On May 9, 2024 Royalty Pharma plc (Nasdaq: RPRX) reported financial results for the first quarter of 2024 and confirmed full year 2024 guidance for Portfolio Receipts (Press release, Royalty Pharma , MAY 9, 2024, View Source [SID1234643016]).
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"We continued to execute on our strategy in the first quarter of 2024 and are on track to deliver our full year guidance" said Pablo Legorreta, Royalty Pharma’s founder and Chief Executive Officer. "We achieved double-digit growth in Royalty Receipts driven by the strength of our diversified portfolio. With today’s transaction to acquire royalties on Sanofi’s frexalimab, a therapy with multi-blockbuster potential, we’ve increased our development-stage portfolio by five-fold to 15 medicines since our IPO. Looking ahead, 2024 is expected to be an event-rich year for our expanding development-stage pipeline with multiple potential regulatory and clinical events. Furthermore, we continue to be highly active in assessing attractive new royalty opportunities, reflecting the strong demand for capital to fund the ongoing wave of healthcare innovation. Based on the powerful fundamental tailwinds underpinning our business, we remain highly confident in our ability to deliver attractive, long-term compounding growth."
Strong Royalty Receipts growth; Portfolio Receipts growth impacted by a high base of comparison
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Royalty Receipts grew 14% to $705 million, driven by strong portfolio performance, including royalties on Evrysdi, Trelegy and the cystic fibrosis franchise.
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Portfolio Receipts declined to $717 million from $1,131 million, reflecting a $475 million Biohaven-related milestone payment received in the first quarter of 2023.
Capital Deployment of approximately $670 million, including cash expected to be paid for frexalimab
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Announced transaction to acquire royalties on Sanofi’s frexalimab, a potential multi-blockbuster in Phase 3 development for multiple sclerosis, for approximately $525 million including estimated transaction costs.
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Financial capacity of >$3.5 billion (including cash and leverage capacity) to execute on value-creating transactions.
Development-stage portfolio growing to 15 therapies with potential significantly >$1 billion in peak royalties
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11 of 15 therapies are in Phase 3 development or undergoing regulatory review.
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Key events expected over next year: FDA filings for aficamten (cardiovascular), pelabresib (myelofibrosis); pivotal study results for seltorexant (depression), Tremfya (Crohn’s disease); FDA action date for KarXT (schizophrenia).
Financial guidance for full year 2024 (excludes contribution from future transactions)
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Royalty Pharma expects 2024 Portfolio Receipts to be between $2,600 million and $2,700 million.
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2024 Portfolio Receipts guidance includes expected growth in Royalty Receipts of 5% to 9%.Financial & Liquidity Summary
Three Months Ended March 31,
(unaudited)
($ and shares in millions) 2024 2023 Change
Portfolio Receipts
717 1,131 (37 )%
Net cash provided by operating activities
665 1,034 (36 )%
Adjusted EBITDA (non-GAAP)*
656 1,044 (37 )%
Portfolio Cash Flow (non-GAAP)*
584 977 (40 )%
Weighted average Class A ordinary shares outstanding – diluted
597 607 (2 )%
*
See "Liquidity and Capital Resources" section. Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures calculated in accordance with the credit agreement.
Portfolio Receipts Highlights
Three Months Ended March 31,
(unaudited)
($ in millions) 2024 2023 Change
Products:
Marketers: Therapeutic Area:
Cystic fibrosis franchise
Vertex Rare disease 218 197 11 %
Trelegy
GSK Respiratory 71 48 46 %
Tysabri
Biogen Neuroscience 69 71 (2 )%
Imbruvica
AbbVie, J&J Cancer 50 57 (12 )%
Evrysdi
Roche Rare disease 45 18 156 %
Promacta
Novartis Hematology 43 41 4 %
Xtandi
Pfizer, Astellas Cancer 41 36 14 %
Tremfya
Johnson & Johnson Immunology 36 32 15 %
Cabometyx/Cometriq
Exelixis, Ipsen, Takeda Cancer 18 16 14 %
Trodelvy
Gilead Cancer 10 7 57 %
Erleada
Johnson & Johnson Cancer 9 6 57 %
Orladeyo
BioCryst Rare disease 9 7 28 %
Spinraza
Biogen Rare disease 7 — n/a
Nurtec ODT/Zavzpret
Pfizer Neuroscience 6 4 40 %
Other products(5)
73 78 (6 )%
Royalty Receipts
705 616 14 %
Milestones and other contractual receipts
12 515 (98 )%
Portfolio Receipts
717 1,131 (37 )%
Amounts shown in the table may not add due to rounding.
