• Net cash provided by operating activities (GAAP) of $1,034 million and Adjusted Cash Receipts⁽¹⁾ (non-GAAP) of $1,131 million
• Announced transactions of up to $1.6 billion in Q1 2023, including $600 million in upfront payments
• Reaffirmed 2023 Adjusted Cash Receipts⁽¹⁾ guidance (increased in March) of $2,850 to $2,950 million
  

NEW YORK, May 09, 2023 (GLOBE NEWSWIRE) -- Royalty Pharma plc (Nasdaq: RPRX) today reported financial results for the first quarter of 2023 and reaffirmed full year 2023 guidance for Adjusted Cash Receipts⁽¹⁾ (a non-GAAP financial measure). “We are delighted to report strong financial performance in the first quarter while advancing our mission of accelerating innovation in life sciences,” said Pablo Legorreta, Royalty Pharma’s founder and Chief Executive Officer. “We announced transactions of up to $1.6 billion to acquire royalties on three innovative therapies, which further diversified our portfolio. In addition, we announced a multi-year share repurchase program of up to $1.0 billion. This reflects our confidence in Royalty Pharma’s attractive outlook for compounding growth and our disciplined capital allocation strategy to create shareholder value.”

First quarter 2023 GAAP financial results benefited from Zavzpret milestone and portfolio strength

• Net cash provided by operating activities grew 125% to $1,034 million, reflecting $475 million Zavzpret milestone; Net cash used in investing activities was $559 million; Net cash used in financing activities was $210 million.
• Total income and other revenues increased 22% to $684 million.

First quarter 2023 non-GAAP financial results show strong double-digit growth

• Adjusted Cash Receipts⁽¹⁾ increased 87% to $1,131 million, driven by the Zavzpret milestone and strong portfolio performance, partially offset by royalty expirations, Imbruvica headwinds and unfavorable foreign exchange.
• Adjusted Cash Receipts⁽¹⁾ grew 11% prior to Biohaven related milestone and fixed payments.
• Adjusted EBITDA⁽²⁾ grew 88% to $1,044 million; Adjusted Cash Flow⁽³⁾ increased 165% to $973 million.
  

Acquired royalties on an established blockbuster and two exciting development-stage therapies

• Acquired royalty interests in Biogen’s Spinraza (a blockbuster for spinal muscular atrophy), Novartis’ pelacarsen (Phase 3, cardiovascular disease with multi-blockbuster potential) and Karuna’s KarXT (Phase 3, schizophrenia with multi-blockbuster potential).
  

Multiple positive clinical and regulatory updates across the portfolio

• FDA granted approvals for Pfizer’s Zavzpret (acute treatment of migraine), AstraZeneca’s Airsupra (asthma), and Gilead’s Trodelvy (HR+/HER2- metastatic breast cancer).
• Positive Phase 3 EMBARK study for Pfizer/Astellas’ Xtandi (non-metastatic prostate cancer).

Financial guidance for 2023 (excludes contributions from new transactions)

• Royalty Pharma reaffirmed that 2023 Adjusted Cash Receipts⁽¹⁾ are expected to be between $2,850 million and $2,950 million, excluding transactions announced subsequent to the date of this release. This guidance was increased in March 2023 following receipt of the Zavzpret milestone.
• This guidance represents underlying growth of 4% to 9% prior to the Zavzpret milestone payment in 2023 and payments related to the Biohaven Preferred Shares in 2022⁽⁴⁾.

First Quarter 2023 Financial Results

Amounts shown in the table may not add due to rounding.
(a) Reflects the $475 million milestone payment received following the FDA approval of Zavzpret.
(b) 2022 royalty receipts include the $16 million quarterly redemption payment related to the Series A Biohaven Preferred Shares⁽⁶⁾ (presented as Proceeds from available for sale debt securities on the statement of cash flows). The Series A Biohaven Preferred Shares were fully redeemed in October 2022 following Pfizer’s acquisition of Biohaven. The remaining amounts are related to royalty receipts from Nurtec ODT.
(c) Royalty Pharma receives royalty payments on Prevymis annual worldwide net sales of up to $300 million, which was reached in the third quarter of 2022. As such, Royalty Pharma did not receive royalty receipts on Prevymis net sales in the first quarter of 2023 related to the fourth quarter of 2022.

