Royalty Pharma plc (Nasdaq: RPRX) today reported financial
results for the third quarter of 2023 and raised full-year 2023
guidance for Adjusted Cash Receipts(1) (a non-GAAP financial
measure).
“We delivered another quarter of impressive financial
performance, as well as substantial deal activity,” said Pablo
Legorreta, Royalty Pharma’s founder and Chief Executive Officer.
“We were thrilled to acquire royalties on three innovative
therapies, increasing our announced value of transactions to $3.8
billion this year. Notably, we acquired additional royalties on
Evrysdi, a blockbuster rare genetic disease therapy, for up to $1.5
billion, and we also completed two synthetic royalty transactions
for up to $650 million. This further underscores the enormous
opportunity to fund innovation in life sciences and our unique
capabilities to customize win-win solutions for our partners. Our
deal pipeline is robust and 2023 is shaping up to be among our best
years ever for capital deployment. As a result, we are on track to
deliver our attractive long-term financial outlook for compounding
growth and value creation.”
Third quarter 2023 GAAP financial results demonstrate
solid operating cash flow growth
- Net cash provided by operating activities grew 6% to $574
million; Net cash used in investing activities was $451 million;
Net cash used in financing activities was $1.4 billion.
- Total income and other revenues was $536 million.
Third quarter 2023 non-GAAP financial results show
continued business momentum
- Adjusted Cash Receipts(1) increased 7% to $637 million, driven
largely by strong performances of the CF franchise and Trelegy, and
the addition of Spinraza, partially offset by royalty expirations
and Imbruvica headwinds.
- Adjusted Cash Receipts(1) grew 9% before a Biohaven-related
payment received in the prior-year period.
- Adjusted EBITDA(2) grew 6% to $582 million; Adjusted Cash
Flow(3) increased 8% to $474 million.
Announced transactions of $2.2 billion in past three
months further expands portfolio
- Increased royalty interest on Roche’s Evrysdi for spinal
muscular atrophy in 5th largest royalty deal ever, bringing Royalty
Pharma market share of transactions >$500 million to 84%.
- Acquired royalties on Ferring’s Adstiladrin for bladder cancer
and Ascendis’ Skytrofa for growth hormone deficiency in two
separate synthetic royalty transactions for a total value of $650
million.
Raising financial guidance range for 2023 (excludes
contributions from new transactions)
- Royalty Pharma now anticipates 2023 Adjusted Cash Receipts(1)
(non-GAAP) to be between $2,950 million and $3,000 million
(previously $2,900 million to $2,975 million), excluding future
transactions.
- Guidance represents underlying growth of 9%(4) to 11%(4) prior
to non-recurring Biohaven-related payments.
Financial
Summary |
Three Months Ended September 30, |
|
(unaudited) |
($ and shares in millions) |
2023 |
|
2022 |
|
Change |
Net cash provided by operating activities (GAAP) |
574 |
|
539 |
|
6 |
% |
Net cash used in investing activities (GAAP) |
(451) |
|
(1,425) |
|
(68 |
)% |
Net cash used in financing activities (GAAP) |
(1,359) |
|
(230) |
|
nm |
Total income and other revenues (GAAP) |
536 |
|
573 |
|
(6 |
)% |
Adjusted Cash Receipts(1) (non-GAAP) |
637 |
|
597 |
|
7 |
% |
Adjusted EBITDA(2) (non-GAAP) |
582 |
|
548 |
|
6 |
% |
Adjusted Cash Flow(3) (non-GAAP) |
474 |
|
441 |
|
8 |
% |
Weighted average Class A ordinary shares outstanding - diluted |
601 |
|
607 |
|
(1 |
)% |
Third Quarter 2023 Financial Results
|
|
|
Three Months Ended September 30, |
|
|
|
(unaudited) |
($ in millions) |
|
|
2023 |
|
2022 |
|
Change |
Net cash provided by operating activities
(GAAP) |
574 |
|
539 |
|
6 |
% |
Royalties: |
Marketers: |
Therapeutic Area: |
|
|
|
Cystic fibrosis franchise |
Vertex |
Rare disease |
238 |
|
208 |
|
14 |
% |
Tysabri |
Biogen |
Neurology |
87 |
|
91 |
|
(5 |
)% |
Imbruvica |
AbbVie, J&J |
Cancer |
62 |
|
74 |
|
(16 |
)% |
Trelegy |
GSK |
Respiratory |
58 |
|
43 |
|
36 |
% |
Promacta |
Novartis |
Hematology |
54 |
|
50 |
|
8 |
% |
Xtandi |
Pfizer, Astellas |
Cancer |
47 |
|
46 |
|
3 |
% |
Tremfya |
Johnson & Johnson |
Immunology |
27 |
|
21 |
|
27 |
% |
Cabometyx/Cometriq |
