Royalty Pharma plc (Nasdaq: RPRX) today reported financial results
for the first quarter of 2023 and reaffirmed full year 2023
guidance for Adjusted Cash Receipts(1) (a non-GAAP financial
measure). “We are delighted to report strong financial performance
in the first quarter while advancing our mission of accelerating
innovation in life sciences,” said Pablo Legorreta, Royalty
Pharma’s founder and Chief Executive Officer. “We announced
transactions of up to $1.6 billion to acquire royalties on three
innovative therapies, which further diversified our portfolio. In
addition, we announced a multi-year share repurchase program of up
to $1.0 billion. This reflects our confidence in Royalty Pharma’s
attractive outlook for compounding growth and our disciplined
capital allocation strategy to create shareholder value.”
First quarter 2023 GAAP financial results benefited from
Zavzpret milestone and portfolio strength
- Net cash provided by operating activities grew 125% to $1,034
million, reflecting $475 million Zavzpret milestone; Net cash used
in investing activities was $559 million; Net cash used in
financing activities was $210 million.
- Total income and other revenues increased 22% to $684
million.
First quarter 2023 non-GAAP financial results show
strong double-digit growth
- Adjusted Cash Receipts(1) increased 87% to $1,131 million,
driven by the Zavzpret milestone and strong portfolio performance,
partially offset by royalty expirations, Imbruvica headwinds and
unfavorable foreign exchange.
- Adjusted Cash Receipts(1) grew 11% prior to Biohaven related
milestone and fixed payments.
- Adjusted EBITDA(2) grew 88% to $1,044 million; Adjusted Cash
Flow(3) increased 165% to $973 million.
Acquired royalties on an established blockbuster and two
exciting development-stage therapies
- Acquired royalty interests in Biogen’s Spinraza (a blockbuster
for spinal muscular atrophy), Novartis’ pelacarsen (Phase 3,
cardiovascular disease with multi-blockbuster potential) and
Karuna’s KarXT (Phase 3, schizophrenia with multi-blockbuster
potential).
Multiple positive clinical and regulatory updates across
the portfolio
- FDA granted approvals for Pfizer’s Zavzpret (acute treatment of
migraine), AstraZeneca’s Airsupra (asthma), and Gilead’s Trodelvy
(HR+/HER2- metastatic breast cancer).
- Positive Phase 3 EMBARK study for Pfizer/Astellas’ Xtandi
(non-metastatic prostate cancer).
Financial guidance for 2023 (excludes contributions from
new transactions)
- Royalty Pharma reaffirmed that 2023 Adjusted Cash Receipts(1)
are expected to be between $2,850 million and $2,950 million,
excluding transactions announced subsequent to the date of this
release. This guidance was increased in March 2023 following
receipt of the Zavzpret milestone.
- This guidance represents underlying
growth of 4% to 9% prior to the Zavzpret milestone payment in 2023
and payments related to the Biohaven Preferred Shares in
2022(4).
