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What changed in Royalty Pharma plc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Royalty Pharma plc's 2023 and 2024 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 2024 report.

+463 added−441 removedSource: 10-K (2025-02-12) vs 10-K (2024-02-15)

Top changes in Royalty Pharma plc's 2024 10-K

463 paragraphs added · 441 removed · 327 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+19 added−16 removed66 unchanged
Biggest changeFood and Drug Administration (“FDA”) approval of Zavzpret in March 2023, a $50.0 million payment from Pfizer related to the oral formulation of zavegepant, a $33.0 million commercial milestone payment related to Soliqua and a $28.7 million payment from our joint venture investee, Avillion II, for our pro rata portion of the $80 million fee paid by AstraZeneca to exercise its option to commercialize Airsupra in the United States. 7 Portfolio Summary The table below provides a summary of the acquisition year, estimated royalty duration, royalty rates and the ownership percentages attributable to Royalty Pharma, net of legacy non-controlling interests for selected approved products in our portfolio: Products Acquisition Year(s) Estimated Royalty Duration (1) Royalty Rates (2) 2023 % Attributable to Royalty Pharma (3) Cystic fibrosis franchise (4) 2014, 2020 2037 Blended royalty of slightly over 9% 86.0% Tysabri 2017 Perpetual Tiered payments of 18% on first $2 billion and 25% on sales >$2 billion 82.4% Imbruvica 2013 2027-2032 Downward tiered mid-single digit royalty 82.4% Trelegy (5) 2022 2029-2030 Tiered royalty of 6.5% on first $750 million, up to 10% on sales >$2.25 billion 100.0% Promacta 2019 2025-2028 Upward tiered 4.7% to 9.4% royalty 82.4% Xtandi 2016 2027-2028 Slightly less than 4% royalty 82.4% Tremfya 2021 2031-2032 Upward tiered mid-single digit royalty 100.0% Evrysdi (6) 2020, 2023 2035-2036 Tiered royalty of 6.5% on first $500 million, up to 13% on sales >$2 billion 100.0% Cabometyx/Cometriq (7) 2021 2026-2029 3% royalty 100.0% Spinraza (8) 2023 2030-2035 Upward tiered 2.8% to 3.8% royalty, increasing to 5% to 6.8% in 2028 100.0% Trodelvy 2018 Perpetual Tiered royalty of 4.15% on first $2 billion, down to 1.75% on sales >$6 billion 82.4% Orladeyo (9) 2020, 2021 2036-2039 Tiered royalty of 9.5% on first $350 million and 4.5% on sales up to $550 million 100.0% Erleada 2019, 2023 2032 Low-single digit royalty 84.6% Nurtec ODT/Zavzpret 2018, 2020 2034-2036 Tiered royalty of ~2.5% on first $1.5 billion and ~1.9% on sales >$1.5 billion 85.2% Notes: (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 (including the timing of such approvals), contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors.
Biggest change(4) Other products primarily include royalties on the following products: Cimzia, Crysvita, Emgality, Entyvio, Farxiga/Onglyza, IDHIFA, Prevymis, Soliqua and distributions from the Legacy SLP Interest, which are presented as Distributions from equity method investees on the Statements of Cash Flows. 7 Portfolio Summary The table below provides a summary of the acquisition year, estimated royalty duration, royalty rates and the ownership percentages attributable to Royalty Pharma, net of legacy non-controlling interests for selected approved products in our portfolio: Products Acquisition Year(s) Estimated Royalty Duration (1) Royalty Rates (2) Attributable to Royalty Pharma (3) Cystic fibrosis franchise (4) 2014, 2020 2039-2041 Blended royalty of slightly over 9% for Trikafta; See footnote (4) 86.5% Trelegy (5) 2022 2029-2030 Tiered royalty of 6.5% on first $750 million, up to 10% on sales >$2.25 billion 100.0% Tysabri 2017 Perpetual Tiered payments of 18% on first $2 billion and 25% on sales >$2 billion 82.4% Imbruvica 2013 2027-2032 Downward tiered mid-single digit royalty 82.4% Evrysdi (6) 2020, 2023, 2024 2035-2036 Tiered royalty of 7.2% on first $500 million, up to 14.5% on sales >$2 billion 100.0% Xtandi 2016 2027-2028 Slightly less than 4% royalty 82.4% Promacta 2019 2025-2028 Upward tiered 4.7% to 9.4% royalty 82.4% Tremfya 2021 2031-2032 Upward tiered mid-single digit royalty 100.0% Cabometyx/Cometriq (7) 2021 2026-2029 3% royalty 100.0% Spinraza (8) 2023 2030-2035 Upward tiered 2.8% to 3.8% royalty, increasing to 5% to 6.8% in 2028 100.0% Trodelvy 2018 Perpetual Tiered royalty of 4.15% on first $2 billion, down to 1.75% on sales >$6 billion 82.4% Erleada 2019, 2023 2032 Low-single digit royalty 86.7% Orladeyo (9) 2020, 2021 2036-2039 Tiered royalty of 9.5% on first $350 million and 4.5% on sales up to $550 million 100.0% Nurtec ODT/Zavzpret 2018, 2020 2034-2036 Tiered royalty of ~2.5% on first $1.5 billion and ~1.9% on sales >$1.5 billion 86.7% (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 (including the timing of such approvals), contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors.
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 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.
We have a highly focused and experienced team that conducts proprietary primary market research, forms its own views on the clinical and commercial outlook for the product, and builds its own financial models, allowing us to generate direct insights and allowing us to take significant accountability and ownership for our investments.
We have a highly focused and experienced team that conducts proprietary primary market research, forms its own views on the clinical and commercial outlook for the product, and builds its own financial models, allowing us to generate direct insights and to take significant accountability and ownership for our investments.
We believe that sustainability is critical to addressing related risks and opportunities for our business. We are focused on tracking our carbon footprint, mitigating our impact through energy efficiency and identifying ways to reduce our environmental impact. Employees Our directors and executive officers manage our operations and activities.
We believe that sustainability is critical to addressing related risks and opportunities for our business. We are focused on tracking our carbon footprint, mitigating our impact through energy efficiency and identifying ways to reduce our environmental impact. 12 Employees Our directors and executive officers manage our operations and activities.
We believe that climate change could present risks to our business. Some of the potential impacts of climate change to our business include increased operating costs due to additional regulatory requirements and the risk of disruptions to our business. We do not believe these risks are material to our business at this time. U.S.
We believe that climate change could present risks to our business. Some of the potential impacts of climate change to our business include increased operating costs due to additional regulatory requirements and the risk of disruptions to our business. We do not believe these risks are material to our business at this time. 13 U.S.
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.
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 (as defined below) and milestones and other contractual receipts.
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.
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, increase the scale of our capital.
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.
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 2024 was on Vertex’s cystic fibrosis franchise.
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.
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 $2.8 billion of cash to acquire royalties, milestones and other contractual receipts (“Capital Deployment”) in 2024, which also includes payments made during the year for transactions from prior years.
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.
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 U.S Food and Drug Administration (“FDA”) drug approvals, and the potential for multiple royalties to be created from each new drug that reaches the market.
Further, references to website URLs are intended to be inactive textual references only. 13
Further, references to website URLs are intended to be inactive textual references only.
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.
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, 2024, the Manager had 99 employees.
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.
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 generic entry thereafter leading to sales decline.
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.
As of December 31, 2024, 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 2024, no individual product accounted for more than 28% of our Portfolio Receipts.
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.
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 drive value creation and are accretive to our long-term growth profile. We conduct extensive due diligence when evaluating potential new opportunities.
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.
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 2024, we generated $2.8 billion of Portfolio Receipts (as defined below) and announced transactions with a total potential value of $2.8 billion.
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.
Our portfolio provides direct exposure to a broad array of blockbuster therapies. As of December 31, 2024, our portfolio included royalties on 15 therapies that each generated end-market sales of more than $1 billion in 2024, including seven therapies that each generated end-market sales of $3 billion or more.
(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.
(2) The 2020 growth rate is 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.
From 2012 through 2023, we deployed $8.3 billion of cash to acquire royalties, milestones and other contractual receipts on development-stage product candidates.
From 2012 through 2024, we deployed $9.3 billion of cash to acquire royalties, milestones and other contractual receipts on development-stage product candidates.
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.
Our team has significant experience identifying, evaluating and acquiring royalties on biopharmaceutical therapies. Together they have been responsible for $29.2 billion in announced transactions of biopharmaceutical royalties, milestones and other contractual receipts from 2012 through 2024. Our acquisitions have included many of the industry’s leading therapies such as Trikafta, Tremfya, Imbruvica and Xtandi.
The Manager is focused on creating a supportive and values-based culture that elevates health, well-being and growth. The Manager values diverse teams and backgrounds: as of December 31, 2023, 49% of the workforce of our Manager are women and approximately 35% of the workforce of our Manager are ethnically diverse.
The Manager is focused on creating a supportive and values-based culture that elevates health, well-being and growth. The Manager values diverse teams and backgrounds: as of December 31, 2024, 48% of the workforce of our Manager are women and approximately 33% of the workforce of our Manager are ethnically diverse.
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.
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. See “Risk Factors” in Item 1A, Risk Factors for further information.
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.
Global prescription pharmaceutical sales are projected to grow from $1.1 trillion in 2024 to $1.7 trillion in 2030, representing a compound annual growth rate of 8% according to EvaluatePharma despite more than $400 billion in cumulative sales being lost to expected patent expiries during the same period.
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.
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.
(2) The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio. (3) Reflects 2023 end market sales for Nurtec ODT. Zavzpret sales are not disclosed by Pfizer.
(2) The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek, which was approved by the FDA in December 2024. (3) Reflects 2024 end market sales for Nurtec ODT. Zavzpret sales are not disclosed by Pfizer.
In 2023, we generated Portfolio Receipts of $3.0 billion. We deployed $2.2 billion of cash in 2023 to acquire royalties, milestones and other contractual receipts, paid dividends of $358.3 million and repurchased shares for $304.8 million. We have a talented, long-tenured team with extensive experience and deep industry relationships.
In 2024, we generated Portfolio Receipts of $2.8 billion. We deployed $2.8 billion of cash in 2024 to acquire royalties, milestones and other contractual receipts, paid dividends of $376.5 million and repurchased shares for $229.9 million. We have a talented, long-tenured team with extensive experience and deep industry relationships.
(6) Royalties are tiered based on sales at 6.5% up to $500 million, 8.9% between $500 million and $1 billion, 11.3% between $1 billion and $2 billion, and 13% over $2 billion. Our royalty rates are expected to be reduced by 18% in the early 2030s.
