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What changed in Royalty Pharma plc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Royalty Pharma plc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+524 added−718 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-15)

Top changes in Royalty Pharma plc's 2023 10-K

524 paragraphs added · 718 removed · 384 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe following table provides an overview of our current portfolio of royalties: Royalties Marketer(s) Product Detail 2022 Royalty Receipts (in millions) 2022 End Market Sales (in millions) (1) Approved Products Cystic fibrosis franchise (2) Vertex Cystic fibrosis $811 $8,931 Nurtec ODT/Biohaven payment (3) Pfizer Migraine 560 764 Tysabri Biogen Relapsing forms of multiple sclerosis 370 2,028 Imbruvica AbbVie, Johnson & Johnson Hematological malignancies and chronic graft versus host disease 313 5,820 Xtandi Pfizer, Astellas Prostate cancer 187 4,817 Promacta Novartis Chronic immune thrombocytopenic purpura and aplastic anemia 182 2,088 Tremfya Johnson & Johnson Plaque psoriasis and psoriatic arthritis 97 2,668 Trelegy GSK Chronic obstructive pulmonary disease and asthma 90 2,142 Januvia, Janumet, Other DPP-IVs Merck & Co., others Diabetes 73 4,512 Cabometyx/Cometriq Exelixis, Ipsen, Takeda Kidney, liver and thyroid cancers 55 1,940 Farxiga/Onglyza AstraZeneca Diabetes 44 4,638 Evrysdi Roche Spinal muscular atrophy 41 1,173 Prevymis Merck & Co.
Biggest changeApproved Products Portfolio Overview The following table provides an overview of our current portfolio of royalties on approved products, including end market sales of the therapies in our portfolio: Products Marketer(s) Therapeutic Area Product Detail 2023 Portfolio Receipts (in millions) 2023 End Market Sales (in millions) (1) Cystic fibrosis franchise (2) Vertex Rare disease Cystic fibrosis $771 $9,869 Tysabri Biogen Neuroscience Relapsing forms of multiple sclerosis 279 1,877 Imbruvica AbbVie, Johnson & Johnson Cancer Hematological malignancies and chronic graft versus host disease 210 4,879 Trelegy GSK Respiratory Chronic obstructive pulmonary disease and asthma 203 2,739 Promacta Novartis Hematology Chronic immune thrombocytopenic purpura and aplastic anemia 161 2,269 Xtandi Pfizer, Astellas Cancer Prostate cancer 146 5,037 Tremfya Johnson & Johnson Immunology Plaque psoriasis and psoriatic arthritis 116 3,147 Evrysdi Roche Rare disease Spinal muscular atrophy 66 1,580 Cabometyx/Cometriq Exelixis, Ipsen, Takeda Cancer Kidney, liver and thyroid cancers 66 2,266 Spinraza Biogen Rare disease Spinal muscular atrophy 45 1,741 Trodelvy Gilead Cancer Breast cancer 33 1,063 Orladeyo BioCryst Rare disease Hereditary angioedema prophylaxis 29 325 Erleada Johnson & Johnson Cancer Prostate cancer 27 2,387 Nurtec ODT/Zavzpret Pfizer Neuroscience Migraine 18 928 (3) Other products (4) 277 — Royalty receipts $2,449 Milestones and other contractual receipts (5) 599 — Portfolio Receipts $3,049 Amounts shown in the table may not add due to rounding.
We believe that there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we do not currently anticipate material capital expenditures arising from environmental regulation.
We believe that there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition or results of operations, and we do not currently anticipate material capital expenditures arising from environmental regulation.
Competitive factors affecting the market position and success of each product include: • effectiveness; • safety and side effect profile; • price, including third-party insurance reimbursement policies; • timing, introduction and marketer support of the product; • efficacy and execution of marketing and commercialization strategy; • market acceptance; • manufacturing, supply and distribution; • governmental regulation, including price caps; • availability of lower-cost generics or biosimilars; • intellectual property protection and exclusivity; • treatment innovations that eliminate or minimize the need for a product; and • product liability claims.
Competitive factors affecting the market position and success of each product include: • effectiveness; • safety and side effect profile; • price, including third-party insurance reimbursement policies; • timing, introduction and marketer support of the product; • efficacy and execution of marketing and commercialization strategy; • market acceptance; • manufacturing, supply and distribution; 10 • governmental regulation, including price caps; • availability of lower-cost generics or biosimilars; • intellectual property protection and exclusivity; • treatment innovations that eliminate or minimize the need for a product; and • product liability claims.
Biotechnology companies typically in-license these new technologies, add value through applied research and early-stage clinical development, and then either out-license the resulting development-stage product candidates to large biopharmaceutical companies for late-stage clinical development and commercialization, or commercialize the products themselves. As new drugs are transferred along this value chain, royalties are created as compensation for the licensing or selling institutions.
Biotechnology companies typically in-license these new technologies, add value through applied research and early-stage clinical development, and then either out-license the resulting product candidates to large biopharmaceutical companies, or commercialize the products themselves. As new drugs are transferred along this value chain, royalties are created as compensation for the licensing or selling institutions.
By acquiring royalties, we are able to realize payments based directly on the top-line sales of leading biopharmaceutical therapies, without the costs associated with fixed R&D, manufacturing and commercial infrastructure. 4 Our unique role in the biopharmaceutical ecosystem positions us to benefit from multiple compounding growth drivers .
By acquiring royalties, we are able to realize payments based directly on the top-line sales of leading biopharmaceutical therapies, without the costs associated with fixed R&D, manufacturing and commercial infrastructure. 3 Our unique role in the biopharmaceutical ecosystem positions us to benefit from multiple compounding growth drivers .
Investment Company Act. To ensure that we are not obligated to register as an investment company, we must not exceed the thresholds provided by the ICA 40% Test.
To ensure that we are not obligated to register as an investment company, we must not exceed the thresholds provided by the ICA 40% Test.
The Management Agreement requires the Manager’s executives to devote substantially all of their time to managing us, Royalty Pharma Investments 2019 ICAV (“RPI” or “RPI 2019 ICAV”) and any legacy vehicles related to Royalty Pharma Investments, an Irish unit trust (“Old RPI”) unless otherwise approved by our Board of Directors.
The Management Agreement requires the Manager’s executives to devote substantially all of their time to managing us, Royalty Pharma Investments 2019 ICAV (“RPI 2019 ICAV”) and any legacy vehicles related to Royalty Pharma Investments, an Irish unit trust (“Old RPI”) unless otherwise approved by our Board of Directors.
We believe that the Manager’s relations with its employees are satisfactory. 18 Human Capital Because we are “externally managed,” we do not employ our own personnel, but instead depend upon the Manager and its executive officers and employees for all of the services we require.
We believe that the Manager’s relations with its employees are satisfactory. 11 Human Capital Because we are “externally managed,” we do not employ our own personnel, but instead depend upon the Manager and its executive officers and employees for all of the services we require.
Our capital-efficient business model enables us to benefit from many of the most attractive characteristics of the biopharmaceutical industry, including long product life cycles, significant barriers to entry and noncyclical revenues, but with substantially reduced exposure to many common industry challenges such as early-stage development risk, therapeutic area constraints, high research and development (“R&D”) costs, and high fixed manufacturing and marketing costs.
Our unique business model enables us to benefit from many of the most attractive characteristics of the biopharmaceutical industry, including long product life cycles, significant barriers to entry and noncyclical revenues, but with substantially reduced exposure to many common industry challenges such as early-stage development risk, therapeutic area constraints, high research and development (“R&D”) costs, and high fixed manufacturing and marketing costs.
The biopharmaceutical industry benefits from a number of highly attractive characteristics, including long product life cycles, significant barriers to entry and non-cyclical revenues. We have a highly flexible approach that is agnostic to both therapeutic area and treatment modality, allowing us to acquire royalties on the most attractive therapies from across the biopharmaceutical industry.
The biopharmaceutical industry benefits from many attractive characteristics, including long product life cycles, significant barriers to entry and non-cyclical revenues. We have a highly flexible approach that is agnostic to both therapeutic area and treatment modality, allowing us to acquire royalties on the most attractive therapies from across the biopharmaceutical industry.
(11) Our royalty interest in Spinraza will revert to Ionis after we receive aggregate Spinraza royalties equal to $475 million or $550 million, depending on the timing and occurrence of certain events.
(8) Our royalty interest in Spinraza will revert to Ionis after we receive aggregate Spinraza royalties equal to $475 million or $550 million, depending on the timing and occurrence of certain events.
As a result of our significant scale and highly flexible business model, we believe that we are uniquely positioned to capitalize on multiple compounding growth drivers: an accelerating understanding of the molecular origins of disease, technological innovation leading to the creation of new treatment modalities, an increasing number of biopharmaceutical industry participants with significant capital needs, competitive industry dynamics which reward companies that can rapidly execute broad clinical development programs, increasing FDA drug approvals which reached an all-time high in 2018 and the potential for multiple royalties to be created from each new drug that reaches the market.
As a result of our significant scale and highly flexible business model, we believe that we are uniquely positioned to capitalize on multiple compounding growth drivers: an accelerating understanding of the molecular origins of disease, technological innovation leading to the creation of new treatment modalities, an increasing number of biopharmaceutical industry participants with significant capital needs, competitive industry dynamics which reward companies that can rapidly execute broad clinical development programs, increasing FDA drug approvals, and the potential for multiple royalties to be created from each new drug that reaches the market.
However, we do not currently have any employees or any officers other than our executive officers. Pursuant to the management agreements entered into in connection with our initial public offering (collectively, the “Management Agreement”) with the Manager, the Manager performs corporate and administration services for us. As of December 31, 2022, the Manager had 75 employees.
However, we do not currently have any employees or any officers other than our executive officers. Pursuant to the management agreements entered into in connection with our initial public offering (collectively, the “Management Agreement”) with the Manager, the Manager performs corporate and administration services for us. As of December 31, 2023, the Manager had 89 employees.
Our agent for service in the United States is CSC North America located at 251 Little Falls Drive, Wilmington, Delaware, 19808.
Our agent for service in the United States is CSC North America located at 251 Little Falls Drive, Wilmington, DE 19808.
The royalties in our portfolio entitle us to payments based directly on the top-line sales of the associated therapies, rather than the profits of these therapies. As such, the diversification of our profits directly reflects the diversification of our royalty receipts, rather than varying levels of product-level profitability, as would typically be expected within a biopharmaceutical company.
The royalties in our portfolio entitle us to payments based directly on the top-line sales of the associated therapies, rather than the profits of these therapies. As such, the diversification of our cash generation directly reflects the diversification of our royalties, rather than varying levels of product-level profitability, as would typically be expected within a biopharmaceutical company.
As a result of the increasing cost and complexity of drug development, the creation of a new drug today typically involves a number of industry participants. Academia and other research institutions conduct basic research and license new technologies to industry for further development.
As a result of the increasing cost and complexity of drug development, the creation of a new drug today typically involves a number of industry participants and can lead to multiple royalties. Academia and other research institutions conduct basic research and license new technologies to industry for further development.
We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including Vertex’s Trikafta, Kalydeco, Orkambi and Symdeko, Biogen’s Tysabri, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, GSK’s Trelegy, Novartis’ Promacta, Pfizer’s Nurtec ODT, Johnson & Johnson’s Tremfya, Roche’s Evrysdi, Gilead’s Trodelvy, and 12 development-stage product candidates.
We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including Vertex’s Trikafta, GSK’s Trelegy, Roche’s Evrysdi, Johnson & Johnson’s Tremfya, Biogen’s Tysabri and Spinraza, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Novartis’ Promacta, Pfizer’s Nurtec ODT and Gilead’s Trodelvy, among others, and 14 development-stage product candidates.
We also fund ongoing R&D for biopharmaceutical companies in exchange for future royalties and milestones if the product or indication we are funding is approved. • Launch and Development Capital – Tailored supplemental funding solutions, generally included as a component within a transaction, increasing the scale of our capital.
A synthetic royalty may also include contingent milestone payments. We also fund ongoing R&D for biopharmaceutical companies in exchange for future royalties and milestones if the product or indication we are funding is approved. • Launch and Development Capital – Tailored supplemental funding solutions, generally included as a component within a transaction, increasing the scale of our capital.
Further, references to website URLs are intended to be inactive textual references only. 20
Further, references to website URLs are intended to be inactive textual references only. 13
We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions. Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities such as our strategic alliance with MSCI Inc.
We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions. Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.
As of January 31, 2023, products underlying $6.4 billion of these acquisitions have already been approved, representing a success rate to date of 77%, while products underlying $0.8 billion were not approved and products underlying $1.1 billion are still in development. Notes: (1) Reflects cash deployed for royalty acquisitions from 2012 through 2022.
As of December 31, 2023, products underlying $6.3 billion of these acquisitions have already been approved, representing a success rate to date of 76%, while products underlying $0.9 billion were not approved and products underlying $1.1 billion are still in development. Notes: (1) Reflects cash deployed for royalty acquisitions from 2012 through 2023.
The length of any product’s commercial life cannot be predicted. There can be no assurance that one or more products will not be rendered obsolete or non-competitive by new or alternate products or improvements made to existing products, either by the current marketer of such products or by another marketer.
There can be no assurance that one or more products will not be rendered obsolete or non-competitive by new or alternate products or improvements made to existing products, either by the current marketer of such products or by another marketer.
We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators.
We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators. Our industry leading royalty portfolio and capital-efficient business model drives our compounding growth.
There can be no assurances that our royalties will expire when expected. (2) The royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements.
There can be no assurances that our royalties will expire when estimated. (2) The royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements. Royalty rates apply to annual worldwide net sales unless otherwise stated.
This compares to our next nearest competitor, which we believe has executed $3 billion of transactions, which we estimate to represent market share of 8%. Given the scale of our business relative to our competitors, we have a particularly strong leadership position within large royalty transactions.
This compares to our nearest competitor, which we believe has executed $3.7 billion of transactions, and represents an estimated market share of 8%. Given the scale of our business relative to our competitors, we have a particularly strong market share of large transactions within the growing biopharmaceutical royalty market.
This has accelerated R&D opportunities for new drugs. The pace of biopharmaceutical innovation coupled with the proliferation of new biotechnology companies and the increasing cost of drug development has created a significant capital need over recent years that we believe will provide a sustainable tailwind for our business. Royalties play a fundamental and growing role in the biopharmaceutical industry.
The pace of innovation coupled with the proliferation of new biotechnology companies and the increasing cost of drug development has created a significant capital need over recent years that we believe will provide a sustainable tailwind for our business.
Since 2012, there have been 13 royalty transactions with an aggregate value of more than $500 million each. We executed 11 of these 13 transactions, for a total aggregate transaction value of approximately $16 billion of cash and estimated market share of 86%, in this transaction size range.
Since 2012, there have been 15 royalty transactions with an aggregate value of more than $500 million each. We have executed 12 of these 15 transactions, for a total transaction value of approximately $17.0 billion of cash and an estimated market share of 85%.
A royalty is the contractual right to a percentage of top-line sales from a licensee’s use of a product, technology or intellectual property. The majority of our current portfolio consists of third-party royalties. • Synthetic Royalties – Newly-created royalties on approved or late-stage development therapies with strong proof of concept and high commercial potential.
The majority of our current portfolio consists of third-party royalties. 4 • Synthetic Royalties – Newly-created royalties on approved or late-stage development therapies with strong proof of concept and high commercial potential. A synthetic royalty is the contractual right to a percentage of top-line sales by the developer or marketer of a therapy in exchange for funding.
As of January 31, 2023, our portfolio consists of royalties on more than 35 marketed biopharmaceutical therapies which address a wide range of therapeutic areas, including rare diseases, cancer, neurology, immunology, hematology and diabetes.
As of December 31, 2023, our portfolio consists of royalties on more than 35 marketed biopharmaceutical therapies which address a wide range of therapeutic areas, including rare diseases, neuroscience, cancer, hematology, immunology, respiratory and diabetes. In 2023, no individual product accounted for more than 23% of our Portfolio Receipts.
