure there with ad stilodrine royalties.

Just wondering if you can disclose what that royalty is tracking at on a dollar basis right now. And then maybe how you see the non muscle invasive segment evolving just given some upcoming competitors that might be entering? And then the second one is just on the operating expenses. Is the 5% to 6% range that you talked about, Terry, for 2025, is that the run rate we should think about for 2026? And then how are you thinking about additional share repos from here?

Thank you.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Thanks for the question. So Terry, why don't you take this question about operating expenses and then Marshall can talk about bladder cancer?

Terry Coyne, EVP, Chief Financial Officer, Royalty Pharma: Sure. So we're now starting to really see the benefits of the internalization on that sort of operating margin with 5% to 6% of portfolio receipts going to expenses in the second half of this year. I think that we haven't given guidance yet for next year, but we do feel like this is a strong trend and heading a direction that will reach when we did the transaction, we said that we could ultimately get to 4% to 5% of portfolio receipts. And I think we're heading there. So we feel really good about that.

And then the question on share repurchases. As we've discussed a number of times in the past, it's going to be very dynamic. I think what we're really excited about right now, and you see it with the Revolution Medicines deal, is the opportunities ahead of us. And so we're really excited about the pipeline. And I think that we're going to try to strike the right balance and look at our capital allocation framework as sort of a guidepost there and look at the attractiveness of royalty deals and the attractiveness of our share price relative to intrinsic value.

And we do feel really good about where the pipeline is right now. And so I think that that's something that we're very excited about.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Then, oh, Terrence, your question the second part of the question on adseladrin, Terrence. So we have not disclosed the nominal royalties for that, but I can certainly provide some thoughts on how we thought about that market and how we see it developing. So we are excited to be a part of AdSaladron. And Faring has done great work, building this market. This is a market that hasn't seen innovation in this area for some time.

And, Faring is doing a good job with the launch and building the market. And as a reminder, our view here and why we got excited about AdSaladrin was you know, kind of three or four things. You know, first one was, this was first to market with a real, advantage in terms of a, you know, what we think is a compelling combination of both efficacy and patient experience in terms of safety and convenience, which comes together to be, we think, really exciting package. Certainly, when we made this investment, we were aware that there were other products coming to market. But this is one where we see that as a positive in the sense that as more companies are focused on this market, we see it growing with patients seeing multiple lines of therapy and certainly not a zero sum game in any way.

And so we are excited about Absaladrin and excited to see how the, non muscle invasive breast cancer market develops from here.

Conference Operator: Thank you. And the next question will come from Jason Gerberry with Bank of America. Your line is open.

Jason Gerberry, Analyst, Bank of America: Hey, guys. Thanks for taking my questions. Maybe one more on the RevMed deal. Curious how important to the upfront deal consideration was frontline PDAC? How you view derisking of Dara combos with chemo specifically in the frontline PDAC setting?

Or is that kind of more factored into the sort of the downstream optionality when you consider that? And then maybe just when we think about 2025 portfolio receipt guidance, can you identify what is the single biggest variable in that 3% delta? Thanks.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Sure. So, Marshall, why don't you take the Revolution Medicine's question? And then, Terry, you can, take the second question.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Sure. Hey, Jason. Good morning. So on the Revolution Medicines deal, and, you know, just wanna reiterate, you know, how excited we are both about this product, what it means for patients, and, how innovative this deal is. And like one of the earlier questions asked about, we really see this as a new approach for companies to develop and access large scale for exciting drugs.

Specifically on the first line question, so we are really excited about the first line opportunity. And I think certainly, the patient need there is just as great. And so we are excited to see the revolution medicines develop there. Won't go into a lot of detail on that except to say, yes, that's something we are excited. We are certainly excited about, beyond second line.

And then finally, just as reminder, one of the tranches of the synthetic royalty deal is based on positive phase three data in pancreatic cancer. So certainly, in first line pancreatic cancer, so certainly that's something that was contemplated as part of our deal. Thanks.

Terry Coyne, EVP, Chief Financial Officer, Royalty Pharma: And then, Jason, on your guidance question, we always try to look at a range of scenarios when we're providing our guidance. And so some of the factors that I mentioned before are certainly Promacta generic is one, Part D redesign, FX. We really try to just kind of stress test all of the potential sales scenarios for a lot of our products when we're doing that. So that's how we came up with that range. Yeah, that's basically it.

Jason Gerberry, Analyst, Bank of America: All right. Thanks, guys.