Net cash provided by operating activities (GAAP) was $1,034 million in the first quarter of 2023, an increase of 125%, compared to $460 million in the same period of 2022. The increase was largely attributable to a $475 million milestone payment received following the FDA approval of Zavzpret, strong portfolio performance and a $35 million payment related to AstraZeneca’s election to commercialize Airsupra in the U.S. The increase was partially offset by lower cash collections from Januvia, Janumet and other DPP-IVs, which substantially ended in the second quarter of 2022, declines in Imbruvica and Tysabri royalties and the end of redemption payments related to the Biohaven Series A Preferred Shares.

Total royalty receipts were $1,223 million in the first quarter of 2023, an increase of 72% compared to $711 million in the same period of 2022. The drivers of the increase in total royalty receipts were the same as noted above for Net cash provided by operating activities.

Drivers of royalty receipts in the first quarter of 2023 are discussed below, based on commentary from the marketers of the products underlying the royalties in the preceding quarter (as royalty receipts generally lag product performance by one calendar quarter). The section below excludes comments from marketers on the impact of foreign exchange rates, which was generally a headwind across the portfolio. Refer to Table 6 for description of approved indications.

Percentages shown represent year-over-year changes.
*Includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio.

Distributions to legacy non-controlling interests - royalty receipts, which reduce royalty receipts to arrive at Adjusted Cash Receipts⁽¹⁾, were $92 million in the first quarter of 2023, a decrease of 14% compared to the same period of 2022. The decrease was largely due to reduced royalties from maturing or expired products, such as Januvia, Janumet and other DPP-IVs, where the percentage of royalties attributed to non-controlling interests is higher. As a percentage of total royalty receipts, distributions to legacy non-controlling interests - royalty receipts decreased to 8% in the first quarter of 2023, compared to 15% in the prior year period. In addition to reduced royalties from maturing or expired products, the decrease as a percentage of total royalty receipts was also driven by the addition of Trelegy and the Zavzpret milestone payment, both of which have no distributions to non-controlling interests.

Adjusted Cash Receipts⁽¹⁾ (non-GAAP) were $1,131 million in the first quarter of 2023, an increase of 87% compared to the same period of 2022, reflecting the Zavzpret milestone, strong portfolio performance, the Airsupra payment and a decrease in distributions to non-controlling interests. This increase was partially offset by a decline in royalty receipts from maturing royalties, lower royalties on Imbruvica and Tysabri, the end of redemption payments related to the Biohaven Series A Preferred Shares as well as unfavorable foreign exchange movements. Prior to the Zavzpret milestone payment in the first quarter of 2023 and the Biohaven redemption payment in the prior year period, Adjusted Cash Receipts⁽¹⁾ growth was 11% in the first quarter of 2023 compared to the first quarter of 2022.

Adjusted EBITDA⁽²⁾ (non-GAAP) is comprised of Adjusted Cash Receipts⁽¹⁾ less payments for operating and professional costs. Adjusted EBITDA⁽²⁾ was $1,044 million in the first quarter of 2023, an increase of 88% compared to Adjusted EBITDA⁽²⁾ of $556 million in the first quarter of 2022, and was largely attributable to growth in Adjusted Cash Receipts⁽¹⁾. Additionally, payments for operating and professional costs of $87 million (representing 8% of Adjusted Cash Receipts⁽¹⁾) in the first quarter of 2023 increased by 78% compared to the $49 million reported in the same period of 2022 (representing 8% of Adjusted Cash Receipts⁽¹⁾). The increase in payments for operating and professional costs was primarily driven by increased royalty receipts, specifically the Zavzpret milestone. Prior to the Zavzpret milestone payment in the first quarter of 2023 and Biohaven redemption payment in the prior year period, Adjusted EBITDA⁽²⁾ growth was 11% in the first quarter of 2023 compared to the first quarter of 2022.

Adjusted Cash Flow⁽³⁾ (non-GAAP) is comprised of Adjusted EBITDA⁽²⁾ less Development-stage funding payments - ongoing, Development-stage funding payments - upfront and milestone, net interest paid and miscellaneous other items. In the first quarter of 2023, Adjusted Cash Flow⁽³⁾ was $973 million, a 165% increase compared to Adjusted Cash Flow⁽³⁾ of $367 million for the same period of 2022. The increase in Adjusted Cash Flow⁽³⁾ was primarily due to growth in Adjusted EBITDA⁽²⁾ and lower upfront and milestone development-stage funding payments. Prior to the Zavzpret milestone payment in the first quarter of 2023 and Biohaven redemption payment in the prior year period, Adjusted Cash Flow⁽³⁾ growth was 49% in the first quarter of 2023 compared to the first quarter of 2022.

A more comprehensive discussion of the non-GAAP measures utilized by Royalty Pharma to manage its business can be found in the section of this press release entitled ‘Use of Non-GAAP Measures’.