Financial
Summary |
Three Months Ended March 31 |
|
(unaudited) |
($ and shares in millions) |
2023 |
2022 |
Change |
Net cash provided by operating activities (GAAP) |
1,034 |
460 |
125% |
Net cash (used in)/provided by investing activities (GAAP) |
(559) |
11 |
nm |
Net cash used in financing activities (GAAP) |
(210) |
(221) |
(5)% |
Total income and other revenues (GAAP) |
684 |
562 |
22% |
Adjusted Cash Receipts(1) (non-GAAP) |
1,131 |
605 |
87% |
Adjusted EBITDA(2) (non-GAAP) |
1,044 |
556 |
88% |
Adjusted Cash Flow(3) (non-GAAP) |
973 |
367 |
165% |
Weighted average Class A shares outstanding - diluted |
607 |
607 |
0% |
First Quarter 2023 Financial Results
|
|
|
Three Months Ended March 31 |
|
|
|
(unaudited) |
($ in millions) |
|
|
2023 |
2022 |
Change |
Net cash provided by operating activities
(GAAP) |
1,034 |
460 |
125% |
Royalties: |
Marketers: |
Therapeutic Area: |
|
|
|
Zavzpret milestone(a) |
Pfizer |
Neurology |
475 |
— |
n/a |
Cystic fibrosis franchise |
Vertex |
Rare disease |
217 |
202 |
7% |
Tysabri |
Biogen |
Neurology |
86 |
97 |
(12)% |
Imbruvica |
AbbVie, J&J |
Cancer |
69 |
87 |
(21)% |
Promacta |
Novartis |
Hematology |
50 |
48 |
3% |
Trelegy |
GSK |
Respiratory |
48 |
— |
n/a |
Xtandi |
Pfizer, Astellas |
Cancer |
44 |
43 |
1% |
Tremfya |
Johnson & Johnson |
Immunology |
32 |
28 |
12% |
Evrysdi |
Roche |
Rare disease |
18 |
9 |
91% |
Cabometyx/Cometriq |
Exelixis, Ipsen, Takeda |
Cancer |
16 |
13 |
21% |
Farxiga/Onglyza |
AstraZeneca |
Diabetes |
12 |
9 |
23% |
Trodelvy |
Gilead |
Cancer |
8 |
5 |
62% |
Erleada |
Johnson & Johnson |
Cancer |
7 |
5 |
40% |
Orladeyo |
BioCryst |
Rare disease |
7 |
4 |
53% |
Crysvita |
Ultragenyx, Kyowa Kirin |
Rare disease |
6 |
5 |
24% |
Nurtec ODT/Biohaven payment(b) |
Pfizer |
Neurology |
5 |
20 |
(74)% |
Emgality |
Lilly |
Neurology |
5 |
5 |
5% |
Prevymis(c) |
Merck & Co. |
Infectious disease |
— |
4 |
nm |
Other products(5) |
121 |
125 |
(4)% |
Total royalty receipts |
1,223 |
711 |
72% |
Distributions to legacy non-controlling interests - royalty
receipts |
(92) |
(106) |
(14)% |
Adjusted Cash
Receipts(1)
(non-GAAP) |
1,131 |
605 |
87% |
Amounts shown in the table may not add due to rounding.(a)
Reflects the $475 million milestone payment received following the
FDA approval of Zavzpret.(b) 2022 royalty receipts include the $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.(c) Royalty
Pharma receives royalty payments on Prevymis annual worldwide net
sales of up to $300 million, which was reached in the third quarter
of 2022. As such, Royalty Pharma did not receive royalty receipts
on Prevymis net sales in the first quarter of 2023 related to the
fourth quarter of 2022.
Net cash provided by operating activities
(GAAP) was $1,034 million in the first quarter of 2023, an
increase of 125%, compared to $460 million in the same period of
2022. The increase was largely attributable to a $475 million
milestone payment received following the FDA approval of Zavzpret,
strong portfolio performance and a $35 million payment related to
AstraZeneca’s election to commercialize Airsupra in the U.S. The
increase was partially offset by lower cash collections from
Januvia, Janumet and other DPP-IVs, which substantially ended in
the second quarter of 2022, declines in Imbruvica and Tysabri
royalties and the end of redemption payments related to the
Biohaven Series A Preferred Shares.
Total royalty receipts were $1,223 million in
the first quarter of 2023, an increase of 72% compared to $711
million in the same period of 2022. The drivers of the increase in
total royalty receipts were the same as noted above for Net cash
provided by operating activities.
Drivers of royalty receipts in the first 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 a headwind
across the portfolio. Refer to Table 6 for description of approved
indications.
Zavzpret milestone |
($475 million, n/a) Following the U.S. FDA approval of
Zavzpret. |
Cystic fibrosis franchise* |
($217 million, +7%) Strong uptake of Kaftrio outside the U.S., as
well as continued performance of Trikafta in the U.S., including
uptake in children ages 6 through 11 years. |
Tysabri |
($86 million, -12%) Impacted by pricing pressure while volume
remained relatively stable. |
Imbruvica |
($69 million, -21%) Impacted by challenging market and share
dynamics attributed to the pace of COVID recovery as well as
increasing competition. |
Promacta |
($50 million, +3%) Driven by increased use in chronic immune
thrombocytopenia purpura and further uptake as a first- and/or
second-line treatment for severe aplastic anemia. |
Trelegy |
($48 million, n/a) Benefited from strong patient demand growth
globally and inclusion on China’s National Reimbursement Drug List.