(6) Royalties are tiered based on sales at 7.2% up to $500 million, 10% between $500 million and $1 billion, 12.7% between $1 billion and $2 billion, and 14.5% over $2 billion. Our royalty rates are expected to be reduced by 8% in the early 2030s.
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.
Royalty entitlement does not reflect PTC exercising the option to sell its remaining 9.5% of the Evrysdi royalty. (7) We are entitled to royalties on U.S. sales of cabozantinib products through September 2026 and non-U.S. markets through the full term of the royalty.
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.
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 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.
None of these employees are represented by labor unions or covered by any collective bargaining agreement. We believe that the Manager’s relations with its employees are satisfactory. 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 expect to receive additional royalties beginning in the first quarter of 2024. • In September 2023, we acquired a royalty interest in Skytrofa for an upfront payment of $150 million. Skytrofa is approved for the treatment of pediatric patients with growth failure due to inadequate secretion of endogenous growth hormone.
In August 2024, we made the upfront payment following the FDA approval on Voranigo. • In September 2023, we acquired a royalty interest in Skytrofa for an upfront payment of $150 million. Skytrofa is approved for the treatment of pediatric patients with growth failure due to inadequate secretion of endogenous growth hormone.
For combination therapies, sales are allocated equally to each of the active pharmaceutical ingredients, with tiered royalties ranging from single digit to subteen percentages on sales of ivacaftor, lumacaftor and tezacaftor, and mid-single digit percentages on sales of elexacaftor.
We estimate expected Trikafta patent expiration in 2037 and potential generic entry thereafter leading to sales decline. For combination therapies, sales are allocated equally to each of the active pharmaceutical ingredients, with tiered royalties ranging from single digit to subteen percentages on sales of ivacaftor, lumacaftor and tezacaftor, and mid-single digit percentages on sales of elexacaftor.
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.
Adverse competition, obsolescence, governmental and regulatory action, or healthcare policy changes could significantly affect the revenues, including royalty-related revenues, of the products which serve as the security or other support for the payments due under the biopharmaceutical products that we hold. 11 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.
(3) Ownership percentages for cystic fibrosis franchise, Erleada and Nurtec ODT/Zavzpret represent blended percentages across multiple royalty interests based on 2023 royalty receipts. (4) Royalty is perpetual; year shown represents Trikafta’s expected patent expiration and potential sales decline based on timing of potential generic entry.
(3) Ownership percentages for cystic fibrosis franchise, Erleada and Nurtec ODT/Zavzpret represent blended percentages across multiple royalty interests based on 2024 Royalty Receipts. (4) Royalty is perpetual. We estimate royalty duration of 2039-2041 due to expected Alyftrek patent expiration and potential generic entry thereafter leading to sales decline.
Development-Stage Product Candidates The table below provides a summary of our portfolio of development-stage product candidates, which have not been approved and therefore have not generated any royalties (and we have not collected any related royalty receipts) to date : Product Candidates Marketer(s) Therapeutic Area Status (1) Product Description Aficamten Cytokinetics Cardiology NDA filing expected 2024 Small molecule cardiac myosin inhibitor for obstructive hypertrophic cardiomyopathy Ampreloxetine Theravance Neuroscience Phase 3 data expected 2025 Investigational once-daily norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy BCX10013 BioCryst Rare disease Phase 1 Oral Factor D inhibitor for complement-mediated diseases Ecopipam (2) Emalex Neuroscience Phase 3 data expected 2024 Oral dopamine-1 receptor antagonist for Tourette’s Syndrome KarXT Karuna (3) Neuroscience PDUFA date Q3 2024 Oral M1/M4 muscarinic agonist for schizophrenia MK-8189 Merck Neuroscience Phase 2b data expected 2024 Oral PDE10A inhibitor for schizophrenia Olpasiran Amgen Cardiology Phase 3 data expected 2027 Small interfering ribonucleic acid for elevated lipoprotein(a), a genetically determined independent risk factor for cardiovascular disease Pelabresib MorphoSys (4) Cancer NDA filing expected 2024 Bromodomain and extra-terminal inhibitor for myelofibrosis Pelacarsen Novartis Cardiology Phase 3 data expected 2025 Antisense oligonucleotide for elevated lipoprotein(a), a genetically determined independent risk factor for cardiovascular disease Seltorexant Johnson & Johnson Neuroscience Phase 3 data expected 2024 Selective orexin 2 receptor antagonist for major depressive disorder with insomnia symptoms TEV-'749 Teva Neuroscience Phase 3 data expected 2024 Long-acting subcutaneous injection of olanzapine for schizophrenia Trontinemab Roche Neuroscience Phase 1a/2b A novel Brainshuttle Aβ antibody for the treatment of Alzheimer’s disease Tulmimetostat MorphoSys (4) Cancer Phase 2 Second-generation enhancer of zeste homolog 2 inhibitor for hematological malignancies and solid tumors Vanzacaftor/tezacaftor/deutivacaftor Vertex Rare disease NDA filing expected 2024 Once-daily triple combination therapy for the treatment of cystic fibrosis NDA: New Drug Application.
We expect to receive royalties on Skytrofa beginning in 2025. 9 Development-Stage Product Candidates The table below provides a summary of our portfolio of development-stage product candidates, which have not been approved and therefore have not generated any royalties (and we have not collected any related Royalty Receipts) to date : Product Candidates Marketer(s) Therapeutic Area Status (1) Product Description Aficamten Cytokinetics Cardiology PDUFA date Q3 2025 Cardiac myosin inhibitor for obstructive hypertrophic cardiomyopathy Ampreloxetine Theravance Neuroscience Phase 3 data expected 2026 Once-daily norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy CK-586 Cytokinetics Cardiology Phase 2 Cardiac myosin inhibitor to reduce the hypercontractility associated with heart failure with preserved ejection fraction Deucrictibant Pharvaris Rare disease Phase 3 data expected 2026 Novel, oral bradykinin B2 receptor antagonist for preventing and treating hereditary angioedema attacks Ecopipam Emalex Neuroscience Phase 3 data expected 2025 Oral dopamine-1 receptor antagonist for Tourette’s Syndrome Frexalimab Sanofi Immunology Phase 3 data expected 2027 Anti-CD40 ligand monoclonal antibody Olpasiran Amgen Cardiology Phase 3 data expected 2027 Small interfering ribonucleic acid for elevated lipoprotein(a), a genetically determined independent risk factor for cardiovascular disease Omecamtiv mecarbil Cytokinetics Cardiology Phase 3 data expected 2027 Cardiac myosin activator for the treatment of heart failure with severely reduced ejection fraction Pelabresib Novartis Cancer Phase 3 Bromodomain and extra-terminal inhibitor for myelofibrosis Pelacarsen Novartis Cardiology Phase 3 data expected 2026 Antisense oligonucleotide for elevated lipoprotein(a), a genetically determined independent risk factor for cardiovascular disease Seltorexant Johnson & Johnson Neuroscience Phase 3 data expected 2027 Selective orexin 2 receptor antagonist for major depressive disorder with insomnia symptoms TEV-'749 Teva Neuroscience Phase 3 data expected 2025 Long-acting subcutaneous injection of olanzapine for schizophrenia Trontinemab Roche Neuroscience Phase 1a/2b Novel Brainshuttle Aβ antibody for the treatment of Alzheimer’s disease Tulmimetostat Novartis Cancer Phase 2 Second-generation enhancer of zeste homolog 2 inhibitor for hematological malignancies and solid tumors PDUFA: Prescription Drug User Fee Act.
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).
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.
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.
As of December 31, 2024, products underlying $6.5 billion of these acquisitions have already been approved, representing a success rate to date of 70%, while products underlying $1.0 billion were not approved and products underlying $1.8 billion are still in development.
Our no longer qualifying for an exemption from registration as an investment company would materially and adversely affect the value of your Class A ordinary shares and our ability to pay dividends in respect of our Class A ordinary shares.
Our no longer qualifying for an exemption from registration as an investment company would materially and adversely affect the value of your Class A ordinary shares and our ability to pay dividends in respect of our Class A ordinary shares. 14 Corporate Information Our predecessor was founded in 1996 and we were incorporated under the laws of England and Wales on February 6, 2020.
Approved 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 invest significant time and resources across all levels of the organization, including senior leadership, in the evaluation of potential opportunities. 6 Approved 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 2024 Portfolio Receipts (in millions) 2024 End Market Sales (in millions) (1) Cystic fibrosis franchise (2) Vertex Rare disease Cystic fibrosis $857 $11,020 Trelegy GSK Respiratory Chronic obstructive pulmonary disease and asthma 284 3,456 Tysabri Biogen Neuroscience Relapsing forms of multiple sclerosis 262 1,711 Imbruvica AbbVie, Johnson & Johnson Cancer Hematological malignancies and chronic graft versus host disease 191 4,466 Evrysdi Roche Rare disease Spinal muscular atrophy 174 1,853 Xtandi Pfizer, Astellas Cancer Prostate cancer 169 5,906 Promacta Novartis Hematology Chronic immune thrombocytopenic purpura and aplastic anemia 158 2,216 Tremfya Johnson & Johnson Immunology Plaque psoriasis, psoriatic arthritis and ulcerative colitis 140 3,670 Cabometyx/Cometriq Exelixis, Ipsen, Takeda Cancer Kidney, liver and thyroid cancers 73 2,483 Spinraza Biogen Rare disease Spinal muscular atrophy 45 1,506 Trodelvy Gilead Cancer Breast cancer 43 1,300 Erleada Johnson & Johnson Cancer Prostate cancer 39 2,999 Orladeyo BioCryst Rare disease Hereditary angioedema prophylaxis 39 437 Nurtec ODT/Zavzpret Pfizer Neuroscience Migraine 26 1,263 (3) Other products (4) 273 — Royalty Receipts $2,771 Milestones and other contractual receipts 31 — Portfolio Receipts $2,801 Amounts shown in the table may not add due to rounding.
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.
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.
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.
Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that are attributed to Royalty Pharma.
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 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, investment funds and other entities.
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.
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.
Our agent for service in the United States is CSC North America located at 251 Little Falls Drive, Wilmington, DE 19808.
Our website and the information contained therein or connected thereto is not incorporated into this Annual Report on Form 10-K. Our agent for service in the United States is CSC North America located at 251 Little Falls Drive, Wilmington, DE 19808.
We analyze a wide range of scientific data and stay in constant communication with leading physicians, scientists, biopharmaceutical executives and venture capital firms.
Our team of scientific experts actively monitors the evolving treatment landscape across many therapeutic areas and treatment modalities in order to identify new opportunities. We analyze a wide range of scientific data and stay in constant communication with leading physicians, scientists, biopharmaceutical executives and venture capital firms.
