Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma second quarter earnings conference call. I would now like to turn the call over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

George Grofik

Good morning and good afternoon to everyone on the call. us Royalty joining XXXX second for results. you to Pharma’s review quarter Thank

a our of release slides can press You find with royaltypharma.com. call the at for on earnings Investors website page our this and results

Moving with file statements. based to the for refer to that available to and statements presented results any information on may unknown forward-looking I statements. differ would risks, this from contains other involve All to assume remind cause are XX-Q of such description statements to factors we risks. call that update on SEC you in these that obligation and our X, Slide a currently I to no forward-looking like known Royalty forward-looking Pharma these uncertainties information materially and actual

will Non-GAAP provided reconciliations non-GAAP to on our used GAAP understand website. press available help are The performance. our release be financial measures financial to in earnings the you

Slide With that, to advance please X.

and Pablo review Financial Officer. which Our speakers Investment, a will Chief provide Coyne, and on discuss Founder Research EVP of EVP, will and after the Officer; are portfolio then Terry and Pablo Terry call Legorreta, Urist, Head update, the Marshall few Chief financials. Marshall highlights, a today will Executive

Pablo, concluding by we will Chris a Following be from we Q&A remarks joined Chairman. Vice Hite, hold will session when EVP and

over Pablo. the to With call that, turn like I’d to

Pablo Legorreta

the to our report the in again summarizes leading quarter of X and to the quarter, life achievements call. solid welcome am everyone momentum another our George, financial strong in Slide you model. delighted execution the our sciences. Thank innovation and demonstrates strategy which against power on of of business funder as second our I

prior to the payment solid delivered of XXXX received the in Biohaven-related adjusted we receipts. cash First, financial second quarter we performance

grew by by X%, line EBITDA X%, X%. adjusted cash grew flow adjusted by Our and top

to $XXX date in royalty allocation, we billion, including acquisitions capital million to upfront up Second $X.X payments. announced on year of

billion share multi-year $X initiated also repurchase our We program.

$XXX night’s a As X repurchased shares last million. we close, have approximately million about for of of spend total

our full receipts we’re $X.X cash Third, guidance billion. $X.XXX billion year adjusted for between raising to and

expected our based portfolio of prior with does our from reflects between guidance standard Consistent to year. guidance benefit X% our XX% this practice, Biohaven-related not the underlying current portfolio payments. of is Our future and the on include any and acquisitions our growth

our On payment financials include Biohaven-related our and we We you in X% detail. period if prior see in delivered Slide can growth line more X, X% prior to the top in payment. this the

by impacting a underscoring the X% approximately minus-X% growth adjust represent to exchange around we would the If strong the in in minus-X% line top quarter. line the exchange top to Foreign for business. continued delivered in our momentum have also headwind, foreign impact, underlying quarter, we

quarter and from EBITDA our payment. for is Adjusted line, measure for our payment payments at to to we operating deducting which the is top adjusted grew Similar X% our EBITDA us, line. X% arrived an non-GAAP by and professional Biohaven-related prior in the by top including costs this important

in the X% prior this adjusted our including and Lastly, payment quarter X% by bottom line, the our cash to flow, grew adjusted Biohaven payment.

of exclusivity, payment our in XXXX. prior against to our Slide of headwinds first ability Despite line XXXX. June our consistently foreign shows IPO our growth reflects X in losses and track the Biohaven-related strong growth execute to This record of since impressive of exchange delivered strategy. top the we quarter X%

portfolio it will to With over on you that, performance. I update to Marshall hand our

Marshall Urist

Pablo. Thanks

on investment cancer a is royalties was our quiet of opportunities, our J&J’s We timing of already from which incremental to make therapy, quarter did portfolio. prostate of Consistent portfolio. in this with UCLA oncology variable a to additions terms small part new the relatively the a Erleada, acquire

CMS robust and busy therapeutic areas. incredibly remains unapproved of across active consistent mix variety with products focus wide XX pipeline and But approach that to XXXX impact initial to have by continue we an on expected I list the want royalties is the and approved potential for of drugs September team a preexisting Our of Act be Reduction selected synthetic Inflation of a as price today, X. of announcement and we the the to determination by as

many the to price lower the three calculate portfolio which Xtandi, Moving the based are however, Imbruvica, to percentage Part our to cash Medicare and we we’ve these XXXX single XXXX impact NPV subject with previously period, IRA D of expect on low Part to IRA as discussed XX, each of medicines, to drugs the portfolio concessions XXXX even Slide there over three in receipts with be digit namely Trelegy; you, in of impact. range D adjusted the we an from for dynamics specific to be

price substantially as turn, it previously, exposure in X.X you concessions. Imbruvica, as case royalty these the loses today. face Taking XXXX aware, a is erosion is smaller so around indicated competition have by we to are Xtandi portion and of does additional our likely driving years of in exclusivity In all XXXX, only represent sales than of to we it receipts

