Royalty Pharma plc (Nasdaq: RPRX) today reported financial results
for the fourth quarter and full year 2022 and introduced full year
2023 guidance for Adjusted Cash Receipts(1) (non-GAAP financial
measure). “Royalty Pharma delivered strong performance in 2022,”
said Pablo Legorreta, Royalty Pharma’s founder and Chief Executive
Officer. “We reported impressive growth and deployed substantial
capital in value-enhancing transactions, further strengthening our
leadership position in funding life science innovation. We expanded
our talented team to support our robust deal pipeline and our
substantial growth opportunities. With strong fundamental tailwinds
underpinning our business, we expect to deliver attractive,
long-term compounding growth while transforming patient lives.”
Fourth quarter and full year 2022 GAAP financial results
demonstrate robust operating cash flow growth
- Net cash provided by operating activities increased 16% to $570
million in the quarter and 6% to $2,144 million for the full year;
Net cash provided by (used in) investing activities of $415 million
in the quarter, ($1,029 million) for the full year; Net cash used
in financing activities of $266 million in the quarter, $945
million for the full year.
- Total income and other revenues of $566 million in the quarter;
$2,237 million for the full year.
Fourth quarter and full year 2022 non-GAAP financial
results show strong double-digit growth
- Adjusted Cash Receipts(1) increased 96% to $1,064 million in
the quarter and 31% to $2,789 million for the full year, driven
primarily by the $458 million accelerated payment from Pfizer’s
acquisition of Biohaven, strong portfolio performance and new
royalty acquisitions.
- Adjusted EBITDA(2) increased 99% to $983 million in the quarter
and 32% to $2,566 million for the full year.
- Adjusted Cash Flow(3) grew 146% to $946 million in the quarter
and 42% to $2,235 million for the full year.
- Prior to Biohaven accelerated payments, Adjusted Cash Receipts
grew 12% for the quarter and 10% for full year.
Positive portfolio updates and nine deals executed in
2022 for six potentially transformative therapies
- Transactions since 2020 expected to add approximately $1.0
billion to Adjusted Cash Receipts(1) in 2025.
- Strong start to 2023 with agreement to provide $500 million in
upfront funding to Ionis Pharmaceuticals.
Financial guidance for full year 2023 (excludes
contribution from new transactions)
- Royalty Pharma expects 2023 Adjusted Cash Receipts(1)
(non-GAAP) to be between $2,375 million and $2,475 million,
excluding a potential $475 million milestone related to FDA
approval of intranasal zavegepant and transactions announced
subsequent to the date of this release. This guidance represents
underlying growth of 4% to 9% prior to payments related to the
Biohaven Preferred Shares in 2022(4).
Financial
Summary |
Three Months EndedDecember 31, |
Twelve Months EndedDecember 31, |
|
(unaudited) |
($ and shares in millions) |
2022 |
2021 |
Change |
2022 |
2021 |
Change |
Net cash provided by operating activities (GAAP) |
570 |
490 |
16% |
2,144 |
2,018 |
6% |
Net cash provided by/(used in) investing activities (GAAP) |
415 |
(552) |
(175)% |
(1,029) |
(1,870) |
(45)% |
Net cash (used in)/provided by financing activities (GAAP) |
(266) |
(198) |
34% |
(945) |
385 |
(345)% |
Total income and other revenues (GAAP) |
566 |
576 |
(2)% |
2,237 |
2,289 |
(2)% |
Adjusted Cash Receipts(1) (non-GAAP) |
1,064 |
543 |
96% |
2,789 |
2,129 |
31% |
Adjusted EBITDA(2) (non-GAAP) |
983 |
494 |
99% |
2,566 |
1,944 |
32% |
Adjusted Cash Flow(3) (non-GAAP) |
946 |
384 |
146% |
2,235 |
1,573 |
42% |
Fully diluted Class A ordinary shares outstanding |
607 |
607 |
0% |
607 |
607 |
0% |
Fourth Quarter 2022 Financial Results
|
|
|
Three Months Ended December 31, |
|
|
|
(unaudited) |
($ in millions) |
|
|
2022 |
2021 |
Change |
Net cash provided by operating activities
(GAAP) |
570 |
490 |
16% |
Royalties: |
Marketers: |
Therapeutic Area: |
|
|
|
Nurtec ODT/Biohaven payment* |
Pfizer* |
Neurology |
500 |
19 |
nm |
Cystic fibrosis franchise |
Vertex |
Rare disease |
219 |
196 |
12% |
Tysabri |
Biogen |
Neurology |
88 |
94 |
(7)% |
Imbruvica |
AbbVie, J&J |
Cancer |
71 |
89 |
(20)% |
Promacta |
Novartis |
Hematology |
49 |
49 |
0% |
Trelegy |
GSK |
Respiratory |
47 |
— |
n/a |
Xtandi |
Pfizer, Astellas |
Cancer |
46 |
41 |
11% |
Tremfya |
Johnson & Johnson |
Immunology |
29 |
19 |
53% |
Cabometyx/Cometriq |
Exelixis, Ipsen, Takeda |
Cancer |
15 |
12 |
29% |
Evrysdi |
Roche |
Rare disease |
14 |
6 |
147% |
Prevymis |
Merck & Co. |
Infectious disease |
12 |
10 |
17% |
Farxiga/Onglyza |
AstraZeneca |
Diabetes |
12 |
9 |
23% |
Trodelvy |
Gilead |
Cancer |
7 |
5 |
40% |
Orladeyo |
BioCryst |
Rare disease |
6 |
3 |
94% |
Erleada |
Johnson & Johnson |
Cancer |
6 |
4 |
42% |
Crysvita |
Ultragenyx, Kyowa Kirin |
Rare disease |
6 |
5 |
19% |
Emgality |
Lilly |
Neurology |
5 |
4 |
21% |
Oxlumo |
Alnylam |
Rare disease |
1 |
1 |
10% |
Januvia, Janumet, Other DPP-IVs |
Merck & Co., others |
Diabetes |
1 |
38 |
(99)% |
Other products(5) |
50 |
55 |
(8)% |
Total royalty receipts |
1,183 |
659 |
79% |
Distributions to legacy non-controlling interests - royalty
receipts |
(119) |
(116) |
3% |
Adjusted Cash
Receipts(1)
(non-GAAP) |
1,064 |
543 |
96% |
Amounts shown in the table may not add due to rounding. Results for
full year 2022 and full year 2021 are shown in Table 3 for
statements of cash flows and Table 4 for non-GAAP financial
measures. *Amounts include quarterly redemption payments of $16
million in 2021 and 2022 related to the Series A Biohaven Preferred
Shares (presented as Proceeds from available for sale debt
securities on the statements of cash flows). For the fourth quarter
of 2022, amounts also include the accelerated redemption payments
of $480 million for all outstanding Series A and Series B Biohaven
Preferred Shares following Pfizer’s acquisition of Biohaven in
October 2022. The remaining amounts are related to royalty receipts
from Nurtec ODT. |
Net cash provided by operating activities
(GAAP) was $570 million in the fourth quarter of 2022, an
increase of 16%, and $2,144 million for full year 2022, an increase
of 6%, compared to the same periods in 2021. The increases in the
fourth quarter and full year 2022 were largely attributable to
higher cash collections from financial royalty assets. These
increases were partially offset by lower cash collections from
Januvia, Janumet and other DPP-IVs, which substantially ended in
the second quarter of 2022, and higher payments for operating and
professional costs. The increase in the full year of 2022 was also
partially offset by a decline in royalty receipts from the HIV
franchise, which reached the end of its royalty term in 2021.