Global prescription pharmaceutical sales are projected to grow from approximately $1.2 trillion in 2022 to approximately $1.5 trillion in 2027, representing a CAGR of 6% according to EvaluatePharma despite more than $140 billion in cumulative sales being lost to expected patent expiries during the same period.
Global prescription pharmaceutical sales are projected to grow from $1.1 trillion in 2023 to $1.5 trillion in 2028, representing a compound annual growth rate of 7% according to EvaluatePharma despite more than $150 billion in cumulative sales being lost to expected patent expiries during the same period.
Given the marketers’ significant focus on and investment in these products, they are motivated to invest substantial resources in driving continued sales growth. 3 Our portfolio is highly diversified across products, therapeutic areas and marketers.
The therapies within our portfolio are marketed by leading global biopharmaceutical companies for whom these products are important sources of revenue. Given the marketers’ significant focus on and investment in these products, they are motivated to invest substantial resources in driving continued sales growth. Our portfolio is highly diversified across products, therapeutic areas and marketers.
In addition, the royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements.
(1) Our fixed payment arrangements are subject to the underlying contractual agreements and legal instruments from which they arise and may be subject to reductions, accelerations, and other adjustments in accordance with the respective terms of such agreements and instruments.
Cytokinetics Commercial Launch Funding Cardiology • Up to five tranches totaling $300.0 million, including first $50.0 million tranche funded in the first quarter of 2022. • Payments to us of 1.9 times the amount drawn, except for the second and third tranches, which each total 2.0 times the amount drawn. • Required draw of $50.0 million if a certain contingency is met and optional draw of the remaining $200.0 million if certain regulatory and clinical development milestones are met. • Each subsequent tranche has a 12-month draw period once certain clinical and regulatory milestones are met. • 34 consecutive quarterly payments to us on the last business day of the seventh quarter following the quarter of the funding date for each tranche.
Cytokinetics Commercial Launch Funding Cardiology • Tranche one $50.0 million funded. • Tranches four and five have a required draw of $50.0 million and an optional draw of up to $125.0 million within a 12-month draw period if certain clinical and regulatory milestones are met. • Payments to us of 1.9 times the amount drawn for tranches one, four and five. • 34 consecutive quarterly payments to us on the last business day of the seventh quarter following the quarter of the funding date for each tranche.
Our focus is to create significant long-term value for our shareholders by acquiring both approved and development-stage product candidates through a variety of structures. In evaluating these acquisition opportunities, we focus on the following financial characteristics: • Long duration cash flows: we prioritize long-duration assets over short-duration assets that may boost near-term financial performance.
Our focus is to create significant long-term value for our shareholders by acquiring both approved and development-stage product candidates through a variety of structures. In evaluating these acquisition opportunities, we focus on the following financial characteristics: • Attractive risk-adjusted returns: we focus on generating attractive returns on our investments on a risk-adjusted basis.
Sales shown for Crysvita represent Europe, the Middle East and Africa only. For the majority of our royalties, royalty receipts lag product performance by one quarter and can generally be estimated by applying our publicly disclosed royalty rate to the preceding quarter’s marketer-announced net revenues on a product-by-product basis.
Notes: (1) Represents end market sales for 2023 as reported by respective product marketers. For the majority of our royalties, royalty receipts lag product performance by one quarter and can generally be estimated by applying our publicly disclosed royalty rate to the preceding quarter’s marketer-announced net revenues on a product-by-product basis.
We believe that our environmental, social and governance (ESG) strategy, policies and practices will create sustainable long-term value for our company, our employees, our shareholders and other stakeholders while also helping us reduce risk and identify new opportunities. Governance Risk management, compliance and high ethical standards are foundational to our culture.
We believe that our corporate responsibility strategy, policies and practices will create sustainable long-term value for our company, our employees, our shareholders and other stakeholders, while also helping us reduce risk and identify new opportunities. We maintain robust governance policies and practices that adhere to high standards of regulatory compliance, ethics, transparency and integrity.
Investment Company Act, which, according to certain SEC staff interpretations, generally may be available to an issuer that invests at least 55% of its assets in “notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services,” which we refer to as ICA Exception Qualifying Assets, and that does not issue any redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates.
Investment Company Act, which, according to certain SEC staff interpretations, generally may be available to an issuer that invests at least 55% of its assets in “notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services,” which we refer to as ICA Exception Qualifying Assets, and that does not issue any redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates. 12 In a no-action letter, dated August 13, 2010, to our predecessor, the SEC staff promulgated an interpretation that royalties that entitle an issuer to collect royalty receivables that are directly based on the sales price of specific biopharmaceutical assets that use intellectual property covered by specific license agreements are ICA Exception Qualifying Assets under Section 3(c)(5)(A).
We rely on this no-action letter for the position that royalty receivables relating to biopharmaceutical assets that we hold are ICA Exception Qualifying Assets under Section 3(c)(5)(A) and Section 3(c)(6), which is described below. 19 As the parent of one or more subsidiaries that rely on Section 3(c)(5)(A), we currently are exempted from registration as an investment company based on Section 3(a)(1)(C) and/or Section 3(c)(6) of the U.S.
We rely on this no-action letter for the position that royalty receivables relating to biopharmaceutical assets that we hold are ICA Exception Qualifying Assets under Section 3(c)(5)(A) and Section 3(c)(6), which is described below.
The success of our business has been the result of a focused strategy of actively identifying and tracking the development and commercialization of key new therapies, allowing us to move quickly to make acquisitions when opportunities arise.
We have a focused strategy of actively identifying and tracking the development and commercialization of important new therapies, which allows us to move quickly to make acquisitions when opportunities arise.
There are a limited number of suitable and attractive acquisition opportunities available in the market. Therefore, competition to acquire such assets is intense. The Manager is subject to competition from other potential royalty buyers, including from the companies that market the products on which royalties are paid, financial institutions and other entities.
Competition We face competition from other entities that acquire biopharmaceutical royalties, including competitors of the Manager that are in the similar business of acquiring biopharmaceutical royalties. There are a limited number of suitable and attractive acquisition opportunities available in the market. Therefore, competition to acquire such assets is intense.
There can be no assurance that we will continue to acquire biopharmaceutical products and companies that hold biopharmaceutical royalties that are acceptable to us. The products that provide the basis for the cash flows of the biopharmaceutical products in which we invest are also subject to intense competition. The biopharmaceutical industry is a highly competitive and rapidly evolving industry.
The products that provide the basis for the cash flows of the biopharmaceutical products in which we invest are also subject to intense competition. The biopharmaceutical industry is a highly competitive and rapidly evolving industry. The length of any product’s commercial life cannot be predicted.
We analyze a wide range of scientific data and stay in constant communication with leading physicians, scientists, biopharmaceutical executives and venture capital firms. This allows us to quickly assess and gain conviction in the value of assets when acquisition opportunities arise.
We analyze a wide range of scientific data and stay in constant communication with leading physicians, scientists, biopharmaceutical executives and venture capital firms.
(“MSCI”) to develop thematic life sciences indexes. 6 From 2012 through 2022, we deployed $8.3 billion of cash to acquire royalties, milestones and related assets on development-stage product candidates.
From 2012 through 2023, we deployed $8.3 billion of cash to acquire royalties, milestones and other contractual receipts on development-stage product candidates.
Our Business Model We believe that the following elements of our business and product portfolio provide a unique and compelling proposition to investors seeking exposure to the biopharmaceutical sector. Our portfolio provides direct exposure to a broad array of blockbuster therapies.
Our Business Model We believe that the following elements of our business and product portfolio provide a unique and compelling proposition to investors seeking exposure to the biopharmaceutical sector. Our business model captures many of the most attractive aspects of the biopharmaceutical industry, but with reduced exposure to many common industry challenges .
We invest significant time and resources across all levels of the organization, including senior leadership, in the evaluation of potential opportunities. Our Portfolio Commercial Products The key royalties in our marketed portfolio related to approved products include the ones listed below.
We invest significant time and resources across all levels of the organization, including senior leadership, in the evaluation of potential opportunities. 6 Our Portfolio Our portfolio consists of royalties on more than 35 commercial products and 14 development-stage product candidates.
(6) Other products primarily include royalties on the following products: Bosulif (a product co-developed by our joint venture investee, Avillion, for which receipts are presented as Distributions from equity method investees on the Statements of Cash Flows), Cimzia, Entyvio, Gavreto, HIV Franchise, IDHIFA, Letairis, Lexiscan, Mircera, Myozyme, Nesina, Soliqua, Tazverik and distributions from the Legacy SLP Interest.
(4) Other products primarily include royalties on the following products: Cimzia, Crysvita, Emgality, Entyvio, Farxiga/Onglyza, IDHIFA, Letairis, Lexiscan, Mircera, Nesina, Prevymis, Soliqua and distributions from the Legacy SLP Interest, which are presented as Distributions from equity method investees on the Statement of Cash Flows.
The estimated weighted average royalty duration of our portfolio is approximately 13 years based on projected cumulative cash royalty receipts. Our largest marketed royalty in 2022 was on Vertex’s cystic fibrosis franchise, and existing patent applications covering Trikafta, the most significant product in that franchise, are expected to provide exclusivity through 2037.
The key growth-driving royalties in our portfolio are protected by long patent lives. The estimated weighted average duration of our portfolio is approximately 13 years based on projected cumulative cash royalty receipts. Our largest marketed royalty in 2023 was on Vertex’s cystic fibrosis franchise.
(3) Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (4) We will pay Theravance Biopharma, Inc. 85% of the royalties in respect of ex-U.S. net sales after June 30, 2029 and 85% of the royalties in respect of U.S. net sales after December 31, 2030.
(5) We will pay Theravance Biopharma, Inc. 85% of the royalties in respect of ex-U.S. sales after June 30, 2029 and 85% of the royalties in respect of U.S. sales after December 31, 2030.
We acquire royalties on approved products, often in the early stages of their commercial launches, and development-stage product candidates with strong proof of concept data, mitigating development risk and expanding our opportunity set.
Additionally, our focus on acquiring royalties on approved products, often in the early stages of their commercial launches, and on development-stage product candidates with strong proof of concept data, mitigates development risk and expands our opportunity set. In 2023, we generated $3.0 billion of Portfolio Receipts (as defined below) and announced transactions with a total potential value of $4.0 billion.
These other potential royalty buyers may be larger and better capitalized than us. The Manager may not be able to identify and obtain a sufficient number of asset acquisition opportunities to invest the full amount of capital that may be available to us.
The Manager may not be able to identify and obtain a sufficient number of asset acquisition opportunities to invest the full amount of capital that may be available to us. We also compete with other forms of financing available to biopharmaceutical companies, such as equity, debt or convertible debt financing and licensing opportunities.
Given our leadership position within the biopharmaceutical royalty sector, we are able to capitalize on the growing volumes of royalties that are created as new therapies are developed to address unmet medical needs.
Biotechnology companies are also increasingly creating royalties on existing products within their portfolios, known as synthetic royalties, in order to provide a source of non-dilutive capital to fund their businesses. Given our leadership position within biopharmaceutical royalties, we are able to capitalize on the growing volumes of royalties created as new therapies are developed to address unmet medical needs.
Simple and efficient operating model generates substantial cash flow for reinvestment in new biopharmaceutical royalties . Our capital-efficient operating model requires limited operating expenses and no material capital investment in fixed assets or infrastructure in order to support the ongoing growth of our business. As a result, we generate high Adjusted Cash Flow relative to our Adjusted Cash Receipts.
Our capital-efficient operating model requires limited operating expenses and no material capital investment in fixed assets or infrastructure in order to support the ongoing growth of our business. Our high cash flow conversion provides us with significant capital that we can redeploy for new royalty acquisitions and return to shareholders through dividends or share repurchases.
The growth of the biopharmaceutical industry is driven by global secular trends, including population growth, increased life expectancy and growth of the middle classes in emerging markets. In addition, a dramatic acceleration of medical research in recent years has led to a better understanding of the molecular origins of disease and identification of potential targets for therapeutic intervention.
In addition, an acceleration of medical research in recent years has led to a better understanding of the molecular origins of disease and identification of potential targets for therapeutic intervention, which has increased R&D investments in new therapies.
We have the ability to access innovation from across the biopharmaceutical ecosystem. Our approach is to first assess innovative science in areas of significant unmet medical need and then evaluate how to acquire royalties on therapies that we believe are attractive.
(2) Not approved includes investments in vosaroxin, palbociclib, Merck KGaA’s anti-IL17 nanobody M1095, BCX9930, gantenerumab, otilimab and omecamtiv mecarbil. Our approach is to first assess innovative science in areas of significant unmet medical need and then evaluate how to acquire royalties on therapies that we believe are attractive.
Our Strategy We intend to grow our business by continuing to partner with constituents across the biopharmaceutical value chain to fund innovation. Our growth strategy is tailored to the needs of our partners through a variety of structures: • Third-party Royalties – Existing royalties on approved or late-stage development therapies with high commercial potential.
Our growth strategy is tailored to the needs of our partners through a variety of structures: • Third-party Royalties – Existing royalties on approved or late-stage development therapies with high commercial potential. A royalty is the contractual right to a percentage of top-line sales from a licensee’s use of a product, technology or intellectual property.
(18) We are entitled to 60% of MorphoSys’ trontinemab royalty payments ranging from 5.5% to 7% of worldwide net sales. (19) Product formerly known as CPI-0209. There can be no assurance that our royalties will expire when expected. Any reductions in the durations of royalties relative to our estimates may adversely affect our financial condition and results of operations.
We are also entitled to a tiered percentage of sublicense revenue for Orladeyo in certain territories. There can be no assurance that our royalties will expire when expected. Any reductions in the durations of royalties relative to our estimates may adversely affect our financial condition or results of operations.
Our team has significant experience identifying, evaluating and acquiring royalties on biopharmaceutical therapies. Together they have been responsible for approximately $30 billion of acquisitions of biopharmaceutical royalties, milestones and related assets since 1996 through January 31, 2023.
Our team has significant experience identifying, evaluating and acquiring royalties on biopharmaceutical therapies. Together they have been responsible for $26.4 billion in announced transactions of biopharmaceutical royalties, milestones and other contractual receipts since 2012 through 2023. Our acquisitions have included many of the industry’s leading therapies such as Trikafta, Tremfya, Imbruvica and Xtandi.
MorphoSys Development Funding Bonds Not applicable • Payments to us of approximately 2.2 times the $300.0 million funded amount. • Expected payments in 36 consecutive quarterly payments from the fourth quarter of 2024.
(4) In February 2024, Novartis announced it has entered into an agreement to acquire MorphoSys. 9 Other Significant Funding Arrangements The table below provides a summary of our significant contractual funding arrangements: Funding Arrangement Therapeutic Area Key Terms (1) MorphoSys Development Funding Bonds Not applicable • Payments to us of 2.2 times the $300.0 million funded amount. • Expected payments in 36 consecutive quarterly payments from the fourth quarter of 2024.
We evaluate opportunities across the risk spectrum and do not target the same return for all assets. • Growth and scale: we seek assets that are accretive to our long-term growth profile and additive to our overall scale. We conduct extensive due diligence when evaluating potential new opportunities.
The durability of our cash flows also allows us to add leverage to our portfolio, enhancing returns and providing capital that we can use to acquire additional assets. • Growth and scale: we seek assets that are accretive to our long-term growth profile and additive to our overall scale. We conduct extensive due diligence when evaluating potential new opportunities.
We also compete with other forms of financing available to biopharmaceutical companies, such as equity, debt or convertible debt financing and licensing opportunities. If biopharmaceutical companies opt to finance through such other means, we may not be able to acquire additional assets or grow our business.
If biopharmaceutical companies opt to finance through such other means, we may not be able to acquire additional assets or grow our business. There can be no assurance that we will continue to acquire biopharmaceutical products and companies that hold biopharmaceutical royalties that are acceptable to us.