We evaluate opportunities across the risk spectrum and do not target the same return for all assets. • Long duration cash flows: we prioritize long-duration assets over short-duration assets that may boost near-term financial performance.
We evaluate opportunities across approved products as well as development-stage product candidates, primarily post proof of concept, and target returns based on the risk spectrum. • Long duration cash flows: we prioritize long-duration assets over short-duration assets that may boost near-term financial performance.
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.
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.
(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 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. We have a strong base of institutional knowledge of important therapeutic areas and key industry trends.
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.
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. Biopharmaceutical Industry and the Role of Royalties Our business is supported by significant growth and unprecedented innovation within the biopharmaceutical industry.
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 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.
Our principal executive offices are located at 110 East 59 th Street, New York, NY 10022, and our telephone number is (212) 883-0200. Our internet site is www.royaltypharma.com. Our website and the information contained therein or connected thereto is not incorporated into this Annual Report on Form 10-K.
We are a holding company and our principal asset is a controlling equity interest in Royalty Pharma Holdings Ltd (“RP Holdings”). Our principal executive offices are located at 110 East 59 th Street, New York, NY 10022, and our telephone number is (212) 883-0200. Our internet site is www.royaltypharma.com.
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.
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. Since 2020, there have been 16 large royalty transactions each with an aggregate value of $500 million or more.
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%.
We have executed 11 of these 16 large transactions, for a total transaction value of approximately $10.5 billion of cash and an estimated market share of 75% based on the transaction value.
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.
We have executed transactions with an aggregate announced value of $15.5 billion from 2020 through 2024, which represents an estimated market share of approximately 51% of all royalty transactions during this period. In comparison, we believe our nearest competitor has executed $3.9 billion of transactions, representing an estimated market share of 13%.
We expect to receive royalties on Skytrofa beginning in 2025. • In August 2023, we acquired a royalty interest in Adstiladrin for an upfront payment of $300 million and a $200 million additional milestone payment contingent on certain manufacturing goals.
Yorvipath is approved for the treatment of hypoparathyroidism in adults. We expect to receive royalties on Yorvipath beginning in 2025. • In May 2024, we announced a transaction to acquire a royalty interest in Voranigo from Agios Pharmaceuticals for an upfront payment of $905 million contingent on FDA approval.
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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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Capital Deployment represents the total outflows that will drive future Portfolio Receipts. 1 (1) Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to Royalty Pharma (“Royalty Receipts”).
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We have a strong base of institutional knowledge of important therapeutic areas and key industry trends. Our team of scientific experts actively monitors the evolving treatment landscape across many therapeutic areas and treatment modalities in order to identify new opportunities.
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Given our leadership position within the biopharmaceutical royalty market, we are able to capitalize on the growing volumes of royalties created as new therapies are developed to address unmet medical needs. We estimate the market for biopharmaceutical royalties reached $6.2 billion in transaction value in 2024.
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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.
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(1) Represents end market sales for 2024 as reported by respective product marketers or, where marketers have not reported end market sales by February 10, 2025 based on Visible Alpha projections as of February 10, 2025.
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(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.
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We believe that deuterated ivacaftor (deutivacaftor) is the same as ivacaftor and is therefore royalty-bearing, which would result in a blended royalty of approximately8% for Alyftrek. Vertex has made public statements that it believes deuterated ivacaftor (deutivacaftor) is not royalty-bearing, which would result in a blended royalty of approximately 4% for Alyftrek.
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(5) Milestones and other contractual receipts include receipts related to Bosulif (a product co-developed by our joint venture investee, Avillion), which are presented as Distributions from equity method investees on the Statements of Cash Flows. Amount also includes a $475.0 million milestone payment that we received following the U.S.
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Other Recent Royalty Acquisitions and Key Developments on Recently Approved Products • In December 2024, Vertex announced the FDA approval of the new triple-combination modulator Alyftrek (vanzacaftor triple) for treatment of cystic fibrosis in people ages 6 and older with at least one responsive mutation. 8 • In November 2024, we acquired a synthetic royalty on Rytelo from Geron Corporation for an upfront payment of $125 million.
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See “Risk Factors” in Item 1A, Risk Factors for further information. 8 Other Recent Royalty Acquisition Activities • In October 2023, we acquired additional royalties on Roche’s Evrysdi for an upfront payment of $1 billion. Evrysdi is approved for the treatment of spinal muscular atrophy.
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Rytelo is approved for the treatment of certain adult patients low- to intermediate-1 risk myelodysplastic syndromes with transfusion-dependent anemia. Following the acquisition, we are entitled to receive royalties on the U.S. net sales on Rytelo. • In November 2024, we acquired a synthetic royalty on Niktimvo from Syndax Pharmaceuticals, Inc. for an upfront payment of $350 million.
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Adstiladrin is approved for the treatment of adult patients with high-risk Bacillus Calmette-Guérin unresponsive non-muscle invasive bladder cancer with carcinoma in situ with or without papillary tumors. We began receiving royalties in the fourth quarter of 2023.
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Niktimvo is approved for the treatment of chronic graft-versus-host disease and will be co-commercialized by Incyte.
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PDUFA: Prescription Drug User Fee Act. (1) Based on information disclosed by marketer of the underlying product and information available on clinicaltrials.gov as of January 31, 2024. (2) We acquired an interest in ecopipam in January 2024. (3) In December 2023, Bristol Myers Squibb announced it has agreed to acquire Karuna.
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We expect to receive royalties on the U.S. net sales of Niktimvo beginning in 2025. • In September 2024, Bristol Myers Squibb announced the FDA approval of Cobenfy (formerly KarXT), a first-in-class muscarinic agonist for the treatment of schizophrenia in adults. • In September 2024, we acquired a synthetic royalty on Yorvipath from Ascendis Pharma A/S for an upfront payment of $150 million.
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(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.
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(1) Based on information disclosed by marketer of the underlying product and information available on clinicaltrials.gov as of February 10, 2025. 10 Other Significant Funding Arrangements The table below provides a summary of our significant contractual funding arrangements and related funding status as of December 31, 2024 (in thousands, unless otherwise stated): Funded Required Future Draw Potential Future Draw Total Total Repayments Based on Amounts Funded Payments Received to Date Cytokinetics Commercial Launch Funding (1) $100,000 $50,000 (2) $250,000 (2) $400,000 $190,000 $11,520 Cytokinetics Development Funding (3) 100,000 — — 100,000 Refer to footnote (3) Refer to footnote (3) MorphoSys Development Funding Bonds 300,000 — — 300,000 Refer to footnote (4) Refer to footnote (4) Teva Development Co-Funding Arrangement (5) 100,000 — — 100,000 $100 million or $125 million — (1) Comprised of seven tranches of which tranches one and six, each of $50 million, were funded.
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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.
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Quarterly payments on tranche one began in the fourth quarter of 2023 and continue through the first quarter of 2032. Quarterly payments on tranche six will begin in the first quarter of 2026 and continue through the second quarter of 2034.
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Teva Development Co-Funding Arrangement Neuroscience • Provide up to $100.0 million over the course of the trial with the mutual option to increase to $125.0 million to co-fund the development of TEV-‘749. • Payments to us equal to the total funded amount over 20 consecutive quarters commencing upon FDA approval in addition to tiered royalty payments based on worldwide sales. • Payment to us of 1.25 times the funded amount if Teva chooses not to file a New Drug Application with the FDA following positive Phase 3 study results of TEV-‘749.
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(2) Potential future draw of $250 million assumes that no more than $25 million will be drawn under tranche 4. Up to $75 million is available to be drawn under tranche 4 until April 2025 and up to $100 million is available to be drawn under tranche 5 until December 2025.
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(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.
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A minimum of $50 million is required to be drawn under either tranche 4 or tranche 5. The condition for $175 million to become available to be drawn under tranche 7 has not yet been satisfied.
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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, investment funds and other entities. These other potential royalty buyers may be larger and better capitalized than us.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

114 edited+43 added−17 removed298 unchanged
Biggest changeThese 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.
Biggest changeThese 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 interests in 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; • disputes with our partners or payors of our royalties; • governmental regulation of the biopharmaceutical industry; 15 • interest rate risk, foreign exchange fluctuations and inflation; • the assumptions underlying our business model; • the competitive nature of the biopharmaceutical industry; Risks Relating to Our Organization and Structure • our organizational structure, including our status as a holding company; • our reliance on the Manager for all services we require, including our reliance on 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; Risks Relating to Our Internalization • the Internalization may not close due to a variety of factors, including the failure or significant delay in obtaining regulatory approvals, and, even if it does close, we may not realize the anticipated benefits; • the Share Consideration in connection with the Internalization, and future sales of our Class A ordinary shares by the Sellers may adversely affect the market price of our Class A ordinary shares; • certain of our officers and directors have interests in the Internalization that are different from, and may potentially conflict with, the interests of us and our shareholders; • the exposure to risks to which we have not historically been exposed, including liabilities with respect to the assets acquired from the Manager; 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; General Risk Factors • cyber-attacks or other failures in telecommunications or information technology systems; and • the outbreak of any infectious or contagious diseases.
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.
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 capital deployment, which could prevent us from executing our growth strategy and negatively impact our business.
Changes in the royalty market, including its structure, participants and growth rate, changes in preferred methods of financing and capital raising in the biopharmaceutical industry, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire royalties, fewer royalties (or fewer royalties of significant scale) being available, or increased competition for royalties.
Changes in the royalty market, including its structure, participants, growth rate, changes in preferred methods of financing and capital raising in the biopharmaceutical industry, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire royalties, fewer royalties (or fewer royalties of significant scale) being available, or increased competition for royalties.
Information about the biopharmaceutical products underlying the royalties we buy available to us may be limited and therefore our ability to analyze each product and its potential future cash flow may be similarly limited. We may have limited information concerning the products generating the royalties we are evaluating for acquisition.
Information available to us about the biopharmaceutical products underlying the royalties we buy may be limited and therefore our ability to analyze each product and its potential future cash flow may be similarly limited. We may have limited information concerning the products generating the royalties we are evaluating for acquisition.
Generally, the holders of royalties on products have granted exclusive regulatory approval, commercialization, manufacturing and marketing rights to the marketers of such products. The marketers have full control over those efforts and sole discretion to determine the extent and priority of the resources they will commit to their program for a product.
Generally, the holders of royalties on products have granted exclusive regulatory approval, commercialization, manufacturing and marketing rights to the marketers of such products. The marketers generally have full control over those efforts and sole discretion to determine the extent and priority of the resources they will commit to their program for a product.
Although we believe that we will not bear responsibility in the event of a product liability claim against the developer, manufacturer, marketer or other seller of the product that generates our royalty. Any such product liability claims against us could adversely affect our business, financial condition or results of operations.