Exelixis, Ipsen, Takeda |
Cancer |
17 |
|
15 |
|
18 |
% |
Evrysdi |
Roche |
Rare disease |
16 |
|
10 |
|
64 |
% |
Prevymis |
Merck & Co. |
Infectious disease |
15 |
|
11 |
|
39 |
% |
Spinraza |
Biogen |
Neurology |
15 |
|
— |
|
n/a |
Trodelvy |
Gilead |
Cancer |
11 |
|
6 |
|
70 |
% |
Farxiga/Onglyza |
AstraZeneca |
Diabetes |
10 |
|
12 |
|
(9 |
)% |
Erleada |
Johnson & Johnson |
Cancer |
9 |
|
6 |
|
60 |
% |
Orladeyo |
BioCryst |
Rare disease |
8 |
|
6 |
|
24 |
% |
Nurtec ODT/Biohaven payment* |
Pfizer |
Neurology |
6 |
|
20 |
|
(70 |
)% |
Emgality |
Lilly |
Neurology |
5 |
|
5 |
|
5 |
% |
Crysvita |
Ultragenyx, Kyowa Kirin |
Rare disease |
5 |
|
5 |
|
(11 |
)% |
Other
products(5) |
46 |
|
75 |
|
(38 |
)% |
Total royalty receipts |
737 |
|
704 |
|
5 |
% |
Distributions to legacy non-controlling interests - royalty
receipts |
(100) |
|
(107) |
|
(6 |
)% |
Adjusted Cash Receipts(1)
(non-GAAP) |
637 |
|
597 |
|
7 |
% |
Amounts shown in the table may not add due to rounding.*In 2022,
amount includes a $16 million quarterly redemption payment related
to the Series A Biohaven Preferred Shares(6) (presented as Proceeds
from available for sale debt securities on the statement of cash
flows). The Series A Biohaven Preferred Shares were fully redeemed
in October 2022 following Pfizer’s acquisition of Biohaven. The
remaining amounts are related to royalty receipts from Nurtec
ODT.
Net cash provided by operating activities
(GAAP) was $574 million in the third quarter of 2023, an
increase of 6%, compared to $539 million in the same period of
2022. The increase was largely attributable to the performances of
the cystic fibrosis franchise and Trelegy, as well as the addition
of the Spinraza royalty, and higher interest received. The increase
was partially offset by declines in Imbruvica royalties as well as
higher development-stage funding payments due to a $50 million
clinical milestone payment made to Cytokinetics.
Total royalty receipts were $737 million in the
third quarter of 2023, an increase of 5% compared to $704 million
in the same period of 2022. The increase in total royalty receipts
was driven by the same royalties as noted above under Net cash
provided by operating activities.
Drivers of total royalty receipts in the third quarter of 2023
are discussed below, based on commentary from the marketers of the
products underlying the royalties in the preceding quarter (as
royalty receipts generally lag product performance by one calendar
quarter). The section below excludes comments from marketers on the
impact of foreign exchange rates, which was generally neutral
across the portfolio. Refer to Table 6 for a description of
approved indications.
Cystic fibrosis franchise* |
($238 million, +14%) Driven by the strong uptake of Kaftrio outside
the United States, including its uptake in younger age groups, and
the continued U.S. performance of Trikafta, including its launch in
children 2 to 5 years of age. |
Tysabri |
($87 million, -5%) Decrease was largely driven by pricing pressure
and competition. |
Imbruvica |
($62 million, -16%) Performance was impacted by competitive
pressures. |
Trelegy |
($58 million, +36%) Benefited from increased patient demand
globally and growth of the single inhaler triple therapy
market. |
Promacta |
($54 million, +8%) Driven by increased use in chronic immune
thrombocytopenia purpura and as a first- and/or second-line
treatment for severe aplastic anemia. |
Xtandi |
($47 million, +3%) Driven by established markets, partially offset
by U.S. underperformance. |
Tremfya |
($27 million, +27%) Driven by market growth and U.S. market share
gains, partially offset by unfavorable patient mix. |
Cabometyx / Cometriq |
($17 million, +18%) Increase primarily due to uptake in combination
with Opdivo as a first-line treatment for patients with advanced
renal cell carcinoma. |
Evrysdi |
($16 million, +64%) Experienced strong growth globally, driven by
switch and treatment naive patient starts in the United States,
including patients less than 2 months old, and share gains in all
major markets. |
Spinraza |
($15 million, n/a) Increase primarily driven by patient growth in
the United States, offset by a decline in rest of world sales.
