Royalty Pharma plc (Nasdaq: RPRX) today reported financial results
for the second quarter of 2022 and raised full-year 2022 guidance
for Adjusted Cash Receipts(1) (a non-GAAP financial measure).
“We continue to make excellent progress against our strategic
and financial objectives,” said Pablo Legorreta, Royalty Pharma’s
founder and Chief Executive Officer. “Our diverse portfolio of
royalties delivered strong growth in the second quarter. In
addition, we further cemented our leading position in the royalty
funding market with $2.5 billion in announced transactions
year-to-date, including the addition of Trelegy, a rapidly growing
blockbuster therapy. Looking forward, the tailwinds behind our
business remain strong, fueled by the significant capital
requirements of the biopharma industry and our ability to create
“win-win” funding solutions. By executing against our mission to
accelerate innovation and transform patient lives, we are confident
in the power of our unique business model to drive long-term,
compounding growth.”
Second quarter 2022 GAAP financial results demonstrate
robust operating cash flow growth
- Net cash provided by operating activities increased 8% to $575
million; Net cash used in investing activities was $30 million; Net
cash used in financing activities increased to $228 million.
- Total income and other revenues decreased 3% to $536
million.
Second quarter 2022 non-GAAP financial results show
strong performance
- Adjusted Cash Receipts(1) increased 10% to $524 million, driven
by a double-digit increase in royalties from the cystic fibrosis
franchise, Xtandi and the addition of Tremfya, which more than
offset royalty expirations.
- Adjusted EBITDA(4) grew 10% to $480 million, driven by strong
growth in Adjusted Cash Receipts(1).
- Adjusted Cash Flow(2) increased 12% to $482 million.
Significant deal activity expands portfolio with two
attractive, approved therapies
- Acquired royalties on GSK’s Trelegy, the leading triple
combination therapy in COPD and asthma, and ex-U.S. and ex-Greater
China royalties on Gavreto, a precision oncology therapy marketed
by Roche.
Positive updates across royalty portfolio
- Pfizer announced the acquisition of Biohaven, accelerating
value creation for Royalty Pharma shareholders.
- FDA filings accepted for Biohaven’s zavegepant in migraine and
AstraZeneca’s PT027 in asthma.
Raising financial guidance for 2022
- Royalty Pharma now anticipates full-year 2022 Adjusted Cash
Receipts(1) to be between $2,275 million and $2,350 million (~+7%
to 10% year/year), excluding transactions announced subsequent to
the date of this release.
- This guidance reflects an estimated foreign exchange impact of
~-3% to -4% (-$65 million to -$85 million)(9) for FY 2022 year/year
Adjusted Cash Receipts(1) growth, assuming current exchange rates
prevail for the balance of 2022.
Financial
Summary |
Three Months Ended June 30, |
|
(unaudited) |
($ and shares in millions) |
2022 |
2021 |
Change |
Net cash provided by operating activities (GAAP) |
575 |
532 |
8% |
Net cash (used in)/provided by investing activities (GAAP) |
(30) |
126 |
(124)% |
Net cash used in financing activities (GAAP) |
(228) |
(224) |
2% |
Total income and other revenues (GAAP) |
536 |
555 |
(3)% |
Adjusted Cash Receipts(1)(non-GAAP) |
524 |
475 |
10% |
Adjusted EBITDA(4)(non-GAAP) |
480 |
436 |
10% |
Adjusted Cash Flow(2)(non-GAAP) |
482 |
429 |
12% |
Weighted average Class A ordinary shares outstanding - diluted |
607 |
607 |
0% |
Second
Quarter 2022 Financial Results |
|
|
Three Months Ended June 30, |
|
(unaudited) |
($ in millions) |
2022 |
2021 |
Change |
Net cash provided by operating activities
(GAAP) |
575 |
532 |
8% |
|
|
|
|
|
|
Royalty Receipts |
|
|
|
|
|
Royalties: |
Marketers: |
Therapeutic Area: |
|
|
|
Cystic fibrosis franchise |
Vertex |
Rare disease |
182 |
156 |
17% |
Tysabri |
Biogen |
Neurology |
93 |
92 |
1% |
Imbruvica |
AbbVie, J&J |
Cancer |
80 |
87 |
(8)% |
Xtandi |
Pfizer, Astellas |
Cancer |
52 |
36 |
45% |
Januvia, Janumet, Other DPP-IVs |
Merck & Co., others |
Diabetes |
36 |
39 |
(9)% |
Promacta |
Novartis |
Hematology |
35 |
32 |
7% |
Nurtec ODT/Biohaven payment* |
Biohaven, Pfizer |
Neurology |
19 |
17 |
12% |
Tremfya |
Johnson & Johnson |
Immunology |
18 |
— |
