Royalty Pharma plc (Nasdaq: RPRX) today reported financial results
for the second quarter of 2020 and introduced full-year 2020
guidance for Adjusted Cash Receipts(1) (a non-GAAP financial
measure).
“2020 has been a landmark year for Royalty Pharma,” said Pablo
Legorreta, Founder and Chief Executive Officer. “We achieved a
major milestone with our initial public offering which raised $1.9
billion in capital to drive future growth. We have also announced
approximately $1.7 billion in new transactions this year which
reflects our unique position in the life sciences ecosystem. At the
same time, we continue to see strong performance in our business.
In the second quarter, Net cash provided by operating activities
grew 33% and Adjusted Cash Receipts increased 24%, supporting
Adjusted Cash Flow growth of nearly 50%. Additionally, the FDA
approvals of Evrysdi, Trodelvy, Nurtec ODT and Tazverik during 2020
have expanded our portfolio of long duration assets and provide
further diversification. As the biopharma industry experiences an
extraordinary period of scientific advancement, Royalty Pharma
expects to play a key role in funding innovation and to deliver
attractive and sustained long-term growth for its shareholders,”
Pablo Legorreta added.
GAAP financial results demonstrate strong operating cash
flow generation and revenue growth
- Cash provided by operating activities increased to $489 million
compared with $368 million on a pro forma basis in the same period
of 2019 primarily driven by higher royalty receipts.
- Cash used in investing activities of $249 million largely
reflected two royalty acquisitions.
- Cash provided by financing activities of $1,579 million was
driven by the receipt of IPO proceeds.
- Total income and other revenues increased 12% driven by growth
from the cystic fibrosis franchise and Imbruvica.
Non-GAAP financial results driven by double-digit
increases across multiple products in the portfolio
- Adjusted Cash Receipts(1) increased 24% on a pro forma basis
led by the cystic fibrosis franchise and Imbruvica.
- Adjusted Cash Flow(2) grew 47% on a pro forma basis to $369
million, enhanced by lower financing expenses.
Portfolio continues to expand with new approvals and
royalty acquisitions
- Recent royalty acquisitions include Prevymis (cytomegalovirus
infection), IDHIFA (acute myeloid leukemia) and Evrysdi (spinal
muscular atrophy) as well as an expanded funding agreement with
Biohaven for Nurtec ODT and zavegepant, resulting in approximately
$1.7 billion in announced transactions this year.
- FDA approvals granted for Trodelvy (triple-negative breast
cancer), Tazverik (follicular lymphoma) and Evrysdi.
|
(unaudited) |
|
For the three months ended June 30 |
($ and shares in millions) |
2020 |
|
2019(3)Pro Forma |
Change |
|
Net cash provided by operating activities (GAAP) |
489 |
|
368 |
33% |
|
Net cash used in investing activities (GAAP) |
(249) |
|
n/a |
n/a |
|
Net cash provided by financing activities (GAAP) |
1,579 |
|
n/a |
n/a |
|
Total income and other revenues (GAAP) |
511 |
|
458 |
12% |
|
|
|
|
|
Adjusted Cash Receipts (1) (non-GAAP) |
462 |
|
373 |
24% |
|
Adjusted Cash Flow (2) (non-GAAP) |
369 |
|
250 |
47% |
|
|
|
|
|
Fully diluted shares outstanding as of June 30, 2020 |
607 |
|
n/a |
n/a |
|
Second quarter financial results
|
|
|
(unaudited) |
|
|
|
For the three months ended June 30 |
($ in
millions) |
|
|
2020 |
|
2019 Pro forma(3) |
Change |
Net cash provided by Operating activities
(GAAP) |
489 |
|
368 |
|
33% |
|
|
|
|
|
|
|
Royalty Receipts: |
Marketer: |
Therapeutic Area: |
|
|
|
Cystic fibrosis franchise |
Vertex |
Rare diseases |
136 |
|
86 |
|
59% |
|
Tysabri |
Biogen |
Neurology |
93 |
|
82 |
|
13% |
|
Imbruvica |
AbbVie/Johnson & Johnson |
Cancer |
82 |
|
66 |
|
23% |
|
HIV franchise |
Gilead,
others |
Infectious disease |
65 |
|
52 |
|
24% |
|
Januvia, Janumet, other DPP-IVs |
Merck
& Co., others |
Diabetes |
35 |
|
41 |
|
(15)% |
|
Xtandi |
Pfizer,