Conference Operator: Thank you. And the next question will come from Umer Raffat with Evercore. Your line is open.

Umer Raffat, Analyst, Evercore: Thanks for taking my questions, guys. I have several today, if that's okay. Maybe just step by step. First, Terry, look. You mentioned, obviously, the change in how Vertex is putting out the royalties now.

I also see consensus tracking at about $900,000,000 in royalty payments to Royalty Pharma for the foreseeable future set next several years. I guess, how would you recommend we think through that while you guys are in the arbitration process? Secondly, maybe this is for Pablo and Marshall. Obviously, congrats on the RevMed deal and very intriguing structure of the deal around pancreatic data, pancreatic approval, etcetera. But there's one thing I can't seem to figure out, which is why were no tranches pegged to the phase three lung cancer readout, and who decided that?

Was it RevMed that decided that, or was it Royalty Pharma? And then finally, on SPINRAZA durability, Biogen's obviously really emphasizing, and so is Ionis, the Salonurson program, which is the once annual version of SPINRAZA. And it prompted me to sort of go back and see how you guys structured the transaction. And at least based on what was put out there, it looks like it was specifically focused on Nusinurson, which is SPINRAZA. So would you guys have to buy into that?

Just trying to think about how to think about the SPINRAZA franchise durability, if I may.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Umer, thanks for the question, and good to hear you. Terry, or maybe Marshall can take the RevMed question, including the phase three lung cancer point, and talk about SPINRAZA, and then Terry can come back to Vertex.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Sure. Umer, good morning. So on the first part of your question on the, tranches and why they were tied to pancreatic cancer, I wouldn't read anything into that about our views on lung cancer. We're certainly excited about that. It was, you know, the tranches and the triggers and the timing was really part of an extensive and collaborative discussion that we had with we had with RevMed about fitting the capital and the cadence of the capital coming in to fit their needs as they're thinking about their broader development program.

So that was really the trigger. And I think it's a good insight and a good question into how we develop these deals and these structures with our partners. So that's the right way to think about that. And on SPINRAZA, on that one, yes, we have certainly been the we have certainly been following the developments on the next generation. And just a reminder that, you know, that on the SPINRAZA, remember that royalty, depending on the Pellet Carson outcome, will end at a certain point when we have received, when we've essentially gotten our capital back.

So there is a limit on that royalty. And then specifically on your NextGen, us come back to you offline on the details on that one. And we can give you some more detail on the extent to which we have exposure to the NextGen.

Terry Coyne, EVP, Chief Financial Officer, Royalty Pharma: And then, Umer, on CF, just to sort of clarify, when we look at our consensus, we see $850,000,000 in 2026 declining to $750,000,000 by 02/1930. As far as what investors should assume during the arbitration or during the dispute resolution process, what we know right now is that we're getting a 4% royalty. I think that that's what we know today. I think as this plays out, I think we'll just have to wait and see. But right now, it's a 4% royalty.

We believe strongly that we are entitled to an 8% royalty. But we need to let this process play out.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Terry, maybe you need to point out the guidance you gave of eight fifty going seven fifty or 700 is based on what assumption in terms of the royalty rates? That's based on consensus estimates. Based on what

Terry Coyne, EVP, Chief Financial Officer, Royalty Pharma: royalty Royalty pharma consensus estimates. I don't know.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: It's a low royalty rate.

Terry Coyne, EVP, Chief Financial Officer, Royalty Pharma: Yeah. I assume that the royalty rate is that that reflects the lower royalty rate.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: The lower royalty rate. Yeah. Obviously, outcome of of this dispute will determine what the actual royalty rate will be, and, you know, that will change this estimate.

Mike Natalkovich, Analyst, TD Cowen: Thank you very much, guys.

Conference Operator: And the next question will come from Mike Natalkovich with TD Cowen. Your line is open.

Mike Natalkovich, Analyst, TD Cowen: Hi. Thank you for the questions. I have three. One is actually a follow-up on the Vertex dispute. In terms of timing, is 2026 the worst case scenario?

Is it within the realm of possibility, for example, that this dispute is settled much earlier than that, or are there structural reasons why the arbitration absolutely must extend into 2026? That's my first question. My second question is on Appetampton. Bristol's Kymzios has been performing much better of late, and I wonder how you interpret those trends. Do you view them as positive for the market opportunity as a whole and likely to accrue to aficamtan's benefit as well?