n/a |
Cabometyx/Cometriq |
Exelixis, Ipsen, Takeda |
Cancer |
13 |
10 |
29% |
Farxiga/Onglyza |
AstraZeneca |
Diabetes |
11 |
9 |
25% |
Prevymis |
Merck & Co. |
Infectious disease |
10 |
9 |
14% |
Evrysdi |
Roche |
Rare disease |
8 |
3 |
nm |
Trodelvy |
Gilead |
Cancer |
6 |
3 |
102% |
Crysvita |
Ultragenyx, Kyowa Kirin |
Rare disease |
5 |
4 |
26% |
Erleada |
Johnson & Johnson |
Cancer |
5 |
3 |
55% |
Orladeyo |
BioCryst |
Rare disease |
5 |
1 |
nm |
Emgality |
Lilly |
Neurology |
4 |
4 |
25% |
Oxlumo |
Alnylam |
Rare disease |
1 |
— |
n/a |
Other products(3) |
50 |
83 |
(39)% |
Total royalty receipts |
633 |
588 |
8% |
Distributions to non-controlling interests |
(109) |
(112) |
(3)% |
Adjusted Cash
Receipts(1)(non-GAAP) |
524 |
475 |
10% |
Amounts shown in the table may not add due to rounding.*Quarterly
redemption payments of $16 million have been received beginning in
the first quarter of 2021 related to the Series A Biohaven
Preferred Shares (presented as Proceeds from available for sale
debt securities on the statements of cash flows). The remaining
cash receipts related to royalty receipts from Nurtec ODT. |
Net cash provided by operating activities
(GAAP) was $575 million in the second quarter of 2022, an
increase of 8% compared to $532 million in the same period of 2021.
The increase was primarily driven by higher cash collections from
financial royalty assets and offset by slightly higher payments for
operating and professional costs.
Total royalty receipts were $633 million in the
second quarter of 2022, an increase of 8% compared to $588 million
in the same period of 2021. The increase was largely attributable
to the performance of the cystic fibrosis franchise and Xtandi, as
well as the addition of the royalty on Tremfya. The increase was
partially offset by a decline in royalties from the HIV franchise,
which reached the end of its royalty term in 2021, as well as an
unfavorable foreign exchange impact.
Drivers of royalty receipts in the second quarter of 2022 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).
- Cystic
fibrosis franchise: Royalty receipts from Vertex’s cystic
fibrosis franchise, which includes Kalydeco, Orkambi,
Symdeko/Symkevi and Trikafta/Kaftrio, all approved for patients
with certain mutations causing cystic fibrosis, were $182 million
in the second quarter of 2022, an increase of 17% compared to the
same period of 2021. The increase was primarily driven by the
launch of Kaftrio in additional countries outside the United States
and the performance of Trikafta in the United States, including its
uptake in children ages 6 through 11 years old.
-
Tysabri: Royalty receipts from Tysabri, which is
marketed by Biogen for the treatment of multiple sclerosis, were
$93 million in the second quarter of 2022, an increase of 1%
compared to the same period of 2021. The increase was primarily
attributable to higher U.S. sales and continued patient growth
outside the United States.
-
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 $80
million in the second quarter of 2022, a decrease of 8% compared to
the same period of 2021. The decrease was largely due to
slower-than-anticipated recovery of the chronic lymphocytic
leukemia market from COVID-19 and increased competition from newer
therapies in the United States.
-
Xtandi: Royalty receipts from Xtandi, which is
marketed by Pfizer and Astellas for the treatment of prostate
cancer, were $52 million in the second quarter of 2022, an increase
of 45% compared to the same period of 2021. The quarter benefited
from a true-up of royalties from prior periods.
- 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 $36 million in the second quarter
of 2022, a decrease of 9% compared to the same period of 2021.
Royalty receipts from Januvia, Janumet and other DPP-IVs
substantially ended in the second quarter of 2022.
-
Promacta: Royalty receipts from Promacta, which is
marketed by Novartis for the treatment of chronic immune
thrombocytopenia purpura (ITP) and severe aplastic anemia, were $35
million in the second quarter of 2022, an increase of 7% compared
to the same period of 2021, primarily resulting from increased use
in ITP and further uptake as a first-line treatment for severe
aplastic anemia in the United States.