Astellas |
Cancer |
34 |
|
27 |
|
26% |
|
Promacta |
Novartis |
Hematology |
27 |
|
19 |
|
38% |
|
Farxiga/Onglyza |
AstraZeneca |
Diabetes |
8 |
|
- |
|
n/a |
|
Prevymis |
Merck
& Co. |
Infectious diseases |
6 |
|
- |
|
n/a |
|
Crysvita |
Ultragenyx, Kyowa Kirin |
Rare diseases |
3 |
|
- |
|
n/a |
|
Erleada |
Johnson
& Johnson |
Cancer |
2 |
|
- |
|
n/a |
|
Emgality |
Eli
Lilly |
Neurology |
2 |
|
- |
|
n/a |
|
Lyrica |
Pfizer |
Neurology |
6 |
|
35 |
|
(82)% |
|
Letairis |
Gilead |
Cardiology |
8 |
|
22 |
|
(66)% |
|
Other Products (4) |
|
|
79 |
|
55 |
|
43% |
|
Total Royalty Receipts |
585 |
|
486 |
|
20% |
|
Distributions to non-controlling interests |
(123) |
|
(114) |
|
8% |
|
Adjusted Cash Receipts (non-GAAP) (1) |
462 |
|
373 |
|
24% |
|
Amounts shown in the
table may not add due to roundingThe difference between Pro forma
and reported results for Total Royalty Receipts relate to the
treatment of Legacy SLP interest in “Other Products.” |
Net cash provided by operating activities
(GAAP) was $489 million in the three months ended June 30,
2020 compared to $368 million on a pro forma basis in the same
period of the prior year. The primary driver was an increase in
cash collections from financial royalty assets, primarily from the
cystic fibrosis franchise and Imbruvica, as discussed below. In the
second quarter of 2020, payments for interest were lower under the
refinanced credit facilities while Development-stage funding
payments reduced as a result of the completion of the funding
arrangement with Pfizer in 2019.
Total Royalty Receipts were $585 million, an
increase of 20% in the second quarter of 2020 compared to the same
period of 2019 on a pro forma basis. This was largely attributable
to the performance of the cystic fibrosis franchise, Imbruvica and
the addition of new royalties, partially offset by a decrease in
royalties for Lyrica and Letairis resulting from losses of
exclusivity.
Drivers of royalty receipts in the quarter are discussed below,
based on commentary from the marketers of the products underlying
the royalties in the preceding quarter (as royalty receipts lag
product performance by one calendar quarter).
- Cystic fibrosis franchise – Royalty receipts
from Vertex’s cystic fibrosis franchise, which includes Kalydeco,
Orkambi, Symdeko/Symkevi and Trikafta, all approved for patients
with certain mutations causing cystic fibrosis, were $136 million
in the second quarter of 2020, an increase of 59% compared to the
same period of 2019 on a pro forma basis, primarily driven by the
highly successful launch of Trikafta in the U.S.
- Tysabri – Royalty receipts from Tysabri, which
is marketed by Biogen for the treatment of multiple sclerosis, were
$93 million in the second quarter of 2020, an increase of 13%
compared to the same period of 2019.
- Imbruvica – Royalty receipts from Imbruvica,
which is marketed by AbbVie and Johnson & Johnson for the
treatment of blood cancers and chronic graft versus host disease,
were $82 million in the second quarter of 2020, an increase of 23%
compared to the same period of 2019.
- HIV franchise – Royalty receipts from the HIV
franchise, which is based on products marketed by Gilead that
contain emtricitabine, including Biktarvy, Genvoya and Truvada,
among others, were $65 million in the second quarter of 2020, an
increase of 24% compared to the same period of 2019.
- Januvia, Janumet, Other DPP-IVs – Royalty
receipts from the DPP-IVs for type 2 diabetes, which include
Januvia and Janumet, both marketed by Merck & Co., were $35
million in the second quarter of 2020, a decrease of 15% compared
to the same period of 2019, reflecting continued pricing pressure
in the U.S.
- Xtandi – Royalty receipts from Xtandi, which
is marketed by Pfizer and Astellas for the treatment of prostate
cancer, were $34 million in the second quarter of 2020, an increase
of 26% compared to the same period of 2019, driven by demand across
various prostate cancer indications.