Royalty Pharma acquired a royalty interest in Trelegy in July 2022
and began receiving royalty receipts in the third quarter of
2022. |
Xtandi |
($44 million, +1%) Relatively consistent compared to the prior year
period. |
Tremfya |
($32 million, +12%) Driven by market growth and market share gains
in psoriasis and psoriatic arthritis, partially offset by an
unfavorable prior period adjustment, patient mix and rebates. |
Evrysdi |
($18 million, +91%) Experienced strong growth globally, driven by
switch and naive patient starts in the U.S. and share gains in all
major markets outside the U.S. |
Cabometyx / Cometriq |
($16 million, +21%) Increased uptake in combination with Opdivo in
the first-line renal cell carcinoma setting, partially offset by
lower net pricing. |
Trodelvy |
($8 million, +62%) Driven by continued adoption in metastatic
triple-negative breast cancer in the U.S. and Europe. |
Orladeyo |
($7 million, +53%) Driven by strong new patient starts and
consistent patient retention, as well as an increase in the
prescriber base. |
Nurtec ODT/Biohaven payment |
($5 million, -74%) Impacted by prior year comparisons as Royalty
Pharma no longer receives Series A Preferred Shares redemption
payments following Pfizer’s acquisition of Biohaven in the fourth
quarter of 2022. Underlying Nurtec ODT royalties increased $0.5
million, or 11%, compared to the prior year 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 royalty receipts to arrive
at Adjusted Cash Receipts(1), were $92 million in the first quarter
of 2023, a decrease of 14% compared to the same period of 2022. The
decrease was largely due to reduced royalties from maturing or
expired products, such as Januvia, Janumet and other DPP-IVs, 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
8% in the first 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 Trelegy and the Zavzpret
milestone payment, both of which have no distributions to
non-controlling interests.
Adjusted Cash
Receipts(1)
(non-GAAP) were $1,131 million in the first
quarter of 2023, an increase of 87% compared to the same period of
2022, reflecting the Zavzpret milestone, strong portfolio
performance, the Airsupra payment and a decrease in distributions
to non-controlling interests. This increase was partially offset by
a decline in royalty receipts from maturing royalties, lower
royalties on Imbruvica and Tysabri, the end of redemption payments
related to the Biohaven Series A Preferred Shares as well as
unfavorable foreign exchange movements. Prior to the Zavzpret
milestone payment in the first quarter of 2023 and the Biohaven
redemption payment in the prior year period, Adjusted Cash
Receipts(1) growth was 11% in the first quarter of 2023 compared to
the first quarter of 2022.
Adjusted
EBITDA(2)
(non-GAAP) is comprised of Adjusted Cash
Receipts(1) less payments for operating and professional costs.
Adjusted EBITDA(2) was $1,044 million in the first quarter of 2023,
an increase of 88% compared to Adjusted EBITDA(2) of $556 million
in the first quarter of 2022, and was largely attributable to
growth in Adjusted Cash Receipts(1). Additionally, payments for
operating and professional costs of $87 million (representing 8% of
Adjusted Cash Receipts(1)) in the first quarter of 2023 increased
by 78% compared to the $49 million reported in the same period of
2022 (representing 8% of Adjusted Cash Receipts(1)). The increase
in payments for operating and professional costs was primarily
driven by increased royalty receipts, specifically the Zavzpret
milestone. Prior to the Zavzpret milestone payment in the first
quarter of 2023 and Biohaven redemption payment in the prior year
period, Adjusted EBITDA(2) growth was 11% in the first quarter of
2023 compared to the first quarter of 2022.