- Nurtec
ODT/Biohaven payment: Royalty receipts from Nurtec ODT,
which is marketed by Biohaven and Pfizer for the acute and
preventative treatment of migraine, were $19 million in the second
quarter of 2022, an increase of 12% compared to the same period of
2021, primarily driven by prescription volume growth. These royalty
receipts include a $16 million fixed payment from Biohaven related
to the Series A Preferred Shares during each of the second quarter
of 2022 and 2021 as a result of the approval of Nurtec ODT in
February 2020.
-
Tremfya: Royalty receipts from Tremfya, which is
marketed by Johnson & Johnson for the treatment of plaque
psoriasis and active psoriatic arthritis, were $18 million in the
second quarter of 2022, primarily driven by continued volume
growth. Royalty Pharma acquired a royalty interest in Tremfya in
July 2021.
-
Cabometyx/Cometriq: Royalty receipts from
Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and
Takeda, were $13 million in the second quarter of 2022, an increase
of 29% compared to the same period of 2021. The increase was
primarily driven by the uptake of Cabometyx in combination with
Opdivo as a first-line treatment for patients with advanced renal
cell carcinoma.
- Additional
highlights:
-
Evrysdi: Royalty receipts from Evrysdi, marketed
by Roche for the treatment of spinal muscular atrophy (SMA) in
adults and children two months of age and older, were $8 million in
the second quarter of 2022, primarily attributable to switch and
naive patient starts in the United States and strong uptake from
early launch countries in Europe.
-
Orladeyo: Royalty receipts from Orladeyo, marketed
by BioCryst for the treatment of hereditary angioedema, were $5
million in the second quarter of 2022, driven by strong patient
demand, including uptake from patients switching from other
prophylactic therapies and acute-only therapy. Royalty Pharma
acquired a royalty interest in Orladeyo in December 2020 and an
additional royalty interest in November 2021.
-
Trodelvy: Royalty receipts from Trodelvy, marketed
by Gilead for the treatment of metastatic triple-negative breast
cancer and metastatic urothelial cancer, were $6 million in the
second quarter of 2022, an increase of 102% compared to the same
period of 2021. The increase was primarily driven by uptake in
second-line metastatic triple-negative breast cancer in the United
States and Europe and metastatic urothelial cancer in the United
States.
Distributions to non-controlling interests,
which reduce royalty receipts to arrive at Adjusted Cash
Receipts(1), were $109 million in the second quarter of 2022, a
decrease of 3% compared to the same period of 2021. As a percent of
total royalty receipts, distributions to non-controlling interests
decreased to 17% in the second quarter of 2022, compared to 19% in
the prior year period. The decrease was largely due to reduced
royalties from maturing or expired products, such as the HIV
franchise, where the percentage of royalties attributed to
non-controlling interests is higher.
Adjusted Cash Receipts(1)
(non-GAAP) were $524 million in the second quarter
of 2022, an increase of 10% compared to the same period of 2021,
reflecting higher royalty receipts from existing products,
including the cystic fibrosis franchise, the addition of new
royalties and the decrease in distributions to non-controlling
interests. The increase was partially offset by a decline in
royalty receipts from expired products, primarily the HIV
franchise, as well as an unfavorable foreign exchange impact.
Adjusted EBITDA(4)
(non-GAAP) is comprised of Adjusted Cash
Receipts(1) less payments for operating and professional costs.
Adjusted EBITDA was $480 million in the second quarter of 2022, an
increase of 10% compared to Adjusted EBITDA of $436 million in
the second quarter of 2021, and was largely attributable to growth
in Adjusted Cash Receipts(1). The increase was partially offset by
higher payments for operating and professional costs of $44 million
(representing 8% of Adjusted Cash Receipts(1)) in the second
quarter of 2022, an increase of 11% compared to the $40 million
reported in the same period of 2021 (representing 8% of Adjusted
Cash Receipts(1)).
Adjusted Cash Flow(2)
(non-GAAP) is comprised of Adjusted EBITDA(4) less
Development-stage funding payments - ongoing, Development-stage
funding payments - upfront and milestone, net interest received and
miscellaneous other items. In the second quarter of 2022, Adjusted
Cash Flow was $482 million, a 12% increase compared to Adjusted
Cash Flow of $429 million for the same period of 2021, primarily
due to growth in Adjusted Cash Receipts(1) and no funding
requirements by the Avillion entities in the second 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.