additional we Lastly Trelegy, which may prove our into offset to be determination. Furthermore, highly will price to modest. price pressure, although impact as selected impact for not and potential already Medicare do B we on and note factored meaningful in rebated help be product therapies a thus could the reminder, that could XXXX, any IRA analysis, more from in impacted is utilization IRA not have Part the IRA increased exposure pricing

in era, model. business unique level given the Now taking attributes many on in a position IRA of strategic back, our remain step strong this a very we a

valuation of broad may commercial flexibility, the in area the the investment to affords of reflecting most for and modality-agnostic attention Our opportunities levels of those patient our unique highest the new acquire. we given innovation, structure on need strategic we we therapies Moreover, are impact focus therapeutic flexibility and and us opportunity. approach attractive our see potential in IRA already which royalties

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

Terrance Coyne

Marshall. Thanks

Slide to XX. move Let’s

royalty the in grew quarter year ago second period. X% versus the Total receipts

performance Excluding due of mainly to the Spinraza. and receipts on The royalty the increase cystic payment royalties addition Trelegy prior in was franchise the year of the strong grew fibrosis Biohaven-related the and X%. period, approximately

growth of and loss double-digit Cabometyx, from our key These from the DPPX positive saw factors weakness of Trodelvy. the Imbruvica including Promacta, most currency also Tremfya, partially We by adverse contributions increases other in and Evrysdi, royalties, were movements. royalties, and Tysabri, offset

due on our to a addition, of royalty prior true-up In high period. a Xtandi year base the in comparison faced

deliver our provides the acquisition quarter various performance the to cash business of XX Turning in to the a line moving adjusted base performance and deeper Spinraza into show The receipts, solid of top Slide represented our line to dive taking around parts. prior period us of allowed combined to to growth expiries growth Royalty royalties foreign exchange the impact into of X% and minus-X%. headwind a payment. top minus-X% before account the Biohaven-related

flow Slide model our redeployed. generates substantial cash XX to be efficient business how shows

cash million non-controlling adjusted quarter. last arrive or non-GAAP interests. As metric to the in growth a This which us amounted you’re aware, of is we deducting distributions $XXX second for year’s X% receipts with key quarter to at after compared

growth prior quarter. As X% I period for in would Biohaven-related been have noted, just the payment, adjusting the

adjusted and in Operating of quarter. receipts costs X% cash were professional approximately the

look be our line royalties, less growth X% with of generated in to into result, we cash we we adjusted think consistent net When a business redeployed growth. quarter, reported adjusted new by the interest. in top value-enhancing As EBITDA to broadly the EBITDA the

interest cash received higher the $XX We payments interest of quarters. During the on notes, in of rates third we the given quarter, strong timing our semi-annual position. sheet and billion positive and from which benefited of quarter reflecting net our first occur million balance $X.X the unsecured the in

After weighted de for average million impact $XXX We would in about third based repurchase minimis per stage largely of diluted outstanding development ongoing quarter by quarter in our benefit funding, for repurchases. $X.XX the share of muted, grew recent to Class $XXX A was on as bottom adjusted expect due greater cash payments the the flow, to from timing line, quarter, second X% shares or activity the million. the the share the

efficiency margin business which again Lastly, our flow the adjusted cash highlights our XX%, model. was of once

position. XX Slide Let’s now financial our and move to

continue as to cash for share to million acquisitions. offset securities billion $X.X than by deployed more combined generation, significant to we’ve This million repurchases. and and on the dividends the so of increased on financial Year capital of flow future end firepower close our strong We over $XXX was $XXX royalty well at as marketable maintain to royalty date, acquisitions cash June.

close briefly and shares repurchased the Expanding we approximately total $XXX X through our a share outlay million for program, X on of in buyback yesterday’s repurchased shares million. million another quarter about

our portfolio based adjusted now We guidance. the to on $X.X billion year receipts updates XX strong of Slide be XXXX cash financial performance. in to $X.XX billion full range our expect

in received this the quarter. guidance the includes a Zavzpret reminder, million $XXX we milestone first As

previous Our is assumes minus-X%, guidance guidance. minus-X% FX an approximately from also to which of impact unchanged

as and and today practice, take acquisitions. any with is this of does standard of royalty portfolio guidance the not consistent future into benefit Importantly our account on based our

previous the costs X%. at received full $XXX is end approximately expected months to million for the balance, does was adjusted to QX We not the low six $XX in to on and and paid expect into cash XXXX payments which first of with year be account quarterly still QX. X% follow XXXX. our around minimis range and receipts interest to established to is amounts XXXX, million X.X% for take pattern cash to X% guidance in operating of compared Interest professional This of our be paid which de for

guidance a aficamten $XX expense. payment to hypertrophic of this in their on as the expect initiate trial September. development second that cardiomyopathy million year pivotal be in will Finally, of funding to make a million a based they will we half stage milestone in $XX This recorded Cytokinetics non-obstructive