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 first quarter of 2023, Adjusted
Cash Flow(3) was $973 million, a 165% increase compared to Adjusted
Cash Flow(3) of $367 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 upfront and milestone
development-stage funding payments. Prior to the Zavzpret milestone
payment in the first quarter of 2023 and Biohaven redemption
payment in the prior year period, Adjusted Cash Flow(3) growth was
49% in the first quarter of 2023 compared to the first quarter of
2022.
A more comprehensive discussion of the non-GAAP measures
utilized by Royalty Pharma to manage its business can be found in
the section of this press release entitled ‘Use of Non-GAAP
Measures’.
Key Developments Relating to the Portfolio
The key developments related to Royalty Pharma’s royalty
interests are discussed below based on disclosures from the
marketers of the products.
Cystic fibrosis franchise |
In April 2023, Vertex announced the U.S. FDA approved the expanded
use of Trikafta to include children with cystic fibrosis ages 2
through 5 years. |
Xtandi |
In March 2023, Pfizer and Astellas announced positive topline
results from the Phase 3 EMBARK trial evaluating Xtandi in men with
non-metastatic castration-sensitive prostate cancer with high-risk
biochemical recurrence. The study met its primary endpoint with a
statistically significant and clinically meaningful improvement in
metastasis-free survival for patients treated with Xtandi plus
leuprolide versus placebo plus leuprolide. At the time of the
analysis, a positive trend in the key secondary endpoint of overall
survival was also observed, but these data were not yet mature.
Patients in the trial will be followed for a subsequent final
overall survival analysis. |
Zavzpret milestone |
In March 2023, Pfizer announced the FDA approval of Zavzpret, the
first and only calcitonin gene-related peptide receptor antagonist
nasal spray for the acute treatment of migraine with or without
aura in adults. Following this approval, Royalty Pharma received a
$475 million milestone payment from Pfizer in the first quarter of
2023. |
Cabometyx |
In March 2023, Exelixis announced that the Phase 3 CONTACT-03
study, evaluating Cabometyx in combination with atezolizumab versus
Cabometyx alone in patients with locally advanced or metastatic
clear cell or non-clear cell renal cell carcinoma (RCC) who
progressed during or after immune checkpoint inhibitor therapy did
not meet its primary endpoint of progression-free survival. |
Aficamten |
In March 2023, Cytokinetics presented positive results from Cohort
4 of REDWOOD-HCM in patients with non-obstructive hypertrophic
cardiomyopathy (HCM). At 10 weeks, patients in Cohort 4 experienced
significant improvements in NT-proBNP and high-sensitivity troponin
I levels also improved significantly proportional to baseline at
each study visit. Aficamten was also well tolerated overall, with
modest on-target reductions in left ventricular ejection fraction
(LVEF) in response to aficamten over 10 weeks. |
Trodelvy |
In February 2023, Gilead announced the FDA approval of 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. |
BCX10013 |
In January 2023, BioCryst announced that initial data from the
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. However, recent dose-related observations in an ongoing
non-clinical study are expected to delay the clinical program. |
Airsupra (PT027) |
In January 2023, AstraZeneca announced the FDA 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. Royalty Pharma invested in Airsupra through its
approximate 44% ownership in Avillion II and its affiliated
entities. Following the U.S. approval, AstraZeneca notified
Avillion II that it elected to pay a fee of $80 million to Avillion
II to exercise the option to commercialize Airsupra in the United
States. Royalty Pharma received its pro rata portion of the
exercise fee of approximately $35 million in March 2023. |
Summary of Recent Royalty Acquisition
Activity
Royalty Pharma announced new transactions of up to $1.6 billion
in the first quarter of 2023, including $600 million in upfront
payments, as detailed below:
- Spinraza and
pelacarsen: In January 2023, Royalty Pharma acquired a
royalty interest in Biogen’s Spinraza 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.
- KarXT: In March
2023, Royalty Pharma acquired a royalty interest in KarXT from
PureTech Health plc (“PureTech”) for an upfront payment of $100
million and up to $400 million in milestone payments contingent on
the achievement of certain regulatory and commercial milestones.