We are the leader within the space, having executed transactions with an aggregate announced transaction value of more than $24 billion since 2012 through January 31, 2023. We estimate this to represent an estimated market share of approximately 60% of all royalty transactions by value announced during this period.
We estimate the market for biopharmaceutical royalties reached $7.4 billion in transaction value in 2023, a greater than three-fold increase compared to 2012. We have executed transactions with an aggregate announced value of $26.4 billion from 2012 through 2023, which represents an estimated market share of approximately 58% of all royalty transactions during this period.
As of January 31, 2023, our portfolio included royalties on 15 therapies that each generated end-market sales of more than $1 billion in 2022, including five therapies that each generated end-market sales of more than $3 billion. The therapies within our royalty portfolio are marketed by leading global biopharmaceutical companies for whom these products are important sources of revenue.
Our portfolio provides direct exposure to a broad array of blockbuster therapies. As of December 31, 2023, our portfolio included royalties on 15 therapies that each generated end-market sales of more than $1 billion in 2023, including six therapies that each generated end-market sales of more than $3 billion.
(7) We are entitled to approximately 43% of the tiered royalties ranging from 8% to 16% for Evrysdi. (8) Royalty is perpetual; years shown represent estimated United States patent expiration for Orladeyo and potential sales decline based on timing of generic entry.
We are entitled to 25% of Ionis’ Spinraza royalty payments of 11% to 15% on sales up to $1.5 billion through 2027, increasing to 45% of royalty payments on sales up to $1.5 billion in 2028. (9) Royalty is perpetual; years shown represent estimated U.S. patent expiration for Orladeyo and potential sales decline based on timing of generic entry.
Our right to receive royalties is perpetual, but we expect that the 2037 patent expiration for Trikafta may result in potential sales declines based on potential generic entry. Several of our marketed royalties have unlimited durations and could provide cash flows for many years after key patents have expired.
Existing patent applications covering Trikafta, the most significant product in that franchise, are expected to provide exclusivity through 2037. Several of our marketed royalties have unlimited durations and could provide cash flows for many years after key patents have expired. Our simple and efficient operating model generates substantial cash flow for reinvestment in new biopharmaceutical royalties .
(5) Royalties on net sales of cabozantinib products in the United States through September 2026 and non-U.S. markets through the full term of the royalty. (6) Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion.
Royalty entitlement does not reflect either PTC or Royalty Pharma exercising option to sell/purchase additional Evrysdi royalties. (7) We are entitled to royalties on sales of cabozantinib products in the U.S. through September 2026 and non-U.S. markets through the full term of the royalty.
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From 2012, when we began acquiring royalties on development-stage product candidates, through January 31, 2023, we have entered into transactions to acquire biopharmaceutical royalties, milestones and related assets with an aggregated transaction value of $24 billion, representing approximately 60% of all royalty transactions by value announced during this period.
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With a deep and experienced team of investment professionals, an exhaustive due diligence process and a focus on high-quality therapies that address significant unmet patient need, we sustain attractive returns above our cost of capital, which in turn propels our compounding growth.
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In 2022, we generated net cash from operating activities of $2.1 billion, Adjusted Cash Receipts (as defined in “Non-GAAP Financial Results”) of $2.8 billion, Adjusted EBITDA (as defined in “Non-GAAP Financial Results”) of $2.6 billion and Adjusted Cash Flow (as defined in “Non-GAAP Financial Results”) of $2.2 billion.
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Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments. Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts.
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We deployed $2.5 billion of cash in 2022 to acquire royalties, milestones and related assets. 1 Portfolio Overview Our portfolio consists of royalties on more than 35 commercial products and 12 development-stage product candidates.
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Please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Portfolio Overview” for additional discussion regarding Portfolio Receipts. We deployed $2.2 billion of cash to acquire royalties, milestones and other contractual receipts (“Capital Deployment”) in 2023, which also includes payments made during the year for transactions from prior years.
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We believe that end market sales of the therapies in our portfolio are important drivers of our financial performance as a substantial portion of our royalties are based on end market sales. In addition, end market sales are a strong indicator of the importance of the therapies to both patients and the marketers.
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Capital Deployment represents the total outflows that will drive future Portfolio Receipts. 1 *Percentage change is not meaningful.
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Prophylaxis of CMV in adult recipients of stem cell transplant 37 428 Trodelvy Gilead Breast cancer 25 680 Orladeyo BioCryst Hereditary angioedema prophylaxis 22 252 Erleada Johnson & Johnson Prostate cancer 21 1,881 Crysvita Ultragenyx, Kyowa Kirin X-linked hypophoshatemia 20 220 Emgality Lilly Migraine prevention & episodic cluster headache 19 651 Oxlumo Alnylam Primary hyperoxaluria type 1 3 67 Spinraza (4) Biogen Spinal muscular atrophy — 1,762 Airsupra (5) AstraZeneca Asthma — — Other products (6) 263 — Total royalty receipts $3,231 Development-Stage Product Candidates Aficamten Cytokinetics Obstructive hypertrophic cardiomyopathy (Phase 3) — — Ampreloxetine Theravance Symptomatic nOH with multiple system atrophy (Phase 3) — — BCX10013 BioCryst Once-daily Factor D Inhibitor (Phase 1) — — MK-8189 Merck Schizophrenia (Phase 2b) — — Olpasiran Amgen Cardiovascular disease (Phase 3) — — Omecamtiv mecarbil (7) Cytokinetics Heart failure (under FDA review) — — Pelabresib MorphoSys Myelofibrosis (Phase 3) — — Pelacarsen (4) Novartis Cardiovascular disease (Phase 3) — — Seltorexant Johnson & Johnson MDD with insomnia symptoms (Phase 3) — — Trontinemab (8) Roche Alzheimer’s disease (Phase 2a) — — Tulmimetostat (9) MorphoSys Hematological malignancies and solid tumors (Phase 2) — — Zavegepant Pfizer Acute migraine (under FDA review) and prevention (Phase 3) — — CMV is cytomegalovirus, nOH is neurogenic orthostatic hypotension and MDD is major depressive disorder.
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(1) The 2019 Portfolio Receipts and 2020 growth rates are calculated on a pro forma basis, which adjusts certain cash flow line items as if our Reorganization Transactions (as described in our final prospectus filed with the SEC on June 17, 2020) and our initial public offering had taken place on January 1, 2019.
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Amounts shown in the table may not add due to rounding. 2 Notes: (1) Represents end market sales for 2022 as reported by respective product marketers or, where marketers have not reported end market sales by February 10, 2023, based on Visible Alpha projections as of February 7, 2023.
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The most significant difference between the pro forma and reported figures is the non-controlling interest attributable to legacy investors that resulted from the Reorganization Transactions. (2) Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that is attributed to Royalty Pharma.
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(2) The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio. (3) Royalty receipts includes quarterly redemption payments of $15.6 million related to the Series A Biohaven Preferred Shares and the accelerated redemption payments of $479.5 million for all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.
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Milestones and other contractual receipts include sales-based or regulatory milestones payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that is attributed to Royalty Pharma. Biopharmaceutical Industry and the Role of Royalties Our business is supported by significant growth and unprecedented innovation within the biopharmaceutical industry.
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The remaining amounts are related to royalty receipts from Nurtec ODT. (4) Royalties were acquired in January 2023. (5) Airsupra, formerly known as PT027, was approved by the U.S. Food and Drug Administration (“FDA”) in January 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

152 edited+31 added−37 removed246 unchanged
Biggest changeAdditional risks related to our leverage include: • our royalties may be used as collateral for our borrowings; • in the event of a default under secured borrowings, if any, one or more of our creditors or their assignees could obtain control of our royalties and, in the event of a distressed sale, these creditors could dispose of these royalties for significantly less value than we could realize for them; • we have to comply with various financial covenants in the agreements that govern our debt, including requirements to maintain certain leverage ratios and coverage ratios, which may affect our ability to achieve our business objectives; • our ability to pay dividends to our shareholders may be restricted; and • to the extent that interest rates at which we borrow increase, our borrowing costs will increase and our leveraging strategy will become more costly, which could lead to diminished net profits.
Biggest changeAdditional risks related to our leverage include: • to the extent that interest rates at which we borrow increase, our borrowing costs will increase and our leveraging strategy will become more costly, which could lead to diminished net profits; • we have to comply with various financial covenants in the agreements that govern our debt, including requirements to maintain certain leverage ratios and coverage ratios, which may affect our ability to achieve our business objectives; • our ability to pay dividends or make share repurchases may be restricted; • our royalties may be used as collateral for our borrowings; and • in the event of a default under secured borrowings, if any, one or more of our creditors or their assignees could obtain control of our royalties and, in the event of a distressed sale, these creditors could dispose of these royalties for significantly less value than we could realize for them.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business. Summary of Risk Factors Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition and results of operations.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business. Summary of Risk Factors Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition or results of operations.
Moreover, the acquisition of operating biopharmaceutical companies will result in the assumption of, or exposure to, liabilities of the acquired business that are not inherent in our other royalty acquisitions, such as direct exposure to product liability claims, high fixed costs and an expansion of our operations and expense structure, thereby potentially decreasing our profitability.
Moreover, the acquisition of operating biopharmaceutical companies will result in the assumption of, or exposure to, liabilities of the acquired business that are not inherent in our other royalty acquisitions, such as direct exposure to product liability claims, high fixed costs or an expansion of our operations and expense structure, thereby potentially decreasing our profitability.
Competitive factors affecting the market position and success of each product include: • effectiveness; • safety and side effect profile; • price, including third-party insurance reimbursement policies; • timing, introduction and marketer support of the product; • efficacy and execution of marketing and commercialization strategy; • market acceptance; • manufacturing, supply and distribution; • governmental regulation, including price caps; • availability of lower-cost generics or biosimilars; • intellectual property protection and exclusivity; • treatment innovations that eliminate or minimize the need for a product; and • product liability claims.
Competitive factors affecting the market position and success of each product include: • safety, side effect profile, effectiveness and market acceptance; • price, including third-party insurance reimbursement policies; • timing, introduction and marketer support of the product; • efficacy and execution of marketing and commercialization strategy; • market acceptance; • manufacturing, supply and distribution; • governmental regulation, including price caps; • availability of lower-cost generics or biosimilars; • intellectual property protection and exclusivity; • treatment innovations that eliminate or minimize the need for a product; and • product liability claims.
The resolution of any contract interpretation disagreement that may arise could narrow what the licensor believes to be the scope of its rights to the relevant intellectual property or technology, or decrease the licensee’s financial or other obligations under the relevant agreement, any of which could in turn impact the value of our royalties and adversely affect our business, financial condition and results of operations.
The resolution of any contract interpretation disagreement that may arise could narrow what the licensor believes to be the scope of its rights to the relevant intellectual property or technology, or decrease the licensee’s financial or other obligations under the relevant agreement, any of which could in turn impact the value of our royalties and adversely affect our business, financial condition or results of operations.
Whether we pay dividends to our shareholders or make share repurchases depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our business and acquisition opportunities, our financial condition and results of operations, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, other restrictions and implications on the payment of dividends by us to our shareholders or making any share repurchases and such other factors as our board of directors may deem relevant.
Whether we pay dividends to our shareholders or make share repurchases depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our business and acquisition opportunities, our financial condition or results of operations, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, other restrictions and implications on the payment of dividends by us to our shareholders or making any share repurchases and such other factors as our board of directors may deem relevant.
English law prohibits us from conducting “on market purchases” as our shares are listed on the NASDAQ and will not be traded on a recognized investment exchange in the United Kingdom. Our shareholders approved the authorization of certain “off market purchases” that will expire five years from June 23, 2022 unless renewed by our shareholders prior to the expiration date.
English law prohibits us from conducting “on market purchases” as our shares are listed on the NASDAQ and will not be traded on a recognized investment exchange in the United Kingdom. 34 Our shareholders approved the authorization of certain “off market purchases” that will expire five years from June 23, 2022 unless renewed by our shareholders prior to the expiration date.
The departure of any of these individuals or competing demands on their time could adversely affect our business, financial condition and results of operations. 24 The key advisory professionals of the Manager have relationships with participants in the biopharmaceutical industry, financial institutions and other advisory professionals, which we rely upon to source potential asset acquisition opportunities.
The departure of any of these individuals or competing demands on their time could adversely affect our business, financial condition or results of operations. The key advisory professionals of the Manager have relationships with participants in the biopharmaceutical industry, financial institutions and other advisory professionals, which we rely upon to source potential asset acquisition opportunities.
The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements. 38 The EU directive on alternative investment fund managers (the “AIFM Directive”) may significantly increase our compliance costs.
The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements. The EU directive on alternative investment fund managers (the “AIFM Directive”) may significantly increase our compliance costs.
In any of these situations, if the expected payments under the license agreements do not materialize, this could result in a significant loss to us and adversely affect our business, financial condition and results of operations. The insolvency of a marketer could adversely affect our receipt of cash flows on the related royalties that we hold.
In any of these situations, if the expected payments under the license agreements do not materialize, this could result in a significant loss to us and adversely affect our business, financial condition or results of operations. The insolvency of a marketer could adversely affect our receipt of cash flows on the related royalties that we hold.
A shareholder who receives a distribution under circumstances where he or she knows or has reasonable grounds for believing that the distribution is unlawful in the circumstances is obliged to repay such distribution (or that part of it, as the case may be) to us. 34 If we were determined to be an investment company under the U.S.
A shareholder who receives a distribution under circumstances where he or she knows or has reasonable grounds for believing that the distribution is unlawful in the circumstances is obliged to repay such distribution (or that part of it, as the case may be) to us. If we were determined to be an investment company under the U.S.
As a result of the above, shareholders may have more difficulty in protecting their interest through actions against our management, directors or other shareholders than they would as shareholders of a U.S. public company. The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation. We are incorporated under English law.
As a result of the above, shareholders may have more difficulty in protecting their interest through actions against our management, directors or other shareholders than they would as shareholders of a U.S. public company. 33 The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation. We are incorporated under English law.
The licensor would be prevented by the automatic stay from taking any action to enforce its rights without the permission of the bankruptcy court. In addition, the marketer could elect to reject the license agreement, which would require the licensor to undertake a new effort to market the applicable product with another distributor.
The licensor would be prevented by the automatic stay in the bankruptcy proceeding from taking any action to enforce its rights without the permission of the bankruptcy court. In addition, the marketer could elect to reject the license agreement, which would require the licensor to undertake a new effort to market the applicable product with another distributor.
While our Class A ordinary shares are eligible for deposit and clearing within the DTC system, DTC has discretion to cease to act as a depository and clearing agency for our Class A ordinary shares, including to the extent that any changes in U.K. law change the stamp duty or stamp duty reserve tax (“SDRT”) position in relation to the Class A ordinary shares.
While our Class A ordinary shares are eligible for deposit and clearing within the DTC system, DTC has discretion to cease to act as a depository and clearing agency for our Class A ordinary shares, including to the extent that any changes in U.K. law change the stamp duty or stamp duty reserve tax position in relation to the Class A ordinary shares.
Despite this, the ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreement, may reduce the amount of time our Manager, its officers or other employees spend managing us. Furthermore, there could be conflicts of interest between us and our advisory personnel. For instance, Mr.
Despite this, the ability of the Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreement, may reduce the amount of time the Manager, its officers or other employees spend managing us. There could be conflicts of interest between us and our advisory personnel. For instance, Mr.
Even if such third parties seek to prosecute, maintain, enforce or defend such rights, they may not be successful. 32 The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has been the subject of much litigation.
Even if such third parties seek to prosecute, maintain, enforce or defend such rights, they may not be successful. The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has been the subject of much litigation.
If a marketer does not devote adequate resources to the ongoing regulatory approval, commercialization and manufacture of a product, or if a marketer engages in illegal or otherwise unauthorized practices, the product’s sales may not generate sufficient royalties, or the product’s sales may be suspended, and consequently, could adversely affect our business.