Additionally, interest paid for full year 2022 was higher as a
result of the first interest payment on the $1.3 billion senior
unsecured notes issued in July 2021 in 2022, which was partially
offset by higher interest received. Also contributing to the
increase in the fourth quarter of 2022 was a decline in
development-stage payments - upfront and milestone.
Total royalty receipts were $1,183 million in
the fourth quarter of 2022, an increase of 79%, and $3,231 million
for full year 2022, an increase of 24%, compared to the same
periods in 2021. The increases in the fourth quarter and full year
2022 were largely attributable to the accelerated redemption of all
outstanding Series A and Series B Biohaven Preferred Shares
following Pfizer’s acquisition of Biohaven in October 2022, strong
performance from existing products, including the cystic fibrosis
franchise and Tremfya, and the addition of new royalties, such as
Trelegy. Growth in the fourth quarter of 2022 was partially offset
by lower Januvia, Janumet and other DPP-IV royalties, which
substantially ended in the second quarter of 2022, and the decline
in Imbruvica. Growth for full year 2022 was also partially offset
by the end of the royalty term for the DPP-IV royalties and HIV
franchise in 2021. Additionally, foreign exchange rates unfavorably
impacted total royalty receipts in the fourth quarter and full year
2022.
Drivers of total royalty receipts for the fourth quarter and
full year 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). The section below excludes comments from
marketers around foreign exchange impact, which was generally a
headwind across the portfolio. Refer to Table 6 for description of
approved indications.
Nurtec ODT / Biohaven payment |
(Q4: $500 million; Full Year: $560 million) Driven by an increase
of $480 million in the fourth quarter and full year resulting from
the redemption of all outstanding Series A and Series B Biohaven
Preferred Shares following Pfizer’s acquisition of Biohaven in
October 2022. Nurtec ODT royalties (Q4: $5 million, +45%; Full
Year: $18 million, +129%) were driven by strong volume growth.
After the redemption of the Biohaven Preferred Shares, Royalty
Pharma will only receive royalties from underlying product sales of
Nurtec ODT and potential future sales of zavegepant, as well as
potential future milestone payments on zavegepant. |
Cystic fibrosis franchise* |
(Q4: $219 million, +12%; Full Year: $811 million, +16%) Strong
uptake of Kaftrio in countries outside the U.S. continued, as well
as positive performance of Trikafta in the U.S., including its
uptake in children 6 through 11 years old. |
Tysabri |
(Q4: $88 million, -7%; Full Year: $370 million, 0%) Decrease in the
quarter was due to higher discounts and lower volume in the U.S.
and a decline in rest of world sales. For full year, global patient
growth continued outside the U.S. offset by U.S. sales
performance. |
Imbruvica |
(Q4: $71 million, -20%; Full Year: $313 million, -11%) Performance
was impacted by competition in the chronic lymphocytic leukemia
market and a decrease in new patient starts in the U.S. relative to
prior periods. |
Promacta |
(Q4: $49 million, 0%; Full Year: $182 million, +5%) Growth in the
U.S. was offset by lower rest of world sales in the quarter.