Although we believe that we will not bear responsibility in the event of a product liability claim against the developer, manufacturer, marketer or other seller of a product that generates our royalty, any such product liability claims against us could adversely affect our business, financial condition or results of operations.
City Code on Takeovers and Mergers (the “Takeover Code”) applies, among other things, to an offer for a public company whose registered office is in the United Kingdom (or the Channel Islands or the Isle of Man) and whose securities are not admitted to trading on a regulated market in the United Kingdom (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (the “Takeover Panel”) to have its place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man).
City Code on Takeovers and Mergers (the “Takeover Code”) applies, among other things, to an offer for a public company whose registered office is in the United Kingdom (and the Channel Islands and the Isle of Man) and whose securities are not admitted to trading on a regulated market in the United Kingdom (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (the “Takeover Panel”) to have its place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man).
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.
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 healthcare programs or insurance plans, loss of patent protection, government regulations or other factors, and development-stage product candidates may fail to reach the market.
While we would pursue alternative arrangements to preserve our listing and maintain trading, any such disruption could adversely affect the market price of our Class A ordinary shares and our access to the capital markets. The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
While we would pursue alternative arrangements to preserve our listing and maintain trading, any such disruption could adversely affect the market price of our Class A ordinary shares and our access to the capital markets. 38 The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
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.
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. 33 The EU directive on alternative investment fund managers (the “AIFM Directive”) may significantly increase our compliance costs.
If these information technology systems suffer severe damage or disruption and the issues are not resolved in a timely manner, our business, financial condition or operations could be adversely affected. In addition, the use of artificial intelligence-based software (including machine learning) is increasingly being used in our industry.
If these information technology systems suffer severe damage or disruption and the issues are not resolved in a timely manner, our business, financial condition or operations could be adversely affected. 43 In addition, the use of artificial intelligence-based software (including machine learning) is increasingly being used in our industry.
Moreover, we may need to raise additional funds through public or private debt or equity financing to acquire any businesses or products, which may result in dilution for shareholders or the incurrence of indebtedness. As a result, our acquisition of biopharmaceutical companies could adversely affect our business, financial condition or results of operations.
Moreover, we may need to raise additional funds through public or private debt or equity financing to acquire any businesses or products, which may result in dilution for shareholders or the incurrence of indebtedness. As a result, our acquisition of operating biopharmaceutical companies could adversely affect our business, financial condition or results of operations.
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.
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.
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.
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. 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.
We will likely not control the companies in which we acquire securities, and as a result, we may have limited ability to determine management, operational decisions or policies. Further, such transactions may face risks and liabilities that due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess.
We will not control the companies in which we acquire securities, and as a result, we will have limited ability to determine management, operational decisions or policies. Further, such transactions may face risks and liabilities that due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess.
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.
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. 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.
COVID-19 or another pandemic could adversely affect us due to, among other factors: • a general decline in business activity; • the destabilization of the markets could negatively impact our partners in the biopharmaceutical industry and the sales of products generating our royalties; • difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; • the potential negative impact on the health of our Manager’s highly qualified personnel, especially if a significant number of them are impacted; • a deterioration in our ability to ensure business continuity during a disruption; • interruptions, shortages, delivery delays and potential discontinuation of supply to our partners, which could (i) delay the clinical trials of the development-stage product candidates underlying our assets and result in a loss of our market share for products generating our royalties or development-stage product candidates underlying our assets, if approved, and (ii) hinder our partners’ ability to timely distribute products generating our royalties and satisfy customer demand; • travel restrictions, shelter-in-place policies or restrictions and other disruptions, which could cause or continue to cause delays and other direct impacts at our partners’ manufacturing sites, which could impact the ability of our partners to manufacture development-stage product candidates underlying our biopharmaceutical assets and products generating our royalties; and • potential interruptions to our partners’ clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets, including: (i) the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns; (ii) changes in hospital or research institution policies or government regulations, which could delay or adversely impact our partners’ ability to conduct their clinical trials; and (iii) pauses to or delays of trial procedures (particularly any procedures that may be deemed non-essential), patient dosing, shipment of our partners’ development-stage product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis due to reasons related to the pandemic, each of which could cause or continue to cause a disruption or delay to the development or the approval of development-stage product candidates underlying our biopharmaceutical assets.
A health outbreak or another pandemic could adversely affect us due to, among other factors: • a general decline in business activity; • the destabilization of the markets could negatively impact our partners in the biopharmaceutical industry and the sales of products generating our royalties; • difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; • the potential negative impact on the health of our Manager’s highly qualified personnel, especially if a significant number of them are impacted; • a deterioration in our ability to ensure business continuity during a disruption; • interruptions, shortages, delivery delays and potential discontinuation of supply to our partners, which could (i) delay the clinical trials of the development-stage product candidates underlying our assets and result in a loss of our market share for products generating our royalties or development-stage product candidates underlying our assets, if approved, and (ii) hinder our partners’ ability to timely distribute products generating our royalties and satisfy customer demand; 44 • travel restrictions, shelter-in-place policies or restrictions and other disruptions, which could cause or continue to cause delays and other direct impacts at our partners’ manufacturing sites, which could impact the ability of our partners to manufacture development-stage product candidates underlying our biopharmaceutical assets and products generating our royalties; and • potential interruptions to our partners’ clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets, including: (i) the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns; (ii) changes in hospital or research institution policies or government regulations, which could delay or adversely impact our partners’ ability to conduct their clinical trials; and (iii) pauses to or delays of trial procedures (particularly any procedures that may be deemed non-essential), patient dosing, shipment of our partners’ development-stage product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis due to reasons related to the pandemic, each of which could cause or continue to cause a disruption or delay to the development or the approval of development-stage product candidates underlying our biopharmaceutical assets.
Outside the United States, numerous major markets, including the EU, Japan and China, have pervasive government regulation of healthcare and government involvement in funding healthcare, and, in that regard, fix the pricing and reimbursement of pharmaceutical products. Consequently, in those markets, the products generating our royalties are subject to government decision-making and budgetary actions.
Outside the United States, numerous major markets, including the EU, UK, Japan and China, have pervasive government regulation of healthcare and government involvement in funding healthcare, and, in that regard, fix the pricing and reimbursement of pharmaceutical products. Consequently, in those markets, the products generating our royalties are subject to government decision-making and budgetary actions.
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.
Investment Company Act and the rules and regulations promulgated thereunder. 30 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.
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.
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 use leverage in connection with our capital deployment, which magnifies the potential for loss if the royalties acquired do not generate sufficient income to us. We use borrowed funds to finance a significant portion of our deployed capital.
We use leverage in connection with our capital deployment, which magnifies the potential for loss if the royalties acquired do not generate sufficient income to us. We use borrowed funds to finance a significant portion of our capital deployment.
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.
In addition, leverage may inhibit our operating flexibility and reduce cash flow available for dividends or to make share repurchases. The level of our indebtedness could limit our ability to respond to changing business conditions.
License agreements relating to products may, in some instances, be unilaterally terminated or disputes may arise which may affect our royalties. License agreements relating to the products generating our royalties may be terminated, which may adversely affect sales of such products and therefore the payments we receive.
License agreements relating to products may, in some instances, be unilaterally terminated or disputes may arise which may affect our royalties. 24 License agreements relating to the products generating our royalties may be terminated, which may adversely affect sales of such products and therefore the payments we receive.
To the extent that interest rates generally increase, our borrowing costs may increase and our leverage strategy will become more costly, leading to diminished net profits. 18 Certain products pay royalties in currencies other than U.S. dollars, which creates foreign currency risk primarily with respect to the Euro, Canadian dollar, British pound, Swiss franc and Japanese yen, as our functional and reporting currency is the U.S. dollar.
To the extent that interest rates generally increase, our borrowing costs may increase and our leverage strategy will become more costly, leading to diminished net profits. 20 Certain products pay royalties in currencies other than U.S. dollars, which creates foreign currency risk primarily with respect to the Euro, Canadian dollar, British pound, Swiss franc and Japanese yen, as our functional and reporting currency is the U.S. dollar.
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.
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; • the process surrounding, and the impact of, the potential internalization of 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; • 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 pandemics, inflation and interest volatility and global conflicts; and • adverse publicity about us or the industries in which we participate or individual scandals.
The manufacture and distribution of a biopharmaceutical product may be interrupted by regulatory agencies or supplier deficiencies. The manufacture of products generating our royalties is typically complex and is highly regulated.
The manufacture and distribution of a biopharmaceutical product may be interrupted by regulatory agencies or supplier deficiencies. 26 The manufacture of products generating our royalties is typically complex and is highly regulated.
Additional 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 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 Portfolio Cash Flow and 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 18 • 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 expect to continue to monitor these and other developments in international tax law. We could be liable for significant taxes due to changes in our eligibility for certain income tax treaty benefits or challenges to our tax positions with respect to the application of income tax treaties. Our subsidiaries expect to receive revenue from both U.S. and non-U.S. sources.
We expect to continue to monitor these and other developments in international tax law. We could be liable for significant taxes due to changes in our eligibility for certain income tax treaty benefits or challenges to our tax positions with respect to the application of income tax treaties. Our subsidiaries expect to receive revenues from both U.S. and non-U.S. sources.
Furthermore, our board of directors’ decisions with respect to dividends or repurchases of ordinary shares may adversely affect the market price of our Class A ordinary shares.
Our board of directors’ decisions with respect to dividends or repurchases of ordinary shares may adversely affect the market price of our Class A ordinary shares.
Over the course of 10 quarters, we recognized non-cash provision expenses as a result of these changes in forecasts, including a non-cash expense of $743.2 million in 2016, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017 related to this financial royalty asset.
Over the course of the next 10 quarters, we recognized non-cash provision expense as a result of these changes in forecasts, including a non-cash expense of $743.2 million in 2016, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017 related to this financial royalty asset.
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.
Insurers and other third-party payors may also encourage the use of generic or alternate 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. Marketers of products that generate our royalties are outside of our control.
In addition, it is doubtful whether English courts would enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon these civil liability provisions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in the United Kingdom.
In addition, it is doubtful whether English courts would enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon the civil liability provisions of the U.S. securities laws or otherwise. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in the United Kingdom.
In addition, we can offer no assurance that these relationships, even if maintained, will generate royalty acquisition opportunities for us in the future. 17 There can be no assurance that the policies and procedures we have established to mitigate conflicts of interest will be effective in doing so.
In addition, we can offer no assurance that these relationships, even if maintained, will generate royalty acquisition opportunities for us in the future. 19 There can be no assurance that the policies and procedures we have established to mitigate conflicts of interest will be effective in doing so.
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.
For example, new U.S. and international laws and regulations relating to corporate responsibility matters, including human rights and human capital management, diversity, sustainability and climate change, 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.