receipts further guidance. for various out our underlying received the comparison of adjusted Biohaven-related graphic Slide payments on face of which the behind base we left-hand pushes in these receipts to illustrative Adjusting base our billion. XX high XXXX. side, sets cash XXXX. a for payments and drills the XXXX brings due pulls Starting but with cash $X.XX the outlook is we $XXX adjusted to down for million The

receipt if growth the expect cash X% adjusted we Biohaven, growth prior X% this underlying the of On the right-hand to milestone year under to X% This previous with side, to of from we compares guidance. XX% prior our underlying payment. base to Zavzpret start

taking payment billion. into future After million $X.X the the I earlier, not billion Zavzpret, account is $XXX $X.XXX of growth line top milestone guidance As mentioned on our to any this raised include does acquisitions. benefit

cystic next with a the little there data slides, to investor significant by I topic interest new the understand be spend time three indicating III this Vertex early these On the Phase discussing could available fibrosis franchise. for on We triple want been XXXX. has

impact triple and that of Trikafta. triple. potential new the a the to common uptake on flagship As will rate, our franchise new Vertex’s the of triple, key the is receive follow-on These new the a investor the implications highlights reminder, triple for we the slide product, duration levers potential Vertex’s the questions and royalty, of royalty growth business. include new CF the This

in line. the potential will these each slides, We the address including top outcomes range of of our bookending to following

that these note the our out consistent comments more our previous would on view We analysis lays but is slides detail. with in

the be under Slide believe continue familiar rate story, part triple, to cystic question why financial those that to portfolio limited scenarios. for important less a on very our key downside illustrates step Taking potentially only one of impact from triple we royalty the component. XX a why Vertex’s we the will back deuterated a many years component the our new come of and is see ivacaftor with new the fibrosis for franchise

with scenarios. start royalty rate the Let’s different

X% side net left-hand and If their component, deuterated sales the receive Vertex new of our royalty net from a approximately royalties On see the you of on currently total to ivacaftor be triple new rate we sales the around would comes can that market of on triple. the X% Trikafta. graphic, royalty of total receive we of

the downside deuterated as ivacaftor said total do same As which be triple. any sales would Under of ivacaftor we scenario X% previously, component, receive on hypothetical and we same we rate the royalty therefore the believe royalty approximately ivacaftor have a is the royalties ivacaftor. new the rate in not should that deuterated net strongly on as carry

billion look to we increasing Now Vertex let’s billion in for about billion to of potential this $X.X has have think and consensus the portfolio as current provided franchise of $XX.X XXXX $X.X estimates the term. value net around XXXX. cystic sales longer guidance fibrosis

to reinitiate has an patients X,XXX as therapy identified could increased consensus opportunity. up triple, are is view and above to Our the the age billion the in more, which franchise, with Vertex groups CF well triple in therapy This and as or new that younger the that new including reach who the penetration is view important rates geographies, XXXX. as based is candidates $XX on discontinued new

graphic in the adjusted number column next on The different our our pulls receipts, of XXXX impact together quantify factors cash a based possible to scenarios. to this potential these of top line,

a As cash we total royalties a to and to receipts. non-controlling record adjusted portion interest reminder, pay arrive a at then

those the appendix to to see various calculation please arrive For presentation. under Page at XX of today’s how the receipts who in scenarios, of cash refer adjusted want detailed the CF franchise we

Let’s start with consensus a baseline. as

out are $XXX from receipts in million, XXXX, franchise expected fibrosis cystic adjusted $XXX for our an the the Looking to around cystic receipts franchise from increase to expected around cash adjusted be XXXX. million fibrosis in cash

scenarios the with new look triple. the let’s Now at

play an extremely term role to an bar, As its given a transformed clinical the the long profile. we has it of impressive lives important setting reminder, globally, over expect high and patients Trikafta CF

at triple X%, correct million the our adjusted a and $XXX there to estimates, be the the are new come receipts of triple consensus higher cash of possibly not to patients for sales royalties. analysis potential could significantly of assume scenario to of may to higher fruition. current robust this Trikafta profile XX% Trikafta. suggests triple, could to franchise to our we new upside rate help royalty new a the If we some compared $XXX However, improved the so explore is to believe due this million be which XX% conservatively We investors switching under with CF little and around impact this from uptake

even top million million this million do scenario, in cash switch figure CF new to million component triple, If we put patients cash receipts is deuterated adjusted from we or cash adjusted adjusted Royalty million line hypothetical context, receive is scenario ivacaftor estimated downside $XXX $XXX downside decline estimate royalties to in receipts compared Pharma’s only below consensus not cash downside on current around $XXX to in would XXXX our consider XX% we only the from adjusted the $XXX in which this as by To implied cystic fibrosis many adjusted cash with receipts impact XXXX; scenario in again the receipts XX% the to in franchise. to $XXX expected receipts modestly the $XXX the million then our around and therefore, the estimates. of to as on XXXX