If a marketer does not devote adequate resources to the ongoing development, regulatory approval, commercialization and manufacture of a product, or if a marketer engages in illegal or otherwise unauthorized practices, the product’s sales may not generate sufficient royalties, or the product’s sales may be suspended, and consequently, could adversely affect our business.
Such proceedings could adversely affect the ability of a payor to make payments with respect to a royalty, and could consequently adversely affect our business, financial condition and results of operations. Unsuccessful attempts to acquire new royalties could result in significant costs and negatively impact subsequent attempts to locate and acquire other assets.
Such proceedings could adversely affect the ability of a payor to make payments with respect to a royalty, and could consequently adversely affect our business, financial condition or results of operations. Unsuccessful attempts to acquire new royalties could result in significant costs and negatively impact subsequent attempts to locate and acquire other assets.
Due to these and other factors, the assets in our current portfolio or future assets may not generate expected returns or returns in line with our historical financial performance or in the time periods we expect or at all, which could adversely affect our financial condition and results of operation.
Due to these and other factors, the assets in our current portfolio or future assets may not generate expected returns or returns in line with our historical financial performance or in the time periods we expect or at all, which could adversely affect our business, financial condition or results of operation.
Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could adversely affect our business, financial condition and results of operations. We intend to conduct our business so as not to become regulated as an investment company under the U.S. Investment Company Act.
Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could adversely affect our business, financial condition or results of operations. We intend to conduct our business so as not to become regulated as an investment company under the U.S. Investment Company Act.
For instance, if RPI were to constitute an “offshore fund” for U.K. tax purposes that has at any time in an accounting period more than 60% by market value of its investments in debt securities, money placed at interest (other than cash awaiting investment), certain contracts for differences, or in holdings in other offshore funds with, broadly, more than 60% of their investments similarly invested, RP Holdings’ shareholding in RPI may be subject to U.K. corporation tax as a deemed “loan relationship”, with the result that dividends received by RP Holdings from RPI could be subject to U.K. tax as deemed interest and RP Holdings may be subject to U.K. corporation tax on increases in the fair market value of its shareholding in RPI.
For instance, if RPI 2019 ICAV were to constitute an “offshore fund” for U.K. tax purposes that has at any time in an accounting period more than 60% by market value of its investments in debt securities, money placed at interest (other than cash awaiting investment), certain contracts for differences, or in holdings in other offshore funds with, broadly, more than 60% of their investments similarly invested, RP Holdings’ shareholding in RPI 2019 ICAV may be subject to U.K. corporation tax as a deemed “loan relationship”, with the result that dividends received by RP Holdings from RPI 2019 ICAV could be subject to U.K. tax as deemed interest and RP Holdings may be subject to U.K. corporation tax on increases in the fair market value of its shareholding in RPI.
It is common for royalty durations to expire earlier or later than anticipated due to unforeseen positive or negative developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing for the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations.
It is common for royalty durations to expire earlier or later than anticipated due to unforeseen positive or negative developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, claims of patent misuse, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing for the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations.
Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations. Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010 (“Bribery Act”), the U.S.
We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations. Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010 (“Bribery Act”), the U.S.
Products for which we have a royalty receivable or other interest may be rendered obsolete or non-competitive by new or alternate products, including generics or biosimilars, improvements on existing products, marketing or commercialization strategies, or governmental or regulatory action.
Products on which we have a royalty receivable or other interest may be rendered obsolete or non-competitive by new or alternate products, including generics or biosimilars, improvements on existing products, marketing or commercialization strategies, or governmental or regulatory action.
In the event of any such termination, a licensor may no longer receive all of the payments it expected to receive from the licensee and may also be unable to find another company to continue developing and commercializing the product on the same or similar terms as those under the license agreement that has been terminated. 29 In addition, license agreements may fail to provide significant protection for the licensor in case of the licensee’s failure to perform or in the event of disputes.
In the event of any such termination, a licensor may no longer receive all of the payments it expected to receive from the licensee and may also be unable to find another company to continue developing and commercializing the product on the same or similar terms as those under the license agreement that has been terminated. 22 In addition, license agreements may fail to provide significant protection for the licensor in case of the licensee’s failure to perform or in the event of disputes.
No such dividend may exceed the amount recommended by the board of directors. There can be no assurance that any dividends, whether quarterly or otherwise, will or can be paid or that any shares will or can be repurchased.
No such dividend may exceed the amount recommended by the board of directors. 26 There can be no assurance that any dividends, whether quarterly or otherwise, will or can be paid or that any shares will or can be repurchased.
Such a failure to accommodate growth, or an increase in costs related to such information systems, could adversely affect our business, financial condition and results of operations.
Such a failure to accommodate growth, or an increase in costs related to such information systems, could adversely affect our business, financial condition or results of operations.
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “ACA”) was enacted by Congress in March 2010 and established a major expansion of healthcare coverage, financed in part by a number of new rebates, discounts and taxes that had a significant effect on the expenses and profitability on the companies that manufacture the products that generate our royalties.
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “ACA”) was enacted by Congress in March 2010 and established a major expansion of healthcare coverage, financed in part by several new rebates, discounts and taxes that had a significant effect on the expenses and profitability on the companies that manufacture the products that generate our royalties.
In the event that we generate positive income, but pay limited or no dividends, holders of Class A ordinary shares may, if they have made certain elections for U.S. federal income tax purposes with respect to their Class A ordinary shares, have a tax liability on our income in excess of the actual cash dividends received by such holders.
If we generate positive income, but pay limited or no dividends, holders of Class A ordinary shares may, if they have made certain elections for U.S. federal income tax purposes with respect to their Class A ordinary shares, have a tax liability on our income in excess of the actual cash dividends received by such holders.
If any such position is successfully challenged, our tax liabilities could materially increase, which would adversely affect our profitability and cash flows. There have been significant changes both made and proposed to international tax laws that increase the complexity, burden and cost of tax compliance for all multinational companies.
If any such position is successfully challenged, our tax reporting or tax liabilities could materially increase, which would adversely affect our profitability and cash flows. There have been significant changes both made and proposed to international tax laws that increase the complexity, burden and cost of tax compliance for all multinational companies.
CFC Rules are highly complex and fact-dependent, and changes to, or adverse interpretations of, these rules, or changes in the future activities of RPI or other non-U.K. companies in which we hold an interest, directly or indirectly, may alter this position and could impact our group’s effective tax rate.
CFC Rules are highly complex and fact-dependent, and changes to, or adverse interpretations of, these rules, or changes in the future activities of RPI 2019 ICAV or other non-U.K. companies in which we hold an interest, directly or indirectly, may alter this position and could impact our group’s effective tax rate.
If the foregoing were to occur, we could experience difficulty in making new asset acquisitions, and the value of our existing assets, our business, financial condition and results of operations could materially suffer. 36 The Manager’s liability is limited under the Management Agreement, and we have agreed to indemnify the Manager against certain liabilities.
If the foregoing were to occur, we could experience difficulty in making new asset acquisitions, and the value of our existing assets, our business, financial condition or results of operations could materially suffer. The Manager’s liability is limited under the Management Agreement, and we have agreed to indemnify the Manager against certain liabilities.
Unexpected side effects, safety or efficacy concerns can arise with respect to a product, leading to product recalls, withdrawals, declining sales or litigation. As a result, payments of our royalties may be reduced or cease. In addition, these payments may be delayed, causing our near-term financial performance to be weaker than expected.
Unexpected side effects, safety or efficacy concerns can arise with respect to a product, leading to product recalls, withdrawals, declining sales or litigation. As a result, payments of our royalties may be reduced or ceased. In addition, these payments may be delayed, causing our near-term financial performance to be weaker than expected.
The use of leverage creates an opportunity for an increased return but also increases the risk of loss if our assets do not generate sufficient income to us. The interest expense and other costs incurred in connection with such borrowings may not be covered by our cash flow.
The use of leverage creates an opportunity for an increased return but also increases the risk of loss if our assets do not generate sufficient cash flows to us. The interest expense and other costs incurred in connection with such borrowings may not be covered by our cash flow.
Such changes could adversely affect our financial condition and results of operations. 47 COVID-19, or the future outbreak of any other infectious or contagious diseases, could adversely affect our results of operations, financial condition and cash flows. The outbreak of COVID-19 and its variants has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets.
Such changes could adversely affect our financial condition or results of operations. 40 COVID-19, or the future outbreak of any other infectious or contagious diseases, could adversely affect our results of operations, financial condition and cash flows. The outbreak of COVID-19 and its variants has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets.
While our Management Agreement requires its executives to devote substantially all their time to managing us and any legacy vehicles related to RPI or Old RPI unless otherwise approved by the board of directors, such resources may prove to be inadequate to meet our needs.
While our Management Agreement requires its executives to devote substantially all their time to managing us and any legacy vehicles related to RPI 2019 ICAV or Old RPI unless otherwise approved by the board of directors, such resources may prove to be inadequate to meet our needs.
Certain non-U.K. entities in which we hold a greater than 25% interest, including RPI (which is Irish tax resident) and Old RPI (which is Irish tax resident and which is held indirectly by us through our participation in RP Holdings), will be Controlled Foreign Companies for U.K. tax purposes.
Certain non-U.K. entities in which we hold a greater than 25% interest, including RPI 2019 ICAV (which is Irish tax resident) and Old RPI (which is Irish tax resident and which is held indirectly by us through our participation in RP Holdings), will be Controlled Foreign Companies for U.K. tax purposes.
We may not be able to predict or estimate accurately the amount of additional costs we may incur or the timing of such costs. 43 Risks Relating to Taxation Our structure involves complex provisions of tax law for which no clear precedent or authority may be available.
We may not be able to predict or estimate accurately the amount of additional costs we may incur or the timing of such costs. 35 Risks Relating to Taxation Our structure involves complex provisions of tax law for which no clear precedent or authority may be available.
We seek to further expand our market opportunity by acquiring securities issued by biopharmaceutical companies. Where we may acquire equity securities as all or part of the consideration for business development activities, the value of those securities will fluctuate, and may depreciate in value.
We may seek to expand our market opportunity by acquiring securities issued by biopharmaceutical companies. Where we acquire equity securities as all or part of the consideration for business development activities, the value of those securities will fluctuate, and may depreciate.
For example, these marketers may be motivated to maximize income by allocating resources to other products and, in the future, may decide to focus less attention on the products generating our royalties or by allocating resources to develop products that do not generate royalties to us.
For example, these marketers may be motivated to maximize their overall income by allocating resources to other products and, in the future, may decide to focus less attention on the products generating our royalties or by allocating resources to develop products that do not generate royalties to us.
For example, new U.S. and international laws and regulations relating to ESG matters, including human capital, diversity, sustainability, climate change and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require additional investments and implementation of new practices and reporting processes, all entailing additional compliance risk.
For example, new U.S. and international laws and regulations relating to corporate responsibility matters, including human capital, diversity, sustainability, climate change and cybersecurity, are under consideration or being adopted, which may include specific, target-driven disclosure requirements or obligations. Our response will require additional investments and implementation of new practices and reporting processes, all entailing additional compliance risk.
If an unexpected shortening of a royalty term were to occur, it could result in a reduction in the effective interest rate, a decline in income from royalties, and a significant reduction in royalty payments compared to expectations, or a permanent impairment.
If an unexpected shortening of a royalty term were to occur, it could result in a reduction in the effective interest rate for the asset, a decline in income from royalties, and a significant reduction in royalty payments compared to expectations, or a permanent impairment.
If a product’s market acceptance is diminished or it is withdrawn from the market, continuing payments with respect to biopharmaceutical products, including royalty payments and payments of interest on and repayment of the principal, may not be made on time or at all, which may affect our ability to realize the benefits of the royalty receivable or other interest in such product and may result in us incurring asset impairment charges.
If a product’s market acceptance is diminished or it is withdrawn from the market, continuing payments with respect to biopharmaceutical products may not be made on time or at all, which may affect our ability to realize the benefits of the royalty receivable or other interest in such product and may result in us incurring asset impairment charges.
The developer, manufacturer or marketer of a product could become subject to product liability claims. A product liability claim, regardless of its merits, could adversely affect the sales of the product and the amount of any related royalty payments, and consequently, could adversely affect the ability of a payor to make payments with respect to a royalty.
The developer, manufacturer or marketer of a product could become subject to product liability claims. A product liability claim, regardless of its merits, could adversely affect the sales of the product and the amount of any related royalty payments and could even adversely affect the ability of a payor to make payments with respect to a royalty.
Additionally, we may only make a distribution if our net assets are not less than the amount of our aggregate called-up share capital and distributable reserves, and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.
Additionally, we may only make a distribution if our net assets are not less than the amount of our aggregate called-up share capital and undistributable reserves, and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.
In addition, many of the products in our portfolio benefit from regulatory exclusivity. If, in an effort to regulate pricing, regulatory exclusivity is not maintained, our business, financial condition and results of operations may be adversely impacted.
In addition, many of the products in our portfolio benefit from regulatory exclusivity. If, in an effort to regulate pricing, regulatory exclusivity is not maintained, our business, financial condition or results of operations may be adversely impacted.
Licensees generally rely on a small number of key, highly specialized suppliers, manufacturers and packagers. Any interruptions, however minimal, in the operation of these manufacturing and packaging facilities could adversely affect production and product sales and therefore adversely affect our business, financial condition and results of operations. Product liability claims may diminish the returns on biopharmaceutical products.
Marketers of biopharmaceutical products generally rely on a small number of key, highly specialized suppliers, manufacturers and packagers. Any interruptions, however minimal, in the operation of these manufacturing and packaging facilities could adversely affect production and product sales and therefore adversely affect our business, financial condition or results of operations. Product liability claims may diminish the returns on biopharmaceutical products.
We believe and have been advised that RP Holdings’ shareholding in RPI should not fall within these rules, however no guarantee can be offered that this will continue to be the case.
We believe and have been advised that RP Holdings’ shareholding in RPI 2019 ICAV should not fall within these rules, however no guarantee can be offered that this will continue to be the case.
In addition, executives of the Manager must devote substantially all of their time to managing us and any legacy vehicle related to RPI or Old RPI, unless otherwise approved by the board of directors.
In addition, executives of the Manager must devote substantially all of their time to managing us and any legacy vehicle related to RPI 2019 ICAV or Old RPI, unless otherwise approved by the board of directors.
Any such event would adversely affect the ability of the payor to make payments of royalties to us or may otherwise reduce the value of our royalty interest, and could consequently adversely affect our business, financial condition and results of operations.
Any such event would adversely affect the ability of the payor to make payments of royalties to us or may otherwise reduce the value of our royalties, and could consequently adversely affect our business, financial condition or results of operations.
We believe that dividends received by us from RP Holdings, and dividends received by RP Holdings from RPI, should fall within such an exempt class and therefore should not be subject to U.K. corporation tax.
We believe that dividends received by us from RP Holdings, and dividends received by RP Holdings from RPI 2019 ICAV, should fall within such an exempt class and therefore should not be subject to U.K. corporation tax.
However, we may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, to invest the full amount of capital that may be available to us in the future, or at our targeted amount and rate of deployment, which could prevent us from executing our growth strategy and negatively impact our results of operations.