Key Developments Relating to the Portfolio

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

Summary of Recent Royalty Acquisition Activity

Royalty Pharma announced new transactions of up to $1.6 billion in the first quarter of 2023, including $600 million in upfront payments, as detailed below:

• Spinraza and pelacarsen: In January 2023, Royalty Pharma acquired a royalty interest in Biogen’s Spinraza for spinal muscular atrophy and Novartis’ pelacarsen in development for Lp(a) driven cardiovascular disease from Ionis Pharmaceuticals for an upfront payment of $500 million and up to $625 million in additional pelacarsen milestone payments. Under the terms of this agreement, Royalty Pharma will receive 25% to 45% of Ionis’ 11% to 15% royalty on Spinraza sales, on up to $1.5 billion in annual sales. Royalty Pharma’s royalty interest in Spinraza will revert to Ionis after Royalty Pharma receives aggregate Spinraza royalties equal to $475 million or $550 million, depending on the timing and occurrence of certain events. Royalty Pharma will also receive 25% of Ionis’ mid-teens to low-20% royalty on net sales of pelacarsen, resulting in a mid-single digit royalty to Royalty Pharma.
• KarXT: In March 2023, Royalty Pharma acquired a royalty interest in KarXT from PureTech Health plc (“PureTech”) for an upfront payment of $100 million and up to $400 million in milestone payments contingent on the achievement of certain regulatory and commercial milestones. KarXT is in Phase 3 development by Karuna for the treatment of psychiatric and neurological conditions, including schizophrenia as a monotherapy and adjunctive therapy and psychosis in Alzheimer’s disease. Under the terms of this agreement, Royalty Pharma will receive a 3% royalty on annual sales up to $2 billion and a 1% royalty on annual sales above $2 billion.

Liquidity and Capital Resources

• As of March 31, 2023, Royalty Pharma had cash, cash equivalents and marketable securities in the amount of $2.0 billion and total debt with principal value of $7.3 billion.
• In March 2023, Royalty Pharma’s Board of Directors approved a share repurchase program of up to $1.0 billion of Class A ordinary shares through June 2027.

2023 Financial Outlook

Royalty Pharma has provided its guidance for full year 2023, excluding transactions announced after the date of this release, as follows:

Royalty Pharma’s 2023 guidance was recently increased to reflect the $475 million accelerated milestone payment related to FDA approval of Pfizer’s Zavzpret, which was received in March 2023. This Adjusted Cash Receipts⁽¹⁾ guidance represents underlying growth of 4% to 9% prior to the Zavzpret milestone payment in 2023 and the payments related to the Biohaven Preferred Shares received in 2022⁽⁴⁾.

Additionally, this guidance reflects an estimated foreign exchange impact of approximately -1% to -2% ⁽¹⁰⁾ for full year 2023 Adjusted Cash Receipts⁽¹⁾ growth, assuming current foreign exchange rates prevail for 2023.

Total interest paid is based on the semi-annual interest payment schedule of Royalty Pharma’s existing notes and is anticipated to be approximately $170 million in 2023. Interest paid is anticipated to be approximately $85 million in the third quarter of 2023 with a de minimis amount recorded in the second and fourth quarters of 2023. The projection assumes no incremental debt financing in 2023. In the first quarter of 2023, Royalty Pharma also received interest of $16 million on its cash, cash equivalents and marketable securities, which partially offset interest paid.

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

Royalty Pharma has not reconciled its non-GAAP 2023 guidance to the most directly comparable GAAP measure, net cash provided by operating activities, at this time due to the inherent difficulty in accurately forecasting and quantifying certain amounts that are necessary for such reconciliation, including, primarily, payments for operating and professional costs, distributions from equity method investees and interest received. Royalty Pharma is not able to forecast on a GAAP basis with reasonable certainty all adjustments needed in order to project net cash provided by operating activities at this time.

Financial Results Call

Royalty Pharma will host a conference call and simultaneous webcast to discuss its first quarter 2023 results today at 8:00 a.m., Eastern Time. Please visit the “Investors” page of the company’s website at https://www.royaltypharma.com/investors/news-and-events/events to obtain conference call information and to view the live webcast. A replay of the conference call and webcast will be archived on the company’s website for at least 30 days.