Each of these individuals is an employee of the Manager and is not subject to an employment contract with us, which means we do not direct the composition of the Manger’s advisory team as well as the compensation or professional development of these individuals.
Each of these individuals is an employee of the Manager and is not subject to an employment contract with us, which means we do not direct the composition of the Manager’s advisory team as well as the compensation or professional development of these individuals.
The risks relating to these assumptions may be exacerbated for development-stage product candidates due to the uncertainties around their development, labeling, regulatory approval, commercialization timing, manufacturing and supply, competing products or related factors.
The risks relating to these assumptions may be exacerbated for development-stage product candidates due to the uncertainties around their development, labeling, regulatory approval, commercialization timing, anticipated pricing, manufacturing and supply, competing products or related factors.
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”).
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 model rules for a global minimum tax rate of 15% (“Pillar Two”).
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.
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. Our interest expense has increased in recent years. The interest expense and other costs incurred in connection with such borrowings may not be covered by our cash flow.
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.
No such dividend may exceed the amount recommended by the board of directors. 29 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.
U.S. investors may have difficulty enforcing civil liabilities against our company, our directors or members of senior management and the experts named herein. We are a public limited company with our registered office in England and our subsidiaries are incorporated in various jurisdictions, including jurisdictions outside the United States.
U.S. investors may have difficulty enforcing civil liabilities against our company, our directors or members of senior management. We are a public limited company with our registered office in England and our subsidiaries are incorporated in various jurisdictions, including jurisdictions outside the United States.
There can be no assurance that the FDA, the Medicines and Healthcare products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”), Pharmaceuticals and Medical Devices Agency (“PMDA”) or other regulatory authorities will approve such products or that such products will be brought to market timely or at all, or that the market will be receptive to such products.
There can be no assurance that the FDA, the Medicines and Healthcare products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”), Pharmaceuticals and Medical Devices Agency (“PMDA”) or other regulatory authorities will approve such products or that such products will be brought to market on a timely basis or at all, or that the market will be receptive to such products.
Multiple unsuccessful attempts to acquire new royalties could hurt our reputation, result in significant costs and an inefficient use of the Manager’s time. The opportunity cost of diverting management and financial resources could negatively impact our ability to locate and acquire other assets.
Unsuccessful attempts to acquire new royalties could hurt our reputation, result in significant costs and an inefficient use of management’s time. The opportunity cost of diverting management and financial resources could negatively impact our ability to locate and acquire other assets.
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 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, a significant reduction in royalty receipts compared to expectations, or a permanent impairment.
The investigation of each specific target royalty and the negotiation, drafting and execution of relevant agreements requires substantial management time and attention and results in substantial costs for accountants, attorneys and others. If a decision is made not to complete a specific acquisition, the costs incurred for the proposed transaction would not be recoverable from a third party.
The investigation of each specific target royalty and the negotiation, drafting and execution of relevant agreements requires substantial management time and attention and results in substantial costs for accountants, attorneys, consultants and other advisors. If a decision is made not to complete a specific acquisition, the costs incurred for the proposed transaction would not be recoverable from a third party.
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 expenses to the income statement and build up a corresponding cumulative allowance which reduced the gross balance for this financial royalty asset.
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 and build up a corresponding cumulative allowance which reduced the gross balance for this financial royalty asset.
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.
While our current asset portfolio includes royalties relating to over 35 marketed products, the top five product franchises accounted for 64% of our Royalty Receipts in the year ended December 31, 2024. In addition, our asset portfolio may not be fully diversified by geographic region or other criteria.
If other product developers introduce and market products that are more effective, safer or less expensive than the products that generate our royalties, or if such developers introduce their products prior to the competing products underlying our royalties, the products in which we have invested may not achieve commercial success and thereby result in diminished returns or reduced royalties for us, adversely affecting our business, financial condition or results of operations. 15 Further, the developers of such products may not have sales, marketing or distribution capabilities.
If other product developers introduce and market products that are more effective, safer or less expensive than the products that generate our royalties, or if such developers introduce their products prior to the competing products underlying our royalties, the products in which we have invested may not achieve commercial success and thereby result in diminished returns or reduced royalties for us, adversely affecting our business, financial condition or results of operations.
If we cannot generate the required cash, we may not be able to make the required payments under our indebtedness. As of December 31, 2023, our total principal amount of senior unsecured notes outstanding was $6.3 billion. In addition, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility (as defined below).
If we cannot generate the required cash, we may not be able to make the required payments under our indebtedness. As of December 31, 2024, our total principal amount of senior unsecured notes outstanding was $7.8 billion. In addition, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility (as defined below).
We will pay Equity Performance Awards to an affiliate of the Manager based on our Net Economic Profit regardless of whether any dividends are paid to our shareholders or any ordinary shares are repurchased. Our board of directors’ decisions with respect to our cash may result in no dividends to our shareholders and no ordinary shares repurchased.
We will pay Equity Performance Awards to an affiliate of the Manager based on our Net Economic Profit regardless of whether any dividends are paid to our shareholders or any ordinary shares are repurchased. Our board of directors’ decisions with respect to our cash may result in our not paying dividends or not repurchasing our ordinary shares.
Despite our business, financial and legal due diligence efforts, we have limited experience in assessing acquisition opportunities, and we ultimately may be unsuccessful in ascertaining or evaluating all risks associated with such acquisitions.
Despite our business, financial and legal due diligence efforts, we have limited experience in assessing opportunities to acquire operating businesses, and we ultimately may be unsuccessful in ascertaining or evaluating all risks associated with such acquisitions.
Even if shareholders are successful in bringing an action of this kind, the laws of England may render shareholders unable to enforce a judgment against our assets or the assets of our directors and executive officers.
Even if shareholders are successful in bringing civil action against us, our directors or executive officers, the laws of England may render shareholders unable to enforce a judgment against our assets or the assets of our directors and executive officers.
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 addition, the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “ACA”) 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.
COVID-19 and other future health outbreaks and pandemics could lead to quarantines, mandating business and school closures and restricting travel, or trigger global economic slowdowns or global recessions.
Health outbreaks and pandemics could lead to quarantines, mandating business and school closures and restricting travel, or trigger global economic slowdowns or global recessions.
These companies and their products face uncertainty due to federal legislative and administrative efforts to repeal, substantially modify or invalidate some or all of the provisions of the IRA and the ACA. 23 Other U.S. federal or state legislative or regulatory action or policy efforts could adversely affect the healthcare industry, including, among others, additional transparency and limitations related to product pricing, review the relationship between pricing and manufacturer patient programs, general budget control actions, changes in patent laws, changing interpretations of competition law, exercise by the government of march-in rights in respect of government funded innovations, the importation of prescription drugs from outside the United States at prices that are regulated by governments of various foreign countries, revisions to reimbursement of biopharmaceutical products under government programs, restrictions on U.S. direct-to-consumer advertising or limitations on interactions with healthcare professionals.
Other U.S. federal or state legislative or regulatory action or policy efforts could adversely affect the healthcare industry, including, among others, additional transparency and limitations related to product pricing, review the relationship between pricing and manufacturer patient programs, general budget control actions, changes in patent laws, changing interpretations of competition law, exercise by the government of march-in rights in respect of government funded innovations, the importation of prescription drugs from outside the United States at prices that are regulated by governments of various foreign countries, revisions to reimbursement of biopharmaceutical products under government programs, restrictions on U.S. direct-to-consumer advertising or limitations on interactions with healthcare professionals.
Even if the marketer was able to obtain a license, it could be non-exclusive, thereby giving its competitors and other third parties access to the same technologies.
Even if the marketer was able to obtain a license to the intellectual property rights and proprietary technologies of others, it could be non-exclusive, thereby giving its competitors and other third parties access to the same technologies.
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.
If a product’s market acceptance is diminished or it is withdrawn from the market, continuing payments with respect to biopharmaceutical products will decrease or potentially cease, 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.
There can be no assurance that our assumptions around the likelihood of a development-stage product candidate’s approval or achieving significant sales will prove correct, that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market timely or at all, or that such products will achieve commercial success or result in royalties consistent with our estimates.
There can be no assurance that our assumptions around the likelihood of a development-stage product candidate’s approval or achieving significant sales will prove correct, that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market on a timely basis or at all, or that such products will achieve commercial success or result in royalties consistent with our estimates. 17 We may undertake strategic acquisitions of operating biopharmaceutical companies or acquire securities of biopharmaceutical companies.
In making assumptions around the royalty duration for terms that are not contractually fixed, we consider the strength of existing patent protection, expected entry of generics, geographical exclusivity periods and potential patent term extensions tied to the underlying product.
The royalty duration is important for purposes of accurately measuring interest income over the life of a royalty. In making assumptions around the royalty duration for terms that are not contractually fixed, we consider the strength of existing patent protection, expected entry of generics, geographical exclusivity periods and potential patent term extensions tied to the underlying product.
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.
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.
As a result, it may be difficult for investors to effect service of process on this director in the United States or to enforce judgments obtained in U.S. courts against us or this director based on the civil liability provisions of the U.S. securities laws or otherwise.
As a result, it may be difficult for investors to enforce judgements obtained in U.S. courts against us based on the civil liability provisions of the U.S. securities laws or otherwise.
It is possible that future accounting standards we are required to adopt may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems.
It is possible that future accounting standards we are required to adopt may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Such changes could adversely affect our financial condition or results of operations.
We are also subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to geopolitical events, including the Russia-Ukraine conflict, conflicts in the Middle East, rising inflation and interest rates, monetary policy changes, financial services sector instability, recessions, global pandemics and foreign currency fluctuations.
We are also subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to geopolitical events, including the Russia-Ukraine conflict, conflicts in the Middle East, tensions between China and Taiwan, trade and other international disputes, including new or increased tariffs and other barriers to trade, rising inflation and interest rates, monetary policy changes, financial services sector instability, recessions, global pandemics, significant natural disasters and foreign currency fluctuations.
Under current U.K. tax law, a company that is incorporated in the U.K. is regarded as resident for tax purposes in the U.K. unless (i) it is concurrently treated as resident for tax purposes in another jurisdiction (applying the rules of that other jurisdiction for determining tax residency) that has a double tax treaty with the U.K. and (ii) there is a residency tie-breaker provision in that tax treaty which allocates tax residence to that other jurisdiction. 37 Based upon our anticipated management and organizational structure, we believe that we and RP Holdings should be regarded as tax resident solely in the U.K.
Under current U.K. tax law, a company that is incorporated in the U.K. is regarded as resident for tax purposes in the U.K. unless (i) it is concurrently treated as resident for tax purposes in another jurisdiction (applying the rules of that other jurisdiction for determining tax residency) that has a double tax treaty with the U.K. and (ii) there is a residency tie-breaker provision in that tax treaty which allocates tax residence to that other jurisdiction.