KarXT is in Phase 3 development by Karuna for the treatment of
psychiatric and neurological conditions, including schizophrenia as
a monotherapy and adjunctive therapy and psychosis in Alzheimer’s
disease. Under the terms of this agreement, Royalty Pharma will
receive a 3% royalty on annual sales up to $2 billion and a 1%
royalty on annual sales above $2 billion.
Liquidity and Capital Resources
- As of March 31, 2023, Royalty Pharma
had cash, cash equivalents and marketable securities in the amount
of $2.0 billion and total debt with principal value of $7.3
billion.
- In March 2023, Royalty Pharma’s
Board of Directors approved a share repurchase program of up to
$1.0 billion of Class A ordinary shares through June 2027.
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 May 9, 2023 |
Previous |
Adjusted Cash
Receipts(1)
(non-GAAP) |
$2,850 million to $2,950 million |
$2,850 million to $2,950 million |
Payments for operating and professional costs |
8% to 9% of Adjusted Cash Receipts |
8% to 9% of Adjusted Cash Receipts |
Interest paid |
$170 million |
$170 million |
Development-stage funding payments - upfront and
milestone |
$50 million |
$50 million |
Royalty Pharma’s 2023 guidance was recently increased to reflect
the $475 million accelerated milestone payment related to FDA
approval of Pfizer’s Zavzpret, which was received in March 2023.
This Adjusted Cash Receipts(1) guidance represents underlying
growth of 4% to 9% prior to the Zavzpret milestone payment in 2023
and the payments related to the Biohaven Preferred Shares received
in 2022(4).
Additionally, this 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 third quarter 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 the first quarter of 2023, Royalty Pharma also received interest
of $16 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 first 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 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 plc |
Condensed Consolidated Statements of Operations
(unaudited) |
Table 1 |
|
|
Three Months Ended March 31, |
($ in millions) |
2023 |
2022 |
Income and other revenues |
|
|
Income from financial royalty assets |
665 |
512 |
Revenue from intangible royalty assets |
0 |
34 |
Other royalty income |
19 |
17 |
Total income and other revenues |
684 |
562 |
Operating expenses |
|
|
Provision for changes in expected cash flows from financial royalty
assets |
119 |
185 |
Research and development funding expense |
1 |
101 |
Amortization of intangible assets |
— |
6 |
General and administrative expenses |
86 |
52 |
Total operating expenses, net |
205 |
342 |
Operating income |
479 |
220 |
Other (income)/expense |
|
|
Equity in earnings of equity method investees |
(35) |
(0) |
Interest expense |
47 |
47 |
Other (income)/expenses, net |
(42) |
45 |
Total other (income)/expenses, net |
(30) |
92 |
Consolidated net income before tax |
509 |
128 |
Income tax expense |
— |
— |
Consolidated net income |
509 |
128 |
Net income attributable to non-controlling interests |
168 |
76 |
Net income attributable to Royalty Pharma plc |
341 |
52 |
Amounts may not add due to rounding.