Royalty Pharma acquired the Spinraza royalty in the first quarter
of 2023. |
Trodelvy |
($11 million, +70%) Driven by growing adoption in pretreated
HR+/HER2- metastatic breast cancer in the United States. |
Erleada |
($9 million, +60%) Benefited from continued share gains and market
growth in metastatic castration-sensitive prostate cancer, as well
as increased penetration from new launches. Royalty Pharma also
benefited from incremental royalties on Erleada acquired in June
2023. |
Nurtec ODT/Biohaven payment |
($6 million, -70%) Impacted by prior year comparisons as Royalty
Pharma no longer receives the $16 million Series A Preferred Shares
quarterly redemption payment following Pfizer’s acquisition of
Biohaven in the fourth quarter of 2022. Underlying Nurtec ODT
royalties increased $1 million, or 29%, compared to the prior-year
period, driven by strong growth in demand. |
Other products |
($46 million, -38%) Decrease was largely driven by generic
competition to Lexiscan ($3 million, compared with $19 million in
the year ago period). |
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 $100 million in the third
quarter of 2023, a decrease of 6% compared to the same period of
2022. The decrease was largely due to reduced royalties from
maturing products, where the percentage of royalties attributed to
non-controlling interests is higher. As a percentage of total
royalty receipts, Distributions to legacy non-controlling interests
- royalty receipts decreased to 14% in the third quarter of 2023,
compared to 15% in the prior year period. In addition to reduced
royalties from maturing or expired products, the decrease as a
percentage of total royalty receipts was also driven by the
addition of Spinraza, which has no distributions to legacy
non-controlling interests.
Adjusted Cash
Receipts(1)
(non-GAAP) were $637 million in the third quarter
of 2023, an increase of 7% compared to the same period of 2022,
reflecting higher royalty receipts from existing products,
including the cystic fibrosis franchise and Trelegy, the addition
of Spinraza and a decrease in distributions to legacy
non-controlling interests. This increase was partially offset by
lower royalties on Imbruvica and the end of redemption payments
related to the Biohaven Series A Preferred Shares. Prior to the
Biohaven-related redemption payment in the third quarter of 2022,
Adjusted Cash Receipts(1) growth was 9% in the third quarter of
2023 compared to the prior-year period.
Adjusted
EBITDA(2)
(non-GAAP) is comprised of Adjusted Cash
Receipts(1) less payments for operating and professional costs.
Adjusted EBITDA(2) was $582 million in the third quarter of 2023,
an increase of 6% compared to Adjusted EBITDA(2) of $548 million in
the third quarter of 2022, and was largely attributable to growth
in Adjusted Cash Receipts(1). Payments for operating and
professional costs of $55 million (representing 9% of Adjusted Cash
Receipts(1)) in the third quarter of 2023 increased by 13% compared
to the $49 million reported in the same period of 2022
(representing 8% of Adjusted Cash Receipts(1)). Prior to the
Biohaven-related redemption payment in the third quarter of 2022,
Adjusted EBITDA(2) growth was 9% in the third quarter of 2023
compared to the year-ago period.
Adjusted Cash
Flow(3)
(non-GAAP) is comprised of Adjusted EBITDA(2) less
Development-stage funding payments - ongoing, Development-stage
funding payments - upfront and milestone, net interest paid and
miscellaneous other items. In the third quarter of 2023, Adjusted
Cash Flow(3) was $474 million, an 8% increase compared to $441
million for the same period of 2022. The increase in Adjusted Cash
Flow(3) was primarily due to growth in Adjusted EBITDA(2) and lower
net interest paid, partially offset by higher development-stage
funding payments - upfront and milestones of $50 million in the
third quarter of 2023 compared with $25 million in the year ago
period. Prior to the Biohaven-related redemption payment in the
third quarter of 2022, Adjusted Cash Flow growth was 10% in the
third quarter of 2023 compared to the prior-year period.
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.
Trontinemab |
In October 2023, at the Clinical Trials on Alzheimer’s Disease
medical conference, Roche presented interim results of a Phase
1b/2a study for trontinemab, a novel Brainshuttle Aβ antibody for
the treatment of Alzheimer’s disease. This study demonstrated that
trontinemab rapidly reduces amyloid plaque reduction in patients
with Alzheimer’s disease. |
KarXT |
In September 2023, Karuna Therapeutics announced the submission of
its New Drug Application (NDA) to the FDA for KarXT for the
treatment of schizophrenia. |
Tysabri |
In September 2023, Sandoz announced that the European Commission
granted marketing authorization for biosimilar Tyruko for relapsing
forms of multiple sclerosis. This follows U.S. Food and Drug
Administration approval of biosimilar Tyruko in August 2023. |
Aficamten |
In September 2023, Cytokinetics announced the start of ACACIA-HCM,
a Phase 3 clinical trial of aficamten in patients with symptomatic
non-obstructive hypertrophic cardiomyopathy. The initiation of
ACACIA-HCM triggered a $50 million payment to Cytokinetics, which
was paid in September 2023. |
Evrysdi |
In August 2023, Roche announced that the European Commission
approved Evrysdi for babies under two months old with spinal
muscular atrophy. |
Cabometyx |
In August 2023, Exelixis and Ipsen announced that Cabometyx in
combination with atezolizumab compared with a second novel hormonal
therapy in patients with metastatic castration-resistant prostate
cancer in the Phase 3 CONTACT-02 trial demonstrated a statistically
significant improvement in progression-free survival (PFS) at the
primary analysis. At a prespecified interim analysis for the
primary endpoint of overall survival (OS) that occurred at the same
time as the primary analysis of PFS, a trend toward improvement of
OS was observed. The trial will continue to the next analysis of
OS. |
Trodelvy |
In July 2023, Gilead announced the European Commission approved
Trodelvy as a monotherapy for the treatment of adult patients with
unresectable or metastatic hormone receptor (HR)-positive,
HER2-negative breast cancer. |
Cystic fibrosis franchise |
In July 2023, Vertex announced the European Commission approved the
label extension of Orkambi for the treatment of children with
cystic fibrosis ages 1 to less than 2 years old. |
Summary of Recent Royalty Acquisition
Activity
Royalty Pharma has announced new transactions of up to $3.8
billion year-to-date, including $2.1 billion in upfront payments.