However, we may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, to invest the full amount of capital that may be available to us in the future, or at our targeted amount and rate of deployment, which could prevent us from executing our growth strategy and negatively impact our business.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Relating to Our Business • sales risks of biopharmaceutical products on which we receive royalties; • the growth of the royalty market; • the ability of the Manager to identify suitable assets for us to acquire; • uncertainties related to the acquisition of interests in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates to our product portfolio; • potential strategic acquisitions of biopharmaceutical companies; • our use of leverage in connection with our capital deployment; • our ability to leverage our competitive strengths; • marketers of products that generate our royalties are outside of our control and are responsible for development, pursuit of ongoing regulatory approval, commercialization, manufacturing and marketing; • governmental regulation of the biopharmaceutical industry; • interest rate risk, foreign exchange fluctuations and inflation; • our reliance on the Manager for all services we require and key members of the Manager ’s senior advisory team; • actual and potential conflicts of interest with the Manager and its affiliates; • the ability of the Manager or its affiliates to attract and retain highly talented professionals; • the assumptions underlying our business model; • our reliance on a limited number of products; • the competitive nature of the biopharmaceutical industry; Risks Relating to Our Organization and Structure • our organizational structure, including our status as a holding company; Risks Relating to Our Class A Ordinary Shares • volatility of the market price of our Class A ordinary shares; • our incorporation under English law; Risks Relating to Taxation • the effect of changes to tax legislation and our tax position; and 21 General Risk Factors • the impact of COVID-19, or the future outbreak of any other infectious or contagious diseases, on our operations.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Relating to Our Business • risks related to sales of biopharmaceutical products on which we receive royalties; • the growth of the royalty market; • the ability of the Manager to identify suitable assets for us to acquire; • uncertainties related to the acquisition of interests in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates to our product portfolio; • potential strategic acquisitions of biopharmaceutical companies; • our use of leverage in connection with our capital deployment; • our ability to leverage our competitive strengths; • marketers of products that generate our royalties are outside of our control and are responsible for development, pursuit of ongoing regulatory approval, commercialization, manufacturing and marketing; • governmental regulation of the biopharmaceutical industry; • interest rate risk, foreign exchange fluctuations and inflation; • our reliance on the Manager for all services we require and key members of the Manager ’s senior advisory team; • actual and potential conflicts of interest with the Manager and its affiliates; • the ability of the Manager or its affiliates to attract and retain highly talented professionals; • the assumptions underlying our business model; • our reliance on a limited number of products; • the competitive nature of the biopharmaceutical industry; Risks Relating to Our Organization and Structure • our organizational structure, including our status as a holding company; Risks Relating to Our Class A Ordinary Shares • volatility of the market price of our Class A ordinary shares; • our incorporation under English law; Risks Relating to Taxation • the effect of changes to tax legislation and our tax position; and 14 General Risk Factors • cyber-attacks or other failures in telecommunications or information technology systems; • the future outbreak of any infectious or contagious diseases, such as COVID-19 on our operations.
In addition, we have announced a number of ESG initiatives and goals, which will require ongoing investment, and there is no assurance that we will achieve any of these goals or that our initiatives will achieve their intended outcomes. Perceptions of our efforts to achieve these goals often differ widely and present risks to our reputation.
In addition, we have announced a number of corporate responsibility initiatives and goals, which will require ongoing investment, and there is no assurance that we will achieve any of these goals or that our initiatives will achieve their intended outcomes. Perceptions of our efforts to achieve these goals often differ widely and present risks to our reputation.
Any of these parties may breach the agreements and disclose the confidential information or competitors might independently develop or learn of the information in some other way, which could harm the competitive position of the products and therefore reduce the amount of cash flow generated by our royalty interest.
Any of these parties may breach the agreements and disclose the confidential information or competitors might independently develop or learn of the information in some other way, which could harm the competitive position of the products and therefore reduce the amount of cash flow generated by our royalties.
In addition to the factors discussed in this Annual Report on Form 10-K, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including: • market conditions in the broader stock market in general, or in our industry in particular; • variations in our quarterly operating results or dividends to shareholders; • additions or departures of key management personnel at the Manager; • timing and rate of capital deployment, including relative to estimates; • changes in our portfolio mix or acquisition strategy; • failure to meet analysts’ earnings estimates; • publication of research reports about our industry; • third-party healthcare reimbursement policies and practices; • litigation and government investigations; • changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; • no results, or projected results, from marketers of products that generate our royalties; • results from, and any delays to, the clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets or other issues relating to such products, including regulatory approval or commercialization; • adverse market reaction to any indebtedness that we may incur or securities we may issue in the future; • changes in market valuations of similar companies or speculation in the press or investment community; • announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; • economic and political conditions or events, such as the COVID-19 pandemic, inflation and rising interest rates and global conflicts, including the Russia-Ukraine war; and • adverse publicity about us or the industries in which we participate or individual scandals.
In addition to the factors discussed in this Annual Report on Form 10-K, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including: • market conditions in the broader stock market in general, or in our industry in particular; • variations in our quarterly operating results or dividends to shareholders or share repurchases; • additions or departures of key management personnel at the Manager; • timing and rate of capital deployment, including relative to estimates; • changes in our portfolio mix or acquisition strategy; • failure to meet analysts’ earnings estimates; • publication of research reports about our industry; • third-party healthcare reimbursement policies and practices; • litigation and government investigations; • changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; • no results, or projected results, from marketers of products that generate our royalties; 32 • results from, and any delays to, the clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets or other issues relating to such products, including regulatory approval or commercialization; • adverse market reaction to any indebtedness that we may incur or securities we may issue in the future; • changes in market valuations of similar companies or speculation in the press or investment community; • announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; • economic and political conditions or events, such as pandemics, inflation and interest volatility and global conflicts; and • adverse publicity about us or the industries in which we participate or individual scandals.
A critical component of such forecast is our assumptions regarding duration of the royalty. 26 The royalty duration is important for purposes of accurately measuring interest income over the life of a royalty.
A critical component of such forecast is our assumptions regarding duration of the royalty. 19 The royalty duration is important for purposes of accurately measuring interest income over the life of a royalty.
The Manager may be the subject of a change of control resulting in a disruption in our operations that could adversely affect our business, financial condition and results of operations.
The Manager may be the subject of a change of control resulting in a disruption in our operations that could adversely affect our business, financial condition or results of operations.
Furthermore, over 130 member jurisdictions of the G20/OECD Inclusive Framework have joined the Two-Pillar Solution to Address the Tax Challenges of the Digitalization of the Economy as part of the OECD’s base erosion and profit sharing project (“BEPS”), which includes a reallocation of taxing rights among market jurisdictions and a global minimum tax rate of 15%.
Furthermore, over 140 member jurisdictions of the G20/OECD Inclusive Framework have joined the Two-Pillar Solution to Address the Tax Challenges of the Digitalization of the Economy as part of the OECD’s base erosion and profit sharing project (“BEPS”), which includes a reallocation of taxing rights among market jurisdictions and a global minimum tax rate of 15% (“Pillar Two”).
Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, changes in the marketer’s strategic priorities, obsolescence, lack of acceptance by government healthcare programs and private insurance plans, loss of patent protection, government regulations, the impact of the COVID-19 global pandemic or other factors, and development-stage product candidates may fail to reach the market.
Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, changes in the marketer’s strategic priorities, obsolescence, lack of acceptance by government healthcare programs or private insurance plans, loss of patent protection, government regulations or other factors, and development-stage product candidates may fail to reach the market.
There could be a change of control of the Manager and, in such a case, the new controlling party may have a different philosophy, employ less experienced advisory professionals, be unsuccessful in identifying asset acquisition opportunities or have a track record that is not as successful as that of the Manager prior to such a change of control.
There could be a change of control of the Manager and, in such a case, the new controlling party may have a different philosophy, employ less experienced advisory professionals, be unsuccessful in identifying royalty acquisition opportunities or have a track record that is not as successful as that of the Manager.
While we expect the Manager to acquire assets that primarily fall within the biopharmaceutical industry, we are not obligated to do so and may acquire other types of assets that are peripheral to or outside of the biopharmaceutical industry.
We have discretion as to the types of assets that we may acquire. While we expect the Manager to acquire assets that primarily fall within the biopharmaceutical industry, we are not obligated to do so and may acquire other types of assets that are peripheral to or outside of the biopharmaceutical industry.
The duration of a royalty usually varies on a country-by-country basis and can be based on a number of factors, such as patent expiration dates, regulatory exclusivity, years from first commercial sale of the patent-protected product, the entry of competing generic or biosimilar products, or other terms set out in the contracts governing the royalty.
The duration of a royalty usually varies on a country-by-country basis and can be based on a number of factors, such as patent expiration dates, whether the product is sold singly or in combination, regulatory exclusivity, years from first commercial sale of the patent-protected product, the entry of competing generic or biosimilar products, or other terms set out in the contracts governing the royalty.
Funds used by RP Holdings to satisfy its tax distribution obligations will not be available for reinvestment in our business. 39 Risks Relating to Our Ordinary Shares The market price of our Class A ordinary shares has been and may in the future be volatile, which could cause the value of our shareholders’ investment to decline.
Funds used by RP Holdings to satisfy its tax distribution obligations will not be available for reinvestment in our business, dividends or share repurchases. Risks Relating to Our Ordinary Shares The market price of our Class A ordinary shares has been and may in the future be volatile, which could cause the value of our shareholders’ investment to decline.
Any significant deterioration in the cash flows from the top products in our asset portfolio could adversely affect our business, financial condition and results of operations. 27 We face competition in acquiring royalties and locating suitable royalties to acquire. There are a limited number of suitable and attractive opportunities to acquire high-quality royalties available in the market.
Any significant deterioration in the cash flows from the top products in our asset portfolio could adversely affect our business, financial condition or results of operations. 20 We face competition in acquiring royalties and locating suitable royalties to acquire. There are a limited number of suitable and attractive opportunities to acquire high-quality royalties.
The resolution of, or increase in the reserves taken in connection with, one or more of these matters could adversely affect our business, financial condition and results of operations. 48 ESG matters and any related reporting obligations may impact our business. U.S. and international regulators, investors and other stakeholders are increasingly focused on ESG matters.
The resolution of, or increase in the reserves taken in connection with, one or more of these matters could adversely affect our business, financial condition or results of operations. 41 Corporate responsibility matters and any related reporting obligations may impact our business. U.S. and international regulators, investors and other stakeholders are increasingly focused on corporate responsibility matters.
Insurers and other third-party payors may also encourage the use of generic products. Any of these developments could adversely affect products for which we have a royalty, and consequently could adversely affect our business, financial condition and results of operations. 28 Marketers of products that generate our royalties are outside of our control.
Insurers and other third-party payors may also encourage the use of generic products. Any of these developments could adversely affect products on which we have a royalty, and consequently could adversely affect our business, financial condition or results of operations. 21 Marketers of products that generate our royalties are outside of our control.
However, a number of conditions must be met in order for such dividends to qualify for this tax exemption, including (in respect of dividends paid by RPI, which are tax resident in Ireland) conditions relating to the application of Irish tax law.
However, a number of conditions must be met in order for such dividends to qualify for this tax exemption, including (in respect of dividends paid by RPI 2019 ICAV, which is tax resident in Ireland) conditions relating to the application of Irish tax law.
Any harm to our reputation resulting from our failure or perceived failure to meet such goals could impact employee retention, the willingness of our partners to do business with us, or investors’ willingness to purchase or hold our ordinary shares, any of which could adversely affect our business, financial condition and results of operations.
Any harm to our reputation resulting from our focus on corporate responsibility matters and goals or our failure or perceived failure to meet such goals could impact employee retention, the willingness of our partners to do business with us, or investors’ willingness to purchase or hold our ordinary shares, any of which could adversely affect our business, financial condition and results of operations.
If the SEC or its staff in the future adopts a contrary interpretation to that provided in the no-action letter to our predecessor or otherwise restricts the conclusions in the SEC staff’s no-action letter such that royalty interests are no longer treated as ICA Exception Qualifying Assets for purposes of Section 3(c)(5)(A) and Section 3(c)(6), or the SEC or its staff in the future determines that the no-action letter does not apply to some or all types of royalty receivables relating to biopharmaceutical assets, our business will be materially and adversely affected.
Investment Company Act and the rules and regulations promulgated thereunder. 27 If the SEC or its staff in the future adopts a contrary interpretation to that provided in the no-action letter to our predecessor or otherwise restricts the conclusions in the SEC staff’s no-action letter such that royalty interests are no longer treated as ICA Exception Qualifying Assets for purposes of Section 3(c)(5)(A) and Section 3(c)(6), or the SEC or its staff in the future determines that the no-action letter does not apply to some or all types of royalty receivables relating to biopharmaceutical assets, our business will be materially and adversely affected.
The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the product, including for certain patient populations, and could include withdrawal of the product from the market.
The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the product and could include withdrawal of the product from the market.
Legorreta serves as the chairperson of the board of directors of ProKidney Corp. and he has founded and participates in foundations that receive and provide medical research funding. Even though he has the involvement with Pharmakon, BioPharma Credit PLC, ProKidney Corp. and the foundations described above, Mr.
Legorreta serves as the chairperson of the board of directors of ProKidney Corp. and he has founded and participates in foundations that receive and provide medical research funding. Even though he is involved with Pharmakon, BioPharma Credit PLC, ProKidney Corp. and the foundations described above, among other organizations, Mr.
An adverse outcome in infringement or other intellectual property-related proceedings could subject a marketer to significant liabilities to third parties, require disputed rights to be licensed from third parties or require the marketer to cease or modify its manufacturing, marketing and distribution of any affected product, any of which could reduce the amount of cash flow generated by the affected products and any associated royalties payable to us and therefore adversely affect our business, financial condition and results of operations. 33 Disclosure of trade secrets of marketers of products could negatively affect the competitive position of the products underlying our biopharmaceutical assets.
An adverse outcome in infringement or other intellectual property-related proceedings could subject a marketer to significant liabilities to third parties, require disputed rights to be licensed from third parties or require the marketer to cease or modify its manufacturing, marketing and distribution of any affected product, any of which could reduce the amount of cash flow generated by the affected products and any associated royalties payable to us and therefore adversely affect our business, financial condition or results of operations.
Consequently, the Manager may be incentivized to have us make security investments regardless of our expected gain on such investments, which may not align with our or our shareholders’ interests. To service our indebtedness and meet our other ongoing liquidity needs, we will require a significant amount of cash.
Consequently, the Manager may be incentivized to have us make investments regardless of our expected gain on such investments, which may not align with our or our shareholders’ interests. To service our indebtedness and meet our other ongoing liquidity needs, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.
In addition, leverage may inhibit our operating flexibility and reduce cash flow available for dividends to our shareholders. The level of our indebtedness could limit our ability to respond to changing business conditions.
In addition, leverage may inhibit our operating flexibility and reduce cash flow available for dividends or to make share repurchases. 16 The level of our indebtedness could limit our ability to respond to changing business conditions.
While our current asset portfolio includes royalties relating to over 35 marketed products and 12 development-stage product candidates, the top five product franchises accounted for 69% of our royalty receipts in the year ended December 31, 2022. In addition, our asset portfolio may not be fully diversified by geographic region or other criteria.
While our current asset portfolio includes royalties relating to over 35 marketed products, the top five product franchises accounted for 66% of our royalty receipts in the year ended December 31, 2023. In addition, our asset portfolio may not be fully diversified by geographic region or other criteria.
There can be no assurance that one or more products on which we are entitled to a royalty will not be rendered obsolete or non-competitive by new or alternate products or improvements on which we are not entitled to a royalty made to existing products, either by the current marketer of such products or by another marketer.
One or more products on which we are entitled to a royalty may be rendered obsolete or non-competitive by new or alternate products or improvements made to existing products on which we are not entitled to a royalty, either by the current marketer of such products or by another marketer.
In addition, as a result of our activities we receive material non-public information about other companies from time to time.
In addition, as a result of our activities, we may receive material non-public information about other companies.
We are subject to interest rate fluctuation exposure through any borrowings under our Revolving Credit Facility and our investments in money market accounts and marketable securities, the majority of which bear a variable interest rate.
Our business is subject to interest rate, foreign exchange, inflation and banking industry risk. We are subject to interest rate fluctuation exposure through any borrowings under our Revolving Credit Facility and our investments in money market accounts and marketable securities, the majority of which bear a variable interest rate.
The market price of our Class A ordinary shares has been and may be volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. During the year ended December 31, 2022, the per share trading price of our Class A ordinary shares fluctuated from a low of $37.46 to a high of $44.65.