However, if at the time of a takeover offer, the Takeover Panel determines that we have our place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man), we would be subject to a number of rules and restrictions, including but not limited to the following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide competing bidders.
However, if at the time of a takeover offer, the Takeover Panel determines that we have our place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man), we would be subject to a number of rules and restrictions, including but not limited to the following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide competing bidders. 37 As a result of recent updates to the Takeover Code, any change in our place of central management and control will cease to be relevant after February 2, 2027, and therefore, on the assumption that our securities remain admitted to trading on the NASDAQ (or another regulated market outside the United Kingdom, the Channel Islands or the Isle of Man), the Takeover Code will not be applicable to us.
We may undertake strategic acquisitions of biopharmaceutical companies or acquire securities of biopharmaceutical companies. Our failure to realize expected benefits of such acquisitions could adversely affect our business, financial condition or results of operations. We may acquire companies with significant royalty assets or where we believe we could create significant synthetic royalties.
Our failure to realize expected benefits of such acquisitions could adversely affect our business, financial condition or results of operations. We may acquire companies with significant royalty assets or where we believe we could create significant synthetic royalties. These acquired or created royalty assets may not perform as we project.
In cases where our contractual arrangements with our partner permit us to do so, we could participate in patent suits brought by third parties but this could result in substantial litigation costs, divert management’s attention from our core business and there can be no assurance that such suits would be successful. 25 The existence of third-party patents in relation to products may result in additional costs for the marketer and reduce the amount of royalties paid to us.
In cases where our contractual arrangements with our partner permit us to do so, we could participate in patent suits brought by third parties but this could result in substantial litigation costs, divert management’s attention from our core business and there can be no assurance that such suits would be successful.
Our board of directors may make decisions with respect to the cash generated from our operations that may result in no dividends paid to our shareholders or no repurchases made of our ordinary shares.
Our board of directors may make decisions with respect to the cash generated from our operations that may result in our not paying dividends or not repurchasing our ordinary shares.
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. For example, in late 2014 we acquired the cystic fibrosis franchise, which is classified as a financial royalty asset.
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.
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.
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. 23 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.
The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount, net of any purchased receivables.
The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount, net of any purchased receivables. A critical component of such forecast is our assumptions regarding duration of the royalty.
Therefore, if our subsidiaries failed to qualify for an exemption from U.S. withholding tax under the Treaty (by satisfying either the 50% U.S. ownership requirement or an alternative Treaty exemption) and such types of income were subject to a 30% U.S. withholding tax, our financial position, profitability and cash flows could be adversely affected.
Therefore, if our subsidiaries failed to qualify for an exemption from U.S. withholding tax under the Treaty (by satisfying either the 50% U.S. ownership requirement or an alternative Treaty exemption) and such types of income were subject to a 30% U.S. withholding tax, our financial position, profitability and cash flows could be adversely affected. 40 On August 25, 2016, the Irish Department of Finance announced that, in the context of the publication by the United States Treasury Department of a revised U.S.
In both U.S. and non-U.S. markets, sales of biopharmaceutical products, and the success of such products, depends in part on governmental regulation and the availability and extent of coverage and reimbursement from third-party payors, including government healthcare programs in addition to private insurance plans.
In both U.S. and non-U.S. markets, sales of biopharmaceutical products, and the success of such products, depends in part on governmental regulation and the availability and extent of coverage and reimbursement from third-party payors, including government healthcare programs in addition to private insurance plans. 25 In the United States, pharmaceutical product pricing is subject to enhanced government regulation, public scrutiny and calls for reforms.
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.
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, to the fullest extent permitted by law, we have agreed to indemnify the Indemnitees from and against any and all claims, liabilities, damages, losses, penalties, actions, judgments, costs and expenses (including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or defending against any claim or alleged claim) of any nature whatsoever, known or unknown, liquidated or unliquidated that are incurred by any Indemnitee or to which such Indemnitee may be subject by reason of its activities on behalf of us or any of our subsidiaries to the extent that such Indemnitee’s conduct did not constitute fraud, bad faith, willful misconduct, gross negligence (as interpreted under New York law), material breach of the Management Agreement that is not cured or a violation of applicable securities laws.
The Manager and its affiliates (including RPI EPA Holdings, LP) and their respective officers, directors, equity holders, members, employees, agents and partners, and any other person who is entitled to indemnification (each, an “Indemnitee”) is not liable to us, any subsidiary of ours, our directors, our shareholders or any subsidiary’s shareholders or partners for acts or omissions performed in accordance with to the Management Agreement, except those resulting from acts constituting fraud, bad faith, willful misconduct, gross negligence (as interpreted under New York law) and a material breach of the Management Agreement that is not cured or a violation of applicable securities laws. 31 In addition, to the fullest extent permitted by law, we have agreed to indemnify the Indemnitees from and against any and all claims, liabilities, damages, losses, penalties, actions, judgments, costs and expenses (including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or defending against any claim or alleged claim) of any nature whatsoever, known or unknown, liquidated or unliquidated that are incurred by any Indemnitee or to which such Indemnitee may be subject by reason of its activities on behalf of us or any of our subsidiaries to the extent that such Indemnitee’s conduct did not constitute fraud, bad faith, willful misconduct, gross negligence (as interpreted under New York law), material breach of the Management Agreement that is not cured or a violation of applicable securities laws.
Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. Our tax treatment, including Irish, U.K. and U.S. federal income tax treatment, depends in some instances on determinations of fact and interpretations of complex provisions of applicable tax law for which no clear precedent or authority may be available.
Our tax treatment, including Irish, U.K. and U.S. federal income tax treatment, depends in some instances on determinations of fact and interpretations of complex provisions of applicable tax law for which no clear precedent or authority may be available.
We intend to continue to provide capital to innovators to co-fund clinical development of a product candidate in exchange for a share of the future revenues of that asset and when we do so, we do not control its clinical development.
Losses from such assets could adversely affect our business, financial condition or results of operations. We intend to continue to provide capital to innovators to co-fund clinical development of a product candidate in exchange for a share of the future revenues of that asset and when we do so, we do not control its clinical development.
Our Articles of Association provide that the courts of England and Wales will be the exclusive forum for the resolution of all shareholder complaints other than complaints asserting a cause of action arising under the Securities Act and the Exchange Act, and that the U.S. federal district courts will be the exclusive forum for the resolution of any shareholder complaint asserting a cause of action arising under the Securities Act and the Exchange Act.
This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 36 Our Articles of Association provide that the courts of England and Wales will be the exclusive forum for the resolution of all shareholder complaints other than complaints asserting a cause of action arising under the Securities Act and the Exchange Act, and that the U.S. federal district courts will be the exclusive forum for the resolution of any shareholder complaint asserting a cause of action arising under the Securities Act and the Exchange Act.
If no sales, marketing or distribution arrangements can be made on acceptable terms or at all, the affected product may not be able to be successfully commercialized, which will result in a loss for us. Losses from such assets could adversely affect our business, financial condition or results of operations.
Further, the developers of such products may not have sales, marketing or distribution capabilities. If no sales, marketing or distribution arrangements can be made on acceptable terms or at all, the affected product may not be able to be successfully commercialized, which will result in a loss for us.
In addition, sustaining our growth may require us or the Manager to commit additional management, operational and financial resources to identify new professionals to join the team and to maintain appropriate operational and financial systems to adequately support expansion. Since the market for hiring talented professionals is competitive, we may not be able to grow at the pace we desire.
In addition, sustaining our growth may require us or the Manager to commit additional management, operational and financial resources to identify new professionals to join the team and to maintain appropriate operational and financial systems to adequately support expansion.
If a taxing authority were to challenge our position regarding the application of an applicable income tax treaty, we could become subject to increased withholding taxes, and such taxes could be significant. 36 Specifically, with respect to certain U.S.-source income, we expect that our subsidiaries will be eligible for benefits under the U.S.-Ireland income tax treaty (the “Treaty”), and, under that Treaty, will not be subject to any U.S. withholding taxes on such U.S.-source payments.
Specifically, with respect to certain U.S.-source income, we expect that our subsidiaries will be eligible for benefits under the U.S.-Ireland income tax treaty (the “Treaty”), and, under that Treaty, will not be subject to any U.S. withholding taxes on such U.S.-source payments.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity program is led by our Chief Technology Officer, who is a part of our senior leadership team and works closely with our team to develop and advance our cybersecurity strategy and regularly reports to our board of directors and the audit committee of our board of directors on cybersecurity matters.
Biggest changeOur cybersecurity program is led by our Chief Technology Officer, who is a part of our senior leadership team and works closely with our team to develop and advance our cybersecurity strategy and regularly reports to our board of directors and the audit committee of our board of directors on cybersecurity matters. 45 Cybersecurity threats are assessed as part of our enterprise risk management assessments.
For more information about these risks, please see “Risk Factors—Cybersecurity vulnerabilities or other failures in information systems could result in information theft, data corruption and significant disruption of our business operations.” 42 Governance The board of directors has adopted a Cyber Security and Personal Data Breach Policy in order to reflect the importance of appropriate security, processes and procedures to the protection of data and assets, and in an effort to establish a foundation for successful protection against cyber-crime and to minimize any potential negative impacts of a successful cyber-attack.
For more information about these risks, please see “Risk Factors—Cybersecurity vulnerabilities or other failures in information systems could result in information theft, data corruption and significant disruption of our business operations.” Governance The board of directors has adopted a Cyber Security and Personal Data Breach Policy in order to reflect the importance of appropriate security, processes and procedures to the protection of data and assets, and in an effort to establish a foundation for successful protection against cyber-crime and to minimize any potential negative impacts of a successful cyber-attack.
In 2023, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
In 2024 and 2023, we did not identify any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Cybersecurity threats are assessed as part of our enterprise risk management assessments. Our cybersecurity strategy includes procedures for identifying material cybersecurity risks, prioritizing risks and analyzing risk mitigation. Our cybersecurity strategy also includes developing and implementing policies and procedures, escalating any issues as necessary that present a material risk and ensuring that all employees have sufficient cybersecurity training.
Our cybersecurity strategy includes procedures for identifying material cybersecurity risks, prioritizing risks and analyzing risk mitigation. Our cybersecurity strategy also includes developing and implementing policies and procedures, escalating any issues as necessary that present a material risk and ensuring that all employees have sufficient cybersecurity training.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile we cannot feasibly predict the outcome of these matters with certainty, we believe, based on examination of these matters, experience to date and discussions with counsel, that the ultimate liability, individually or in the aggregate, will not adversely affect our business, financial condition or results of operations. Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II.