- Promacta – Royalty receipts from Promacta,
which is marketed by Novartis for the treatment of chronic immune
thrombocytopenia purpura (ITP) and aplastic anemia, were $27
million in the second quarter of 2020, an increase of 38% compared
to the same period of 2019. Global growth was driven by increased
use in ITP and further uptake as first-line treatment for severe
aplastic anemia in the US. Royalty Pharma acquired the Promacta
royalty in March 2019.
Distributions to non-controlling interests were
$123 million in the second quarter of 2020, an increase of 8%
compared to the same period of 2019 on a pro forma basis, which
reduces royalty receipts to arrive at Adjusted Cash Receipts.
Adjusted Cash Receipts (non-GAAP) (1) were $462
million in the second quarter of 2020, an increase of 24% compared
to the same period of 2019 on a pro forma basis, primarily as a
result of performance of the cystic fibrosis franchise, Imbruvica
and Other Products. This was partially offset by the increase in
distributions to non-controlling interests as discussed above, as
well as the decrease in royalty receipts from Lyrica and Letairis
resulting from their losses of exclusivity.
Adjusted EBITDA (5) is a non-GAAP measure used
by Royalty Pharma which comprises Adjusted Cash Receipts less
payments for operating costs and professional services. In the
second quarter of 2020, Adjusted EBITDA was $418 million, a 25%
increase compared to Adjusted EBITDA of $333 million on a pro forma
basis in 2019:
- The increase was largely attributable to the 24% growth in
Adjusted Cash Receipts.
- Payments for operating and professional costs amounted to $44
million in the quarter (representing 9.6% of Adjusted Cash
Receipts), versus $39 million (10.6% of Adjusted Cash Receipts) in
the second quarter of 2019 on a pro forma basis.
Adjusted Cash Flow (2) is a non-GAAP measure
which is comprised of Adjusted EBITDA less R&D funding, Net
interest paid and miscellaneous other items relating to swap
arrangements, investment in non-consolidated affiliates and
contributions from non-controlling interests. In the second quarter
of 2020, Adjusted Cash Flow was $369 million, a 47% increase
compared to Adjusted Cash Flow of $250 million for the same period
of 2019 on a pro forma basis. The increase was primarily driven by
the growth in Adjusted Cash Receipts as well as lower Net interest
paid and Development-stage funding payments. Items in the period
included:
- Development-stage funding payments of $6 million in the second
quarter was significantly lower than the $21 million in the same
period in 2019, as ongoing R&D programs (primarily related to
the Phase 3 adjuvant studies of Ibrance) reached completion at the
end of 2019.
- Net interest paid of $31 million was lower than the $57 million
paid in the same period of 2019 on a pro forma basis due to the
impact of debt refinancing and a reduction in interest rates.
- Investment in non-consolidated affiliates was $16 million, up
from $10 million in the second quarter of 2019.
- Contributions from non-controlling interest-R&D were $4
million in in the second quarter, as compared with $6 million in
the year-ago period on a pro forma basis.
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 earnings release entitled ‘Use of Non-GAAP
Measures’.
Recent Events Related to our Portfolio
- Cystic fibrosis franchise: In June 2020,
Vertex announced that EMA’s Committee for Medicinal Products for
Human Use (CHMP) adopted a positive opinion for the triple
combination therapy Kaftrio (ivacaftor/tezacaftor/elexacaftor) in a
combination with Kalydeco in people ages 12 and older with cystic
fibrosis with the most common genotype. If granted Marketing
Authorization, people ages 12 and older in Europe who have one
F508del mutation and one minimal function mutation will for the
first time be able to benefit from a medicine that treats the
underlying cause of the disease, and people 12 years of age and
older who have two F508del mutations also will be eligible for the
new triple combination regimen.
- Tazverik (tazemetostat): In June 2020,
Epizyme, Inc. announced that the U.S. Food and Drug Administration
(FDA) granted accelerated approval of the supplemental New Drug
Application (sNDA) for Tazverik for two distinct follicular
lymphoma (FL) indications, including adult patients with relapsed
or refractory FL whose tumors are positive for an EZH2 mutation as
detected by an FDA-approved test and who have received at least two
prior systemic therapies and adult patients with relapsed or
refractory FL who have no satisfactory alternative treatment
options.
- Ibrance (palbociclib): In May 2020, Pfizer
reported that the independent data monitoring committee for the
PALLAS trial had concluded after the recent interim analysis that
the PALLAS trial is “unlikely to show a statistically significant
improvement in the primary endpoint of invasive disease-free
survival.” If Pfizer’s PENELOPE-B trial is successful, Royalty
Pharma will be entitled to receive approval-based fixed milestone
payments of $250 million.