The information contained in this section should be read together
with Royalty Pharma’s reports and documents filed with the SEC at
www.sec.gov and the reader is also encouraged to review all other
press releases and information available in the Investors section
of Royalty Pharma’s website at www.royaltypharma.com. Recent
transactions include:
- In October 2023, Royalty Pharma
acquired additional royalties on Roche’s Evrysdi (press release),
an approved product for the treatment of spinal muscular atrophy,
from PTC Therapeutics, Inc. (PTC) for an upfront payment of $1.0
billion. Until December 31, 2025, PTC will have the option to sell
the remainder of the Evrysdi royalty retained by PTC to Royalty
Pharma for $500 million less royalties received in five equal
tranches. If PTC exercises fewer than three of these options,
Royalty Pharma has the option to purchase 50% of the remaining PTC
royalty for $250 million less royalties received until March 31,
2026.
- In September 2023, Royalty Pharma
acquired a royalty interest in Skytrofa from Ascendis Pharma A/S
(press release) for an upfront payment of $150 million. Skytrofa is
approved for the treatment of pediatric patients who have growth
failure due to inadequate secretion of endogenous growth
hormone.
- In August 2023, Royalty Pharma
acquired a royalty interest in Adstiladrin from Ferring
Pharmaceuticals (press release) for $300 million upfront and an
additional $200 million payment contingent on the achievement of
certain manufacturing goals. Adstiladrin is approved for the
treatment of adult patients with high-risk, Bacillus
Calmette-Guérin-unresponsive non-muscle invasive bladder cancer
with carcinoma in situ with or without papillary tumors.
Liquidity and Capital Resources
- As of September 30, 2023, Royalty
Pharma had cash and cash equivalents of $936 million and total debt
with principal value of $6.3 billion.
- In September 2023, Royalty Pharma
repaid $1.0 billion of senior unsecured notes upon maturity. In
October 2023, Royalty Pharma drew $350 million under its existing
five-year unsecured revolving credit facility of up to $1.5
billion.
- Royalty Pharma began repurchasing
its Class A ordinary shares in April 2023. During the third quarter
of 2023, Royalty Pharma repurchased approximately five million
shares for $144 million. The weighted-average diluted Class A
ordinary shares outstanding for the third quarter of 2023 was
approximately 601 million as compared to 607 million for the third
quarter of 2022. Through November 7, 2023, Royalty Pharma has
repurchased approximately ten million shares for $305 million.
2023 Financial Outlook
Royalty Pharma has provided its guidance for full-year 2023,
excluding transactions announced after the date of
this release, as follows:
|
Provided November 8, 2023 |
Previous |
Adjusted Cash
Receipts(1)
(non-GAAP) |
$2,950 million to $3,000 million |
$2,900 million to $2,975 million |
Payments for operating and professional costs |
8% to 8.5% of Adjusted Cash Receipts(1) |
8% to 8.5% of Adjusted Cash Receipts(1) |
Interest paid |
$170 million |
$170 million |
Development-stage funding payments - upfront and
milestone |
$50 million |
$50 million |
This Adjusted Cash Receipts(1) guidance represents underlying
growth of 9%(4) to 11%(4) prior to the Zavzpret milestone payment
in the first quarter of 2023 and the payments related to the
Biohaven Preferred Shares received in 2022.
Additionally, this guidance reflects an estimated foreign
exchange impact of approximately -1%(10) for full-year 2023
Adjusted Cash Receipts(1) growth, assuming current foreign exchange
rates prevail for the remainder of 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 de minimis in the fourth quarter. Through the first nine
months of 2023, Royalty Pharma also received interest of $63
million on its cash and cash equivalents, 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 third quarter 2023 results today at 8:00
a.m., Eastern Time. Please visit the “Investors” page of the
company’s website at
https://www.royaltypharma.com/investors/news-and-events/events to
obtain conference call information and to view the live webcast. A
replay of the conference call and webcast will be archived on the
company’s website for at least 30 days.