Portfolio Receipts were $717 million in the first quarter of 2024, a decrease of 37% compared to $1,131 million in the same period of 2023. The decrease was attributable to a high base of comparison in the first quarter of 2023 in milestones and other contractual receipts, which reflected a $475 million Zavzpret milestone payment and a $29 million Airsupra payment.
Royalty Receipts increased 14% to $705 million, primarily driven by strong growth in Trelegy and the cystic fibrosis franchise, and incremental royalties acquired on Evrysdi in October 2023.
Liquidity and Capital Resources
Royalty Pharma’s liquidity and capital resources are summarized below:
As of March 31, 2024, Royalty Pharma had cash and cash equivalents of $843 million and total debt with principal value of $6.3 billion.
Liquidity Summary
Three Months Ended March 31,
(unaudited)
($ in millions) 2024 2023
Portfolio Receipts
717 1,131
Payments for operating and professional costs
(61 ) (87 )
Adjusted EBITDA (non-GAAP)
656 1,044
Interest paid, net
(73 ) (67 )
Portfolio Cash Flow (non-GAAP)
584 977
Amounts shown in the table may not add due to rounding.
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Adjusted EBITDA (non-GAAP) was $656 million in the first quarter of 2024. Adjusted EBITDA is calculated in accordance with the credit agreement as Portfolio Receipts minus payments for operating and professional costs.
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Portfolio Cash Flow (non-GAAP) was $584 million in the first quarter of 2024. Portfolio Cash Flow is calculated in accordance with the credit agreement as Adjusted EBITDA minus interest paid or received, net. This measure reflects the cash generated by Royalty Pharma’s business that can be redeployed into value-enhancing royalty acquisitions, used to repay debt, returned to shareholders through dividends or share purchases, or utilized for other discretionary investments.
Royalty Pharma has provided a reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure, net cash provided by operating activities, in Table 4.
Royalty Pharma announced new transactions of up to $94 million in the first quarter of 2024, which include upfront payments and potential future milestones. Royalty Pharma is also providing an aggregate amount for Capital Deployment, which reflects cash payments during the period for new and previously announced transactions. Capital Deployment was $93 million in the first quarter of 2024, consisting primarily of the $49 million upfront payment for ecopipam and $36 million in research and development funding support for TEV-’749. Additionally, in April 2024, Royalty Pharma made a $50 million milestone payment to Arrowhead related to olpasiran. In May 2024, Royalty Pharma announced a transaction to acquire royalties and milestones on frexalimab owned by ImmuNext for approximately $525 million in cash including estimated transaction costs.
The table below details Capital Deployment by category:
Capital Deployment
Three Months Ended March 31,
($ in millions) 2024 2023
Acquisitions of financial royalty assets
(86 ) (602 )
Development-stage funding payments – ongoing
(1 ) (1 )
Milestone payments
— (12 )
Investments in equity method investees
(7 ) (4 )
Contributions from legacy non-controlling interests – R&D
0 0
Capital Deployment
(93 ) (618 )
Amounts may not add due to rounding.
Recent Transactions
During 2024, Royalty Pharma announced new transactions of up to $619 million. Announced transactions amount reflects the entire amount of capital committed for new transactions during the year, including potential future milestones.
Recent transactions include:
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In January 2024, Royalty Pharma acquired a royalty interest in ecopipam for an upfront payment of $49 million and up to $44 million in milestone payments contingent on the achievement of certain regulatory milestones. Ecopipam is in Phase 3 development by Emalex Biosciences for the treatment of Tourette Syndrome.
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In May 2024, Royalty Pharma announced a transaction to acquire royalties and milestones on frexalimab owned by ImmuNext for approximately $525 million in cash including estimated transaction costs. ImmuNext is entitled to royalties on frexalimab, which is a first-in-class, second generation anti-CD40 ligand monoclonal antibody in development by Sanofi. Frexalimab is being evaluated in Phase 3 clinical studies for the treatment of multiple sclerosis and is in Phase 2 clinical studies for systemic lupus erythematosus and Type 1 Diabetes.
The information 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.
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.