Or do you think it might make the competitor more difficult to dislodge? Either way, in what ways do you think aficamtan might differentiate in the marketplace? And then my last question is actually on the ABI conference. It's very interesting. I'm curious if you might share with us one new thing that you learned at the conference about the industry that perhaps you have not heard in other venues.

Thank you.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Sure. So, regarding the the timing estimate we gave you for the resolution of the Vertex, dispute, it's a conservative, time based on on a lot of data of how much time it takes for these disputes to get resolved. And, obviously, there's scenarios where this could get resolved much quicker. But if we wanted to give you, you know, what is sort of act what actually happens in this kind of situation, and and that's why we we guided conservatively. And then Marshall can touch on the africanctin question.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Okay. Great. Hey, Mike. Good morning. So first of all, just to confirm on Umer's last question.

So, Umer, the answer to your question is yes. The next generation SPINRAZA is included as part of our deal. So so, you know, no no concerns there on SPINRAZA sustainability because it is it is included. And then, Mike, on Kamsiyos. So, yeah, we have been happy to see, the uptake of Camzios and I think confirms our view of the market and the unmet need there and the size of that market.

And so I think the stage for the aficamtan launch nicely. So, that's our view overall. And I think there's lots of parts to it. I think certainly having options in a market for physicians and for patients is always a powerful thing. I think some of the ease of use factors, with aficamtan are certainly going to be viewed positively by physicians.

Conference Operator: And then

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: the set of data that Cytokinetics is developing around the product will certainly be helpful, like you saw the beta blocker comparison study that read out positively earlier this year. So we remain really excited about aficamten and the success success of Kamsios only confirms that for us. Thanks.

Conference Operator: Thank you. And the next question is going to come from Ash Verma with UBS. Your line is open.

George Gralfik, Senior Vice President, Head of Investor Relations and Communications, Royalty Pharma0: Hi. Thanks for taking our questions. So I wanted to ask about just broadly on the biopharma royalty universe. I saw the transaction between Healthcare Royalty Partners and KKR. I'm just curious to get your thoughts on how competition scaling up impacts your ability to compete for new new royalties, especially for large transactions.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Sure, Ash. Thank you for the question. So it's not a surprise to us. We've actually known Healthcare Royalty for probably two decades and, you know, know the team well, know the people. And it's not a surprise to us that they have now been acquired by KKR.

We expected that. And, you know, what I would just say is that it the competition has been out in the market for decades, and we are we know really well how to operate with competitors. The and, you know, there's been other things that have happened recently. There was another fund that was raised billion dollars. But I think a few things to just remind you of.

One is Royal Pharma has an very, very different structure than the rest of the competitors we have. We're a fully integrated company with a very low cost of capital, you know, a WAC of, you know, 7% ish, around 7%, maybe a little bit higher, and cost of debt that is extremely, extremely low. You know, our overall cost of debt is a little bit north of 3%, and obviously, to raise new debt will be slightly higher, given the interest rates today. But we also when you look at our debt, it's it's weighted average duration of thirteen years. So, you know, Royal Pharma, with our current structure, gives us access to the biggest capital markets in the world, The US equity market, and also the biggest debt markets in the world where we can fund our business, you know, incredibly competitively.

It's really a cost of capital equivalent to to big pharma. So that puts us in a very unique position. Scale is another really important factor. We're doing deals that are multi billion dollars, sometimes as an upfront. You know, we've invested $2,000,000,000 in the BRISD with PTC.

In the past we bought a royalty on Tysari for $2,000,000,000 a royalty in cystic fibrosis for close to $4,000,000,000 when you look at the two combined transactions we did. And you saw the Revolution Medicine transaction we announced a few weeks ago. And that really shows how we can work with partners in transactions that are really large scale transactions. And I would point out that many of our competitors, the entire fund they have is, you know, the size of one of the transactions that we do. So it just tells you how, you know, they need to do transactions that are much smaller because they're not gonna put, you know, their entire fund in one transaction.

They will probably put 15% of the size of the fund in one transaction. And the other things that I think make us very unique is the the team that we have at Royalty Pharma, which is probably one of the biggest investment teams in life sciences that has been working in a very cohesive way with a great culture over decades. And so we feel really, really good about how Royal de Pharma is evolving and continues to evolve to stay ahead of the competition. And again, you know, we we welcome competition. It's good, you know, for companies that are trying to do transactions and fund themselves to have multiple alternatives.