our Trikafta. the would Furthermore, XXXX, triple CF potentially around benefit even $X Putting potential from downside only XXXX together, per scenarios as as compared all we to would reduce NPV the the the duration would protection this franchise as us $X have NPV new of of impact share we extended there rate in negative royalty potential in would to impact for patent estimate and scenario. the be portfolio between a the This of existing downside to XXXX with today. to

the in new impact therapy triple broader of Taking any a Vertex’s must consider back, context Pharma’s we business. step of Royalty

top decade, our rate CAGR since to our in XXXX over of receive execute To adjusted as of royalty the ultimately to $X.X target graphic. are triple, on implies the adjusted you investor around new $X May and, regardless receipts or at growth can of downside we the XXXX. strategy the a cash transactions would strongly add indicated in includes by XXXX. receipts we XX%-plus see This this on targeting note around end, billion just scenarios, this line continue day CF importantly, are and We expected billion as more cash in we

at-risk percentage the a would of we CF be by million on line quantified significantly the top of around end portion expect prior decade. $XXX million we that small our of of this royalties $XXX a larger the that slide Furthermore, franchise to

the of Specifically franchise limited combination impact to as we by triple growing so new in and context be of anticipated portfolio. broad our potential any XXXX, is continue top CF believe percentage continue to to manageable we diversify all XX% decline CF the business, around a the line to therapy from our and teens would of our considered,

the would Pablo his call With like comments. back closing to for that, hand to I

Pablo Legorreta

Thanks Terry.

continued start against me am execution remarks how by by priorities saying strategic Let pleased strong our our XXXX. with I in concluding

to on but drive shareholder value our to only deliver full guidance transform and well for year track We’re raised globally. not patients’ the creation lives

the healthcare highlight we important Slide our unique follows I an to in Accelerating third ABI parties the facilitate Institute annual sponsored diverse at to similar The connect organized Kingdom quarter on event want in place this On drug aim at and XXXX in we Massachusetts This our XXXX. took is ecosystem. discussions United MIT XX, and year’s conference June, that in Technology the development biopharma University partnership to sciences the in ecosystem. Cambridge translational the advancing underscores role of Innovation conference. conferences with by of in In conference and the and of

approach Royalty future uniformly is we and received This XXX between audience another up year, both ex-U.S. participants, mind short, those finance well three we attendance. academia well tremendous and conference seeking was of In a XX for a life The as laureates. dialogue partner feedback example and from their VC fund had sciences leading of strong with Nobel executives, including balanced a CEOs, the this and representation the and front unique sets of industry conference scientists, had and in innovators was positive including firms. many as of professionals U.S. The of innovation. keeps XX many for to our Pharma us win-win turnout

highlight our passed Slide a To of IPO, significant just to would I XXXX accomplishments June the to we and third on then. anniversary since our XX, moment finish take like

the we growth. we billion delivered line guidance XXXX for $X.X in than outlook biopharma. five-year set compared to significant upper of payments, around increased the X% at top Furthermore, to from the we raised end more delivered Biohaven-related projected aside XX% cap XXXX. our positions XX% is higher profile at we us XX%, midpoint If XX% a increase. to X% First, the our growth large growth This in to growth

deployment the we and our based strength on moat business Second, expanded opportunity our significantly capital our vast set. model, of competitive

this of XX% to $XX capital in by which five-year initial an to billion than for quality has look bar deployment very The most the three-year I’m expectations, capital We over more $XX is increase have the deployed What I when investments remained target led the well our have added we new back portfolio. to billion. between to period proud of at high. ahead our royalties our of

Third, we our significantly portfolio. strengthened have

We XX prior more the tripled than have three three years, added uplift past in to our of development a on have and therapies number years, XX. therapies we stage XX% the

substantially platform. IPO. to Full compared prior we strengthened XX with XX Lastly, number scaled and our now employees the have time

in added set, My line capabilities opportunity have to we funding, expect accomplishment over royalty able position We years our in reviews have our with ahead, very data take are on the I to proud three expanding many we increasing with by the important leadership cemented been and and milestones. and larger of deliver team significantly when analytics excited have for in opportunity we years. and this in-depth XX% past more workloads

on a Royalty attractive that years return highly its remain confident very ahead has deliver I closing, profile. we’re In best and Pharma that growth track to and

we questions. that, will be take happy With to your

Operator

instructions] [Operator

Goldman The Chris comes question Sachs. with Shibutani from first

Your line is open.