-
Cabometyx: In July 2022, Exelixis announced that
COSMIC-313, an ongoing Phase 3 trial evaluating Cabometyx,
nivolumab and ipilimumab versus the combination of nivolumab and
ipilimumab in patients with previously untreated advanced
intermediate- or poor-risk renal cell carcinoma, met its primary
endpoint, demonstrating significant improvement in progression-free
survival (PFS) at the primary analysis (hazard ratio: 0.73; 95%
confidence interval: 0.57-0.94; p=0.01). At a prespecified interim
analysis for the secondary endpoint of overall survival, the
combination of Cabometyx, nivolumab and ipilimumab did not
demonstrate a significant benefit. The trial will continue to the
next analysis of overall survival. Exelixis intends to discuss the
results with the U.S. Food and Drug Administration (FDA) to
determine next steps toward a potential regulatory submission.In
May 2022, Ipsen announced that it received approval from the
European Commission for Cabometyx as a monotherapy for the
treatment of adult patients with locally advanced or metastatic
differentiated thyroid carcinoma, refractory or not eligible to
radioactive iodine who progressed during or after prior systemic
therapy.
-
Tazverik: In June 2022, Ipsen and Epizyme
announced that they entered into a definitive merger agreement
under which Ipsen will acquire Epizyme. Ipsen will initiate a
tender offer to acquire all outstanding shares of Epizyme at a
price of $1.45 per share in cash at the closing of the transaction,
for an initial estimated aggregate consideration of $247 million
plus a contingent value right of $1 per share. The transaction is
anticipated to close by the end of the third quarter of 2022.
- Omecamtiv
mecarbil: In June 2022, Cytokinetics announced that the
FDA informed the company that the Cardiovascular and Renal Drugs
Advisory Committee will review its New Drug Application (NDA) on
December 13, 2022. Additionally, the FDA has assigned the NDA a
Prescription Drug User Fee Act (PDUFA) date of February 28,
2023.
-
Trodelvy: In June 2022, Gilead announced results
from the primary analysis of the Phase 3 TROPiCS-02 study of
Trodelvy versus physicians’ choice of chemotherapy in heavily
pre-treated HR+/HER2- metastatic breast cancer patients who
received prior endocrine therapy, CDK4/6 inhibitors and two to four
lines of chemotherapy. The study met its primary endpoint of PFS
with a statistically significant and clinically meaningful 34%
reduction in the risk of disease progression or death. The first
interim analysis of the key secondary endpoint of overall survival
demonstrated a trend in improvement. Patients will be followed for
a subsequent overall survival analysis. The safety profile for
Trodelvy was consistent with prior studies.
-
Imbruvica: In June 2022, Johnson & Johnson
announced primary results from the Phase 3 SHINE study, which
demonstrated that the combination of once-daily oral Imbruvica plus
bendamustine-rituximab (BR) and rituximab maintenance significantly
reduced the risk of disease progression or death by 25% compared to
patients who received placebo plus BR and rituximab maintenance in
patients aged 65 years or older with newly diagnosed mantle cell
lymphoma. With a median follow-up of 84.7 months, the Imbruvica
plus BR and rituximab maintenance combination showed a
statistically significant and clinically meaningful 2.3-year
improvement in median PFS (6.7 years) versus BR (4.4 years). The
safety profile of the Imbruvica plus BR regimen was consistent with
the known safety profiles of Imbruvica as well as BR.
-
Evrysdi: In May 2022, Roche announced that the FDA
approved a label extension for Evrysdi to include infants under two
months old with SMA. The approval is based on the interim efficacy
and safety data from the RAINBOWFISH study in newborns, which
showed that the majority of pre-symptomatic infants treated with
Evrysdi achieved key milestones, such as sitting and standing with
half walking, after 12 months of treatment.
-
PT027: In May 2022, Avillion LLP, a drug
development company focused on the co-development and financing of
pharmaceutical candidates from proof-of-concept through to
regulatory approval, announced that the FDA accepted for filing the
NDA for AstraZeneca’s PT027. The proposed indication is for the
as-needed treatment or prevention of bronchoconstriction and for
the prevention of exacerbation of asthma. The co-development
partnership between AstraZeneca and Avillion also recently expanded
to include the BATURA study, a randomized Phase 3b decentralized
trial to further assess the role of PT027 in preventing asthma
exacerbations.