- Trodelvy (sacituzumab govitecan-hziy): In
April 2020, Immunomedics announced that the FDA granted accelerated
approval of Trodelvy (sacituzumab govitecan-hziy) for the treatment
of patients with metastatic triple-negative breast cancer (TNBC)
who have received at least two prior therapies for metastatic
disease. Trodelvy is the first antibody-drug conjugate (ADC)
approved by the FDA specifically for TNBC.
Summary of Recent Royalty Acquisition
Activity
- Nurtec ODT (rimegepant) and zavegepant: In
August 2020, Royalty Pharma announced an expanded agreement with
Biohaven Pharmaceuticals for up to $450 million to fund the
development of zavegepant and the commercialization of Nurtec ODT.
To support the zavegepant Phase 3 program, Biohaven will receive a
$150 million upfront payment and an additional $100 million payment
upon the start of the oral zavegepant phase 3 program. Royalty
Pharma will receive a royalty of 0.4% on Nurtec ODT, a royalty of
up to 3% on zavegepant and success-based milestone payments based
on zavegepant regulatory approvals. Royalty Pharma will also
provide further support for the ongoing launch of Nurtec ODT
through the purchase of committed, non-contingent Commercial Launch
Preferred Equity for a total of $200 million payable between 2021
and 2024.
- Evrysdi (risdiplam): In July 2020, Royalty
Pharma acquired a royalty on Evrysdi, a development-stage product
candidate for the treatment of Types 1, 2 and 3 spinal muscular
atrophy (SMA), from PTC Therapeutics, Inc. in exchange for an
upfront payment of $650 million. Evrysdi was subsequently approved
by FDA on August 7, 2020, representing the first at home, oral
treatment approved for infants, children and adults with all SMA
types.
- IDHIFA (enasidenib): In June 2020, Royalty
Pharma acquired a royalty on IDHIFA, an approved product for the
treatment of adult patients with relapsed or refractory acute
myeloid leukemia (AML) with an isocitrate dehydrogenase-2 (IDH2)
mutation, from Agios Pharmaceuticals, Inc. in exchange for an
upfront payment of $255 million.
- Prevymis (letermovir): In April 2020, Royalty
Pharma acquired a royalty on Prevymis, an approved product to
prevent cytomegalovirus (CMV) infection in stem cell transplants,
from AiCuris Anti-infective Cures GmbH in exchange for an upfront
payment of $220 million.
Liquidity and Capital Resources
- At June 30, 2020, Royalty Pharma had cash, cash equivalents and
marketable securities in the amount of $2,787 million and $5,912
million of long-term debt, inclusive of unamortized issuance cost
and discount of $34 million.
- Royalty Pharma’s initial public offering (IPO) was completed on
June 18, 2020, whereby the company issued 89.3 million shares of
Class A ordinary shares at a price to the public of $28 per share,
of which 71.7 million and 17.7 million shares were offered by the
company and selling shareholders, respectively. The number of Class
A ordinary shares issued at closing included the exercise in full
of the underwriters’ option to purchase 11.7 million additional
Class A ordinary shares from the company. The company received net
proceeds of approximately $1.9 billion from the IPO. The Class A
ordinary shares began trading on the Nasdaq Global Select Market
under the ticker symbol “RPRX” on June 16, 2020.
- Following the IPO, Royalty Pharma has 607.1 million fully
diluted shares outstanding.
2020 Financial Outlook
Royalty Pharma has provided guidance for 2020 as follows:
|
Provided August 12, 2020 |
Adjusted Cash Receipts (non-GAAP) excluding new
transactionsannounced after the date of this release |
$1,720 million to $1,760 million |
The company also expects that Payments for operating and
professional costs will be approximately 10% of Adjusted Cash
Receipts in 2020.
Royalty Pharma today provides this guidance based on its
first-half performance and on its most up-to-date view on the
company’s 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 reserves the right to 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 2020 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
non-consolidated affiliates, and Interest received. We are 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.
Earnings Conference Call
Royalty Pharma will host a conference call and simultaneous
webcast to discuss this earnings release today at 8:00 AM, Eastern
Time. A link to the webcast may be accessed from the 'Investors'
page of Royalty Pharma’s website or at
https://edge.media-server.com/mmc/p/2ujdenpf. Please allow at
least five minutes for registering and accessing the
presentation. A replay of the conference call and webcast
will be archived on the company's website for at least 30
days.