Full-year results primarily driven by increased use in chronic
immune thrombocytopenia purpura and further U.S. uptake as a
first-line treatment for severe aplastic anemia. |
Trelegy |
(Q4: $47 million; Full Year: $90 million) Experienced strong
patient demand globally and growth of the single inhaler triple
therapy market. Royalty Pharma acquired a royalty interest in
Trelegy in July 2022 and began receiving royalty receipts in the
third quarter of 2022. |
Xtandi |
(Q4: $46 million, +11%; Full Year: $187 million, +18%) Benefited
from higher demand across various prostate cancer indications. For
full year, there was also a benefit from a true-up of royalties
from prior periods. |
Tremfya |
(Q4: $29 million, +53%; Full Year: $97 million, +172%) Market
growth and market share gains continued. Royalty Pharma acquired a
royalty interest in Tremfya in July 2021 and began receiving
royalty receipts in the third quarter of 2021. |
Cabometyx / Cometriq |
(Q4: $15 million, +29%; Full Year: $55 million, +64%) Growth was
due to uptake of Cabometyx in combination with Opdivo as a
first-line treatment for patients with advanced renal cell
carcinoma, including longer duration of therapy. Royalty Pharma
acquired a royalty interest in Cabometyx/Cometriq in March 2021 and
began recording royalty receipts in the second quarter of
2021. |
Evrysdi |
(Q4: $14 million, +147%; Full Year: $41 million, +152%) Experienced
strong growth globally. |
Trodelvy |
(Q4: $7 million, +40%; Full Year: $25 million, +85%) Performance
was largely attributable to adoption in the second- and third-line
settings for the treatment of metastatic triple-negative breast
cancer in the U.S. and Europe and uptake in metastatic urothelial
cancer in the U.S. |
Orladeyo |
(Q4: $6 million, +94%; Full Year: $22 million, +223%) Benefited
from strong new patient starts. Royalty Pharma acquired a royalty
interest in Orladeyo in December 2020 and an additional royalty
interest in November 2021. |
Januvia, Janumet, other DPP-IVs |
(Q4: $1 million, -99%; Full Year: $73 million, -52%). Royalty
receipts substantially ended in the second quarter of 2022. |
Percentages
shown represent year-over-year changes. *Includes Kalydeco,
Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio. |
Distributions to legacy non-controlling interests -
royalty receipts, which reduce total royalty receipts to
arrive at Adjusted Cash Receipts(1), were $119 million in the
fourth quarter of 2022, a slight increase of 3%, compared to the
same period of 2021. Distributions to legacy non-controlling
interests - royalty receipts were $442 million for full year 2022,
a decrease of 8%, compared to full year 2021, primarily due to
lower royalties from products reaching the end of their royalty
term which were associated with a higher percentage of
distributions to legacy non-controlling interests. The lower
distributions were partially offset by a distribution to legacy
non-controlling interests related to the accelerated redemption of
all outstanding Biohaven Series A Preferred Shares that followed
Pfizer’s acquisition of Biohaven in October 2022. As a percentage
of total royalty receipts, distributions to legacy non-controlling
interests – royalty receipts decreased to 10% and 14% in the fourth
quarter and full year 2022, respectively, compared to 18% in the
same periods in 2021.
Adjusted Cash
Receipts(1)
(non-GAAP) were $1,064 million in the fourth
quarter of 2022, an increase of 96%, and $2,789 million for full
year 2022, an increase of 31%, compared to the same periods of
2021, reflecting the accelerated redemption payment on all
outstanding Series A and Series B Biohaven Preferred Shares, higher
royalty receipts from existing products and the addition of new
royalties. Additionally, full year 2022 benefited from a decrease
in royalty receipts distributions to legacy non-controlling
interests. These increases were partially offset by a decline in
royalty receipts from royalties reaching the end of their term,
weaker Imbruvica performance, a one-time Soliqua milestone of $37
million in the third quarter of 2021 and unfavorable foreign
exchange rate movements. Prior to the accelerated Biohaven
redemption payment, Adjusted Cash Receipts(1) growth was 12% for
the fourth quarter and 10% for the full year of 2022 compared to
the same periods of 2021.
Adjusted
EBITDA(2)
(non-GAAP) is comprised of Adjusted Cash
Receipts(1) less payments for operating and professional costs.
Adjusted EBITDA(2) was $983 million in the fourth quarter of 2022,
an increase of 99%, and $2,566 million for full year 2022, an
increase of 32%, compared to the same periods of 2021 and was
largely attributable to growth in Adjusted Cash Receipts(1).
Payments for operating and professional costs were $81 million and
$49 million, or 8% and 9% of Adjusted Cash Receipts(1) in the
fourth quarter of 2022 and 2021, respectively, representing a 65%
increase. Payments for operating and professional costs were $223
million and $185 million, or 8% and 9% of Adjusted Cash Receipts(1)
in the full year of 2022 and 2021, respectively, representing a 21%
increase. The increases in payments for operating and professional
costs were primarily driven by increased royalty receipts,
specifically the one-time accelerated redemption payment on the
Biohaven Preferred Shares. Prior to the accelerated Biohaven
redemption payments, Adjusted EBITDA(2) growth was 13% for the
fourth quarter and 10% for the full year of 2022 compared to the
same periods of 2021.
Adjusted Cash
Flow(3)
(non-GAAP) is comprised of Adjusted EBITDA(2) less
Development-stage funding payments - ongoing, Development-stage
funding payments - upfront and milestone, net interest
paid/received and miscellaneous other items. Adjusted Cash Flow(3)
was $946 million in the fourth quarter of 2022, an increase of
146%, and $2,235 million for full year 2022, an increase of 42%,
compared to the same periods of 2021, primarily driven by the same
reasons noted above for Adjusted Cash Receipts. The increase in
Adjusted Cash Flow(3) for the fourth quarter further benefited from
higher net interest received and lower upfront development-stage
funding payments, the latter of which were $50 million as compared
to $103 million in the prior year period. The increase in Adjusted
Cash Flow(3) for the full year was also driven by lower upfront
development-stage funding payments, which were $175 million in 2022
as compared to $193 million in 2021, and were partially offset by
higher net interest paid. Prior to the accelerated Biohaven
redemption payment, Adjusted Cash Flow(3) growth was 35% for the
fourth quarter and 15% for the full year of 2022 compared to the
same periods of 2021.
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.’
Financial royalty asset impairment (GAAP)
reflected a $616 million non-cash charge for impairments of
gantenerumab and otilimab following recent developments from the
marketers, and Gavreto (see “Key Developments Relating to the
Portfolio”).
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.
Nurtec ODT |
In October 2022, Pfizer completed its acquisition of Biohaven.