-
Zavegepant: In May 2022, Biohaven announced that
the FDA accepted for review an NDA for zavegepant nasal spray for
the acute treatment of migraine in adults. The PDUFA date is set
for the first quarter of 2023.
- Nurtec
ODT: In May 2022, Pfizer and Biohaven announced that they
entered into a definitive agreement under which Pfizer will acquire
Biohaven. Pfizer will acquire all outstanding shares of Biohaven
not already owned by Pfizer for $148.50 per share in cash for a
total of approximately $11.6 billion. Pfizer will also make
payments at closing to settle Biohaven’s third party debt and for
the redemption of all outstanding shares of Biohaven’s redeemable
preferred stock. The transaction is expected to close by early
2023.In April 2022, Pfizer and Biohaven announced that the European
Commission granted marketing authorization for Vydura (rimegepant)
for both the acute treatment of migraine with or without aura, and
prophylaxis of episodic migraine in adults who have at least four
migraine attacks per month.
-
BCX9930: In May 2022, BioCryst announced that it
plans to discuss with regulators whether clinical trials with
amended protocols could resume using stepped dosing to 400
milligrams twice-daily of BCX9330, an oral Factor D inhibitor being
investigated in paroxysmal nocturnal hemoglobinuria (PNH). This
follows a pause in clinical trial enrollment in the REDEEM-1,
REDEEM-2 and RENEW clinical trials after elevated serum creatinine
levels were seen in some patients. BioCryst expects to have
discussions with regulators by the end of the third quarter of
2022.
Summary of Recent Royalty Acquisition
Activity
- Theravance
and Innoviva: In July 2022, Royalty Pharma acquired a
royalty interest in Trelegy from Theravance Biopharma and Innoviva
for $1.31 billion in net cash upfront and up to $300 million in
additional payments contingent on the achievement of certain sales
milestones. Trelegy, marketed by GSK, is the leading triple
combination therapy for the maintenance treatment of chronic
obstructive pulmonary disease (COPD) and asthma.
- Blueprint
Medicines: In June 2022, Royalty Pharma acquired an
ex-U.S. and ex-Greater China royalty interest in Gavreto from
Blueprint Medicines for up to $340 million, consisting of $175
million upfront and up to $165 million in potential sales-based
milestones. Gavreto, marketed by Roche in certain markets outside
the United States and Greater China, is a once-daily RET
(rearranged during transfection) targeted therapy approved in
Europe for the treatment of certain RET-altered non-small cell lung
cancers. Additionally, Gavreto has been submitted for marketing
approval for thyroid cancers in the European Union with a decision
expected in the second half of 2022.
Liquidity and Capital Resources
- As of June 30, 2022,
Royalty Pharma had cash, cash equivalents and marketable securities
in the amount of $2.4 billion and long-term debt with principal
value of $7.3 billion.
- In July 2022,
Royalty Pharma closed funding agreements with Theravance and
Innoviva related primarily to the acquisition of royalties on
Trelegy. This transaction, including the funding of ampreloxetine,
resulted in cash outflows of $1.34 billion, which will be reflected
in Royalty Pharma’s third quarter 2022 financial results.
2022 Financial Outlook
Royalty Pharma has provided its guidance for full-year 2022 as
follows:
|
Provided August 4, 2022 |
Adjusted Cash
Receipts(1)(non-GAAP) excluding transactionsannounced
after the date of this release |
$2,275 million to $2,350 million(+7% to 10% year/year) |
This guidance reflects an estimated foreign exchange impact of
approximately -3% to -4% (-$65 million to -$85 million)(9) for
full-year 2022 year/year Adjusted Cash Receipts(1) growth, assuming
current exchange rates prevail for the balance of 2022.
Royalty Pharma expects payments for operating and professional
costs to be approximately 8% to 9% of Adjusted Cash Receipts(1) in
2022.
Total interest paid is expected to be approximately $170 million
for full-year 2022. Based on the semi-annual interest payment
schedule of Royalty Pharma’s existing notes, interest paid is
anticipated to be $83 million in the third quarter of 2022 and a de
minimis amount in the fourth quarter of 2022. The projection
assumes no additional debt financing in 2022.
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 2022 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 second quarter 2022 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, AbbVie
and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s
Xtandi, GSK’s Trelegy, Novartis’ Promacta, Biohaven and 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.