Royalty Pharma plc |
Selected Balance Sheet Data (unaudited) |
Table 2 |
|
($ in millions) |
As of March 31, 2023 |
As of December 31, 2022 |
Cash and cash equivalents |
1,976 |
1,711 |
Marketable securities |
— |
24 |
Total current and non-current financial royalty assets, net |
14,272 |
14,184 |
Total assets |
17,074 |
16,813 |
Current portion of long-term debt |
998 |
998 |
Long-term debt, net of current portion |
6,123 |
6,119 |
Total liabilities |
7,252 |
7,288 |
Total shareholders’ equity |
9,822 |
9,525 |
Royalty Pharma plc |
Condensed Consolidated Statements of Cash Flows
(unaudited) |
Table 3 |
|
|
Three Months Ended March 31, |
($ in millions) |
2023 |
2022 |
Cash flows from operating activities: |
|
|
Cash collections from financial royalty assets |
1,152 |
622 |
Cash collections from intangible royalty assets |
1 |
36 |
Other royalty cash collections |
20 |
17 |
Distributions from equity method investees |
16 |
21 |
Interest received |
16 |
0 |
Development-stage funding payments - ongoing |
(1) |
(1) |
Development-stage funding payments - upfront and milestone |
— |
(100) |
Payments for operating and professional costs |
(87) |
(49) |
Interest paid |
(83) |
(86) |
Net cash provided by operating activities |
1,034 |
460 |
Cash flows from investing activities: |
|
|
Distributions from equity method investees |
35 |
— |
Investments in equity method investees |
(4) |
(3) |
Purchases of equity securities |
— |
(34) |
Purchases of available for sale debt securities |
— |
(65) |
Proceeds from available for sale debt securities |
— |
16 |
Purchases of marketable securities |
— |
(177) |
Proceeds from sales and maturities of marketable securities |
24 |
275 |
Acquisitions of financial royalty assets |
(602) |
(0) |
Milestone payments |
(12) |
— |
Net cash (used in)/provided by investing
activities |
(559) |
11 |
Cash flows from financing activities: |
|
|
Distributions to legacy non-controlling interests - royalty
receipts |
(92) |
(106) |
Distributions to continuing non-controlling interests |
(33) |
(35 |
Dividends to shareholders |
(89) |
(82) |
Contributions from legacy non-controlling interests - R&D |
0 |
1 |
Contributions from non-controlling interests - other |
3 |
2 |
Net cash used in financing activities |
(210) |
(221) |
Net change in cash and cash equivalents |
265 |
250 |
Cash and cash equivalents, beginning of period |
1,711 |
1,541 |
Cash and cash equivalents, end of period |
1,976 |
1,792 |
Amounts may not add due to rounding.
Royalty Pharma plc |
Non-GAAP Financial Measures (unaudited) |
Table 4 |
|
|
|
Three Months Ended March 31, |
($ in millions) |
2023 |
2022 |
Change |
Net cash provided by operating activities
(GAAP) |
1,034 |
460 |
125% |
Royalties: |
|
|
|
Zavzpret milestone(a) |
475 |
— |
n/a |
Cystic fibrosis franchise |
217 |
202 |
7% |
Tysabri |
86 |
97 |
(12)% |
Imbruvica |
69 |
87 |
(21)% |
Promacta |
50 |
48 |
3% |
Trelegy |
48 |
— |
n/a |
Xtandi |
44 |
43 |
1% |
Tremfya |
32 |
28 |
12% |
Evrysdi |
18 |
9 |
91% |
Cabometyx/Cometriq |
16 |
13 |
21% |
Farxiga/Onglyza |
12 |
9 |
23% |
Trodelvy |
8 |
5 |
62% |
Erleada |
7 |
5 |
40% |
Orladeyo |
7 |
4 |
53% |
Crysvita |
6 |
5 |
24% |
Nurtec ODT/Biohaven payment(b) |
5 |
20 |
(74)% |
Emgality |
5 |
5 |
5% |
Prevymis(c) |
— |
4 |
nm |
Other products(5) |
121 |
125 |
(4)% |
Total royalty receipts |
1,223 |
711 |
72% |
Distributions to legacy non-controlling interests - royalty
receipts |
(92) |
(106) |
(14)% |
Adjusted Cash
Receipts(1)
(non-GAAP) |
1,131 |
605 |
87% |
Payments for operating and professional costs |
(87) |
(49) |
78% |
Adjusted
EBITDA(2)
(non-GAAP) |
1,044 |
556 |
88% |
Development-stage funding payments - ongoing |
(1) |
(1) |
- |
Development-stage funding payments - upfront and milestone |
— |
(100) |
(100)% |
Interest paid, net |
(67) |
(86) |
(22)% |
Investments in equity method investees |
(4) |
(3) |
17% |
Contributions from legacy non-controlling interests - R&D |
0 |
1 |
(55)% |
Adjusted Cash
Flow(3)
(non-GAAP) |
973 |
367 |
165% |
Amounts may not add due to rounding.(a) Reflects the $475
million milestone payment received following the FDA approval of
Zavzpret.(b) 2022 royalty receipts include the $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.(c) Royalty Pharma
receives royalty payments on Prevymis annual worldwide net sales of
up to $300 million, which was reached in the third quarter of 2022.