Pfizer acquired 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 also made payments at closing
to settle Biohaven’s third party debt and to redeem outstanding
redeemable Biohaven Preferred Shares. |
Xtandi |
In October 2022, Pfizer announced positive topline results from the
Phase 3 TALAPRO-2 study of Talzenna, an oral poly ADP-ribose
polymerase inhibitor, in combination with Xtandi compared to
placebo plus Xtandi in men with metastatic castration-resistant
prostate cancer. The study met its primary endpoint with a
statistically significant and clinically meaningful improvement in
radiographic progression-free survival. The safety of Talzenna plus
Xtandi were generally consistent with the known safety profile of
each medicine. Pfizer intends to share these data with global
regulatory authorities to potentially support a regulatory
filing. |
Oxlumo |
In October 2022, Alnylam announced that the Food and Drug
Administration (FDA) approved a label expansion for Oxlumo, now
indicated for the treatment of primary hyperoxaluria type 1 to
lower urinary oxalate and plasma oxalate levels in pediatric and
adult patients. The approval was based on the positive efficacy and
safety results of the ILLUMINATE-C Phase 3 study of Oxlumo in
patients with severe renal impairment, including those on
hemodialysis. |
Otilimab |
In October 2022, GSK announced that two of three Phase 3 trials met
their primary endpoints, but the limited efficacy demonstrated in
the ContRAst Phase 3 program did not support a suitable
benefit/risk profile for otilimab as a potential treatment for
rheumatoid arthritis. As a result, GSK decided not to progress with
regulatory submissions. Following this development, Royalty Pharma
recorded a non-cash impairment charge of $160 million. |
Tulmimetostat |
In October 2022, MorphoSys announced preliminary Phase 1/2 results
of tulmimetostat (CPI-0209), an oral, investigational
next-generation selective dual inhibitor of EZH2 and EZH1, in
heavily pretreated patients with advanced cancers. Results showed
responses or disease stabilization in five cohorts with evaluable
patients. The safety profile of tulmimetostat was consistent with
the mechanism of action of EZH2 inhibition. |
Tremfya |
In October 2022, Johnson & Johnson announced new results from
the Phase 2b QUASAR Induction Study 1 in ulcerative colitis.
Results showed that continued treatment with Tremfya in adults with
moderately to severely active ulcerative colitis with inadequate
responses to previous treatments allowed a mean of 52.1% of IV
Tremfya week 12 clinical nonresponders to achieve clinical response
at week 24. Clinical response at weeks 12 or 24 of the study was
ultimately achieved by 80.2% of patients who were randomized to IV
Tremfya 200mg and by 78.5% of patients who were randomized to IV
Tremfya 400mg. |
Gantenerumab |
In November 2022, Roche stated that it would discontinue clinical
trials of gantenerumab after the GRADUATE I and II studies
evaluating gantenerumab in people with early Alzheimer’s did not
meet the primary endpoint of slowing clinical decline. Following
this development, Royalty Pharma recorded a non-cash impairment
charge of $274 million. Roche continues to study trontinemab, its
brain shuttle version of gantenerumab, in a Phase 2a study. |
Cabometyx |
In December 2022, Exelixis announced that the Phase 3 CONTACT-01
study of Cabometyx in combination with atezolizumab versus
docetaxel in patients with metastatic non-small cell lung cancer
without actionable mutations who experienced disease progression on
or after treatment with an immune checkpoint inhibitor and
platinum-containing chemotherapy, did not meet its primary endpoint
of overall survival at the final analysis. Detailed findings from
CONTACT-01 are expected to be submitted for presentation at a
future medical meeting. |
Omecamtiv mecarbil |
In December 2022, the U.S. FDA Cardiovascular and Renal Drugs
Advisory Committee voted 8 to 3 that the benefits of omecamtiv
mecarbil do not outweigh its risks for the treatment of heart
failure with reduced ejection fraction (HFrEF). The New Drug
Application for omecamtiv mecarbil is currently under review by the
FDA, with a PDUFA target action date of February 28, 2023. |
BCX9930 |
In December 2022, BioCryst announced that it would discontinue the
development of BCX9930 based on new competitive data recently
presented at the American Society of Hematology annual meeting.
BioCryst plans to focus its complement inhibitor development
efforts on BCX10013. |
BCX10013 |
In January 2023, BioCryst announced that initial data from ongoing
Phase 1 single ascending dose and multiple ascending dose trials of
BCX10013, a potential once-daily, oral Factor D inhibitor, in
healthy volunteers showed rapid and sustained suppression of the
alternative pathway of the complement system. BCX10013 was safe and
generally well-tolerated at all doses studied to date. BioCryst
plans to advance BCX10013 into patient studies in mid-2023,
including in patients with paroxysmal nocturnal hemoglobinuria, to
evaluate once-daily dosing. BioCryst expects to confirm the optimal
dosing for pivotal trials by the end of the year, move directly
into a pivotal trial in patients with immunoglobulin A nephropathy,
and rapidly expand into pivotal trials in additional
indications. |
Airsupra (PT027) |
In January 2023, AstraZeneca announced the U.S. approval of
Airsupra for the as-needed treatment or prevention of
bronchoconstriction and to reduce the risk of exacerbations in
people with asthma aged 18 years and older. Airsupra is a
first-in-class, pressurized metered-dose inhaler, fixed-dose
combination rescue medication containing albuterol, a short-acting
beta2-agonist, and budesonide, an anti-inflammatory inhaled
corticosteroid. |
Gavreto |
In February 2023, Roche announced an impairment charge was recorded
due to lower sales expectations. Royalty Pharma recorded a non-cash
impairment charge of $182 million due to the uncertainty of
Gavreto’s commercial outlook in the fourth quarter of 2022. |
Trodelvy |
In February 2023, Gilead announced the FDA approved Trodelvy for
the treatment of adult patients with unresectable locally advanced
or metastatic hormone receptor (HR)-positive, human epidermal
growth factor receptor 2 (HER2)-negative breast cancer who have
received endocrine-based therapy and at least two additional
systemic therapies in the metastatic setting. |
Summary of Recent Royalty Acquisition
Activity
Royalty Pharma announced new transactions of up to $3.5 billion
in 2022, including $2.0 billion in upfront payments, and has had a
strong start to 2023 with the Ionis transaction. Royalty Pharma
recently announced the following transactions:
- Spinraza and
pelacarsen: In January 2023, Royalty Pharma acquired a
royalty interest in Biogen’s Spinraza (marketed for spinal muscular
atrophy) and Novartis’ pelacarsen (in development for Lp(a) driven
cardiovascular disease) from Ionis Pharmaceuticals for an upfront
payment of $500 million and up to $625 million in additional
pelacarsen milestone payments. Under the terms of this agreement,
Royalty Pharma will receive 25% to 45% of Ionis’ 11% to 15% royalty
on Spinraza sales, on up to $1.5 billion in annual sales. Royalty
Pharma’s royalty interest in Spinraza will revert to Ionis after
Royalty Pharma receives aggregate Spinraza royalties equal to $475
million or $550 million, depending on the timing and occurrence of
certain events. Royalty Pharma will also receive 25% of Ionis’
mid-teens to low-20% royalty on net sales of pelacarsen, resulting
in a mid-single digit royalty to Royalty Pharma.