To ask a question during the live broadcast or listen without
Internet access, please dial in at least 15 minutes in advance to
ensure a timely connection to the call. The dial in number to
join the call is (833) 519-1253 from within the United States; the
number for international callers is + 1 (914) 800-3826. Enter
the passcode 6299563 when prompted.
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
not-for-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 45 commercial products, including AbbVie and
J&J’s Imbruvica, Astellas and Pfizer’s Xtandi, Biogen’s
Tysabri, Gilead’s HIV franchise, Merck’s Januvia, Novartis’
Promacta, and Vertex’s Kalydeco, Symdeko and Trikafta, and four
development-stage product candidates. For more information, visit
www.royaltypharma.com.
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 our
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 our 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 our reports and
documents filed with the U.S. Securities and Exchange Commission
(SEC). You may get these documents by visiting EDGAR on the SEC
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 our
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 our
operating performance is a function of our liquidity, the non-GAAP
measures used by management are presented and defined as
supplemental liquidity measures. We caution readers that amounts
presented in accordance with our 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 we use in the same
manner. We compensate 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.
We believe that Adjusted Cash Receipts and Adjusted Cash Flow
provide meaningful information about our 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 our operating results.
Management strongly believes that our significant operating cash
flow is one of the attributes that attracts potential investors to
our business.
In addition, we believe 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 our liquidity and is a key component
of certain material covenants contained within the company’s Credit
Agreement. Noncompliance with the interest coverage ratio and
leverage ratio covenants under the credit agreement could result in
our lenders requiring the company to immediately repay all amounts
borrowed. If we cannot satisfy these financial covenants, we would
be prohibited under our credit agreement from engaging in certain
activities, such as incurring additional indebtedness, paying
dividends, making certain payments, and acquiring and disposing of
assets. Consequently, Adjusted EBITDA is critical to the assessment
of our liquidity.
Management uses Adjusted Cash Flow to evaluate its ability to
generate cash and performance of the business and to evaluate the
company’s performance as compared to its peer group. Management
also uses Adjusted Cash Flow to compare its performance against
non-GAAP adjusted net income 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. We believe that non-GAAP
financial measures, including Adjusted Cash Flow, are frequently
used by securities analysts, investors, and other interested
parties to evaluate companies in our industry.
The non-GAAP financial measures used in this earnings release
have limitations as analytical tools, and you should not consider
them in isolation or as a substitute for the analysis of our
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 plc
Condensed Consolidated Income Statement (unaudited) Table
1
|
(As reported) |
|
For the three months ended June 30 |
($ in millions) |
2020 |
|
2019 |
|
Total income and revenues |
|
|
Income from financial royalty assets |
474 |
|
417 |
|
Revenue from intangible royalty assets |
33 |
|
35 |
|
Other royalty income |
3 |
|
5 |
|
Total income and other revenues |
511 |
|
458 |
|
|
|
|
Operating expenses |
|
|
Research and development funding expense |
6 |
|
21 |
|
Provision for changes in expected cash flows from financial royalty
assets |
47 |
|
72 |
|
Amortization of intangible assets |
6 |
|
6 |
|
General and administrative expenses |
43 |
|
30 |
|
Total operating expenses, net |
102 |
|
130 |
|
|
|
|
Operating income |
409 |
|
328 |
|
|
|
|
Other (income)/expense |
|
|
Equity in (earnings)/loss of non-consolidated affiliates |
(29) |
|
8 |
|
Interest expense |
34 |
|
69 |
|
Other (income)/expense |
(198) |
|
72 |
|
Total other (income)/expense, net |
(193) |
|
149 |
|
|
|
|
Consolidated net income before tax |
602 |
|
179 |
|
Income tax expense |
- |
|
- |
|
Consolidated net income |
602 |
|
179 |
|
Less: Net income attributable to non-controlling interest |
(160) |
|
(27) |
|
Net income attributable to controlling
interest |
442 |
|
152 |
|
Amounts may not add due to
rounding.