About Royalty Pharma plc
Founded in 1996, Royalty Pharma is the largest buyer of
biopharmaceutical royalties and a leading funder of innovation
across the biopharmaceutical industry, collaborating with
innovators from academic institutions, research hospitals and
non-profits through small and mid-cap biotechnology companies to
leading global pharmaceutical companies. Royalty Pharma has
assembled a portfolio of royalties which entitles it to payments
based directly on the top-line sales of many of the industry’s
leading therapies. Royalty Pharma funds innovation in the
biopharmaceutical industry both directly and indirectly - directly
when it partners with companies to co-fund late-stage clinical
trials and new product launches in exchange for future royalties,
and indirectly when it acquires existing royalties from the
original innovators. Royalty Pharma’s current portfolio includes
royalties on more than 35 commercial products, including Vertex’s
Trikafta, Kalydeco, Orkambi and Symdeko, Biogen’s Tysabri and
Spinraza, AbbVie and Johnson & Johnson’s Imbruvica, Astellas
and Pfizer’s Xtandi, GSK’s Trelegy, Novartis’ Promacta, Pfizer’s
Nurtec ODT, Johnson & Johnson’s Tremfya, Roche’s Evrysdi,
Gilead’s Trodelvy, and 11 development-stage product candidates.
Forward-Looking Statements
The information set forth herein does not purport to be complete
or to contain all of the information you may desire. Statements
contained herein are made as of the date of this document unless
stated otherwise, and neither the delivery of this document at any
time, nor any sale of securities, shall under any circumstances
create an implication that the information contained herein is
correct as of any time after such date or that information will be
updated or revised to reflect information that subsequently becomes
available or changes occurring after the date hereof.
This document contains statements that constitute
“forward-looking statements” as that term is defined in the United
States Private Securities Litigation Reform Act of 1995, including
statements that express the company’s opinions, expectations,
beliefs, plans, objectives, assumptions or projections regarding
future events or future results, in contrast with statements that
reflect historical facts. Examples include discussion of Royalty
Pharma’s strategies, financing plans, growth opportunities and
market growth. In some cases, you can identify such forward-looking
statements by terminology such as “anticipate,” “intend,”
“believe,” “estimate,” “plan,” “seek,” “project,” “expect,” “may,”
“will,” “would,” “could” or “should,” the negative of these terms
or similar expressions. Forward-looking statements are based on
management’s current beliefs and assumptions and on information
currently available to the company. However, these forward-looking
statements are not a guarantee of Royalty Pharma’s performance, and
you should not place undue reliance on such statements.
Forward-looking statements are subject to many risks, uncertainties
and other variable circumstances, and other factors. Such risks and
uncertainties may cause the statements to be inaccurate and readers
are cautioned not to place undue reliance on such statements. Many
of these risks are outside of the company’s control and could cause
its actual results to differ materially from those it thought would
occur. The forward-looking statements included in this document are
made only as of the date hereof. The company does not undertake,
and specifically declines, any obligation to update any such
statements or to publicly announce the results of any revisions to
any such statements to reflect future events or developments,
except as required by law.
Certain information contained in this document relates to or is
based on studies, publications, surveys and other data obtained
from third-party sources and the company’s own internal estimates
and research. While the company believes these third-party sources
to be reliable as of the date of this document, it has not
independently verified, and makes no representation as to the
adequacy, fairness, accuracy or completeness of, any information
obtained from third-party sources. In addition, all of the market
data included in this document involves a number of assumptions and
limitations, and there can be no guarantee as to the accuracy or
reliability of such assumptions. Finally, while the company
believes its own internal research is reliable, such research has
not been verified by any independent source.
For further information, please reference Royalty Pharma’s
reports and documents filed with the U.S. Securities and Exchange
Commission ("SEC") by visiting EDGAR on the SEC's website at
www.sec.gov.
Use of Non-GAAP Measures
Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow
are non-GAAP measures presented as supplemental measures to Royalty
Pharma’s GAAP measures. These non-GAAP 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 measures as supplements to GAAP measures and by presenting
the reconciliations of the non-GAAP measures to their most
comparable GAAP 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, debt repayments, dividends and
other discretionary investments. Further, these non-GAAP 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 and is a key component of certain material
covenants contained within the company’s amended and restated
credit agreement that Royalty Pharma’s subsidiary entered to
provide for a five-year unsecured revolving credit facility with
borrowing capacity of up to $1.5 billion (“Credit Agreement”). The
definition of Adjusted EBITDA used by Royalty Pharma is the same as
the definition of Consolidated EBITDA in the 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 believes Adjusted Cash Flow provides meaningful
information about Royalty Pharma’s operating performance because
one of its core business strategies is to generate consistent cash
flows that can be redeployed into new royalty investments. Tracking
Adjusted Cash Flow over time helps to identify underlying trends in
the business and permits management and investors to better
understand Royalty Pharma’s performance. Management uses Adjusted
Cash Flow for decision-making purposes related to the funding of
investments in royalty-generating assets, debt repayments,
dividends and other discretionary investments. 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 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 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 measure, except for its non-GAAP
outlook to the most directly comparable GAAP measure, in each case
being net cash provided by operating activities at Table 4.