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“forward-looking statements” as that term is defined in the United
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Pharma’s strategies, financing plans, growth opportunities and
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“believe,” “estimate,” “plan,” “seek,” “project,” “expect,” “may,”
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Forward-looking statements are subject to many risks, uncertainties
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of these risks are outside of the company’s control and could cause
its actual results to differ materially from those it thought would
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made only as of the date hereof. The company does not undertake,
and specifically declines, any obligation to update any such
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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
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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. Noncompliance with the interest coverage ratio and
leverage ratio covenants under the credit agreement 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 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 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. 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) 883-6772ir@royaltypharma.com
Royalty Pharma plc |
Condensed Consolidated Income Statement
(unaudited) |
Table 1 |
|
|
Three Months Ended June 30, |
($ in millions) |
2022 |
2021 |
Income and other revenues: |
|
|
Income from financial royalty assets |
515 |
503 |
Revenue from intangible royalty assets |
3 |
40 |
Other royalty income |
18 |
11 |
Total income and other revenues |
536 |
555 |
Operating expenses: |
|
|
Provision for changes in expected cash flows from financial royalty
assets |
106 |
(244) |
Research and development funding expense |
1 |
3 |
Amortization of intangible assets |
— |
6 |
General and administrative expenses |
52 |
45 |
Total operating expenses/(income), net |
158 |
(190) |
Operating income |
378 |
745 |
Other (income)/expense: |
|
|
Equity in earnings of equity method investees |
(1) |
(18) |
Interest expense |
47 |
37 |
Other income, net |
(160) |
(82) |
Total other income, net |
(114) |
(62) |
Consolidated net income before tax |
492 |
807 |
Income tax expense |
— |
— |
Consolidated net income |
492 |
807 |
Net income attributable to non-controlling interests |
187 |
366 |
Net income attributable to Royalty Pharma plc |
305 |
441 |
Amounts may not add due to rounding.
Royalty Pharma plc |
Selected Balance Sheet Data (unaudited) |
Table 2 |
|
($ in millions) |
As of June 30, 2022 |
As of December 31, 2021 |
Cash and cash equivalents |
2,108 |
1,541 |
Marketable securities |
290 |
582 |
Total financial royalty assets, net |
14,063 |
14,333 |
Total assets |
17,740 |
17,516 |
Long-term debt |
7,106 |
7,096 |
Total liabilities |
7,332 |
7,267 |
Total shareholders’ equity |
10,408 |
10,249 |
Royalty Pharma plc |
Condensed Consolidated Statements of Cash Flows
(unaudited) |
Table 3 |
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
($ in millions) |
2022 |
2021 |
2022 |
2021 |
Cash flows from operating activities: |
|
|
|
|
Cash collections from financial royalty assets |
560 |
520 |
1,181 |
1,094 |
Cash collections from intangible royalty assets |
36 |
39 |
71 |
75 |
Other royalty cash collections |
15 |
7 |
33 |
14 |
Distributions from equity method investees |
7 |
5 |
28 |
22 |
Interest received |
3 |
1 |
3 |
2 |
Derivative collateral received |
— |
11 |
— |
11 |
Derivative collateral posted |
— |
(9) |
— |
(9) |
Development-stage funding payments - ongoing |
(1) |
(3) |
(1) |
(6) |
Development-stage funding payments - upfront and milestone |
— |
— |
(100) |
— |
Payments for operating and professional costs |
(44) |
(40) |
(93) |
(82) |
Interest paid |
(1) |
— |
(87) |
(65) |
Net cash provided by operating activities |
575 |
532 |
1,035 |
1,058 |
Cash flows from investing activities: |
|
|
|
|
Distributions from equity method investees |
— |
1 |
— |
1 |
Investments in equity method investees |
— |
(9) |
(3) |
(17) |
Purchases of equity securities |
(29) |
— |
(63) |
— |
Proceeds from equity securities |
— |
109 |
— |
109 |
Purchases of available for sale debt securities |
(15) |
(18) |
(79) |
(35) |
Proceeds from available for sale debt securities |
16 |
16 |
31 |
31 |
Purchases of marketable securities |
(58) |
(223) |
(235) |
(728) |
Proceeds from sales and maturities of marketable securities |
251 |
449 |
526 |
869 |
Acquisitions of financial royalty assets |
(175) |
(181) |
(175) |
(684) |
Acquisitions of other financial assets |
(21) |
— |
(21) |
— |
Milestone payments |
— |
(19) |
— |
(19) |
Net cash (used in)/provided by investing
activities |
(30) |
126 |
(19) |
(473) |
Cash flows from financing activities: |
|
|
|
|
Distributions to non-controlling interests |
(109) |
(112) |
(216) |
(238) |
Distributions to non-controlling interests- other |
(38) |
(50) |
(72) |
(87) |
Dividends to shareholders |
(83) |
(73) |
(165) |
(139) |
Contributions from non-controlling interests- R&D |
0 |
2 |
1 |
4 |
Contributions from non-controlling interests- other |
2 |
8 |
3 |
9 |
Net cash used in financing activities |
(228) |
(224) |
(449) |
(451) |
Net change in cash and cash equivalents |
317 |
433 |
567 |
134 |
Cash and cash equivalents, beginning of period |
1,792 |
709 |
1,541 |
1,009 |
Cash and cash equivalents, end of period |
2,108 |
1,142 |
2,108 |
1,142 |
Amounts may not add due to rounding.