As such, Royalty Pharma did not receive royalty receipts on
Prevymis net sales in the first quarter of 2023 related to the
fourth quarter of 2022.
Royalty Pharma plc |
GAAP to Non-GAAP Reconciliation (unaudited) |
Table 5 |
|
|
Three Months Ended March 31 |
($ in millions) |
2023 |
2022 |
Net cash provided by operating activities
(GAAP) |
1,034 |
460 |
Adjustments: |
|
|
Proceeds from available for sale debt securities(6)(7) |
— |
16 |
Distributions from equity method investees(7) |
35 |
— |
Interest paid, net(7) |
67 |
86 |
Development-stage funding payments - ongoing(8) |
1 |
1 |
Development-stage funding payments - upfront and milestone(8) |
— |
100 |
Payments for operating and professional costs |
87 |
49 |
Distributions to legacy non-controlling interests - royalty
receipts(7) |
(92) |
(106) |
Adjusted Cash
Receipts(1)
(non-GAAP) |
1,131 |
605 |
Net cash provided by operating activities
(GAAP) |
1,034 |
460 |
Adjustments: |
|
|
Proceeds from available for sale debt securities(6)(7) |
— |
16 |
Distributions from equity method investees(7) |
35 |
— |
Interest paid, net(7) |
67 |
86 |
Development-stage funding payments - ongoing(8) |
1 |
1 |
Development-stage funding payments - upfront and milestone(8) |
— |
100 |
Distributions to legacy non-controlling interests - royalty
receipts(7) |
(92) |
(106) |
Adjusted
EBITDA(2)
(non-GAAP) |
1,044 |
556 |
Net cash provided by operating activities
(GAAP) |
1,034 |
460 |
Adjustments: |
|
|
Proceeds from available for sale debt securities(6)(7) |
— |
16 |
Distributions from equity method investees(7) |
35 |
— |
Contributions from legacy non-controlling interests -
R&D(7) |
0 |
1 |
Distributions to legacy non-controlling interests - royalty
receipts(7) |
(92) |
(106) |
Investments in equity method investees(7)(9) |
(4) |
(3) |
Adjusted Cash
Flow(3)
(non-GAAP) |
973 |
367 |
Amounts may not add due to rounding.
Royalty
Pharma plc |
Description
of Approved Indications for Select Portfolio
Therapies |
Table
6 |
|
|
Zavzpret |
Acute 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 |
Evrysdi |
Spinal muscular atrophy |
Cabometyx / Cometriq |
Kidney, liver and thyroid cancer |
Trodelvy |
Breast and bladder cancer |
Orladeyo |
Hereditary angioedema prophylaxis |
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 (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 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: Bosulif (a product
co-developed by Royalty Pharma’s joint venture investee, Avillion
I, for which receipts are presented as Distributions from equity
method investees in the operating section of the statements of cash
flows), Cimzia, Entyvio, IDHIFA, Januvia, Janumet, Other DPP-IVs,
Letairis, Lexiscan, Mircera, Myozyme, Nesina, Oxlumo, Soliqua,
Tazverik and distributions from the Legacy SLP Interest. In the
first quarter of 2023, amount also includes a receipt of $35
million from Royalty Pharma’s joint venture investee, Avillion II,
for the pro rata portion of the $80 million fee paid by AstraZeneca
to exercise the option to commercialize Airsupra in the United
States (presented as Distributions from equity method investees in
the investing section of the statements of cash flows). |
(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 |
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 paid, net |
Operating activities (Interest paid less Interest received) |
Contributions from legacy non-controlling interest - 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 development-stage
funding payments. |
(9) |
Royalty Pharma considers all
payments to fund its operating joint ventures that are performing
R&D activities for development-stage product candidates similar
to asset acquisitions as these funds are expected to generate
operational returns in the future. As a result, amounts funded
through capital calls by Royalty Pharma’s equity method investees,
the Avillion Entities, are deducted to arrive at Adjusted Cash
Flow(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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