Biggest changeWhile we cannot feasibly predict the outcome of these matters with certainty, we believe, based on examination of these matters, experience to date and discussions with counsel, that the ultimate liability, individually or in the aggregate, will not adversely affect our business, financial condition or results of operations. 46 Item 4. MINE SAFETY DISCLOSURES Not applicable. PART II.

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. 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.
Biggest changeTo the extent approved and payable, we intend to pay dividends on or about March 10, June 10, September 10 and December 10 to holders of record on or about the twentieth day of each such prior month.
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.
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, 2024.
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]
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. 48 Item 6. [Reserved]
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.
As of February 7, 2025, 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.
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.
Use of Proceeds None. Dividends In 2024, we declared and paid four quarterly cash dividends of $0.21 per Class A ordinary share for an aggregate amount of $376.5 million to holders of our Class A ordinary shares. Future dividends are subject to declaration by the board of directors.
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.
Issuer Purchases of Equity Securities Share repurchase activities of our Class A ordinary shares during the fourth quarter of 2024 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, 2024 - October 31, 2024 1,662 $ 27.81 1,662 $ 469,356 November 1, 2024 - November 30, 2024 147 27.35 147 465,335 December 1, 2024 - December 31, 2024 — — — 465,335 Total 1,809 27.78 1,809 (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.
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.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A ordinary shares. 47 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.
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The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our Class A ordinary shares.
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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 7. Management's Discussion & Analysis

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

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Biggest changeThe comparison of our historical results of operations for 2023 and 2022 is as follows (in thousands): Years Ended December 31, Change 2023 2022 $ % Income and other revenues Income from financial royalty assets $ 2,197,754 $ 2,125,096 $ 72,658 3.4 % Revenue from intangible royalty assets 835 37,484 (36,649) (97.8) % Other royalty income 155,965 74,635 81,330 109.0 % Total income and other revenues 2,354,554 2,237,215 117,339 5.2 % Operating expenses Provision for changes in expected cash flows from financial royalty assets 560,656 904,244 (343,588) (38.0) % Research and development funding expense 52,000 177,106 (125,106) (70.6) % Amortization of intangible assets — 5,670 (5,670) (100.0) % General and administrative expenses 249,748 227,303 22,445 9.9 % Financial royalty asset impairment — 615,827 (615,827) (100.0) % Total operating expenses, net 862,404 1,930,150 (1,067,746) (55.3) % Operating income 1,492,150 307,065 1,185,085 385.9 % Other (income)/expense Equity in (earnings)/losses of equity method investees (28,882) 8,973 (37,855) * Interest expense 187,187 187,961 (774) (0.4) % Other income, net (366,243) (119,933) (246,310) 205.4 % Total other (income)/expense, net (207,938) 77,001 (284,939) * Consolidated net income 1,700,088 230,064 1,470,024 639.0 % Net income attributable to non-controlling interests 565,254 187,232 378,022 201.9 % Net income attributable to Royalty Pharma plc $ 1,134,834 $ 42,832 $ 1,092,002 * *Percentage change is not meaningful. 52 Total income and other revenues Income from financial royalty assets Income from financial royalty assets by top products for 2023 and 2022 is as follows, in order of contribution to income in 2023 (in thousands): Years Ended December 31, Change 2023 2022 $ % Cystic fibrosis franchise $ 852,312 $ 808,947 $ 43,365 5.4 % Imbruvica 173,162 310,929 (137,767) (44.3) % Tysabri 167,536 207,164 (39,628) (19.1) % Zavzpret 153,649 — 153,649 n/a Tremfya 149,716 109,796 39,920 36.4 % Trelegy 128,051 57,931 70,120 121.0 % Other products 573,328 630,329 (57,001) (9.0) % Total income from financial royalty assets $ 2,197,754 $ 2,125,096 $ 72,658 3.4 % Income from financial royalty assets increased by $72.7 million, or 3.4%, in 2023 compared to 2022, primarily driven by the FDA approval of Pfizer’s Zavzpret in March 2023.
Biggest changeThe comparison of our historical results of operations is as follows (in thousands): Years Ended December 31, Change 2024 2023 $ % Income and other revenues Income from financial royalty assets $ 2,149,422 $ 2,197,754 (48,332) (2.2) Other royalty income and revenues 114,154 156,800 (42,646) (27.2) Total income and other revenues 2,263,576 2,354,554 (90,978) (3.9) Operating expense Provision for changes in expected cash flows from financial royalty assets 732,461 560,656 171,805 30.6 Research and development funding expense 2,000 52,000 (50,000) (96.2) General and administrative expenses 236,671 249,748 (13,077) (5.2) Total operating expense, net 971,132 862,404 108,728 12.6 Operating income 1,292,444 1,492,150 (199,706) (13.4) Other (income)/expense Equity in earnings of equity method investees (29,611) (28,882) (729) 2.5 Interest expense 225,512 187,187 38,325 20.5 Other income, net (234,270) (366,243) 131,973 (36.0) Total other income, net (38,369) (207,938) 169,569 (81.5) Consolidated net income 1,330,813 1,700,088 (369,275) (21.7) Net income attributable to non-controlling interests 471,830 565,254 (93,424) (16.5) Net income attributable to Royalty Pharma plc $ 858,983 $ 1,134,834 (275,851) (24.3) Total income and other revenues Income from financial royalty assets Income from financial royalty assets by top products is as follows, in order of contribution to income in 2024 (in thousands): Years Ended December 31, Change 2024 2023 $ % Cystic fibrosis franchise $ 826,205 $ 852,312 (26,107) (3.1) Evrysdi 224,429 97,742 126,687 129.6 Tremfya 147,141 149,716 (2,575) (1.7) Trelegy 146,920 128,051 18,869 14.7 Imbruvica 131,090 173,162 (42,072) (24.3) Tysabri 124,815 167,536 (42,721) (25.5) Other products 548,822 629,235 (80,413) (12.8) Total income from financial royalty assets $ 2,149,422 $ 2,197,754 (48,332) (2.2) Income from financial royalty assets decreased by $48.3 million, or 2.2%, in 2024 as compared to 2023, primarily due to a significant milestone receipt in 2023 related to Pfizer’s Zavzpret.
Patents may expire earlier than expected at the time of the acquisition due to the loss of patent protection, loss of data exclusivity on intellectual property, contractual licensing terms limiting royalty payments based on time from product launch, due to recent legal developments or litigation.
Patents may expire earlier than expected at the time of the acquisition due to the loss of patent protection, loss of data exclusivity on intellectual property, contractual licensing terms limiting royalty payments based on time from product launch, recent legal developments or litigation.
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.
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.
Reconciling Adjustment Statements of Cash Flows Classification Interest paid, net Operating activities ( Interest paid less Interest received ) Distributions from equity method investees Investing activities Proceeds from available for sale debt securities Investing activities Distributions to legacy non-controlling interests - Portfolio Receipts Financing activities Uses of Capital Acquisitions of Royalties We acquire product royalties in ways that can be 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.
Reconciling Adjustment Statements of Cash Flows Classification Interest paid, net Operating activities ( Interest paid less Interest received ) Distributions from equity method investees Investing activities Proceeds from available for sale debt securities Investing activities Distributions to legacy non-controlling interests - Portfolio Receipts Financing activities 68 Uses of Capital Acquisitions of Royalties We acquire product royalties in ways that can be 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.
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.
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.
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.
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 timing for 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 royalties, which is referred to as royalty bearing sales.
However, an extended duration for a financial royalty asset could result in the reduction of any existing cumulative allowance for changes in expected future cash flows, which would be recognized in the current period as provision income and is reflected in the table below for these top three financial royalty assets.
However, an extended duration for a financial royalty asset could result in the reduction of any existing cumulative allowance for changes in expected cash flows, which would be recognized in the current period as provision income and is reflected in the table below for these top three financial royalty assets.
EPA Holdings may also receive a periodic cash advance in respect of the RP Holdings Class C Special Interest to the extent necessary for EPA Holdings or any of its beneficial owners to pay when due any income tax imposed on it or them as a result of holding such RP Holdings Class C Special Interest.
EPA Vehicle may also receive a periodic cash advance in respect of the RP Holdings Class C Special Interest to the extent necessary for EPA Vehicle or any of its beneficial owners to pay when due any income tax imposed on it or them as a result of holding such RP Holdings Class C Special Interest.
These estimates and judgments arise because of the inherent uncertainty in predicting future events. We evaluate financial royalty assets for impairment on an individual basis by comparing the effective interest rate at each reporting date to that of the prior period.
These estimates and judgments arise because of the inherent uncertainty in predicting future events. 71 We evaluate financial royalty assets for impairment on an individual basis by comparing the effective interest rate at each reporting date to that of the prior period.
Portfolio Receipts also enables management to better analyze our liquidity and long-term growth prospects by providing a more granular product-by-product presentation of the underlying cash generation of our royalty investments. Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts.
Portfolio Receipts also enables management to better analyze our liquidity and long-term growth prospects by providing a more granular product-by-product presentation of the underlying cash generation of our royalty investments. 57 Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts.
In January 2024, Gilead announced that the Phase 3 EVOKE-01 study evaluating Trodelvy compared to docetaxel did not meet its primary endpoint of overall survival in patients with previously treated metastatic non-small cell lung cancer. • Zavzpret.
In January 2024, Gilead announced that the Phase 3 EVOKE-01 study evaluating Trodelvy compared to docetaxel did not meet its primary endpoint of overall survival in patients with previously treated metastatic non-small cell lung cancer.
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.
Over the course of the next 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.
If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a non-cash credit to the provision.
If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a non-cash credit to the provision, or provision income.
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.
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. 73 Even though we believe interest income from financial royalty assets and the associated non-cash provision for changes in expected 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.
Capital Deployment represents the total outflows that will drive future Portfolio Receipts and reflects cash paid at the acquisition date and any subsequent associated milestone investments reflected in the period in which cash was paid. Capital Deployment in approved/marketed royalties versus development-stage royalties is based upon the approval status of the therapy at the time of our upfront investment.
Capital Deployment represents the total outflows that will drive future Portfolio Receipts and includes cash paid at the acquisition date and any subsequent associated milestone investments reflected in the period in which cash was paid. Capital Deployment in approved/marketed royalties versus development-stage royalties is based upon the approval status of the therapy at the time of our upfront investment.
Following our acquisition of the remaining non-controlling interest in RPCT held by RPSFT in December 2023 and as the Legacy Investors Partnerships no longer participate in investment opportunities, the related net income attributable to the legacy non-controlling interests is expected to decline over time as the assets held by Old RPI and RPI ICAV mature.