Chris Shibutani

morning. very much. Good you Thank

which Vertex, combination. worst and levels of investors difference royalty there X% difference. the is discussion over scenarios? the their issues thoughtful the between in said the as very you X% actual of debated that thorough case dispute which magnitude during the lower, two triple call, been and the potential substantially Is potentially X%, any in recent they on outline those the the versus viewed difference the of have difference royalty Appreciated amongst the

Then risk, us helpful, for XX factored ahead, price on your thank help ranges of just the better you. extrapolate exposure on some IRA, will order you in, to understand, what you be occur, we’re discounts since how understanding verge could That the in would months implementation perspective? of

Pablo Legorreta

then Thank Marshall triple, your you question question on Terry’s CF on to will going address triple, the your IRA. and Chris. the take the

Terrance Coyne

the component, X%, that’s there. correct you ivacaftor look be The if about to ivacaftor as when the contract. get then and same only the would not on royalties and based rate the that we rates described on those entitled all is only laid the the tezacaftor receive we on deuterated Chris, the component, debate component. so would be so will bookends sort X%, do are there’s at that the are no we we royalty royalty we think the the--and they’re Yes, on and Trikafta. the question of If on question we page, royalties The that is are so only ultimately out are we the we

Marshall Urist

think took, morning. think, at question at IRA level, a a what what good all view and into to did again, feel Hi think and looking Great. reductions related of broad we take I specifically, scenarios, range of terms like getting of price wanted approach pretty IRA, is in to Chris, On there. on different I I conservative cover, your a in without scenarios second so numbers wide might the a just we terms high we be,

your on other part The question implementation. of was

provide all structure in so out. and learn, and to negotiated some terms Pharma. think to how I a a lots for products lot and at watching all moving there what and and available watch price there pieces guidance going but once of I are is conservative that to the everyone we’re to work of a thoughts might did benefit formularies we There’s wanted price, mean to on view understand that is obviously it trying how lot pretty change take think Royalty

Pablo Legorreta

helpful on XX. something laid in forecasts. depending the appendix be different suggest would Chris, is our royalties maybe to and these that’s on greater out cystic one on so Slide franchise, calculations of We the detail thing to fibrosis want I’d scenarios, go your do that the may in you analysis

Chris Shibutani

you. thank Great,

Operator

Schott Chris Morgan. with from comes question next JP The

Your line is open.

Hardik Parekh

Schott. is Hardik Parekh Chris in this Hi, for

a strong acquisitions how I recent focus How question space? but and exposure We’ve already you to the seen see Tremfya quick pharma about opportunity a immunology in there are Pharma? immunology space. that for thinking on Royalty exposure know you have you. additional Thank you Just space, the in the do

Pablo Legorreta

Sure. don’t that take you question? Marshall, why

Marshall Urist

Yes, of question. the course. Thanks for

been important us Tremfya point an out and for it historically. focus with You is today has

this As with way all know, to in have T&Fs many history the of the back beginning. space you we the a long

We are watching and the all terms this space, new in the look in for continue of space there. in in oral and of against of developments to great market opportunities of targets opportunities some this terms

I think products we by are what with inflammatory high and quality the really greater excited to J&J have kind to to portfolio in disease Tremfya come, we’re portfolio. exactly markets as in marketer we large when a psoriasis looking growth bowel add the doing to part a of of see the it’s backed that and in

Operator

with Geoff question Bank from of next comes America. The Meacham

is line Your open.

Geoff Meacham

two. thanks just guys, the for Hey had question. I

can get The into is the just for but going the CF talk not there math - for before? with go that. can you when does Terry, super - resolved vanzacaftor strategy, first could timing so legal about helpful Vertex discussion we start some appreciate of know or I you’re to know, launches, anything resolution really when I be you

way played it strategy and intentional Thank was this you. that bigger today out. going that. doesn’t wasn’t going just Marshall, the pipeline. forward, if royalty the but a an like there’s XX maybe if I The Slide show guys guys rare emphasizing are from contribution second strong I deals forward, broader you or question, on you disease, was markets or note sure it look

Pablo Legorreta

talk part Terry, you don’t Geoff. then the you why question, your the and and elaborate Marshall, his for question, of about ahead Thanks first go can just on pipeline.

Terrance Coyne

Geoff. Sure

timing. In want terms timing, investors of to we the understand understand totally that

XXXX, data, The we’ll around the that, timing, does really--you be us first look critical be we difficult it just but on specifics this obviously--the which something elaborate at and is beyond over card Trikafta. drug for in is know, competitive early will this turn it’s that like with and we what question could approved actual to see any point, to but

Marshall Urist

The question make at remains to comments. to there of just with I’d continue be your or morning. respect opportunities place and two terms good and on where or strategic a On orphan change pipeline second space nothing we look focus. the disease, Geoff, Hi any shift active, in orphan

exciting One very central we an year, is just deal all remains again, front actionable that us, did be opportunities to reminder, and the strategy to all--look we’re space strategy. beginning at one longer considering. a broadly with most areas at more But it a that’s look product of remind strategy. remains core active, to period, and this to for our at the active Spinraza the just over so waterfront therapeutic little and the our time point little in of the one I when and look remains strategy in sometimes at a think a and opportunities might we a orphan you, in means bit That less opportunities but really whole covering you find

Geoff Meacham

you. Thank

Operator

with question Flynn Morgan from Terence comes next Stanley. The

line Your is open.