- Olpasiran: In
November 2022, Royalty Pharma acquired a royalty interest in
Amgen’s olpasiran (in development for Lp(a) driven cardiovascular
disease) from Arrowhead Pharmaceuticals for an upfront payment of
$250 million and certain contingent clinical, regulatory and
sales-based milestones of up to $160 million. Royalty Pharma
acquired the entirety of Arrowhead’s royalty of up to low-double
digits on worldwide net sales of olpasiran.
- MK-8189: In October
2022, Royalty Pharma announced an R&D funding collaboration
with Merck, a potential treatment for schizophrenia. The
transaction utilized a novel structure involving a modest $50
million upfront payment to support Phase 2b development which will
be followed by a decision to potentially scale the investment to
co-fund the Phase 3 studies for an additional $375 million. Royalty
Pharma will be eligible for milestone payments associated with
certain regulatory approvals for MK-8189 as well as royalties on
annual worldwide net sales of any approved product. Royalty Pharma
believes the risk-sharing structure of this collaboration with
Merck may serve as a model for future transactions with large
biopharma companies.
Liquidity and Capital Resources
- As of December 31, 2022, Royalty
Pharma had cash, cash equivalents and marketable securities of $1.7
billion and total debt with principal value of $7.3 billion.
- In January 2023, Royalty Pharma
announced a funding agreement with Ionis Pharmaceuticals to acquire
royalties on Biogen’s Spinraza and Novartis’ pelacarsen, as
discussed above. This transaction resulted in a cash outflow of
$500 million, which will be reflected in Royalty Pharma’s first
quarter 2023 financial results.
2023 Financial Outlook
Royalty Pharma has provided guidance for full year 2023,
excluding transactions announced after the date of
this release, as follows:
|
Provided February 15, 2023 |
Adjusted Cash
Receipts(1)
(non-GAAP) |
$2,375 million to $2,475 million |
Payments for operating and professional costs |
8% to 9% of Adjusted Cash Receipts |
Interest paid |
$170 million |
Development-stage funding payments - upfront and
milestone |
$50 million |
Royalty Pharma’s 2023 guidance does not include a potential $475
million accelerated milestone payment related to FDA approval of
Pfizer’s intranasal zavegepant for migraine, which has a PDUFA date
in the first quarter of 2023. This Adjusted Cash Receipts(1)
guidance for 2023 represents underlying growth of 4% to 9% prior to
payments related to the Biohaven Preferred Shares in 2022(4).
Additionally, guidance reflects an estimated foreign exchange
impact of approximately -1% to -2%(10) for full year 2023 Adjusted
Cash Receipts(1) growth, assuming current foreign exchange rates
prevail for 2023.
Total interest paid is based on the semi-annual interest payment
schedule of Royalty Pharma’s existing notes and is anticipated to
be approximately $170 million in 2023. Interest paid is anticipated
to be approximately $85 million in the first and third quarters of
2023 with a de minimis amount recorded in the second and fourth
quarters of 2023. The projection assumes no incremental debt
financing in 2023. In 2022, Royalty Pharma also received interest
of $25 million on its cash, cash equivalents and marketable
securities, which partially offset interest paid.
Royalty Pharma today provides this guidance based on its most
up-to-date view on its prospects. This guidance assumes no major
unforeseen adverse events and excludes the contributions from
transactions announced subsequent to the date of this press
release. Furthermore, Royalty Pharma may amend its guidance in the
event it engages in new royalty transactions which have a material
near-term financial impact on the company.
Royalty Pharma has not reconciled its non-GAAP 2023 guidance to
the most directly comparable GAAP measure, net cash provided by
operating activities, at this time due to the inherent difficulty
in accurately forecasting and quantifying certain amounts that are
necessary for such reconciliation, including, primarily, payments
for operating and professional costs, distributions from equity
method investees and interest received. Royalty Pharma is not able
to forecast on a GAAP basis with reasonable certainty all
adjustments needed in order to project net cash provided by
operating activities at this time.
Financial Results Call
Royalty Pharma will host a conference call and simultaneous
webcast to discuss its fourth quarter and full year 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, 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") by visiting EDGAR on the SEC's website at
www.sec.gov.
Use of Non-GAAP Measures
Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow
are non-GAAP measures presented as supplemental measures to Royalty
Pharma’s GAAP financial performance. These non-GAAP financial
measures exclude the impact of certain items and therefore have not
been calculated in accordance with GAAP. In each case, because
operating performance is a function of liquidity, the non-GAAP
measures used by management are presented and defined as
supplemental liquidity measures. Royalty Pharma cautions readers
that amounts presented in accordance with the definitions of
Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow may
not be the same as similar measures used by other companies. Not
all companies and analysts calculate the non-GAAP measures Royalty
Pharma uses in the same manner. Royalty Pharma compensates for
these limitations by using non-GAAP financial measures as
supplements to GAAP financial measures and by presenting the
reconciliations of the non-GAAP financial measures to their most
comparable GAAP financial measures, in each case being net cash
provided by operating activities.
Royalty Pharma believes that Adjusted Cash Receipts and Adjusted
Cash Flow provide meaningful information about its operating
performance because the business is heavily reliant on its ability
to generate consistent cash flows and these measures reflect the
core cash collections and cash charges comprising its operating
results. Management strongly believes that Royalty Pharma’s
significant operating cash flow is one of the attributes that
attracts potential investors to its business.
In addition, Royalty Pharma believes that Adjusted Cash Receipts
and Adjusted Cash Flow help identify underlying trends in the
business and permit investors to more fully understand how
management assesses the performance of the company, including
planning and forecasting for future periods. Adjusted Cash Receipts
and Adjusted Cash Flow are used by management as key liquidity
measures in the evaluation of the company’s ability to generate
cash from operations. Both measures are an indication of the
strength of the company and the performance of the business.