And we tend to win when we like the asset because of the advantages we have, the low cost of capital, the scale, and our relationships. That's another really important thing that we've built relationships with management teams over decades. But I'll stop there. Thank you for the question.

Jason Gerberry, Analyst, Bank of America: Thanks. And

Conference Operator: the next question will come from Geoff Meacham with Citi. Your line is open.

George Gralfik, Senior Vice President, Head of Investor Relations and Communications, Royalty Pharma1: Hey guys. Thanks for the question. Just have a couple. I wanted to get an updated view on kind of policy and impact. I think when you look at what ultimately could impact net pricing and then also consensus assumptions, it's MFN and perhaps PBM reform, and we may get that by year end.

So to what degree have you guys been you know, proactive here to to maybe assess the range of an impact? And the second question, also another one on competition in the space. Yeah. Does Realty still see high interest in in larger scale deals, I e, like, more than a billion? Pablo, this is where you guys are the most differentiated.

And how would you rank synthetic deals as a strategic priority in this context? I I think it used to be near the top, but I wanted to kinda get an update there.

George Gralfik, Senior Vice President, Head of Investor Relations and Communications, Royalty Pharma: Thank you.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Yes. Of course. So maybe just quickly on on competition. You know, we we do believe that there will continue to be very large transactions in our space, you know, billion plus. You know, they they are there's obviously fewer of those larger ones than, you know, transactions in the $255,100,000,000 dollar range where we have many of those per year.

But what's interesting for me to see, Jeff, is that, you know, ten years ago, you know, fifteen years ago, it was actually rare to have a transaction that was multibillion dollars. You know, it would happen once every couple of years, every two, three years. And now it seems like every year we have a transaction of that size, you know, where an ego was around that, you know, 900,000,000 plus. So it's large. And and, you know, as as I mentioned, we had, you know, Tremfya, which was over a billion dollars, Trilogy, a billion 3.

And then, you know, the transactions with PTC that added up to about, I think, 2,100,000,000.0 so far. So, you know, I think it's becoming more common that we have this large billion dollar transactions every year. And I think I'm confident that that's going to continue because when I see the royalties that are being created, you know, when licenses are put in place. There are large royalties, you know, high single digit, low double digit royalties that when you look at a product that can be a multibillion dollar product, those royalties will be worth, you know, billion plus, and in some cases multiple billions. And I think what's also interesting, again, going back to the China question and China strategy, we are Royal Trauma have been working on a China strategy now for some time, and we think that's going to start to pay off.

But when you look at all of the licensing deals that are happening between, you know, Chinese companies that are generating great assets and Western companies. These royalties are large and some of them will be royalties in blockbuster drugs, multi billion dollar drugs, and they will be worth, you know, many billions of dollars. So I think that's another new source of of potential investments for us, and and we're excited about that. And then there was the question on policy and MFN that Marshall will take.

Marshall Urest, EVP, Head of Research and Investments, Royalty Pharma: Hey, Jeff. Yeah, thanks for the question on MFN and policy impact in general. So we've come at it in a couple different ways. I think certainly we're trying to stay as close to developments as we can with our advisors and consultants on the policy side in DC to think about various scenarios and what might happen. So, you know, I think staying informed is a certain part of it.

We've certainly been focused on that. And then second, we have been taking an approach that we've described before, which is really a scenario based approach. And thinking about a wide range of scenarios as we consider new investments. But I think the thing that we continue to stay focused on is first, being focused on the most high impact important medicines out there like you saw us just do with Revolution Medicine. Because regardless of what ultimately may happen, we think those are the medicines that are gonna be most successful if they're helping patients.

If they're helping patients in important ways, they're going to be commercially successful as well. And then second, just to remind everyone, this kind of environment, it does highlight the advantages of just our flexible model and how we can focus our time and investments and innovation and on where the innovation is most attractive, But also respond to policy changes in real time and incorporate them certainly in real time into new investments. So something we continue to watch, something we certainly are focused on and continue to watch carefully.

Jason Gerberry, Analyst, Bank of America: All right, thanks.

Conference Operator: I show no further questions at this time. I would like to turn the call back over to Pablo for closing remarks.

Pablo Legeretta, Founder and Chief Executive Officer, Royalty Pharma: Thank you, operator, and thank thank you to everyone on the call for your continued interest in Royal Pharma. If you have any follow-up questions, please feel free to reach out to George Grofich and his team. Thank you very much.

Conference Operator: This concludes today's conference call and thank you for participating. You may now disconnect.

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