About Royalty Pharma plc

Founded in 1996, Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry, collaborating with innovators from academic institutions, research hospitals and non-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. Royalty Pharma has assembled a portfolio of royalties which entitles it to payments based directly on the top-line sales of many of the industry’s leading therapies. Royalty Pharma funds innovation in the biopharmaceutical industry both directly and indirectly - directly when it partners with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators. Royalty Pharma’s current portfolio includes royalties on more than 35 commercial products, including Vertex’s Trikafta, Kalydeco, Orkambi and Symdeko, Biogen’s Tysabri and Spinraza, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, GSK’s Trelegy, Novartis’ Promacta, Pfizer’s Nurtec ODT, Johnson & Johnson’s Tremfya, Roche’s Evrysdi, Gilead’s Trodelvy, and 11 development-stage product candidates.

Forward-Looking Statements

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

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

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

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

Use of Non-GAAP Measures

Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow are non-GAAP measures presented as supplemental measures to Royalty Pharma’s GAAP financial performance. These non-GAAP financial measures exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. In each case, because operating performance is a function of liquidity, the non-GAAP measures used by management are presented and defined as supplemental liquidity measures. Royalty Pharma cautions readers that amounts presented in accordance with the definitions of Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate the non-GAAP measures Royalty Pharma uses in the same manner. Royalty Pharma compensates for these limitations by using non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures, in each case being net cash provided by operating activities.

Royalty Pharma believes that Adjusted Cash Receipts and Adjusted Cash Flow provide meaningful information about its operating performance because the business is heavily reliant on its ability to generate consistent cash flows and these measures reflect the core cash collections and cash charges comprising its operating results. Management strongly believes that Royalty Pharma’s significant operating cash flow is one of the attributes that attracts potential investors to its business.

In addition, Royalty Pharma believes that Adjusted Cash Receipts and Adjusted Cash Flow help identify underlying trends in the business and permit investors to more fully understand how management assesses the performance of the company, including planning and forecasting for future periods. Adjusted Cash Receipts and Adjusted Cash Flow are used by management as key liquidity measures in the evaluation of the company’s ability to generate cash from operations. Both measures are an indication of the strength of the company and the performance of the business. Management uses Adjusted Cash Receipts and Adjusted Cash Flow when considering available cash, including for decision-making purposes related to funding of acquisitions, voluntary debt repayments, dividends and other discretionary investments. Further, these non-GAAP financial measures help management, the audit committee and investors evaluate the company’s ability to generate liquidity from operating activities.

Management believes that Adjusted EBITDA is an important non-GAAP measure in analyzing liquidity and is a key component of certain material covenants contained within the company’s Credit Agreement⁽¹¹⁾. Noncompliance with the interest coverage ratio and leverage ratio covenants under the Credit Agreement⁽¹¹⁾ could result in lenders requiring the company to immediately repay all amounts borrowed. If Royalty Pharma cannot satisfy these financial covenants, it would be prohibited under the Credit Agreement⁽¹¹⁾ from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the assessment of Royalty Pharma’s liquidity.

Management uses Adjusted Cash Flow to evaluate its ability to generate cash from operations, the performance of the business and the company’s performance as compared to its peer group. Management also uses Adjusted Cash Flow to compare its performance against non-GAAP measures used by many companies in the biopharmaceutical industry, even though each company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s. Royalty Pharma believes that non-GAAP financial measures, including Adjusted Cash Flow, are frequently used by securities analysts, investors and other interested parties to evaluate companies in Royalty Pharma’s industry.

The non-GAAP financial measures used in this press release have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of Royalty Pharma’s results as reported under GAAP. The company has provided a reconciliation of each non-GAAP financial measure, except for its non-GAAP outlook to the most directly comparable GAAP financial measure, in each case being net cash provided by operating activities at Table 5.

Royalty Pharma Investor Relations and Communications

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

Amounts may not add due to rounding.

Amounts may not add due to rounding.

Amounts may not add due to rounding.
(a) Reflects the $475 million milestone payment received following the FDA approval of Zavzpret.
(b) 2022 royalty receipts include the $16 million quarterly redemption payment related to the Series A Biohaven Preferred Shares⁽⁶⁾ (presented as Proceeds from available for sale debt securities on the statement of cash flows). The Series A Biohaven Preferred Shares were fully redeemed in October 2022 following Pfizer’s acquisition of Biohaven. The remaining amounts are related to royalty receipts from Nurtec ODT.
(c) Royalty Pharma receives royalty payments on Prevymis annual worldwide net sales of up to $300 million, which was reached in the third quarter of 2022. As such, Royalty Pharma did not receive royalty receipts on Prevymis net sales in the first quarter of 2023 related to the fourth quarter of 2022.

Amounts may not add due to rounding.

Notes