The market price of our Class A ordinary shares has been and may be volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. During the year ended December 31, 2023, the per share trading price of our Class A ordinary shares fluctuated from a low of $26.21 to a high of $39.40.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTo the extent approved and payable, we intend to pay dividends on or about March 15, June 15, September 15 and December 15 to holders of record on or about the twentieth day of each such prior month.
Biggest changeTo the extent approved and payable, we intend to pay dividends on or about March 15, June 15, September 15 and December 15 to holders of record on or about the twentieth day of each such prior month. 43 Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information regarding securities authorized for issuance.
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A ordinary shares are traded in the Nasdaq Global Select Market under the symbol “RPRX”. Our Class B ordinary shares are not listed on any stock exchange nor traded on any public market.
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our Class A ordinary shares are traded under the symbol “RPRX” on the Nasdaq Global Select Market. Our Class B ordinary shares are not listed on any stock exchange nor traded on any public market.
The graph assumes an initial investment of $100 in our Class A ordinary shares at the market close on June 16, 2020, which was our initial trading day and its relative performance is tracked through December 31, 2022.
The graph assumes an initial investment of $100 in our Class A ordinary shares at the market close on June 16, 2020, which was our initial trading day and its relative performance is tracked through December 31, 2023.
As of February 10, 2023, there were 2 shareholders of record of our Class A ordinary shares and 2 shareholders of record of our Class B ordinary shares. The number of record holders does not include persons who held our Class A ordinary shares in nominee or “street name” accounts through brokers or other institutions on behalf of shareholders.
As of February 9, 2024, there were 2 shareholders of record of our Class A ordinary shares and 2 shareholders of record of our Class B ordinary shares. The number of record holders does not include persons who held our Class A ordinary shares in nominee or “street name” accounts through brokers or other institutions on behalf of shareholders.
The above performance graph shall not be deemed soliciting material or to be filed with the SEC for purposes of Section 18 of the Exchange Act, nor shall such information be incorporated by reference into any of our other filings under the Exchange Act or the Securities Act. Recent Sales of Unregistered Securities None.
The above performance graph shall not be deemed soliciting material or to be filed with the SEC for purposes of Section 18 of the Exchange Act, nor shall such information be incorporated by reference into any of our other filings under the Exchange Act or the Securities Act.
Use of Proceeds None. 49 Dividends In 2022, we declared and paid four quarterly cash dividends of $0.19 per Class A ordinary share for an aggregate amount of $333.3 million to holders of our Class A ordinary shares. Future dividends are subject to declaration by the board of directors.
Use of Proceeds None. Dividends In 2023, we declared and paid four quarterly cash dividends of $0.20 per Class A ordinary share for an aggregate amount of $358.3 million to holders of our Class A ordinary shares. Future dividends are subject to declaration by the board of directors.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information regarding securities authorized for issuance.
Added
Recent Sales of Unregistered Securities None. 44 Issuer Purchases of Equity Securities Share repurchase activities of our Class A ordinary shares during the fourth quarter of 2023 are as follows (in thousands, except per share amounts): Periods Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (1) October 1, 2023 - October 31, 2023 957 $ 27.32 957 $ 695,241 November 1, 2023 - November 30, 2023 — — — 695,241 December 1, 2023 - December 31, 2023 — — — 695,241 Total 957 27.32 957 (1) On March 27, 2023, we announced our board of directors authorized a share repurchase program under which we may repurchase up to $1.0 billion of our Class A ordinary shares.
Removed
Issuer Purchases of Equity Securities None. 50 Item 6. [Reserved]
Added
The share repurchase program expires on June 23, 2027. The share repurchase program does not obligate us to acquire a minimum amount of our Class A ordinary shares.
Added
Under the share repurchase program, Class A ordinary shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. 45 Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

152 edited+68 added−177 removed66 unchanged
Biggest changeThis is intended to present an Adjusted Cash Flow measure that is representative of cash generated from the broader business strategy of acquiring royalty-generating assets that are available for reinvestment and for discretionary purposes. 73 (in thousands) Years Ended December 31, 2022 2021 Cash flow data (GAAP basis) Net cash provided by (used in): Operating activities $ 2,143,980 $ 2,017,536 Investing activities (1,029,421) (1,870,280) Financing activities (944,856) 385,112 Net cash provided by operating activities (GAAP) $ 2,143,980 $ 2,017,536 Adjustments: Proceeds from available for sale debt securities (1), (2) 542,044 62,500 Distributions from equity method investees (2) — 523 Interest paid, net (2) 145,157 127,295 Development-stage funding payments - ongoing (3) 2,106 6,876 Development-stage funding payments - upfront and milestone (3) 175,000 193,208 Payments for operating and professional costs 222,969 184,511 Termination payments on derivative instruments — 16,093 Distributions to legacy non-controlling interests - royalty receipts (2) (441,963) (479,604) Adjusted Cash Receipts (non-GAAP) $ 2,789,293 $ 2,128,938 Net cash provided by operating activities (GAAP) $ 2,143,980 $ 2,017,536 Adjustments: Proceeds from available for sale debt securities (1), (2) 542,044 62,500 Distributions from equity method investees (2) — 523 Interest paid, net (2) 145,157 127,295 Development-stage funding payments - ongoing (3) 2,106 6,876 Development-stage funding payments - upfront and milestone (3) 175,000 193,208 Termination payments on derivative instruments — 16,093 Distributions to legacy non-controlling interests - royalty receipts (2) (441,963) (479,604) Adjusted EBITDA (non-GAAP) $ 2,566,324 $ 1,944,427 Net cash provided by operating activities (GAAP) $ 2,143,980 $ 2,017,536 Adjustments: Proceeds from available for sale debt securities (1), (2) 542,044 62,500 Distributions from equity method investees (2) — 523 Distributions to legacy non-controlling interests - royalty receipts (2) (441,963) (479,604) Investments in equity method investees (2), (4) (9,896) (34,855) Contributions from legacy non-controlling interests - R&D (2) 1,059 7,339 Adjusted Cash Flow (non-GAAP) $ 2,235,224 $ 1,573,439 (1) Receipts from the quarterly redemption of the Series A Biohaven Preferred Shares in 2021 and 2022 and the accelerated redemption payments of all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022 are presented as Proceeds from available for sale debt securities on the statements of cash flows.
Biggest changeA reconciliation of Adjusted EBITDA and Portfolio Cash Flow to Net cash provided by operating activities , the closest GAAP measure, is presented below (in thousands): Years Ended December 31, 2023 2022 Net cash provided by operating activities (GAAP) $ 2,987,802 $ 2,143,980 Adjustments: Proceeds from available for sale debt securities (1), (2) 1,440 542,044 Distributions from equity method investees (2) 43,882 — Interest paid, net (2) 97,564 145,157 Development-stage funding payments - ongoing 2,000 2,106 Development-stage funding payments - upfront and milestone 50,000 175,000 Distributions to legacy non-controlling interests - Portfolio Receipts (2) (376,987) (441,963) Adjusted EBITDA (non-GAAP) $ 2,805,701 $ 2,566,324 Interest paid, net (2) (97,564) (145,157) Portfolio Cash Flow (non-GAAP) $ 2,708,137 $ 2,421,167 65 (1) In the fourth quarter of 2023, we began receiving quarterly payments on the return of the first tranche of the Cytokinetics Commercial Launch Funding (presented as Proceeds from available for sale debt securities on the statement of cash flows).
Our royalties on Januvia and Janumet expired in the first quarter of 2022. Our royalties on other DPP-IV products have also substantially ended and we do not expect any material revenue from the other DPP-IV products in the future periods.
Our royalties on Januvia and Janumet expired in the first quarter of 2022. Our royalties on other DPP-IV products have also substantially ended and we do not expect any material revenue from the other DPP-IV products in future periods.
Other royalty income Other royalty income primarily includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of R&D funding arrangements.
Other royalty income Other royalty income primarily includes income and milestones from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of R&D funding arrangements.
Future net income attributable to the non-controlling interest related to RP Holdings Class B Interests held by the Continuing Investors Partnerships will decline over time if the investors who indirectly own RP Holdings Class B Interests conduct exchanges for our Class A ordinary shares.
Future net income attributable to the non-controlling interest related to RP Holdings Class B Interests indirectly held by the Continuing Investors Partnerships will decline over time if the investors who indirectly own RP Holdings Class B Interests conduct exchanges for our Class A ordinary shares.
Launch and development capital is generally provided in exchange for a long-term stream of fixed payments with a predetermined schedule around the launch of a drug.
Launch and development capital is generally provided in exchange for a long-term stream of fixed payments with a predetermined schedule around the launch of a drug.
Products may be covered by a number of patents and, for products whose royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest patent protection to align the period over which management forecasts expected future cash flows to the royalty term.
Products may be covered by a number of patents and, for products whose royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest protection to align the period over which management forecasts expected future cash flows to the royalty term.
As the Legacy Investors Partnerships no longer participate in investment opportunities, the value of the Legacy SLP Interest is expected to decline over time. 57 2. The Avillion Entities The Avillion Entities (as defined below) partner with global biopharmaceutical companies to perform R&D in exchange for success-based milestones or royalties if products are commercialized.
As the Legacy Investors Partnerships no longer participate in investment opportunities, the value of the Legacy SLP Interest is expected to decline over time. 2. The Avillion Entities. The Avillion Entities (as defined below) partner with global biopharmaceutical companies to perform R&D in exchange for success-based milestones or royalties if products are commercialized.
Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our most critical accounting policies relate to our financial royalty assets and the full descriptions can be found in Note 2–Summary of Significant Accounting Policies to our consolidated financial statements.
Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. 68 Our most critical accounting policies relate to our financial royalty assets and the full descriptions can be found in Note 2–Summary of Significant Accounting Policies to our consolidated financial statements.
When royalty-bearing pharmaceutical products have limited or no coverage by sell-side equity research analysts, or where sell-side equity research analyst estimates are not available for the full term of our royalty, particularly for the later years in a product’s life, we generally incorporate a statistical curve developed using historical sales data and available consensus sales projections to forecast product sales over the remaining life of the product. 83 Even though we believe interest income from financial royalty assets and the associated non-cash provision for changes in future cash flows are not indicative of our near-term financial performance and should not be used as a source for predicting future income or growth trends, changes in the aforementioned assumptions could result in a material impact to our financial statements.
When royalty-bearing pharmaceutical products have limited or no coverage by sell-side equity research analysts, or where sell-side equity research analyst estimates are not available for the full term of our royalty, particularly for the later years in a product’s life, we generally incorporate a statistical curve developed using historical sales data and available consensus sales projections to forecast product sales over the remaining life of the product. 70 Even though we believe interest income from financial royalty assets and the associated non-cash provision for changes in future cash flows are not indicative of our near-term financial performance and should not be used as a source for predicting future income or growth trends, changes in the aforementioned assumptions could result in a material impact to our financial statements.
We believe that our existing capital resources, cash provided by operating activities and access to our undrawn Revolving Credit Facility (defined below) will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions and R&D funding arrangements, and to meet our debt service obligations for the foreseeable future.
We believe that our existing capital resources, cash provided by operating activities and access to our Revolving Credit Facility (defined below) will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions and R&D funding arrangements, and to meet our debt service obligations for the foreseeable future.
Based on the level of detail in sell-side equity research analyst models, management can also be required to apply assumptions to the sales forecasts to estimate the quarterly and geographical allocation from annual sales projections and, for franchised products, to estimate the product mix and pricing mix, or to exclude from projections sales forecasts for unapproved products or indications.
Based on the level of detail in sell-side equity research analyst models, management can also be required to apply assumptions to the sales forecasts to estimate the quarterly and geographical allocation from annual sales projections and, for franchised products, to estimate the product mix and pricing mix, or to exclude from projections sales forecasts for unapproved products.
Our contractual royalty terms, rates, and any milestones are then applied to the adjusted sales projections to calculate the expected royalty or milestone payments over the term of the financial royalty asset’s life, forming the basis for our forecast of expected future cash flows used to calculate and measure interest income. 82 • Commercial performance .
Our contractual royalty terms, rates, and any milestones are then applied to the adjusted sales projections to calculate the expected royalty or milestone payments over the term of the financial royalty asset’s life, forming the basis for our forecast of expected future cash flows used to calculate and measure interest income. • Commercial performance .
Other (income)/expenses, net Other income, net of $119.9 million in 2022 was primarily comprised of $96.6 million of gains on derivative financial instruments related to our Milestone Acceleration Option that increased in value with the announcement and subsequent completion of Pfizer’s acquisition of Biohaven in October 2022.
Other income, net of $119.9 million in 2022 was primarily comprised of $96.6 million of gains on derivative financial instruments related to our Milestone Acceleration Option that increased in value with the announcement and subsequent completion of Pfizer’s acquisition of Biohaven in October 2022.
We generally do not recognize income from, or forecast sales for, unapproved products or indications. If a product is removed from all or a portion of a market, subsequent sell-side equity research analysts’ consensus sales forecasts will reflect the expected drop in sales.
We generally do not recognize income from, or forecast sales for, unapproved products. If a product is removed from all or a portion of a market, subsequent sell-side equity research analysts’ consensus sales forecasts will reflect the expected drop in sales.
FDA approved Trodelvy for the treatment of adult patients with unresectable locally advanced or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting. • Cabometyx.
FDA approved Trodelvy for the treatment of adult patients with unresectable locally advanced or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.
Legacy SLP Interest In connection with the Exchange Offer Transactions, we acquired an equity method investment from the Continuing Investors Partnerships in the form of a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) in exchange for issuing shares in our subsidiary.
In connection with the Exchange Offer, we acquired an equity method investment from the Continuing Investors Partnerships in the form of a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) in exchange for issuing shares in our subsidiary.
Net income attributable to the continuing non-controlling interests includes RP Holdings Class B Interests held by the Continuing Investors Partnerships and will include net income attributable to the RP Holdings Class C Special Interest held by EPA Holdings once certain performance conditions have been met.
Net income attributable to the continuing non-controlling interests includes RP Holdings Class B Interests indirectly held by the Continuing Investors Partnerships and will include net income attributable to the RP Holdings Class C Special Interest held by EPA Holdings once certain performance conditions have been met.
Both the new cash flow streams and the cessation of cash flow streams related to a product’s performance in the market over the royalty term can materially affect our forecast of expected future cash flows. • Royalty duration.
Both the new cash flow streams and the cessation of cash flow streams related to a product’s performance in the market over the royalty term can materially affect our forecast of expected future cash flows. 69 • Royalty duration.
The extension and reduction in royalty terms are modelled in isolation for purposes of the sensitivity disclosures below and does not include any consideration of the related allowance for current expected credit losses. The measurement of interest income from our financial royalty assets is recalculated each reporting period, which requires updates to various inputs and assumptions, including estimated royalty duration.
The extension and reduction in royalty terms are modelled in isolation for purposes of the sensitivity disclosures below and do not include any consideration of the related allowance for current expected credit losses. The measurement of interest income from our financial royalty assets is recalculated each reporting period, which requires updates to various inputs and assumptions, including estimated royalty duration.
For a discussion of cash flow activities for 2021 compared to 2020, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
For a discussion of cash flow activities for 2022 compared to 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
There can be no assurances that our royalties will expire when expected. (2) Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (3) RPIFT acquired a perpetual royalty on net sales of Tysabri.
There can be no assurances that our royalties will expire when expected. (2) Royalty is perpetual; year shown represents Trikafta’s expected patent expiration and potential sales decline based on timing of potential generic entry. (3) RPIFT acquired a perpetual royalty on net sales of Tysabri.
Net income attributable to non-controlling interests above can fluctuate significantly from period to period, primarily driven by volatility in the income statement activity of the respective underlying entity as a result of the non-cash charges associated with applying the effective interest accounting methodology to our financial royalty assets as described in section titled “Understanding Our Financial Reporting.” 58 Results of Operations In this section, we discuss the results of our operations for 2022 compared to 2021.