Royalty Pharma Investor Relations and
Communications
+1 (212) 883-6772ir@royaltypharma.com
Royalty Pharma
plcCondensed Consolidated Statements of Operations
(unaudited)Table 1
|
Three Months Ended September 30, |
($ in millions) |
2023 |
|
2022 |
|
Income and other revenues |
|
|
Income from financial royalty assets |
509 |
|
552 |
|
Revenue from intangible royalty assets |
0 |
|
1 |
|
Other royalty income |
27 |
|
21 |
|
Total income and other revenues |
536 |
|
573 |
|
Operating expenses |
|
|
Provision for changes in expected cash flows from financial royalty
assets |
277 |
|
305 |
|
Research and development funding expense |
51 |
|
26 |
|
General and administrative expenses |
57 |
|
51 |
|
Total operating expenses, net |
385 |
|
381 |
|
Operating income |
151 |
|
192 |
|
Other expense/(income) |
|
|
Equity in losses of equity method investees |
5 |
|
3 |
|
Interest expense |
46 |
|
47 |
|
Other income, net |
(22) |
|
(78) |
|
Total other expense/(income), net |
29 |
|
(28) |
|
Consolidated net income before tax |
122 |
|
220 |
|
Income tax expense |
— |
|
— |
|
Consolidated net income |
122 |
|
220 |
|
Net income attributable to non-controlling interests |
50 |
|
78 |
|
Net income attributable to Royalty Pharma plc |
72 |
|
143 |
|
Amounts may not add due to rounding.
Royalty Pharma
plcSelected Balance Sheet Data
(unaudited)Table 2
($ in millions) |
As of September 30, 2023 |
As of December 31, 2022 |
Cash and cash equivalents |
936 |
1,711 |
Marketable securities |
— |
24 |
Total current and non-current financial royalty assets, net |
13,973 |
14,184 |
Total assets |
15,856 |
16,813 |
Current portion of long-term debt |
— |
998 |
Long-term debt, net of current portion |
6,131 |
6,119 |
Total liabilities |
6,270 |
7,288 |
Total shareholders’ equity |
9,585 |
9,525 |
Royalty Pharma
plcCondensed Consolidated Statements of Cash Flows
(unaudited)Table 3
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
($ in millions) |
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Cash flows from operating activities: |
|
|
|
|
Cash collections from financial royalty assets |
708 |
|
663 |
|
2,454 |
|
1,844 |
|
Cash collections from intangible royalty assets |
0 |
|
1 |
|
1 |
|
72 |
|
Other royalty cash collections |
25 |
|
19 |
|
84 |
|
52 |
|
Distributions from equity method investees |
0 |
|
6 |
|
19 |
|
33 |
|
Interest received |
29 |
|
7 |
|
63 |
|
11 |
|
Development-stage funding payments - ongoing |
(1) |
|
(1) |
|
(2) |
|
(2) |
|
Development-stage funding payments - upfront and milestone |
(50) |
|
(25) |
|
(50) |
|
(125) |
|
Payments for operating and professional costs |
(55) |
|
(49) |
|
(189) |
|
(142) |
|
Interest paid |
(83) |
|
(83) |
|
(166) |
|
(169) |
|
Net cash provided by operating activities |
574 |
|
539 |
|
2,215 |
|
1,574 |
|
Cash flows from investing activities: |
|
|
|
|
Distributions from equity method investees |
4 |
|
— |
|
39 |
|
— |
|
Investments in equity method investees |
(4) |
|
(7) |
|
(11) |
|
(10) |
|
Purchases of equity securities |
— |
|
— |
|
— |
|
(63) |
|
Proceeds from equity securities |
— |
|
46 |
|
— |
|
46 |
|
Purchases of available for sale debt securities |
— |
|
(315) |
|
— |
|
(394) |
|
Proceeds from available for sale debt securities |
— |
|
16 |
|
— |
|
47 |
|
Purchases of marketable securities |
— |
|
— |
|
— |
|
(235) |
|
Proceeds from sales and maturities of marketable securities |
— |
|
151 |
|
24 |
|
677 |
|
Acquisitions of financial royalty assets |
(451) |
|
(1,316) |
|
(1,113) |
|
(1,491) |
|
Acquisitions of other financial assets |
— |
|
— |
|
— |
|
(21) |
|
Milestone payments |
— |
|
— |
|
(12) |
|
— |
|
Net cash used in investing activities |
(451) |
|
(1,425) |
|
(1,073) |
|
(1,444) |
|
Cash flows from financing activities: |
|
|
|
|
Distributions to legacy non-controlling interests - royalty
receipts |
(100) |
|
(107) |
|
(285) |
|
(323) |
|
Distributions to legacy non-controlling interests - other |
— |
|
(2) |
|
— |
|
(2) |
|
Distributions to continuing non-controlling interests |
(31) |
|
(39) |
|
(95) |
|
(111) |
|
Dividends to shareholders |
(90) |
|
(84) |
|
(269) |
|
(249) |
|
Repurchases of Class A ordinary shares |
(140) |
|
— |
|
(275) |
|
— |
|
Contributions from legacy non-controlling interests - R&D |
0 |
|
0 |
|
0 |
|
1 |
|
Contributions from non-controlling interests - other |
2 |
|
2 |
|
6 |
|
5 |
|
Repayment of long-term debt |
(1,000) |
|
— |
|
(1,000) |
|
— |
|
Net cash used in financing activities |
(1,359) |
|
(230) |
|
(1,917) |
|
(679) |
|
Net change in cash and cash equivalents |
(1,237) |
|
(1,116) |
|
(774) |
|
(549) |
|
Cash and cash equivalents, beginning of period |
2,173 |
|
2,108 |
|
1,711 |
|
1,541 |
|
Cash and cash equivalents, end of period |
936 |
|
992 |
|
936 |
|
992 |
|
Amounts may not add due to rounding.