Royalty Pharma plc |
Non-GAAP Financial Measures (unaudited) |
Table 4 |
|
|
Three Months Ended June 30, |
($ in millions) |
2022 |
2021 |
Change |
Net cash provided by operating activities
(GAAP) |
575 |
532 |
8% |
|
|
|
|
Royalties: |
|
|
|
Cystic fibrosis franchise |
182 |
156 |
17% |
Tysabri |
93 |
92 |
1% |
Imbruvica |
80 |
87 |
(8)% |
Xtandi |
52 |
36 |
45% |
Januvia, Janumet, Other DPP-IVs |
36 |
39 |
(9)% |
Promacta |
35 |
32 |
7% |
Nurtec ODT/Biohaven payment* |
19 |
17 |
12% |
Tremfya |
18 |
— |
n/a |
Cabometyx/Cometriq |
13 |
10 |
29% |
Farxiga/Onglyza |
11 |
9 |
25% |
Prevymis |
10 |
9 |
14% |
Evrysdi |
8 |
3 |
nm |
Trodelvy |
6 |
3 |
102% |
Crysvita |
5 |
4 |
26% |
Erleada |
5 |
3 |
55% |
Orladeyo |
5 |
1 |
nm |
Emgality |
4 |
4 |
25% |
Oxlumo |
1 |
— |
n/a |
Other products(3) |
50 |
83 |
(39)% |
Total royalty receipts |
633 |
588 |
8% |
Distributions to non-controlling interests |
(109) |
(112) |
(3)% |
Adjusted Cash Receipts
(non-GAAP)(1) |
524 |
475 |
10% |
Payments for operating and professional costs |
(44) |
(40) |
11% |
Adjusted EBITDA
(non-GAAP)(4) |
480 |
436 |
10% |
Development-stage funding payments - ongoing |
(1) |
(3) |
(81)% |
Interest received, net |
2 |
1 |
170% |
Investments in equity method investees |
— |
(9) |
(100)% |
Contributions from non-controlling interests- R&D |
0 |
2 |
(95)% |
Other |
— |
2 |
(100)% |
Adjusted Cash Flow
(non-GAAP)(2) |
482 |
429 |
12% |
Amounts may not add due to rounding.*Quarterly redemption
payments of $16 million have been received beginning in the first
quarter of 2021 related to the Series A Biohaven Preferred Shares
(presented as Proceeds from available for sale debt securities on
the statements of cash flows). The remaining cash receipts related
to royalty receipts from Nurtec ODT.
Royalty Pharma plc |
GAAP to Non-GAAP Reconciliation (unaudited) |
Table 5 |
|
|
Three Months Ended June 30, |
($ in millions) |
2022 |
2021 |
Net cash provided by operating activities
(GAAP) |
575 |
532 |
Adjustments: |
|
|
Proceeds from available for sale debt securities(5)(6) |
16 |
16 |
Distributions from equity method investees - investing(6) |
— |
1 |
Interest received, net(6) |
(2) |
(1) |
Development-stage funding payments - ongoing(7) |
1 |
3 |
Payments for operating and professional costs |
44 |
40 |
Distributions to non-controlling interests(6) |
(109) |
(112) |
Derivative collateral received, net(6) |
— |
(2) |
Adjusted Cash Receipts
(non-GAAP)(1) |
524 |
475 |
Net cash provided by operating activities
(GAAP) |
575 |
532 |
Adjustments: |
|
|
Proceeds from available for sale debt securities(5)(6) |
16 |
16 |
Distributions from equity method investees - investing(6) |
— |
1 |
Interest received, net(6) |
(2) |
(1) |
Development-stage funding payments - ongoing(7) |
1 |
3 |
Distributions to non-controlling interests(6) |
(109) |
(112) |
Derivative collateral received, net(6) |
— |
(2) |
Adjusted EBITDA
(non-GAAP)(4) |
480 |
436 |
Net cash provided by operating activities
(GAAP) |
575 |
532 |
Adjustments: |
|
|
Proceeds from available for sale debt securities(5)(6) |
16 |
16 |
Distributions from equity method investees - investing(6) |
— |
1 |
Contributions from non-controlling interests- R&D(6) |
0 |
2 |
Distributions to non-controlling interests(6) |
(109) |
(112) |
Investments in equity method investees(6)(8) |
— |
(9) |
Adjusted Cash Flow
(non-GAAP)(2) |
482 |
429 |
Amounts may not add due to rounding.