Net income attributable to non-controlling interests above can fluctuate significantly from period to period, primarily driven by volatility in the income statement activity of the respective underlying entity as a result of the non-cash charges associated with applying the effective interest accounting methodology to our financial royalty assets as described in the section titled “Understanding Our Financial Reporting.” Results of Operations In this section, we discuss the results of our operations for 2023 compared to 2022.
For a discussion of 2021 compared to 2020, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
For a discussion of 2022 compared to 2021, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Our capital-efficient business model enables us to benefit from many of the most attractive characteristics of the biopharmaceutical industry, including long product life cycles, significant barriers to entry and noncyclical revenues, but with substantially reduced exposure to many common industry challenges such as early stage development risk, therapeutic area constraints, high R&D costs, and high fixed manufacturing and marketing costs.
Our unique business model enables us to benefit from many of the most attractive characteristics of the biopharmaceutical industry, including long product life cycles, significant barriers to entry and noncyclical revenues, but with substantially reduced exposure to many common industry challenges such as early stage development risk, therapeutic area constraints, high R&D costs, and high fixed manufacturing and marketing costs.
We classify our royalty acquisitions by the approval status of the therapy at the time of acquisition: • Approved Products – We acquire royalties in approved products that generate predictable cash flows and may offer upside potential from unapproved indications.
We classify our royalty acquisitions by the approval status of the therapy at the time of acquisition: • Approved Products – We acquire royalties on approved products that generate predictable cash flows and may offer upside potential from unapproved indications.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations, cash flows and other changes in financial condition.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations, cash flows, other changes in financial condition and business performance.
The operating and personnel payments for Old RPI, an obligation of the Legacy Investors Partnerships as a non-controlling interest in Old RPI and for which the expense is reflected in G&A expenses, are calculated as the greater of $1 million per quarter and 0.3125% of royalties from Royalty Investments (as defined in the limited partnership agreements of the Legacy Investors Partnerships) during the previous twelve calendar months.
The operating and personnel payments for Old RPI, an obligation of the Legacy Investors Partnerships and for which the expense is reflected in G&A expenses, are calculated as the greater of $1 million per quarter and 0.3125% of royalties from Royalty Investments (as defined in the limited partnership agreements of the Legacy Investors Partnerships) during the previous twelve calendar months.
While volatility exists in the total amount of our new acquisitions on a year-to-year basis due to the unpredictable timing of new investment opportunities, we have consistently deployed significant amounts of cash when measured over multi-year periods. Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold.
While volatility exists in the funding of new acquisitions on a year-to-year basis due to the unpredictable timing of new investment opportunities, we have consistently deployed significant amounts of cash when measured over multi-year periods. Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold.
Under the Management Agreement, we pay a quarterly operating and personnel payment to the Manager or its affiliates (“Operating and Personnel Payments”) equal to 6.5% of the cash receipts from royalty investments for such quarter and 0.25% of the value of our security investments under GAAP as of the end of such quarter.
Under the Management Agreement, we pay a quarterly operating and personnel payment to the Manager or its affiliates (“Operating and Personnel Payments”) equal to 6.5% of the cash receipts from Royalty Investments (as defined in the Management Agreement), or Portfolio Receipts for such quarter, and 0.25% of the value of our security investments under GAAP as of the end of such quarter.
Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high conversion of our Adjusted Cash Receipts to Adjusted Cash Flow.
Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high cash flow conversion.
Significant Assumptions Applied in Developing Forecasted Expected Future Cash Flows As part of the preparation of the forecasted expected future cash flows, which relies on the sources and variables discussed above, management is required to make assumptions around the following forecast inputs: (1) estimates of the duration of the royalty, which includes consideration of the strength of patent protection and anticipated entry of generics, (2) product growth rates and sales trends in outer years, generally projected through statistical curves, (3) the product and pricing mix for franchised products, and (4) the geographical allocation of annual sales data from sell-side equity research analysts’ models.
Significant Assumptions Applied in Developing Forecasted Expected Future Cash Flows As part of the preparation of the forecasted expected future cash flows, which relies on the sources and variables discussed above, management is required to make assumptions around the following forecast inputs: (1) estimates of the duration of the royalty, which includes consideration of the strength of patent protection and anticipated entry of generics, (2) product growth rates and sales trends in outer years, generally projected through statistical curves, (3) the product and pricing mix for franchised products, (4) the geographical allocation of annual sales data from sell-side equity research analysts’ models, and (5) the portion of sales that are subject to royalty which is referred to as royalty bearing sales.
Launch and development capital may also include a direct investment in the public equity of a company. • M&A Related – We acquire royalties in connection with M&A transactions, often from the buyers of biopharmaceutical companies when they dispose of the non-strategic assets of the target company following the closing of the acquisition.
Launch and development capital may also include a direct investment in the public equity of a company. • Mergers and Acquisitions (“M&A”) Related – We acquire royalties in connection with M&A transactions, often from the buyers of biopharmaceutical companies when they dispose of the non-strategic assets of the target company following the closing of the acquisition.
As of December 31, 2022, the par value and carrying value of the total outstanding and guaranteed Notes was $7.3 billion and $7.1 billion, respectively. The following financial information presents summarized combined balance sheet information as of December 31, 2022, and summarized combined statement of operations information for 2022 for Royalty Pharma plc and RP Holdings.
As of December 31, 2023, the par value and carrying value of the total outstanding and guaranteed Notes was $6.3 billion and $6.1 billion, respectively. The following financial information presents summarized combined balance sheet information as of December 31, 2023, and summarized combined statement of operations information for 2023 for Royalty Pharma plc and RP Holdings.
The provision income for credit losses was primarily driven by a significant decrease in current expected credit losses related to Tazverik as a result of the decline in the financial asset value and changes in payors for certain products with stronger credit profiles, which was partially offset by the addition of Trelegy to our portfolio of financial royalty assets with limited protective rights.
The provision income for credit losses was primarily driven by a significant decrease in current expected credit losses related to Tazverik as a result of the decline in the financial asset value and changes in payors for certain products with stronger credit profiles, which was partially offset by the addition of Trelegy to our portfolio.
If the duration of these financial royalty assets were extended two years by assuming the statistically projected growth trends continue and all other royalty terms and assumptions remain unchanged, any impact to interest income would be recognized prospectively over the remaining expected life of the financial asset. Therefore, the impact to interest income is not disclosed below.
If the duration of these financial royalty assets were extended two years by assuming the statistically projected growth trends continue and all other royalty terms and assumptions remain unchanged, any impact to interest income would be recognized prospectively over the remaining expected life of the financial asset.
Equity in losses/(earnings) of equity method investees Equity in losses/(earnings) of equity method investees primarily includes the results of our share of income or loss from the following non-consolidated affiliates: 1.
Equity in losses/(earnings) of equity method investees Equity in losses/(earnings) of equity method investees primarily includes the results of our share of income or loss from the following non-consolidated affiliates: 1. Legacy SLP Interest.
Most of our royalties are classified as financial assets as our ownership rights are generally protective and passive in nature. In instances in which we acquire a royalty that does include more substantial rights or ownership of the underlying intellectual property, we classify such royalties as intangible assets. We recognize interest income related to our financial royalty assets.
Most of our royalties are classified as financial assets as our ownership rights are generally protective and passive in nature. In instances in which we acquire a royalty that does include more substantial rights or ownership of the underlying intellectual property, we classify such royalties as intangible assets.
We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including Vertex’s Trikafta, Kalydeco, Orkambi and Symdeko, Biogen’s Tysabri, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, GSK’s Trelegy, Novartis’ Promacta, Pfizer’s Nurtec ODT, Johnson & Johnson’s Tremfya, Roche’s Evrysdi, Gilead’s Trodelvy and 12 development-stage product candidates.
We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including Vertex’s Trikafta, GSK’s Trelegy, Roche’s Evrysdi, Johnson & Johnson’s Tremfya, Biogen’s Tysabri and Spinraza, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Novartis’ Promacta, Pfizer’s Nurtec ODT, Gilead’s Trodelvy, among others, and 14 development-stage product candidates.
Understanding Our Results of Operations We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us and which are attributable to: 1. The Legacy Investors Partnerships’ ownership of approximately 18% of Old RPI and Royalty Pharma Investments ICAV (“RPI ICAV”).
Understanding Our Results of Operations We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us and which are attributable to: 1. The Legacy Investors Partnerships’ ownership of approximately 18% of Old RPI and RPI ICAV.
Royalty duration varies by geography as the United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms.
Royalty durations vary by geography as the United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms.
For 2022 and 2021, the royalty payors accounting for greater than 10% of our total income and other revenues in any one year are shown in the table below: Years Ended December 31, Royalty Payor Royalty 2022 2021 Vertex Cystic fibrosis franchise 36 % 33 % AbbVie Imbruvica 14 % 17 % Income from financial royalty assets Our financial royalty assets represent investments in cash flow streams with yield components that most closely resemble loans measured at amortized cost under the effective interest method.
For 2023 and 2022, the royalty payors that accounted for greater than 10% of our total income and other revenues in any one year are shown in the table below: Years Ended December 31, Royalty Payor Royalty 2023 2022 Vertex Cystic fibrosis franchise 36 % 36 % AbbVie Imbruvica * 14 % *Represents less than 10%. 49 Income from financial royalty assets Our financial royalty assets represent investments in cash flow streams with yield components that most closely resemble loans measured at amortized cost under the effective interest method.
For example, in late 2014, we acquired the cystic fibrosis franchise and beginning in the second quarter of 2015, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expense in our consolidated income statements.
For example, in late 2014 we acquired the cystic fibrosis franchise and shortly after, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expense in our consolidated income statements.
We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and our acquisition program through cash flow and issuances of equity and debt. In the past, we have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.
We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and investments through cash flow and issuances of equity and debt. We have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.
Our cash flow forecasts are updated each reporting period primarily using sell-side equity research analysts’ consensus sales estimates for each of the products in which we own royalties. We then calculate our expected royalty cash flows using these consensus sales forecasts.
Our cash flow forecasts are updated each reporting period primarily using sell-side equity research analysts’ consensus sales estimates for each of the products in which we own royalties. We then calculate our expected royalty receipts by applying our royalty terms to these consensus sales forecasts.
We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions. Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities such as our strategic alliance with MSCI Inc.
We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions. Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.
A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 11–Borrowings within the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. We have historically funded our acquisition program through free cash flow, equity contributions and debt.
A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 10–Borrowings within the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 62 We have historically funded our investments through operating cash flows, equity contributions and debt.
As our committed capital requirements are based on phases of development, the completion of which is highly uncertain, only the capital required to fund the current stage of development under such funding arrangements is considered committed capital, which approximates $43.8 million as of December 31, 2022.
As our committed capital requirements are based on phases of development, the completion of which is highly uncertain, only the capital required to fund the current stage of development under such funding arrangements is considered committed capital, which approximates $27.3 million as of December 31, 2023.
Royalty Pharma plc is a public limited company incorporated under the laws of England and Wales that was created to facilitate the initial public offering (“IPO”) of our Class A ordinary shares on June 16, 2020. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis.
Royalty Pharma plc is a public limited company that was incorporated under the laws of England and Wales to facilitate our initial public offering (“IPO”) in 2020. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis.
We also fund ongoing R&D for biopharmaceutical companies in exchange for future royalties and milestones if the product or indication we are funding is approved. 79 • Launch and Development Capital – Tailored supplemental funding solutions, generally included as a component within a transaction, increasing the scale of our capital.
A synthetic royalty may also include contingent milestone payments. We also fund ongoing R&D for biopharmaceutical companies in exchange for future royalties and milestones if the product or indication we are funding is approved. • Launch and Development Capital – Tailored supplemental funding solutions, generally included as a component within a transaction, increasing the scale of our capital.
The expenses incurred in respect of Operating and Personnel Payments are expected to comprise the most significant component of G&A expenses on an ongoing basis. Guarantor Financial Information Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings, a non-wholly owned subsidiary (the “Guarantor Subsidiary”). Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the Notes.
Additionally, the expenses incurred in respect of Operating and Personnel Payments are expected to comprise the most significant component of G&A expenses on an ongoing basis. 67 Guarantor Financial Information Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings, a non-wholly owned subsidiary (the “Guarantor Subsidiary”).
The value of this non-controlling interest will decline over time as the assets in Old RPI and RPI ICAV expire. 2. A de minimis interest in RPCT held by RPSFT. The value of this non-controlling interest was substantially eliminated as of December 31, 2022.
The value of this non-controlling interest will decline over time as the assets in Old RPI and RPI ICAV expire. 2. A de minimis interest in RPCT held by RPSFT.
Small declines in sell-side equity research analysts’ consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition which generates a corresponding cumulative allowance that reduces the gross asset balance, even though the applicable cash inflows will not be realized for many years into the future.
Small declines in sell-side equity research analysts’ consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future.
Through the Exchange Offer, investors which represented 82% of the aggregate limited partnership interests in the various partnerships (the “Legacy Investors Partnerships”) that owned Old RPI, exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP, a Delaware limited partnership, or RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”).
Through the Exchange Offer, investors which represented 82% of the aggregate limited partnership interests in the various partnerships (the “Legacy Investors Partnerships”) that owned Royalty Pharma Investments, an Irish unit trust (“Old RPI”), exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP, a Delaware limited partnership, or RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”).
With the approval of the Vertex triple combination therapy, Trikafta, in October 2019, sell-side equity research analysts’ consensus sales forecasts increased to reflect the larger addressable market and the extension of the expected duration of the Trikafta royalty.
With the approval of the Vertex triple combination therapy, Trikafta, in October 2019, sell-side equity research analysts’ consensus sales forecasts increased to reflect the larger addressable market and the extension of the expected duration of the Trikafta royalty, resulting in the reversal of the remaining $1.10 billion cumulative allowance.
Under the terms of the indenture governing the Notes, Royalty Pharma plc and the Guarantor Subsidiary each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on the Notes.
Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the Notes. Under the terms of the indenture governing the Notes, Royalty Pharma plc and the Guarantor Subsidiary each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on the Notes.
The remaining 34% of RPCT is owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), which is wholly owned by Royalty Pharma Select, an Irish unit trust.
Prior to December 29, 2023, the remaining 34% of RPCT was owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), which was wholly owned by Royalty Pharma Select, an Irish unit trust.
Operating and Personnel Payments Under the Management Agreement, we pay quarterly Operating and Personnel Payments equal to 6.5% of the cash receipts from royalty investments for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter. Because the Operating and Personnel Payments are determined based on cash receipts, the amounts are variable.
Operating and Personnel Payments Under the Management Agreement, we pay quarterly Operating and Personnel Payments equal to 6.5% of the cash receipts from Royalty Investments, or Portfolio Receipts, for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter.
(“MSCI”) to develop thematic life science indexes. Background and Format of Presentation We consummated an exchange offer on February 11, 2020 (the “Exchange Offer”) to facilitate our IPO.
Background and Format of Presentation We consummated an exchange offer on February 11, 2020 (the “Exchange Offer”) to facilitate our IPO.
We invest in these therapies through the purchase of royalties, milestones and related assets, by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets. In 2022, we invested $2.5 billion to acquire royalties, milestones and related assets.
We invest in these therapies through the purchase of royalties, milestones and other contractual receipts by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets. In 2023, we invested $2.2 billion in royalties, milestones and other contractual receipts.
Over the course of 10 quarters, we continued to recognize non-cash provision expense as a result of these changes in forecasts including non-cash provision expense of $743.2 million in 2016, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017.
Over the course of 10 quarters, we continued to recognize non-cash provision expense because of these changes in sales forecasts, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017.
We caution readers that amounts presented in accordance with our 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 we use in the same manner.
We caution readers that amounts presented in accordance with our definitions of Adjusted EBITDA and Portfolio Cash Flow may not be the same as similar measures used by other companies or analysts.