Royalty Pharma plcGAAP
to Non-GAAP Reconciliation (unaudited)Table
4
|
Three Months Ended September 30, |
($ in millions) |
2023 |
|
2022 |
|
Net cash provided by operating activities
(GAAP) |
574 |
|
539 |
|
Adjustments: |
|
|
Distributions from equity method investees(7) |
4 |
|
— |
|
Proceeds from available for sale debt securities(6)(7) |
— |
|
16 |
|
Interest paid, net(7) |
54 |
|
75 |
|
Development-stage funding payments - ongoing(8) |
1 |
|
1 |
|
Development-stage funding payments - upfront and milestone(8) |
50 |
|
25 |
|
Payments for operating and professional costs |
55 |
|
49 |
|
Distributions to legacy non-controlling interests - royalty
receipts(7) |
(100) |
|
(107) |
|
Adjusted Cash
Receipts(1)
(non-GAAP) |
637 |
|
597 |
|
Net cash provided by operating activities
(GAAP) |
574 |
|
539 |
|
Adjustments: |
|
|
Distributions from equity method investees(7) |
4 |
|
— |
|
Proceeds from available for sale debt securities(6)(7) |
— |
|
16 |
|
Interest paid, net(7) |
54 |
|
75 |
|
Development-stage funding payments - ongoing(8) |
1 |
|
1 |
|
Development-stage funding payments - upfront and milestone(8) |
50 |
|
25 |
|
Distributions to legacy non-controlling interests - royalty
receipts(7) |
(100) |
|
(107) |
|
Adjusted
EBITDA(2)
(non-GAAP) |
582 |
|
548 |
|
Net cash provided by operating activities
(GAAP) |
574 |
|
539 |
|
Adjustments: |
|
|
Distributions from equity method investees(7) |
4 |
|
— |
|
Proceeds from available for sale debt securities(6)(7) |
— |
|
16 |
|
Contributions from legacy non-controlling interests -
R&D(7) |
0 |
|
0 |
|
Investments in equity method investees(7)(9) |
(4) |
|
(7) |
|
Distributions to legacy non-controlling interests - royalty
receipts(7) |
(100) |
|
(107) |
|
Adjusted Cash
Flow(3)
(non-GAAP) |
474 |
|
441 |
|
Amounts may not add due to rounding.