Terence Flynn

the me. much Maybe questions. so for thanks for Great, two taking

thinking year, think activity share half Obviously but how the just of saw Just some that we on wondering forward? you’re about the the in from first should here. repurchases how about

the profile XX% vanzacaftor of on that that XX% you. FEV to your missed if can of your terms just chloride? scenario, apologize conversion I you in assume assumes you Terry, and Then us in that but thoughts in this, sweat terms give Thank

Pablo Legorreta

levels, look you you that look we basis obvious these multiple thank Terence. stock believe that about level the just whether at business, or program, it’s a we of on is to fundamentals attractive at share DCF very a bases, us repurchase Sure, purchase. when top very it the at this Maybe the

through shares but own will time, that, As of I’ve saw, launched much million be purchase acquiring levels Royalty these a done buying me been decided repurchase result given acquired so we amount already where meaningful $XXX a over we to also at of and but I this shares on night. for program Personally, as have stock, share have active billion scale Pharma fact the I dollar the smaller that also you a very and so, last shares.

these at obviously levels. that continue, to We’re is this but going think a purchase attractive we very

and question. of Terry, want else the part about Marshall share will you program, about the do add other talk to your repurchase anything then

Terrance Coyne

the be I we continue will add only it is to Yes, thing a would balanced think--you approach. know,

priority, can we we create that’s think what is tool royalties, we of has an think one changed, to number capital shareholders when value be the at we the extremely buy and for not nice shareholders. also prices, kit, capital. and return opportunity it’s way a one in a as great see number view additional attractive we to to this some to use tool Our going and But to that that’s have

your to assumptions Pablo a space really range and this ago, investment first here. space obviously our CF looked on long the time, we investment first this we profile, We’ve followed considered in the clinical made question really XX our years so know made of a scenarios. at--we for Terence, new triple for well. we the Then

I to think get would both to meaningfully and type scenario, need our view triple chloride wait share on order new and that is than to sweat have our view see. Trikafta is We’ll XX% be the that FEVX. in to better

this be up patients cash the that that’s see, as being downside this debate with we receipts that by were significant, could if was end isn’t look like switch, was as there case, to showed adjusted That’s and to the case, record very and going table off of of that it’s really--you analysis franchise we perception the you just can it the line consistent the the know, still there from the this so somehow if why demonstrates. XX% not that kind to wanted going that take really does showing CF, seems away, today top we’re to year what

Pablo Legorreta

$XXX or from million by was be not, so to even CF, so in levels. I totally similar. highlighted, million there Terence, was--I obviously to for this it the as from we know scenario don’t upside some and the meant where XXXX, is think clear year going downside but could higher, our potential $XXX scenarios us current million record $XXX very there’s in But about investment what we’re it’s it’s if this Terry

or other upside. could there XX% a switch assuming assumptions, Even be

Operator

comes The with next Baum question Andrew from Citi.

open. is Your line

Andrew Baum

math. many done concern it, may think question CF more My bearing really price, future frustration, we, your think CF math the any mean, and lack be you to I’m in belief to is, the the that yet for a time have not walk not reflecting to worth, on everything fundamental which I again that driving much seems sure what share historic it’s you Thank of the it’s through that is that call, others one. the it’s suggest to the reflection previously, explained I IR the is taking

of it the do, you and reflects that think could from the the buyback, Perhaps what you you business some apart at aside anything and point? your stock, the contributing that capital be from market to could there the to factors can Many is and underperformance hoping talk are thanks. about deploying prosecuting

Pablo Legorreta

shift the little Royalty with to to bit in just actually that Yes, to want a important Pharma of I’m front I more remind talk us, of Chris big ask you has the broadly going massive shareholder base occurred the massive, legacy we a opportunity of all to about market have we from thing think--I new but another we that shareholders we private, for years had shareholder is when our which base current unusual, have. were in the fairly XX-plus partners were and is that

and of endowment, generations, Management Harvard more We third of time very as to, were Also, had the manager a with like large incredibly they so hands. - groups viewing decades split went us of Wood money, performance, like but and individuals, investors XX--really, ’XX having Company, they others. University in Foundation there every achieved a Robert the Columbia investors, of and and over went very, to and component June the their and foundations, actually kind were that many Pharma investors different family foundations the offices, lot in were many because in some business to in could us have the even I than XX was which trusted XXXX, us becoming over years, supported grew Royalty and in of University and and public investors of from invest invested the two of then second and they Boston they would many very when were a we stock. loyal they very more allocate actually A endowments We and approached value of people us endowments many strong were and since that those of shares Johnson raised XXXX shares, specifically now model, to foundations. that that sold into them did nature, many stock - the significant capital been creation, having for those go we