The impact of these sensitivity assumptions is summarized as follows (in thousands): Year Ended December 31, 2022 Year Ended December 31, 2022 Estimated Royalty Duration (1) Change in Duration Assumption Applied Provision Income for Changes in Expected Cash Flows Change in Duration Assumption Applied Provision Expense for Changes in Expected Cash Flows Cystic fibrosis franchise 2037 (2) + 2 years $ (10,908) - 2 years $ 276,338 Tysabri (3) + 2 years $ (77,443) - 2 years $ 119,168 Trelegy 2029-2030 + 2 years $ (24,126) - 2 years $ 249,612 (1) Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography.
The impact of these sensitivity assumptions is summarized as follows (in thousands): Year Ended December 31, 2023 Year Ended December 31, 2023 Estimated Royalty Duration (1) Change in Duration Assumption Applied Provision Income for Changes in Expected Cash Flows Change in Duration Assumption Applied Provision Expense for Changes in Expected Cash Flows Cystic fibrosis franchise 2037 (2) + 2 years $ (2,539) - 2 years $ 295,974 Trelegy 2029-2030 + 2 years (4) - 2 years $ 269,333 Tysabri (3) + 2 years $ (60,312) - 2 years $ 97,797 (1) Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may vary by geography and may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors.
Cash Flows The following table and analysis of cash flow changes presents a summary of our cash flow activity for 2022 compared to 2021 (in thousands).
Cash Flows The following table and analysis of cash flow changes present a summary of our cash flow activities for 2023 compared to 2022 (in thousands).
Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones.
The initial tranche of $50 million was funded upon closing. Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones (“Cytokinetics Funding Commitments”).
Other (income)/expenses, net Other (income)/expenses, net primarily includes the changes in fair market value of our equity securities, derivative instruments and available for sale debt securities, including related forwards and funding commitments, and interest income.
Other income, net Other income, net primarily includes the changes in fair market value of our equity securities, derivative instruments and available for sale debt securities, including related forwards and funding commitments, and interest income. 51 Net income attributable to non-controlling interests The net income attributable to non-controlling interests includes income attributable to the legacy non-controlling interests and the continuing non-controlling interests.
If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement (defined below) 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 our liquidity.
If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.
Other royalty income also includes income from royalties that are recorded at fair value on our consolidated balance sheets. 56 Provision for changes in expected cash flows from financial royalty assets The Provision for changes in expected future cash flows from financial royalty assets includes the following: • non-cash expense or income related to the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows; and • non-cash expense or income related to the provision for current expected credit losses, which reflects the activity for the period, primarily due to new financial royalty assets with limited protective rights and changes to cash flow estimates for financial royalty assets with limited protective rights.
Provision for changes in expected cash flows from financial royalty assets The Provision for changes in expected future cash flows from financial royalty assets includes the following: • non-cash expense or income related to the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows; and • non-cash expense or income related to the provision for current expected credit losses, which reflects the activity for the period, primarily due to new financial royalty assets with limited protective rights and changes to cash flow estimates for financial royalty assets with limited protective rights.
We have access to substantial sources of funds in the capital markets and we may, from time to time, seek additional capital through a combination of additional debt or equity financings. In July 2021, we issued $1.3 billion of senior unsecured notes.
We have access to substantial sources of funds in the capital markets and we may, from time to time, seek additional capital through a combination of additional debt or equity financings. In September 2023, we repaid $1.0 billion of our senior unsecured notes upon maturity.
Financial royalty asset impairment Financial royalty asset impairment was $615.8 million in 2022 due to the recognition of non-cash impairment charges of $273.6 million, $160.1 million and $182.1 million related to gantenerumab, otilimab and Gavreto, respectively. In November 2022, Roche stated that it would discontinue clinical trials of gantenerumab.
Financial royalty asset impairment We did not recognize any financial royalty impairments in 2023. We recognized financial royalty asset impairments of $615.8 million in 2022, comprised of non-cash impairment charges of $273.6 million, $160.1 million and $182.1 million related to gantenerumab, otilimab and Gavreto, respectively. In November 2022, Roche stated that it would discontinue clinical trials of gantenerumab.
We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions.
We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions. Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.
We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties or milestones, and indirectly when we acquire existing royalties from the original innovators.
We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators. Our industry leading royalty portfolio and capital-efficient business model drives our compounding growth.
A royalty is the contractual right to a percentage of top-line sales from a licensee’s use of a product, technology or intellectual property. The majority of our current portfolio consists of third-party royalties. • Synthetic Royalties – Newly-created royalties on approved or late-stage development therapies with strong proof of concept and high commercial potential.
The majority of our current portfolio consists of third-party royalties. • Synthetic Royalties – Newly-created royalties on approved or late-stage development therapies with strong proof of concept and high commercial potential. A synthetic royalty is the contractual right to a percentage of top-line sales by the developer or marketer of a therapy in exchange for funding.
We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, sales of marketable securities, future cash flows from operations or the issuance of additional debt.
As of December 31, 2022, our cash and cash equivalents and marketable securities totaled $1.7 billion and $24.4 million, respectively. We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, sales of marketable securities, future cash flows from operations or the issuance of additional debt.
Included below are tables of investment activities over each of the last three years based on the type of investment at the acquisition date (in thousands). Announced transactions amounts reflect maximum transaction value for transactions entered into over each of the last three years.
Included below are tables of investment activities over each of the last five years (in thousands). Announced transactions amounts reflect maximum transaction value for transactions entered into over each of the periods presented.
From 2012 through 2022, we have deployed $12.1 billion to acquire royalties, milestones and related assets on approved products. • Development-Stage Product Candidates – We acquire royalties on development-stage product candidates that have demonstrated strong clinical proof of concept.
From 2012 through 2023, we deployed $13.8 billion to acquire royalties, milestones and other contractual receipts on approved products. • Development-Stage Product Candidates – We acquire royalties on development-stage product candidates that have demonstrated strong clinical proof of concept.
In October 2022, GSK announced that it has decided not to progress with regulatory submissions for otilimab. These announcements contributed to our conclusion to impair these two assets. Additionally, during the fourth quarter of 2022, we impaired our financial royalty asset related to Gavreto due to the uncertainty of Gaverto’s commercial outlook. There was no comparable activity in 2021.
In October 2022, GSK announced that it has decided not to progress with regulatory submissions for otilimab. Additionally, during the fourth quarter of 2022, we impaired our financial royalty asset related to Gavreto due to the uncertainty of Gavreto’s commercial outlook.
All of the results of operations of RP Holdings, Old RPI, RPI ICAV and RPCT are consolidated into our financial statements. 55 Total income and other revenues Total income and other revenues is primarily comprised of income from our financial royalty assets, royalty income generally arising from successful commercialization of products developed through R&D funding arrangements, and a declining contribution of royalty revenue from our intangible royalty assets for which patent rights have materially expired.
Total income and other revenues Total income and other revenues is primarily comprised of interest income from our financial royalty assets, royalty income generally arising from successful commercialization of products developed through R&D funding arrangements, and a declining contribution of royalty revenue from our intangible royalty assets for which patent rights have materially expired.
Royalty Receipts • Cystic fibrosis franchise – Royalty receipts from the cystic fibrosis franchise, which includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio, which are marketed by Vertex for patients with certain mutations causing cystic fibrosis, increased by $108.9 million in 2022 compared to 2021.
Analysis of Portfolio Receipts Below we discuss the key drivers of Portfolio Receipts: • Cystic fibrosis franchise – Royalty receipts from the cystic fibrosis franchise, which includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio, which are marketed by Vertex for patients with certain mutations causing cystic fibrosis, increased by $81.2 million in 2023 compared to 2022.
Revenue from intangible royalty assets Revenue from intangible royalty assets decreased by $133.8 million, or 78.1%, in 2022 compared to 2021, primarily driven by the maturity of our royalties on Januvia and Janumet in the first quarter of 2022 and the recognition of underpaid prior period royalties on Tradjenta in 2021.
Revenue from intangible royalty assets Revenue from intangible royalty assets decreased by $36.6 million, or 97.8%, in 2023 compared to 2022, primarily driven by the maturity of our royalties on Januvia and Janumet in the first quarter of 2022.
Currently, we believe that we have sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support our growth objectives. 78 Borrowings Our borrowings as of December 31, 2022 and 2021 consisted of the following (in thousands): Date of Issuance Maturity As of December 31, 2022 As of December 31, 2021 Senior Unsecured Notes: $1,000,000, 0.75% (issued at 99.322% of par) 9/2020 9/2023 $ 1,000,000 $ 1,000,000 $1,000,000, 1.20% (issued at 98.875% of par) 9/2020 9/2025 1,000,000 1,000,000 $1,000,000, 1.75% (issued at 98.284% of par) 9/2020 9/2027 1,000,000 1,000,000 $1,000,000, 2.20% (issued at 97.760% of par) 9/2020 9/2030 1,000,000 1,000,000 $600,000, 2.15% (issued at 98.263% of par) 7/2021 9/2031 600,000 600,000 $1,000,000, 3.30% (issued at 95.556% of par) 9/2020 9/2040 1,000,000 1,000,000 $1,000,000, 3.55% (issued at 95.306% of par) 9/2020 9/2050 1,000,000 1,000,000 $700,000, 3.35% (issued at 97.565% of par) 7/2021 9/2051 700,000 700,000 Total senior unsecured debt 7,300,000 7,300,000 Unamortized debt discount and issuance costs (183,678) (203,930) Total long-term debt, including current portion 7,116,322 7,096,070 Less: Current portion of long-term debt (997,512) — Total long-term debt $ 6,118,810 $ 7,096,070 Senior Unsecured Notes On July 26, 2021, we issued the 2021 Notes with a weighted average coupon rate of 2.80% and requiring annual interest payments of approximately $36.4 million, paid semi-annually.
Borrowings Our borrowings as of December 31, 2023 and 2022 consisted of the following (in thousands): Date of Issuance Maturity As of December 31, 2023 As of December 31, 2022 Senior Unsecured Notes: $1,000,000, 0.75% (issued at 99.322% of par) 9/2020 9/2023 $ — $ 1,000,000 $1,000,000, 1.20% (issued at 98.875% of par) 9/2020 9/2025 1,000,000 1,000,000 $1,000,000, 1.75% (issued at 98.284% of par) 9/2020 9/2027 1,000,000 1,000,000 $1,000,000, 2.20% (issued at 97.760% of par) 9/2020 9/2030 1,000,000 1,000,000 $600,000, 2.15% (issued at 98.263% of par) 7/2021 9/2031 600,000 600,000 $1,000,000, 3.30% (issued at 95.556% of par) 9/2020 9/2040 1,000,000 1,000,000 $1,000,000, 3.55% (issued at 95.306% of par) 9/2020 9/2050 1,000,000 1,000,000 $700,000, 3.35% (issued at 97.565% of par) 7/2021 9/2051 700,000 700,000 Total senior unsecured debt 6,300,000 7,300,000 Unamortized debt discount and issuance costs (164,715) (183,678) Total long-term debt, including current portion 6,135,285 7,116,322 Less: Current portion of long-term debt — (997,512) Total long-term debt $ 6,135,285 $ 6,118,810 Senior Unsecured Notes On July 26, 2021, we issued $1.3 billion of senior unsecured notes (the “2021 Notes”) with a weighted average coupon rate of 2.80%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+2 added−3 removed11 unchanged
Biggest changeAs of December 31, 2022, we held cash and cash equivalents of $1.7 billion, of which $1.7 billion was cash and $5.1 million was invested in interest-bearing money market funds. We also held $24.4 million in marketable securities at December 31, 2022, which were invested in certificates of deposit and government securities.
Biggest changeAs of December 31, 2023, we held cash and cash equivalents of $477.0 million, of which $319.6 million was cash and $157.4 million was invested in interest-bearing money market funds. As of December 31, 2022, we had cash and cash equivalents of $1.7 billion, of which $1.7 billion was cash and $5.1 million was invested in interest-bearing money market funds.
If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative financial instruments due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative financial instruments in a bankruptcy or other reorganization proceeding. 86
If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative financial instruments due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative financial instruments in a bankruptcy or other reorganization proceeding. 73
Refer to “Understanding Our Results of Operations” within this MD&A for a discussion of the royalty payors accounting for 10% or more of our total income and other revenues for 2022 and 2021.
Refer to “Understanding Our Results of Operations” within this MD&A for a discussion of the royalty payors accounting for 10% or more of our total income and other revenues for 2023 and 2022.
Our debt portfolio is managed on a consolidated basis and management makes financing decisions to achieve the lowest cost of debt capital and to maximize portfolio objectives. As of December 31, 2022, 100% of our outstanding debt has fixed interest rates.
Our debt portfolio is managed on a consolidated basis and management makes financing decisions to achieve the lowest cost of debt capital and to maximize portfolio objectives. As of December 31, 2023, 100% of our outstanding Notes have fixed interest rates.
For 2022 and 2021, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 31% and 32% of our current portion of Financial royalty assets, net, respectively, representing the largest individual marketer and payor of our royalties.
As of December 31, 2023 and 2022 , Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 32% and 31% of our current portion of financial royalty assets, respectively, and represented the largest individual marketer and payor of our royalties.
The objectives of our investment policy are the preservation of capital and fulfillment of liquidity needs. In order to maximize income without assuming significant market risk, we maintain our excess cash and cash equivalents in money market funds and marketable securities, largely composed of investment grade, short to intermediate term fixed income and debt securities.
In order to maximize income without assuming significant market risk, we maintain our excess cash and cash equivalents in money market funds and marketable securities, largely composed of investment grade, short to intermediate term fixed income and debt securities.
The products in which we hold royalties are marketed by leading biopharmaceutical industry participants, including, among others, AbbVie, Amgen, Bristol Myers Squibb, Gilead, Johnson & Johnson, Lilly, Merck, Pfizer, Novartis, Biogen, Roche/Genentech and Vertex.
The products in which we hold royalties are marketed by leading biopharmaceutical industry participants, including, among others, Vertex, GSK, Roche, Johnson & Johnson, Biogen, AbbVie, Astellas, Pfizer, Novartis and Gilead.
The treasury lock contracts were terminated in July 2021. 85 Credit and Counterparty Risk We are exposed to credit risk related to the counterparties with which we do business. We are subject to credit risk from our royalty assets, our receivables and our financial instruments, primarily derivative and available for sale debt securities.
We are subject to credit risk from our royalty assets, our receivables and our financial instruments, primarily derivative and available for sale debt securities.
We have a $1.5 billion Revolving Credit Facility with a variable interest rate that remained undrawn as of December 31, 2022. We are subject to interest rate fluctuation exposure related to the Revolving Credit Facility, if drawn.
We have a $1.8 billion Revolving Credit Facility with a variable interest rate that had no outstanding borrowing balance as of December 31, 2023.
Removed
As of December 31, 2021, we had cash and cash equivalents of $1.5 billion, of which $887.8 million was cash, $598.3 million was invested in interest-bearing money market funds and $55.0 million was invested in commercial paper and certificates of deposit. We also held $581.9 million in marketable securities which were invested in commercial paper and certificates of deposit.
Added
We also held $24.4 million in marketable securities which were invested in commercial paper and certificates of deposit. The objectives of our investment policy are the preservation of capital and fulfillment of liquidity needs.
Removed
We may manage our exposure to interest rate volatility on future debt issuances by entering into treasury rate lock contracts to lock in the rate on the interest payments related to anticipated debt issuances.
Added
We are subject to interest rate fluctuation exposure related to the Revolving Credit Facility for the amounts drawn. 72 Credit and Counterparty Risk We are exposed to credit risk related to the counterparties with which we do business.
Removed
In June 2021, we executed treasury rate lock contracts with notional amounts totaling $600.0 million to fix the interest rate on a portion of the principal related to our 2021 Notes issued in July 2021.

Other RPRX 10-K year-over-year comparisons