Royalty Pharma
plcNon-GAAP Financial Measures
(unaudited)Table 5
|
Three Months Ended September 30, |
($ in millions) |
2023 |
|
2022 |
|
Change |
Net cash provided by operating activities
(GAAP) |
574 |
|
539 |
|
6 |
% |
Royalties: |
|
|
|
Cystic fibrosis franchise |
238 |
|
208 |
|
14 |
% |
Tysabri |
87 |
|
91 |
|
(5 |
)% |
Imbruvica |
62 |
|
74 |
|
(16 |
)% |
Trelegy |
58 |
|
43 |
|
36 |
% |
Promacta |
54 |
|
50 |
|
8 |
% |
Xtandi |
47 |
|
46 |
|
3 |
% |
Tremfya |
27 |
|
21 |
|
27 |
% |
Cabometyx/Cometriq |
17 |
|
15 |
|
18 |
% |
Evrysdi |
16 |
|
10 |
|
64 |
% |
Prevymis |
15 |
|
11 |
|
39 |
% |
Spinraza |
15 |
|
— |
|
n/a |
Trodelvy |
11 |
|
6 |
|
70 |
% |
Farxiga/Onglyza |
10 |
|
12 |
|
(9 |
)% |
Erleada |
9 |
|
6 |
|
60 |
% |
Orladeyo |
8 |
|
6 |
|
24 |
% |
Nurtec ODT/Biohaven payment* |
6 |
|
20 |
|
(70 |
)% |
Emgality |
5 |
|
5 |
|
5 |
% |
Crysvita |
5 |
|
5 |
|
(11 |
)% |
Other products(5) |
46 |
|
75 |
|
(38 |
)% |
Total royalty receipts |
737 |
|
704 |
|
5 |
% |
Distributions to legacy non-controlling interests - royalty
receipts |
(100) |
|
(107) |
|
(6 |
)% |
Adjusted Cash
Receipts(1)
(non-GAAP) |
637 |
|
597 |
|
7 |
% |
Payments for operating and professional costs |
(55) |
|
(49) |
|
13 |
% |
Adjusted
EBITDA(2)
(non-GAAP) |
582 |
|
548 |
|
6 |
% |
Development-stage funding payments - ongoing |
(1) |
|
(1) |
|
0 |
% |
Development-stage funding payments - upfront and milestone |
(50) |
|
(25) |
|
100 |
% |
Interest paid, net |
(54) |
|
(75) |
|
(28 |
)% |
Investments in equity method investees |
(4) |
|
(7) |
|
(42 |
)% |
Contributions from legacy non-controlling interests - R&D |
0 |
|
0 |
|
(63 |
)% |
Adjusted Cash
Flow(3)
(non-GAAP) |
474 |
|
441 |
|
8 |
% |
Amounts may not add due to rounding.*In 2022, amount includes a
$16 million quarterly redemption payment related to the Series A
Biohaven Preferred Shares(6) (presented as Proceeds from available
for sale debt securities on the statement of cash flows). The
Series A Biohaven Preferred Shares were fully redeemed in October
2022 following Pfizer’s acquisition of Biohaven. The remaining
amounts are related to royalty receipts from Nurtec ODT.
Royalty Pharma
plcDescription of Approved Indications for Select
Portfolio TherapiesTable 6
Cystic fibrosis franchise |
Cystic fibrosis |
Tysabri |
Relapsing forms of multiple sclerosis |
Imbruvica |
Hematological malignancies and chronic graft versus host
disease |
Xtandi |
Prostate cancer |
Promacta |
Chronic immune thrombocytopenia purpura and aplastic anemia |
Trelegy |
Chronic obstructive pulmonary disease and asthma |
Tremfya |
Plaque psoriasis and active psoriatic arthritis |
Cabometyx / Cometriq |
Kidney, liver and thyroid cancer |
Evrysdi |
Spinal muscular atrophy |
Spinraza |
Spinal muscular atrophy |
Trodelvy |
Breast and bladder cancer |
Erleada |
Prostate cancer |
Nurtec ODT |
Acute and preventative treatment of migraine |
Notes
(1) Adjusted Cash Receipts is a measure
calculated with inputs directly from the statements of cash flows
and includes 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, and (iv) Proceeds from available for sale
debt securities; less 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 GAAP to Non-GAAP
reconciliation at Table 4.
(2) Adjusted EBITDA is an important non-GAAP
used by our lenders to assess our ability to meet our financial
covenants. Adjusted EBITDA is calculated as Adjusted Cash Receipts
less Payments for operating and professional costs. See GAAP to
Non-GAAP reconciliation at Table 4.
(3) Adjusted Cash Flow is calculated as
Adjusted Cash Receipts less (1) Payments for operating and
professional costs, (2) Development-stage funding payments -
ongoing, (3) Development-stage funding payments - upfront and
milestone, (4) Interest paid, net of Interest received, (5)
Investments in equity method investees and (5) Other (including
Derivative collateral posted, net of Derivative collateral received
and Termination payments on derivative instruments) and 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 4.
(4) Underlying growth in 2023 Adjusted Cash
Receipts is calculated based on Royalty Pharma’s 2023 guidance net
of the $475 million Zavzpret milestone payment and 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: Cimzia, Entyvio, IDHIFA,
Lexiscan, Nesina, Soliqua and distributions from the Legacy SLP
Interest.
(6) Receipts from the quarterly redemption of
the Series A Biohaven Preferred Shares in 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 |
Interest paid, net |
Operating activities (Interest paid less Interest received) |
Distributions from equity method investees |
Investing activities |
Investments in equity method investees |
Investing activities |
Proceeds from available for sale debt securities |
Investing activities |
Distributions to legacy non-controlling interests - royalty
receipts |
Financing activities |
Contributions from legacy non-controlling interest - R&D |
Financing 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. As a
result, Adjusted EBITDA captures the full add-back for
development-stage funding payments.
(9) Royalty Pharma’s lenders consider 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.
(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.
Royalty Pharma (NASDAQ:RPRX)
Historical Stock Chart
From Jun 2024 to Jul 2024
Royalty Pharma (NASDAQ:RPRX)
Historical Stock Chart
From Jul 2023 to Jul 2024