Royalty Pharma plc
Selected Balance Sheet Data Table 2
|
(unaudited) |
($ in millions) |
As ofJune 30, 2020 |
As ofDecember 31, 2019 |
Cash and cash equivalents |
2,443 |
284 |
Marketable securities |
344 |
57 |
Total assets |
15,686 |
12,450 |
Current portion of long-term debt |
182 |
282 |
Long-term debt, excluding current portion |
5,730 |
5,956 |
Total liabilities |
6,291 |
6,308 |
Total shareholders’ equity |
9,395 |
6,141 |
|
|
|
|
Royalty Pharma plc
Condensed Consolidated Statements of Cash Flows (unaudited)
Table 3
|
(As reported) |
(As reported) |
($ in millions) |
For the three months ended June 30 |
For the six months ended June 30 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Cash flows from operating activities: |
|
|
|
|
Cash collections from financial royalty assets |
515 |
|
427 |
|
1,004 |
|
895 |
|
Cash collections from intangible royalty assets |
35 |
|
41 |
|
70 |
|
74 |
|
Other royalty cash collections |
8 |
|
7 |
|
9 |
|
21 |
|
Interest received |
1 |
|
4 |
|
4 |
|
14 |
|
Swap collateral received |
- |
|
- |
|
45 |
|
0.4 |
|
Swap collateral posted |
- |
|
(26) |
|
- |
|
(27) |
|
Swap termination payments |
- |
|
- |
|
(35) |
|
- |
|
Distributions from non-consolidated affiliates |
12 |
|
- |
|
32 |
|
14 |
|
Development-stage funding payments—ongoing |
(6) |
|
(21) |
|
(13) |
|
(44) |
|
Payments for operating and professional costs |
(44) |
|
(29) |
|
(70) |
|
(47) |
|
Interest paid |
(32) |
|
(66) |
|
(83) |
|
(130) |
|
Net cash provided by operating activities |
489 |
|
337 |
|
960 |
|
770 |
|
Cash flows from investing activities: |
|
|
|
|
Distributions from non-consolidated affiliates |
15 |
|
- |
|
15 |
|
- |
|
Purchases of available for sale debt securities |
- |
|
(125) |
|
- |
|
(125) |
|
Purchase of equity securities |
- |
|
- |
|
(50) |
|
- |
|
Proceeds from available for sale debt securities |
- |
|
- |
|
- |
|
150 |
|
Purchase of marketable securities |
- |
|
- |
|
(637) |
|
- |
|
Proceeds from sales and maturities of marketable securities |
227 |
|
- |
|
354 |
|
- |
|
Investments in non-consolidated affiliates |
(16) |
|
(10) |
|
(29) |
|
(19) |
|
Acquisitions of financial royalty assets |
(475) |
|
(23) |
|
(575) |
|
(1,232) |
|
Milestone payments |
- |
|
- |
|
- |
|
(250) |
|
Net cash used in investing activities |
(249) |
|
(158) |
|
(922) |
|
(1,476) |
|
Cash flows from financing activities: |
|
|
|
|
Distributions to shareholders/unitholders |
(144) |
|
(198) |
|
(285) |
|
(396) |
|
Distributions to non-controlling interest |
(123) |
|
(36) |
|
(285) |
|
(78) |
|
Distributions to non-controlling interest – other |
(28) |
|
- |
|
(28) |
|
- |
|
Contributions from non-controlling interest- acquisitions |
- |
|
- |
|
17 |
|
- |
|
Contributions from non-controlling interest- R&D |
4 |
|
- |
|
5 |
|
- |
|
Contributions from non-controlling interest- other |
- |
|
- |
|
13 |
|
- |
|
Scheduled repayments of long-term debt |
(47) |
|
(74) |
|
(94) |
|
(147) |
|
Repayments of long-term debt |
- |
|
- |
|
(5,170) |
|
- |
|
Proceeds from issuance of long-term debt |
- |
|
- |
|
6,040 |
|
- |
|
Debt issuance costs and other |
(1) |
|
(2) |
|
(9) |
|
- |
|
Purchase of treasury interests |
- |
|
- |
|
- |
|
(4) |
|
Proceeds from issuance of ordinary shares upon initial public
offering, net of offering costs |
1,918 |
|
- |
|
1,918 |
|
- |
|
Net cash provided by / (used in) financing
activities |
1,579 |
|
(310) |
|
2,122 |
|
(625) |
|
Net change in cash and cash equivalents |
1,819 |
|
(132) |
|
2,160 |
|
(1,331) |
|
Cash and cash equivalents, beginning of period |
624 |
|
(916) |
|
284 |
|
1,924 |
|
Cash and cash equivalents, end of period |
2,443 |
|
(1,047) |
|
2,443 |
|
593 |
|
Amounts may not add due to rounding.