that’s business when had portfolios, not do of any because not sell sell. know, They in stocks. those stock be investors’ endowments allocate public, pickers not business. don’t They you to kind are their their specific became we that investing fit to in managers university to so. money actually - box it’s We so had As to they

done massive this shift which changed base over had and shareholders new in in billion addition the of give over headwind XX%, $XX we replace meant this of that shares. very XX%, of us. the with that so behind selling just we have significant you of constant XX% had to a three we or investors. then years, sense, sold, so shareholder where We’ve XX% That’s to last to--just capital turnover So had the and hands,

going something invest many start add to XX%-ish that’s think Royalty ownership the a will that Europe so could to way in few and I Pharma when and those to remaining do of to the Then a years. of many is so proposition, I all cultivate of as XX%, to see we’re management investment U.S., board, behind to that two the the by is we’re next innovation biotech investors edge over life and cutting XX, believe investment owned do think need in we XX in what as Royalty committed now generalists you forward sciences us, very in numbers, innovation, we other obviously Pharma now an close attractive and the that is

so model, investors an it, about about lot that can about We what’s X, it It business N talk but achieve, stop the we of the since because there. to already achieved takes can have unique more we’re work educate I’ll and a that we that need our of later, IPO. very, very performance strong

you about we us? about have of ahead talk the maybe opportunity aspects other want Chris, to big

Chris Hite

a and well in and biopharma, execute. the R&D in sector between profitable talked of governments fragmentation to R&D the to large as pharma front the Pablo, by of needs the of as the R&D question, overall Andrew. not-for-profits. and continue sector for spend spend the in opportunity terms thanks We of lot emerging need spend us. thanks the the We’ve Sure, about historically We just see and

to of to actually which Pablo initial All greater opportunity nice to set, target think years transaction a that’s goals since over the talked done IPO. billion where next five we our $XX a times a announced is We’ve leads years. XX that increasing capital about - what XX% XXXX job value I the deployment and total did increase billion three $XX we our our Slide $XX on of in than at for three from had transactions over increasing prior billion,

future to their capital be the the market and the extremely understanding see just enormous a set in royalties about in execute. front formation, of opportunity growing to of we of we’re the We need continue us. their sense think how and is can We component excited of

Operator

with question comes next Evercore. Raffat from The Umer

Your line open. is

Mike DiFiore

Mike on questions. my Thanks for for is Two Hi taking me. DiFiore guys, Umer. much this so for

math respect Why Is debate royalty questions CF now Royalty Again, integrity streams. this. Two the sales on this the as for thanks streams? of perhaps so - much include confident different a royalty not I in mean, scenarios could Pharma how to slide the has play forever. this with these out future been for

the estimate, to to running calculating. math the in Then our you implies a have part $XXX you’re more little to conversion you $XXX a the million at XX% second base. that The scenarios a in you. question than are thank because million that that follow-up, How confident bit billion I shortfall sales is XX% scenario, higher that are $XX

Pablo Legorreta

is bit now because see the a decided investing we’re that out many in takes we’re heard confident, life missing, very, the to and to we hearing investors it of is or talked to as confidence question investors are little for thanks stock this legal they we position going of--they in attractive as that way clearly have. of one-on-ones, very the when a whatever we but as we lay very this and do They the conferences goes to that sciences. Sure, feel question. our is on levels them from we actually there been in very see contract the lot many a that attractive an and, investment, see behind also, sort The based a be sidelines and Andrew them CF investors The to current where metrics, is very obviously could and that headwind. stand of downside different investors, lot many from are or they possible situation this reason trading the what had reality on a the it but it on important had confident as because again have remain

you clarify to where when a minor, downside that honesty that we explain think--you hearing this seems over and said, the really very need is business should we believe business really based very revenue that we’ll forecast how by at our when billion to you in XX%-plus it again, $XXX know, billion. million have of like really, look thought we on look $XXX After that million, we XXXX clear, on at get $X.X revenues this clarifying and that of over and it make really of we about to it’s revenue guidance, was $X.X a important. of swing We all minor

on on - we question. just why we’re do market. would or and scenario Related not your possible as putting perspective here the current want about additional a real some $XX wouldn’t, Terry billion, question that But that’s the we dynamics to forward, CF your based see it to comment whole add the maybe if

Terrance Coyne

has people ahead a of consistently as a has has that elaborate groups can up ended I really really continued have quarter-out. strong, and Patient the Yes, on quarter-in been This and outperformed numbers expectations. the uptake been little growth billion. thought, franchise younger $XX and than expand has geographically, bigger consistently to being age been younger they’ve to move bit and

so had realistic, very talked $XX dropped have together, themselves number you when do that’s billion just Vertex we think that’s X,XXX and We is why fruit last patients like for new over that triple, out. point there. hanging we this about that more the feel Then all low add is out previously or and that put