Notes
(1) Adjusted Cash Receipts is a measure
calculated with inputs directly from the statements of cash flows
and includes (1) royalty receipts by product: (i) cash
collections from royalty assets (financial assets and intangible
assets), (ii) Other royalty cash collections,
(iii) Distributions from equity method investees, plus
(2) Proceeds from available for sale debt securities, and less
(1) Distributions to non-controlling interests, which
represent contractual distributions of royalty receipts and
proceeds from available for sale debt securities to the Company’s
historical non-controlling interests related to the Legacy
Investors Partnerships and Royalty Pharma Select Finance Trust
(RPSFT). See Royalty Pharma’s Annual Report on Form 10-K filed with
the SEC on February 15, 2022 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) Development-stage funding payments – upfront and milestone, (3)
Interest paid, net of Interest received, (4) Investments in equity
method investees and (5) Other (including Derivative collateral
posted, net of Derivative collateral received and Termination
payments on derivative instruments) plus (1) Contributions from
non-controlling interests- R&D, all directly reconcilable to
the statements of cash flows. See GAAP to Non-GAAP reconciliation
at Table 5.
(3) Other products primarily include royalty
receipts on the following products: Cimzia, HIV franchise, IDHIFA,
Letairis, Lexiscan, Mircera, Myozyme, Nesina, Soliqua, Tazverik and
contributions from the Legacy SLP Interest.
(4) Adjusted EBITDA is important to lenders and
is defined under the credit agreement as Adjusted Cash Receipts
less payments for operating and professional costs. Operating and
professional costs reflect Payments for operating and professional
costs from the statements of cash flows. See GAAP to Non-GAAP
reconciliation at Table 5.
(5) Receipts from the quarterly redemption of
Royalty Pharma’s Series A Biohaven Preferred Shares are presented
as Proceeds from available for sale debt securities on the
condensed consolidated statements of cash flows.
(6) The table below shows the line item for
each adjustment and the direct location for such line item on the
statements of cash flows.
Reconciling Adjustment |
Statements of Cash Flows Classification |
Proceeds from available for sale debt securities |
Investing activities |
Investments in equity method investees |
Investing activities |
Distributions to non-controlling interests |
Financing activities |
Interest received, net |
Operating activities (Interest paid less Interest
received) |
Derivative collateral received, net |
Operating activities (Derivative collateral
received less Derivative collateral posted) |
Contributions from non-controlling interest- R&D |
Financing activities |
Distributions from equity method investees - investing |
Investing activities |
(7) Royalty Pharma’s lenders consider all
payments made to support R&D activities for development-stage
product candidates similar to asset acquisitions as these funds are
expected to generate operational returns in the future. All ongoing
development-stage funding payments and upfront and milestone
development-stage funding payments are reported in 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.
(8) Royalty Pharma considers all payments to
fund its operating joint ventures that are performing R&D
activities for development-stage product candidates 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 Royalty Pharma’s equity method investees,
the Avillion Entities, are deducted to arrive at Adjusted Cash
Flow, but are not deducted in Adjusted EBITDA.
(9) Foreign exchange impact represents an
estimate of the difference in results that are attributable to
fluctuations in currency exchange rates as of the current reporting
date based on certain assumptions of prevailing exchange rates,
contractual terms, geographies from which royalties are derived,
timing of payments and other factors. The marketers paying
royalties may not provide or may not be required to provide the
breakdown of product sales by geography. Actual foreign exchange
impact may be different than estimates.
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