Royalty Pharma plc
Non-GAAP Financial Measures (unaudited) Table
4
($ in millions) |
For the three months ended June 30 |
|
2020 |
|
2019 Pro Forma(3) |
change |
|
Net cash provided by Operating activities
(GAAP) |
489 |
|
368 |
|
33% |
|
|
|
|
|
Products: |
|
|
|
Cystic fibrosis franchise |
136 |
|
86 |
|
59% |
|
Tysabri |
93 |
|
82 |
|
13% |
|
Imbruvica |
82 |
|
66 |
|
23% |
|
HIV franchise |
65 |
|
52 |
|
24% |
|
Januvia, Janumet, Other DPP-IVs |
35 |
|
41 |
|
(15)% |
|
Xtandi |
34 |
|
27 |
|
26% |
|
Promacta |
27 |
|
19 |
|
38% |
|
Farxiga/Onglyza |
8 |
|
- |
|
n/a |
|
Prevymis |
6 |
|
- |
|
n/a |
|
Crysvita |
3 |
|
- |
|
n/a |
|
Erleada |
2 |
|
- |
|
n/a |
|
Emgality |
2 |
|
- |
|
n/a |
|
Lyrica |
6 |
|
35 |
|
(82)% |
|
Letairis |
8 |
|
22 |
|
(66)% |
|
Other Products (4) |
79 |
|
55 |
|
43% |
|
Total Royalty Receipts |
585 |
|
486 |
|
20% |
|
Distributions to non-controlling interest |
(123) |
|
(114) |
|
8 |
|
Adjusted Cash Receipts (non-GAAP) (1) |
462 |
|
373 |
|
24% |
|
Payments for operating and professional costs |
(44) |
|
(39) |
|
12% |
|
Adjusted EBITDA (non-GAAP) (5) |
418 |
|
333 |
|
25% |
|
Development-stage funding payments – ongoing |
(6) |
|
(21) |
|
(73)% |
|
Interest paid, net |
(31) |
|
(57) |
|
(46)% |
|
Investment in non-consolidated affiliates |
(16) |
|
(10) |
|
64% |
|
Contributions from non-controlling interest- R&D |
4 |
|
6 |
|
(30) |
|
Adjusted Cash Flow (non-GAAP) (2) |
369 |
|
250 |
|
47% |
|
|
|
|
|
Amounts may not add due to
rounding.
Royalty Pharma plc GAAP
to Non-GAAP Reconciliation (unaudited) Table 5
|
For the three months ended June 30 |
($ in millions) |
2020 |
|
2019 Pro Forma(3) |
|
Net cash provided by operating activities
(GAAP) |
489 |
|
368 |
|
Adjustments: |
|
|
Distributions from non-consolidated affiliates - investing(6) |
15 |
|
- |
|
Interest paid, net (6) |
31 |
|
57 |
|
Development-stage funding payments – ongoing (7) |
6 |
|
21 |
|
Payments for operating and professional costs |
44 |
|
39 |
|
Swap termination payments |
- |
|
- |
|
Distributions to non-controlling interests (6) |
(123) |
|
(114) |
|
Adjusted Cash Receipts (non-GAAP) (1) |
462 |
|
373 |
|
|
|
|
Net cash provided by operating activities
(GAAP) |
489 |
|
368 |
|
Adjustments: |
|
|
Distributions from non-consolidated affiliates - investing(6) |
15 |
|
- |
|
Interest paid, net (6) |
31 |
|
57 |
|
Development-stage funding payments – ongoing (7) |
6 |
|
21 |
|
Swap termination payments |
- |
|
- |
|
Distributions to non-controlling interests (6) |
(123) |
|
(114) |
|
Swap collateral posted or (received), net (6) |
- |
|
- |
|
Adjusted EBITDA (non-GAAP) (5) |
418 |
|
333 |
|
|
|
|
Net cash provided by operating activities
(GAAP) |
489 |
|
368 |
|
Adjustments: |
|
|
Distributions from non-consolidated affiliates - investing(6) |
15 |
|
- |
|
Contribution from non-controlling interest- R&D (6) |
4 |
|
6 |
|
Distributions to non-controlling interests (6) |
(123) |
|
(114) |
|
Investment in non-consolidated affiliates (6) (8) |
(16) |
|
(10) |
|
Adjusted Cash Flow (non-GAAP) (2) |
369 |
|
250 |
|
Amounts may not add due to rounding.