TEV-‘749 In May 2024, Teva Pharmaceuticals announced positive efficacy results from its Phase 3 trial evaluating TEV-‘749, a once-monthly subcutaneous long-acting injection of olanzapine, in adult patients with schizophrenia. Results demonstrated that TEV-‘749 met its primary endpoint as measured by a change in the Positive and Negative Syndrome Scale (PANSS) total score from baseline after eight weeks compared to placebo. Additionally, no cases of Post-injection Delirium/Sedation Syndrome (PDSS) have been reported to date, after administration of approximately 80% of the minimal target injection number.
Cystic fibrosis franchise
In May 2024, Vertex announced that it submitted a New Drug Application and Marketing Authorization Application for the new triple combination therapy to the Food & Drug Administration and the European Medicines Agency, respectively, for approval. This follows positive Phase 3 results for the new triple combination therapy in February 2024.
In April 2024, Vertex announced that the European Commission had granted approval for the label expansion of Kalydeco for the treatment of infants down to one month of age with cystic fibrosis (CF) who have certain mutations in the CF transmembrane conductance regulator gene.
Tremfya In May 2024, Johnson and Johnson announced positive Phase 3 results for Tremfya in patients with moderately to severely active Crohn’s disease with inadequate response/intolerance to conventional therapies and/or biologics. Johnson and Johnson submitted applications to the European Medicines Agency seeking to expand the Marketing Authorization Application for Tremfya to include ulcerative colitis and Crohn’s disease.
Xtandi
In April 2024, Astellas Pharma announced the European Commission approved a label extension for Xtandi as monotherapy or in combination with androgen deprivation therapy for the treatment of adult men with high-risk biochemical recurrent non-metastatic hormone-sensitive prostate cancer who are unsuitable for salvage-radiotherapy.
In January 2024, Pfizer announced that the European Commission had approved Talzenna (talazoparib), an oral poly ADP-ribose polymerase inhibitor, in combination with Xtandi, for the treatment of adult patients with metastatic castration-resistant prostate cancer in whom chemotherapy is not clinically indicated.
KarXT In March 2024, Bristol Myers Squibb announced that it completed its acquisition of Karuna. Bristol Myers acquired Karuna for $330 per share, for a total equity value of $14 billion. The New Drug Application for KarXT for the treatment of schizophrenia in adults was accepted for review by the FDA, with a Prescription Drug User Fee Act date of September 26, 2024.
Trontinemab In March 2024, Roche held a neurology update event in which it announced that in people with Alzheimer’s Disease, trontinemab demonstrated rapid and robust amyloid plaque reduction at relatively low doses compared with standard anti-Aß monoclonal antibodies. The sustained low Amyloid Related Imaging Abnormalities incidence and overall favorable safety and tolerability profile support further investigation.
Pelabresib In February 2024, Novartis announced that it had entered into an agreement to make a voluntary public takeover offer to acquire MorphoSys for €68 per share, for a total equity value of €2.7 billion. The closing is expected in the first half of 2024.
Trodelvy In January 2024, Gilead announced that the Phase 3 EVOKE-01 study evaluating Trodelvy compared to docetaxel did not meet its primary endpoint of overall survival in patients with previously treated metastatic non-small cell lung cancer.
2024 Financial Outlook
Royalty Pharma has provided guidance for full year 2024, excluding transactions and borrowings announced after the date of this release, as follows:
Provided May 9, 2024 Previous
Portfolio Receipts
$2,600 million to $2,700 million $2,600 million to $2,700 million
Payments for operating and professional costs
8% to 9% of Portfolio Receipts 8% to 9% of Portfolio Receipts
Interest paid
$160 million $160 million
The above Portfolio Receipts guidance includes expected Royalty Receipts growth of 5% to 9% in 2024.
Royalty Pharma’s full year 2024 guidance reflects a negligible estimated foreign exchange impact to Portfolio Receipts, assuming current foreign exchange rates prevail for 2024.
Total interest paid is based on the semi-annual interest payment schedule of Royalty Pharma’s existing notes and is anticipated to be approximately $160 million in 2024. Interest paid is anticipated to be approximately $79 million in the third quarter of 2024 with de minimis amounts being recorded in the second and fourth quarters of 2024. The projection assumes no additional debt financing in 2024, including no drawdown on the revolving credit facility. In the first quarter of 2024, Royalty Pharma collected interest of $6 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 of 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.
Financial Results Call
Royalty Pharma will host a conference call and simultaneous webcast to discuss its first quarter 2024 results today at 8:00 a.m., Eastern Time. Please visit the "Investors" page of the company’s website at View Source 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.