Management uses Adjusted Cash Receipts and Adjusted Cash Flow when
considering available cash, including for decision-making purposes
related to funding of acquisitions, voluntary debt repayments,
dividends and other discretionary investments. Further, these
non-GAAP financial measures help management, the audit committee
and investors evaluate the company’s ability to generate liquidity
from operating activities.
Management believes that Adjusted EBITDA is an important
non-GAAP measure in analyzing liquidity and is a key component of
certain material covenants contained within the company’s Credit
Agreement(11). Noncompliance with the interest coverage ratio and
leverage ratio covenants under the Credit Agreement(11) could
result in lenders requiring the company to immediately repay all
amounts borrowed. If Royalty Pharma cannot satisfy these financial
covenants, it would be prohibited under the Credit Agreement(11)
from engaging in certain activities, such as incurring additional
indebtedness, paying dividends, making certain payments, and
acquiring and disposing of assets. Consequently, Adjusted EBITDA is
critical to the assessment of Royalty Pharma’s liquidity.
Management uses Adjusted Cash Flow to evaluate its ability to
generate cash from operations, the performance of the business and
the company’s performance as compared to its peer group. Management
also uses Adjusted Cash Flow to compare its performance against
non-GAAP measures used by many companies in the biopharmaceutical
industry, even though each company may customize its own
calculation and therefore one company’s metric may not be directly
comparable to another’s. Royalty Pharma believes that non-GAAP
financial measures, including Adjusted Cash Flow, are frequently
used by securities analysts, investors and other interested parties
to evaluate companies in Royalty Pharma’s industry.
The non-GAAP financial measures used in this press release have
limitations as analytical tools, and you should not consider them
in isolation or as a substitute for the analysis of Royalty
Pharma’s results as reported under GAAP. The company has provided a
reconciliation of each non-GAAP financial measure, except for its
non-GAAP outlook to the most directly comparable GAAP financial
measure, in each case being net cash provided by operating
activities at Table 5.
Royalty Pharma Investor Relations and
Communications
+1 (212) 883-6772ir@royaltypharma.com
Royalty Pharma
plcCondensed Consolidated Income Statement
(unaudited)Table 1
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
($ in millions) |
2022 |
2021 |
2022 |
2021 |
Income and other revenues: |
|
|
|
|
Income from financial royalty assets |
547 |
526 |
2,125 |
2,065 |
Revenue from intangible royalty assets |
0 |
32 |
37 |
171 |
Other royalty income |
19 |
18 |
75 |
53 |
Total income and other revenues |
566 |
576 |
2,237 |
2,289 |
Operating expenses: |
|
|
|
|
Provision for changes in expected cash flows from financial royalty
assets |
309 |
267 |
904 |
453 |
Research and development funding expense |
51 |
104 |
177 |
200 |
Amortization of intangible assets |
— |
6 |
6 |
23 |
General and administrative expenses |
73 |
46 |
227 |
183 |
Financial royalty asset impairment |
616 |
— |
616 |
— |
Total operating expenses, net |
1,048 |
422 |
1,930 |
859 |
Operating (loss)/income |
(483) |
153 |
307 |
1,431 |
Other expense/(income): |
|
|
|
|
Equity in losses of equity method investees |
7 |
38 |
9 |
19 |
Interest expense |
47 |
47 |
188 |
166 |
Other expenses/(income), net |
74 |
15 |
(120) |
4 |
Total other expenses, net |
127 |
100 |
77 |
190 |
Consolidated net (loss)/income before tax |
(610) |
54 |
230 |
1,241 |
Income tax expense |
— |
— |
— |
— |
Consolidated net (loss)/income |
(610) |
54 |
230 |
1,241 |
Net (loss)/income attributable to non-controlling interests |
(154) |
46 |
187 |
621 |
Net (loss)/income attributable to Royalty Pharma
plc |
(456) |
8 |
43 |
620 |
Amounts may not add due to rounding.
Royalty Pharma
plcSelected Balance Sheet Data
(unaudited)Table 2
($ in millions) |
As of December 31, 2022 |
As of December 31, 2021 |
Cash and cash equivalents |
1,711 |
1,541 |
Marketable securities |
24 |
582 |
Total current and non-current financial royalty assets, net |
14,184 |
14,333 |
Total assets |
16,813 |
17,516 |
Current portion of long-term debt |
998 |
— |
Long-term debt, net of current portion |
6,119 |
7,096 |
Total liabilities |
7,288 |
7,267 |
Total shareholders’ equity |
9,525 |
10,249 |
Royalty Pharma
plcCondensed Consolidated Statements of Cash Flows
(unaudited)Table 3
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
($ in millions) |
2022 |
2021 |
2022 |
2021 |
Cash flows from operating activities: |
|
|
|
|
Cash collections from financial royalty assets |
663 |
583 |
2,507 |
2,316 |
Cash collections from intangible royalty assets |
1 |
38 |
73 |
151 |
Other royalty cash collections |
18 |
17 |
70 |
44 |
Distributions from equity method investees |
6 |
6 |
39 |
34 |
Interest received |
14 |
0 |
25 |
3 |
Derivative collateral received |
— |
— |
— |
35 |
Derivative collateral posted |
— |
— |
— |
(35) |
Termination payments on derivative instruments |
— |
— |
— |
(16) |
Development-stage funding payments – ongoing |
(1) |
(1) |
(2) |
(7) |
Development-stage funding payments – upfront and milestone |
(50) |
(103) |
(175) |
(193) |
Payments for operating and professional costs |
(81) |
(49) |
(223) |
(185) |
Interest paid |
(1) |
(1) |
(170) |
(130) |
Net cash provided by operating activities |
570 |
490 |
2,144 |
2,018 |
Cash flows from investing activities: |
|
|
|
|
Distributions from equity method investees |
— |
— |
— |
1 |
Investments in equity method investees |
— |
(7) |
(10) |
(35) |
Purchases of equity securities |
(25) |
(35) |
(88) |
(135) |
Proceeds from equity securities |
165 |
— |
211 |
116 |
Purchases of available for sale debt securities |
(86) |
(18) |
(480) |
(70) |
Proceeds from available for sale debt securities |
495 |
16 |
542 |
63 |
Purchases of marketable securities |
— |
(441) |
(235) |
(1,197) |
Proceeds from sales and maturities of marketable securities |
116 |
105 |
792 |
1,598 |
Acquisitions of financial royalty assets |
(250) |
(172) |
(1,742) |
(2,192) |
Acquisitions of other financial assets |
— |
— |
(21) |
— |
Milestone payments |
— |
— |
— |
(19) |
Net cash provided by/(used in) investing
activities |
415 |
(552) |
(1,029) |
(1,870) |
Cash flows from financing activities: |
|
|
|
|
Distributions to legacy non-controlling interests – royalty
receipts |
(119) |
(116) |
(442) |
(480) |
Distributions to legacy non-controlling interests – other |
(29) |
— |
(31) |
(20) |
Distributions to continuing non-controlling interests |
(33) |
(34) |
(144) |
(133) |
Dividends to shareholders |
(84) |
(74) |
(333) |
(285) |
Contributions from legacy non-controlling interests – R&D |
0 |
1 |
1 |
7 |
Contributions from non-controlling interests – other |
1 |
25 |
6 |
37 |
Proceeds from issuance of long-term debt, net of discount |
— |
— |
— |
1,273 |
Debt issuance costs and other |
(1) |
(1) |
(1) |
(13) |
Net cash (used in)/provided by financing
activities |
(266) |
(198) |
(945) |
385 |
Net change in cash and cash equivalents |
719 |
(260) |
170 |
532 |
Cash and cash equivalents, beginning of
period |
992 |
1,801 |
1,541 |
1,009 |
Cash and cash equivalents, end of period |
1,711 |
1,541 |
1,711 |
1,541 |
Amounts may not add due to rounding.
