Royalty Pharma plc (Nasdaq: RPRX) today provided an update on its
business performance, including recent key accomplishments and the
full year 2022 outlook for Net cash provided by operating
activities (GAAP financial measure) and Adjusted Cash Receipts(1)
(non-GAAP financial measure). Pablo Legorreta, Royalty Pharma’s
founder and Chief Executive Officer, will discuss these updates
today as part of a webcast presentation at the 41st Annual J.P.
Morgan Healthcare Conference to be held at 11:15 a.m. Eastern Time
/ 8:15 a.m. Pacific Time.
“Royalty Pharma delivered outstanding performance in 2022,” said
Pablo Legorreta. “We deployed substantial capital and added
royalties on six new therapies, ranging from an approved, growing
blockbuster to exciting development-stage therapies in areas of
high unmet patient need. Further, we hosted our inaugural Investor
Day, highlighting our talented team, the unique strength of our
business model, and our strategy to drive long-term, compounding
growth. Lastly, we expect to achieve the upper end of our 2022
financial guidance, putting us in a strong position to accelerate
innovation in life sciences and transform patient lives
globally.”
Strong 2022 Financial Performance
Based on preliminary unaudited fourth quarter 2022 results,
Royalty Pharma expects Net cash provided by operating activities
(GAAP) to be approximately $2,140 million to $2,150 million for
full year 2022. Additionally, Royalty Pharma now expects to deliver
Adjusted Cash Receipts(1) (non-GAAP) for full year 2022 of
approximately $2,785 million to $2,790 million, which is towards
the upper end of its guidance range of $2,750 million to $2,800
million and represents growth of 31% year-over-year. This strong
double-digit growth in Adjusted Cash Receipts reflects the strong
performance of Royalty Pharma’s diversified royalty portfolio as
well as the acceleration of payments related to Pfizer’s
acquisition of Biohaven. Importantly, the growth in Adjusted Cash
Receipts was achieved despite a significant decline in two of
Royalty Pharma’s largest royalties in previous years, the HIV and
DPP-IV franchises, highlighting the resilience of the business
model with a unique ability to grow through royalty
expirations.
Royalty Pharma’s preliminary unaudited fourth quarter 2022
results provided in this press release are subject to change in
connection with the completion of the company’s final closing
procedures, final adjustments and other developments that may arise
in the course of the preparation or audit of its financial
statements. Royalty Pharma’s management will host a conference call
to discuss Royalty Pharma’s fourth quarter and full year 2022
results in February.
Strong Capital Deployment Added Innovative Therapies,
Enhancing Long-term Growth
Since 2020, Royalty Pharma has announced transactions of $10
billion, including $3.4 billion in 2022. Important additions to
Royalty Pharma’s portfolio in the past year have included the
growing respiratory therapy, Trelegy, as well as the potentially
practice-changing, development-stage compounds, olpasiran and
aficamten (both for cardiovascular disease) and MK-8189
(schizophrenia). In total, 29 unique therapies have been added to
the company’s portfolio since 2020 (of which 14 are either
currently or projected to be blockbusters that generate annual
sales of $1 billion or more based on consensus estimates). These
new medicines are expected to make a significant contribution to
Royalty Pharma’s financial performance in the coming years. In
aggregate, based on consensus sales forecasts, investments made
since 2020 are estimated to add approximately $1 billion to Royalty
Pharma’s annual Adjusted Cash Receipts(1) (non-GAAP) in 2025.
Biotech Funding Environment Driving New Royalty
Opportunities
The biopharmaceutical ecosystem is generating significant
demands for capital to fund the ongoing wave of healthcare
innovation. Reflecting this positive market backdrop, between 2019
and 2022, the number of initial and in-depth reviews of new royalty
opportunities conducted by Royalty Pharma increased by 75%,
resulting in a 55% increase in announced annual transaction value
(from $2.2 billion in 2019 to $3.4 billion in 2022). Looking ahead,
Royalty Pharma estimates that the biopharma ecosystem will
cumulatively spend more than $4 trillion to fund life sciences
research and development over the next decade (of which
unprofitable biopoharma will spend more than $1 trillion including
SG&A), which is expected to generate many new royalty
opportunities.
Given Royalty Pharma’s unique role at the heart of funding life
sciences innovation, Royalty Pharma believes that there will be
significant opportunity to deploy capital and fund innovation,
while creating value for its stakeholders. This is reflected in the
company’s capital deployment target of $10 billion to $12 billion
over the next five years and in Royalty Pharma’s expectation that
it has the potential over the longer term to double its average
annual capital deployment to $4 billion to $5 billion.
Webcast of J.P. Morgan Healthcare
Conference
Royalty Pharma will present at the 41st Annual J.P. Morgan
Healthcare Conference at 11:15 a.m. ET / 8:15 a.m. PT today. The
webcast will be accessible from Royalty Pharma’s “Events” page at
https://www.royaltypharma.com/investors/news-and-events/events. The
webcast will also be archived for a minimum of thirty days.
About Royalty Pharma
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, Pfizer’s Nurtec ODT,
Johnson & Johnson’s Tremfya, Roche’s Evrysdi, Gilead’s
Trodelvy, and 12 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). 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 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 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. 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 Adjusted Cash Receipts as used in this press
release at Table 1.
Royalty Pharma Investor Relations and
Communications
+1 (212) 883-6772ir@royaltypharma.com
Table 1 – GAAP to Non-GAAP Reconciliation
(unaudited)
($ in
millions) |
Full-year 2022 |
|
|
Net cash provided by operating activities
(GAAP) |
$2,140 - 2,150 |
Adjustments: |
|
Proceeds from available for sale debt securities(2)(3) |
540 - 545 |
Interest paid, net(2) |
144 – 145 |
Development-stage funding payments - ongoing |
2 – 3 |
Development-stage funding payments - upfront and milestone |
170 - 175 |
Payments for operating and professional costs |
220 - 225 |
Distributions to non-controlling interests(2) |
(435 - 445) |
Adjusted Cash Receipts(1)
(non-GAAP) |
$2,785 - 2,790 |
Amounts may not add due to ranges presented by
line item.
Notes
(1) Adjusted Cash Receipts is a measure calculated with inputs
directly from the statement 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; less (3)
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.
(2) 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 |
Proceeds from available for sale
debt securities |
|
Investing activities |
Distributions
to non-controlling interests |
|
Financing activities |
Interest paid, net |
|
Operating activities (Interest
paid less Interest received) |
3) Receipts from the redemption of Royalty
Pharma’s Series A and Series B Biohaven Preferred Shares are
presented as Proceeds from available for sale debt securities on
the statement of cash flows.
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