Operator

Steven Cowen. comes The from Scala next with question

open. line Your is

Steven Scala

there have I you. sales GSK royalties least Royalty some sort Trelegy all reported, in one-time? actually QX, estimate. in brief. but missed three at Thank on in Was QX, Pharma yet of what perhaps adjustment Based our royalties they’re questions, beat

to million my is franchise million recollection franchise, changed what $XXX growth, the but this a I case for in delta. curious clarify. than but was assume $XXX modest million delta previously $XXX that - better expected This was a picky, just is change, this CF please Second, the worst the but

quarters in think Pablo, I lastly, of that mentioned Royalty the the that of Then your you accomplishments in IPO, IPO. raised since majority summary don’t Pharma’s you guidance since

is will doesn’t they you. drivers you’re Thank As back wondering inflect this what really your that on since at outperformance what to it, the you drivers good beats think the time have going to What’s been reflect so been. what you extent to just lend interesting pretty itself biggest and business IPO, have the and yet raises, forward?

Pablo Legorreta

do Of then first bit. you questions maybe Trelegy, the and $XXX two to million take also course. million, and to to regarding last back I’ll the $XXX Terry, want come the

Terrance Coyne

of the sort about year, so the investment it’s and extent probably Trelegy, us, throughout second think a well, quarter tiers The feel the year, issue. a at which quarter for to performing sales, just and - of throughout would royalty is the tiering be resets really lower and first beginning year, I on tiering maybe we Steve, had royalties issue. really Trelegy going sure. flat rates it’s off. just are at the little why the that tier, looked the that still people to so explain probably a great that royalty some it’s Yes, that a But oftentimes up

a explain the On a talked $XXX nothing extreme said within tried there. range, downside changed about why necessarily would has and say XX%, $XXX we is about Pharma so what I believe a what to we might million. think previously difference a I little was that’s to scenario bookend Royalty question like that’s hundred really what we the that so million that couple when we feel there. very bit that internally, we say We also there’s for million, wouldn’t

Pablo Legorreta

been had this we the been and for numbers our business marketed the quarter--not we numbers of The about outperformance, outperformance quarter quarter reason fundamental when very forecast saw consistent have we decades, business, products top companies business, during every year, certainly for the your by Related our but where has after that better. outperformance the and question is when the or reality to the consistently our you at we sciences. every in, the were private came more looked vast of invest that very every how were in that quarter, to two able in than important majority top for quarters life

resulted innovation, we’re transforming two great has the the company, significant been many drugs and invest those getting to doesn’t at obviously drugs when and outperform. to do big are over decades, a that to the You than Maybe of patients and that outcomes able select can you diseases. we’re able in them, more in and top are companies, consistently are of close for leading marketed driving because ones products drugs top the three we that of have that best are how companies, cycle have very When you outperformance. every look that the by drugs decades look that but the happen, we in

like ago, this the you and of ability at when blockbusters to this at rate Pfizer’s five every have it’s that been our Every look Celgene, the three characteristic we and every analysis, back We’ve there’s did a blockbuster then add smaller and Pharma, every over big that Trelegy, and Nurtec a to add we great blockbusters for years, pharmas of ability a example, business little at franchise super-super more, lot blockbusters last now pharmas biotechs biotechs But when years, at and looking hands. would their look years, bit our three five through to four the ability businesses, have maybe big or is it’s biotechs add acquisitions. by drug, others. every you you if a of three but a amazing outperformance adding to many limited. in year. Years of three, two, big to unique important obviously year, years, this Royalty big about one really look we Biogen Another at drugs- driven talked that’s

blockbusters look years look of and front the us we of in that ago I more ability opportunities than many had ago. is what’s set I think set increased. opportunity at have remarkable Pharma number in XX the of us, portfolio years now these future I is our opportunity the has at The so our we have of to when and to bigger, front we add XX or products Royalty

We are doing it more consistently.

attractive prior I growth life continue our line sciences. that continuing as and well, what going unique this growth delivering great think price the do then on to line will very top is questions, bottom focus as and itself Eventually in just add very will we’ve team reflect exceeds said and our to share performance consistent that great we’re as performance, just in take guidance, a business. very care business model this the is of assets to to

Steven Scala

Thank you.

Operator

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

Pablo Legorreta

on Operator, Pharma. your for you everyone the you to call Thank in and interest thank Royalty continued

feel any out IR to George free to you reach follow-up questions, If have team. please and our Grofik obviously

our mentioned about say was good show that very it our which excited we when just and - the itself, just really team headwind. to believe downside business important obviously end magnitude We you CF, and the and at situation with much business the limited of to at I I’ll feel look has been and now think the our really are I our thought business decade. when really look you investment that that at clarify a that, to incredibly the myself finish smaller of we already about

to listening call. But thank you for everyone our

Operator

conference for This call. Thank participating. you today’s concludes

disconnect. You now may

Royalty Pharma (RPRX) 8 Aug 232023 Q2 Earnings call transcript