Royalty Pharma
plcNon-GAAP Financial Measures
(unaudited)Table 4
|
Three Months Ended December 31, |
Twelve Months EndedDecember 31, |
($ in millions) |
2022 |
2021 |
Change |
2022 |
2021 |
Change |
Net cash provided by operating activities
(GAAP) |
570 |
490 |
16% |
2,144 |
2,018 |
6% |
Royalties: |
|
|
|
|
|
|
Nurtec ODT/Biohaven payment* |
500 |
19 |
nm |
560 |
70 |
nm |
Cystic fibrosis franchise |
219 |
196 |
12% |
811 |
702 |
16% |
Tysabri |
88 |
94 |
(7)% |
370 |
369 |
0% |
Imbruvica |
71 |
89 |
(20)% |
313 |
353 |
(11)% |
Promacta |
49 |
49 |
0% |
182 |
174 |
5% |
Trelegy |
47 |
— |
n/a |
90 |
— |
n/a |
Xtandi |
46 |
41 |
11% |
187 |
158 |
18% |
Tremfya |
29 |
19 |
53% |
97 |
36 |
172% |
Cabometyx/Cometriq |
15 |
12 |
29% |
55 |
34 |
64% |
Evrysdi |
14 |
6 |
147% |
41 |
16 |
152% |
Prevymis |
12 |
10 |
17% |
37 |
38 |
(1)% |
Farxiga/Onglyza |
12 |
9 |
23% |
44 |
36 |
21% |
Trodelvy |
7 |
5 |
40% |
25 |
13 |
85% |
Orladeyo |
6 |
3 |
94% |
22 |
7 |
223% |
Erleada |
6 |
4 |
42% |
21 |
14 |
50% |
Crysvita |
6 |
5 |
19% |
20 |
17 |
22% |
Emgality |
5 |
4 |
21% |
19 |
15 |
22% |
Oxlumo |
1 |
1 |
10% |
3 |
1 |
108% |
Januvia, Janumet, Other DPP-IVs |
1 |
38 |
(99)% |
73 |
151 |
(52)% |
Other products(5) |
50 |
55 |
(8)% |
263 |
404 |
(35)% |
Total royalty receipts |
1,183 |
659 |
79% |
3,231 |
2,609 |
24% |
Distributions to legacy non-controlling interests – royalty
receipts |
(119) |
(116) |
3% |
(442) |
(480) |
(8)% |
Adjusted Cash Receipts
(non-GAAP)(1) |
1,064 |
543 |
96% |
2,789 |
2,129 |
31% |
Payments for operating and professional costs |
(81) |
(49) |
65% |
(223) |
(185) |
21% |
Adjusted EBITDA
(non-GAAP)(2) |
983 |
494 |
99% |
2,566 |
1,944 |
32% |
Development-stage funding payments – ongoing |
(1) |
(1) |
(18)% |
(2) |
(7) |
(69)% |
Development-stage funding payments – upfront and milestone |
(50) |
(103) |
(52)% |
(175) |
(193) |
(9)% |
Interest received/(paid), net |
14 |
(1) |
nm |
(145) |
(127) |
14% |
Investments in equity method investees |
— |
(7) |
(100)% |
(10) |
(35) |
(72)% |
Contributions from legacy non-controlling interests – R&D |
0 |
1 |
(93)% |
1 |
7 |
(86)% |
Other |
— |
— |
n/a |
— |
(16) |
(100)% |
Adjusted Cash Flow
(non-GAAP)(3) |
946 |
384 |
146% |
2,235 |
1,573 |
42% |
Amounts may not add due to rounding.*Amounts include quarterly
redemption payments of $16 million related to the Series A Biohaven
Preferred Shares (presented as Proceeds from available for sale
debt securities on the statements of cash flows) in 2022 and 2021.
In the fourth quarter and full year of 2022, amounts also include
the accelerated redemption payments of $480 million for all
outstanding Series A and Series B Biohaven Preferred Shares
following Pfizer’s acquisition of Biohaven in October 2022. The
remaining amounts are related to royalty receipts from Nurtec
ODT.