Notes
(1) Adjusted Cash Receipts is a measure calculated
with inputs directly from the Statement of Cash Flows and includes
(1) royalty receipts: (i) Cash collections from royalty
assets (financial assets and intangible assets), (ii) Other royalty
cash collections, (iii) Distributions from non-consolidated
affiliates, plus (2) Proceeds from available for sale debt
securities (Tecfidera milestone payments), and less
(3) Distributions to non-controlling interest, which
represents distributions to our historical non-controlling interest
attributable to a de minimis interest in RPCT held by certain
legacy investors and to a new non-controlling interest that was
created as a result of the Exchange Offer Transactions in February
2020 related to the Legacy Investors Partnerships' ownership of
approximately 18% in Old RPI. See our Prospectus for additional
discussion. See GAAP to Non-GAAP reconciliation at Table 5.
(2) Adjusted Cash Flow is defined as Adjusted EBITDA
less (1) Development-stage funding payments – ongoing, (2)
Interest paid, net, (3) Swap collateral (posted) or received, net,
(4) Swap termination payments, and (5) Investment in
non-consolidated affiliates, and plus (1) Contributions from
non-controlling interest- R&D, all directly reconcilable to the
Statement of Cash Flows. See GAAP to Non-GAAP reconciliation at
Table 5.
(3) To aid in comparability, three months ended June 30,
2019 figures are presented on an unaudited pro
forma basis, which adjusts certain cash flow line items as if
Royalty Pharma’s Reorganization Transactions (as described in the
Company’s final prospectus filed with the SEC on June 17, 2020
(‘Prospectus’)) and its initial public offering (IPO) had taken
place on January 1, 2019. The most significant difference between
the pro forma and reported figures is the new non-controlling
interest that resulted from the Reorganization Transactions. A new
contractual non-controlling interest arose in the Reorganization
transaction that results in a higher distribution to
non-controlling interests on a pro forma basis as compared to prior
historical periods. Less material differences also arise in the
Royalty Receipts line for ‘Other Products’ as well as Payments for
operating and professional costs, and interest paid,
net.(4) Other Products include royalties on the following
products: Bosulif (a product co-developed by our joint venture
investee, Avillion, for which receipts are presented as
Distributions received from nonconsolidated affiliates on the
Statement of Cash Flows), Cimzia, Conbriza/Fablyn/Viviant, Entyvio,
Lexiscan, Mircera, Myozyme, Nesina, Prezista, Priligy, Rotateq,
Savella, Soliqua and Thalomid. Other Products also include
contributions from the Legacy SLP Interest and a distribution from
Avillion in respect of the Merck KGaA Asset, for which development
ceased in 2020, and for which the receipt is presented as
Distributions received from non-consolidated affiliates in both the
operating and investing section of the Statement of Cash Flows.
(5) Adjusted EBITDA is important to our lenders and
is defined under the credit agreement Adjusted Cash Receipts less
payments for operating and professional costs. Operating and
professional costs are comprised of Payments for operating costs
and professional services and Payments for rebates from the
Statement of Cash Flows. See GAAP to Non-GAAP reconciliation at
Table 5.
(6) The table below shows the line item for each adjustment
and the direct location for such line item on the Statement of Cash
Flows.
|
|
Reconciling adjustment |
Statement of Cash Flows classification |
Investments in non-consolidated affiliates |
Investing activities |
Distributions to non-controlling interests |
Financing activities |
Interest paid, net |
Operating activities (Interest paid less Interest received) |
Contributions from non-controlling interest- R&D |
Financing activities |
Distributions from non-consolidated affiliates - investing |
Investing activities |
|
|
(7) Our lenders consider all payments made to support
R&D activities for products undergoing late-stage development
similar to asset acquisitions as these funds are expected to
generate operational returns in the future. All development-stage
funding payments - ongoing and upfront - run through R&D
funding expense in net income and are added back in aggregate to
Net cash provided by operating activities to arrive at Adjusted
EBITDA. As a result, Adjusted EBITDA captures the full add-back for
R&D funding payments while Adjusted Cash Flow only reflects the
add-back for the upfront portion of development-stage funding
payments due to the fact that development-stage funding payments –
ongoing are considered an ongoing business expense.
(8) We consider all payments to fund our operating joint
ventures that are performing research and development activities
for products undergoing late stage development similar to asset
acquisitions as these funds are expected to generate operational
returns in the future. As a result, amounts funded through capital
calls by our equity method investees, the Avillion entities, are
added back to Adjusted Cash Flow.
Royalty Pharma Investor Relations and Communications
+1 (212) 883-2295ir@royaltypharma.com
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