Royalty Pharma plcGAAP
to Non-GAAP Reconciliation (unaudited)Table
5
|
Three Months Ended December 31, |
Twelve Months Ended December 31, |
($ in millions) |
2022 |
2021 |
2022 |
2021 |
Net cash provided by operating activities
(GAAP) |
570 |
490 |
2,144 |
2,018 |
Adjustments: |
|
|
|
|
Proceeds from available for sale debt securities(6)(7) |
495 |
16 |
542 |
63 |
Distributions from equity method investees(7) |
— |
— |
— |
1 |
Interest (received)/paid, net(7) |
(14) |
1 |
145 |
127 |
Development-stage funding payments – ongoing(8) |
1 |
1 |
2 |
7 |
Development-stage funding payments – upfront and milestone(8) |
50 |
103 |
175 |
193 |
Payments for operating and professional costs |
81 |
49 |
223 |
185 |
Termination payments on derivative instruments |
— |
— |
— |
16 |
Distributions to legacy non-controlling interests – royalty
receipts(7) |
(119) |
(116) |
(442) |
(480) |
Adjusted Cash
Receipts(1)
(non-GAAP) |
1,064 |
543 |
2,789 |
2,129 |
Net cash provided by operating activities
(GAAP) |
570 |
490 |
2,144 |
2,018 |
Adjustments: |
|
|
|
|
Proceeds from available for sale debt securities(6)(7) |
495 |
16 |
542 |
63 |
Distributions from equity method investees(7) |
— |
— |
— |
1 |
Interest (received)/paid, net(7) |
(14) |
1 |
145 |
127 |
Development-stage funding payments – ongoing(8) |
1 |
1 |
2 |
7 |
Development-stage funding payments – upfront and milestone(8) |
50 |
103 |
175 |
193 |
Termination payments on derivative instruments |
— |
— |
— |
16 |
Distributions to legacy non-controlling interests – royalty
receipts(7) |
(119) |
(116) |
(442) |
(480) |
Adjusted
EBITDA(2)
(non-GAAP) |
983 |
494 |
2,566 |
1,944 |
Net cash provided by operating activities
(GAAP) |
570 |
490 |
2,144 |
2,018 |
Adjustments: |
|
|
|
|
Proceeds from available for sale debt securities(6)(7) |
495 |
16 |
542 |
63 |
Distributions from equity method investees(7) |
— |
— |
— |
1 |
Distributions to legacy non-controlling interests – royalty
receipts(7) |
(119) |
(116) |
(442) |
(480) |
Investments in equity method investees(7)(9) |
— |
(7) |
(10) |
(35) |
Contributions from legacy non-controlling interests –
R&D(7) |
0 |
1 |
1 |
7 |
Adjusted Cash
Flow(3)
(non-GAAP) |
946 |
384 |
2,235 |
1,573 |
Amounts may not add due to rounding.
Royalty Pharma
plcDescription of Approved Indications for Select
Portfolio TherapiesTable 6
Nurtec ODT |
Acute and preventative treatment of migraine |
Cystic fibrosis franchise |
Cystic fibrosis |
Tysabri |
Relapsing forms of multiple sclerosis |
Imbruvica |
Hematological malignancies and chronic graft versus host
disease |
Promacta |
Chronic immune thrombocytopenia purpura and aplastic anemia |
Trelegy |
Chronic obstructive pulmonary disease and asthma |
Xtandi |
Prostate cancer |
Tremfya |
Plaque psoriasis and active psoriatic arthritis |
Cabometyx / Cometriq |
Kidney, liver and thyroid cancer |
Evrysdi |
Spinal muscular atrophy |
Trodelvy |
Breast and bladder cancer |
Orladeyo |
Hereditary angioedema prophylaxis |
Januvia, Janumet, other DPP-IVs |
Type 2 diabetes |
Notes
(1) Adjusted Cash Receipts is a measure
calculated with inputs directly from the statements of cash flows
and includes (1) total royalty receipts: (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 legacy non-controlling interests –
royalty receipts, which represent contractual distributions of
royalty receipts and proceeds from available for sale debt
securities 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, 2023 for additional
discussion. See GAAP to Non-GAAP reconciliation at Table 5.
(2) Adjusted EBITDA is important to lenders and
is defined under the Credit Agreement(11) as Adjusted Cash
Receipts(1) 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.
(3) Adjusted Cash Flow is defined as Adjusted
EBITDA(2) 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 legacy non-controlling interests – R&D, all
directly reconcilable to the statements of cash flows. See GAAP to
Non-GAAP reconciliation at Table 5.
(4) Underlying growth in 2023 Adjusted Cash
Receipts is calculated based on Adjusted Cash Receipts of $2,789
million in 2022 net of the $458 million accelerated Biohaven
payment from Pfizer’s acquisition of Biohaven and $52 million
related to contributions from quarterly redemption payments of
Series A Biohaven Preferred Shares in 2022.
(5) Other products primarily include royalty
receipts on the following products: Bosulif (a product co-developed
by our joint venture investee, Avillion I, for which receipts are
presented as Distributions from equity method investees on the
statements of cash flows), Cimzia, Entyvio, Gavreto, HIV franchise,
IDHIFA, Letairis, Lexiscan, Mircera, Myozyme, Nesina, Soliqua,
Tazverik and distributions from the Legacy SLP Interest. In the
twelve months ended December 31, 2021, other products also included
a one-time Soliqua milestone payment of $45 million.
(6) Receipts from the quarterly redemption of
the Series A Biohaven Preferred Shares in 2021 and 2022 and the
accelerated redemption payments of all outstanding Series A and
Series B Biohaven Preferred Shares following Pfizer’s acquisition
of Biohaven in October 2022 are presented as Proceeds from
available for sale debt securities on the statements of cash
flows.
(7) 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 legacy non-controlling interests - royalty
receipts |
Financing activities |
Interest (received)/paid, net |
Operating activities (Interest received less Interest paid) |
Contributions from legacy non-controlling interests - R&D |
Financing activities |
Distributions from equity method investees |
Investing activities |
(8) 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(2).
As a result, Adjusted EBITDA(2) captures the full add-back for
R&D funding payments.
(9) Royalty Pharma considers all payments to
fund its operating joint ventures that are performing R&D
activities 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(3), but are
not deducted in Adjusted EBITDA(2).
(10) Foreign exchange impact represents an
estimate of the difference in results that are attributable to
fluctuations in currency exchange rates 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.
(11) See Royalty Pharma’s
Annual Report on Form 10-K filed with the SEC on February 15, 2023
for additional discussion on defined term.
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