Following our acquisition of the remaining non-controlling interest in RPCT held by RPSFT in December 2023, and since the Legacy Investors Partnerships no longer participate in investment opportunities, the related net income attributable to the legacy non-controlling interests is expected to continue to decline over time as the assets held by Old RPI and RPI ICAV mature.
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.
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, increase the scale of our capital.
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.
For a discussion of cash flow activities for 2023 compared to 2022, 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, 2023.
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.
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 statements of operations.
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.
For a discussion of 2023 compared to 2022, 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, 2023.
We were in compliance with the financial covenants as of December 31, 2023. Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that are key components of certain material covenants contained within the Credit Agreement. Noncompliance with the financial covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed.
We were in compliance with the financial covenants as of December 31, 2024. 67 Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that are key components of certain material covenants contained within the Credit Agreement. Noncompliance with the financial covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed.
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.
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.
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 .
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 performanc e.
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.
Products may be covered by a number of patents and, where a 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.
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.
The net income attributable to the continuing non-controlling interests includes RP Holdings Class B Interests held by the Continuing Investors Partnerships for which the related future net income will decline over time if the investors who indirectly own RP Holdings Class B Interests conduct exchanges for our Class A ordinary shares.
Macroeconomic factors, such as changes in economies or the competitive landscape, including the unexpected loss of exclusivity to the products underlying our portfolio of royalties, changes in government legislation, product life cycles, industry consolidations and other changes beyond our control could result in a positive or negative impact on our forecast of expected future cash flows.
Macroeconomic factors, such as changes in economies or the competitive landscape, including the unexpected loss of exclusivity to the products underlying our portfolio of royalties, changes in government legislation, product life cycles, industry consolidations and other changes beyond our control could result in a positive or negative impact on our forecast of expected future cash flows and the related measurement of interest income.
As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the income statement through the line item Provision for changes in expected cash flows from financial royalty assets .
As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the consolidated statements of operations through the line item Provision for changes in expected cash flows from financial royalty assets .
General and administrative expenses General and administrative (“G&A”) expenses include primarily Operating and Personnel Payments (defined below), legal expenses, other expenses for professional services and share-based compensation. The expenses incurred in respect of Operating and Personnel Payments comprise the most significant component of G&A expenses on an ongoing basis.
General and administrative expenses General and administrative (“G&A”) expenses include primarily Operating and Personnel Payments (defined below), legal expenses, other expenses for professional services and share-based compensation. The expenses incurred in respect of Operating and Personnel Payments comprise the most significant component of G&A expenses.
Variables affecting the recognition of interest income from financial royalty assets under the prospective effective interest method include any one of the following: (1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (e.g., patent expiration date) and (5) changes in amounts and timing of projected royalty receipts and milestone payments.
Variables affecting the recognition of interest income from financial royalty assets under the prospective effective interest method include any one of the following: (1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (e.g., patent expiration date), (5) changes in amounts and timing of projected royalty receipts and milestone payments and (6) changes in the portion of sales that are subject to the royalty, which is referred to as royalty bearing sales.
The most significant assumptions used in forecasting the expected future cash flows for our royalties and requiring management’s judgement include (1) estimates of the duration of the royalty and (2) sales trends and product growth rates in outer years of the royalty term, which are primarily derived from statistical models.
Generally the most significant and judgmental assumptions used in forecasting the expected future cash flows for our royalties include (1) estimates of the duration of the royalty and (2) sales trends and product growth rates in outer years of the royalty term, which are primarily derived from statistical models.
As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the income statement as non-cash provision expense.
As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the consolidated statements of operations as non-cash provision expense.
As a result of the non-cash charges associated with applying the effective interest method accounting methodology to our financial royalty assets, our consolidated income statement activity can be volatile and unpredictable.
As a result of the non-cash charges associated with applying the effective interest method accounting methodology to our financial royalty assets, our consolidated statements of operations activity can be volatile and unpredictable.
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.
With the approval of Vertex’s 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.
Distributions to Shareholders We paid dividends to holders of our Class A ordinary shares of $358.3 million and $333.3 million in 2023 and 2022, respectively. We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.
Distributions to Shareholders We paid dividends to holders of our Class A ordinary shares of $376.5 million and $358.3 million in 2024 and 2023, respectively. We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.
Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that is attributed to us. 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 us.
Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to us (“Royalty Receipts”). Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that are attributed to us.
Class A Ordinary Share Repurchases In March 2023, 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. The authorization for the share repurchase program expires on June 23, 2027. Share repurchases may be made in the open market or in privately negotiated transactions.
Class A Ordinary Share Repurchases In March 2023, 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. The repurchases may be made in the open market or in privately negotiated transactions.
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.
As of December 31, 2024, the par value and carrying value of the total outstanding and guaranteed Notes was $7.8 billion and $7.6 billion, respectively. 70 The following financial information presents summarized combined balance sheet information as of December 31, 2024, and summarized combined statement of operations information for 2024 for Royalty Pharma plc and RP Holdings.
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.
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 was approximately $17.3 million as of December 31, 2024.
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.
We consider a variety of metrics in assessing the performance of our business. 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.
As of December 31, 2023, we have a borrowing capacity of $1.8 billion under the Revolving Credit Facility. 64 The Credit Agreement that governs the Revolving Credit Facility contains certain customary covenants, that among other things, require us to maintain (i) a consolidated leverage ratio at or below 4.00 to 1.00 (or at or below 4.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Adjusted EBITDA, each as defined and calculated with the ratio level calculated with further adjustments as set forth in the Credit Agreement, (ii) a consolidated coverage ratio at or above 2.50 to 1.00 of Adjusted EBITDA to consolidated interest expense, each as defined and calculated with further adjustments as set forth in the Credit Agreement and (iii) a consolidated Portfolio Cash Flow Ratio at or below 5.00 to 1.00 (or at or below 5.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Portfolio Cash Flow, each as defined and calculated with the ratio level calculated with further adjustments as set forth in the Credit Agreement.
The Credit Agreement that governs the Revolving Credit Facility contains certain customary covenants, that among other things, require us to maintain (i) a consolidated leverage ratio at or below 4.00 to 1.00 (or at or below 4.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Adjusted EBITDA, each as defined and calculated as set forth in the Credit Agreement, (ii) a consolidated coverage ratio at or above 2.50 to 1.00 of Adjusted EBITDA to consolidated interest expense, each as defined and calculated as set forth in the Credit Agreement and (iii) a consolidated Portfolio Cash Flow Ratio at or below 5.00 to 1.00 (or at or below 5.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Portfolio Cash Flow, each as defined and calculated as set forth in the Credit Agreement.
Additionally, RP Holdings began to retire RP Holdings Class A Interests held by us in connection with our repurchase of our Class A ordinary shares. As RP Holdings retires RP Holdings Class A Interests, our ownership in RP Holdings decreases and the value of this non-controlling interest increases.
As the Continuing Investors Partnerships conduct exchanges, the Continuing Investors Partnerships’ ownership in RP Holdings decreases and the value of this non-controlling interest decreases. Additionally, RP Holdings began to retire RP Holdings Class A Interests held by us in connection with our repurchase of our Class A ordinary shares.
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.
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.
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.
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.
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.
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, which directly impacts the measurement of interest income. 72 • Royalty duration.
Equity Performance Awards owed to EPA Holdings will be recognized as an equity transaction when the obligation becomes due and will impact the income allocated to non-controlling interest related to the RP Holdings Class C Special Interest.
EPA Vehicle is entitled to receive equity distributions through its RP Holdings Class C Special Interest (“Equity Performance Awards”). Equity Performance Awards owed to EPA Vehicle will be recognized as an equity transaction when the obligation becomes due and will impact the income allocated to non-controlling interest related to the RP Holdings Class C Special Interest.
Our operations have historically been financed primarily with cash flows generated by our royalties. Given the importance of cash flows and their predictability to management’s operation of the business, management uses Portfolio Receipts (as defined below) as a primary measure of our operating performance. See “ — Portfolio Overview” for additional discussion regarding Portfolio Receipts.
Given the importance of cash flows and their predictability to management’s operation of the business, management uses Portfolio Receipts (as defined below) as a primary measure of our operating performance. See “ — Portfolio Overview” for additional discussion regarding Portfolio Receipts.
For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and may be entitled to royalties on future combination products, which, once approved, create new cash flow streams which were not initially contemplated and for which sales were previously not reflected in expected future cash flows.
For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and on future combination products, which create new cash flow streams that were previously not reflected.
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 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. 52 As discussed above, income is accreted on our financial royalty assets using the effective interest method.
We recorded provision expense for changes in expected cash flows for Imbruvica, Tysabri and Tazverik primarily due to significant declines in sell-side equity research analysts’ consensus sales forecasts.
We recorded provision expense for changes in expected cash flows primarily related to Evrysdi due to declines in sell-side equity research analysts’ consensus sales forecasts.
Portfolio Receipts is calculated as the sum of the following line items from our GAAP consolidated statements of cash flows: Cash collections from financial royalty assets , Cash collections from intangible royalty assets , Other royalty cash collections , Proceeds from available for sale debt securities and Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts , which represent contractual distributions of royalty receipts, milestones and other contractual receipts to the Legacy Investors Partnerships and RPSFT. 55 Our portfolio consists of royalties on more than 35 marketed therapies and 14 development-stage product candidates.
Portfolio Receipts is calculated as the sum of the following line items from our GAAP statements of cash flows: Cash collections from financial royalty assets , Cash collections from intangible royalty assets , Other royalty cash collections , Proceeds from available for sale debt securities and Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts , which represent contractual distributions of Royalty Receipts, milestones and other contractual receipts to RPSFT and the Legacy Investors Partnerships.
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.
The impact of these sensitivity assumptions is summarized as follows (in thousands): Year Ended December 31, 2024 Year Ended December 31, 2024 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 2039-2041 (2) + 2 years $ (160,723) - 2 years $ 283,088 Trelegy 2029-2030 + 2 years (66,647) - 2 years 281,188 Tysabri (3) + 2 years (31,357) - 2 years 46,844 (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.
In each scenario where a financial royalty asset has been fully amortized, income from such royalty is recognized as Other royalty income . Other royalty income also includes income from royalties that are recorded at fair value on our consolidated balance sheets.
In each scenario where a financial royalty asset has been fully amortized, income from such royalty is recognized as Other royalty income and revenues . Other royalty income and revenues also includes revenues from intangible royalty assets and income from royalties that are recorded at fair value.
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.
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.
R&D funding expense R&D funding expense consists of payments that we have made to counterparties to acquire royalties or milestones on product candidates. It includes development-stage funding payments that are made upfront or upon pre-approval milestones, and development-stage funding payments that are made over time as the related product candidates undergo clinical trials with our counterparties.
It includes development-stage funding payments to counterparties that are made upfront or upon pre-approval milestones, and development-stage funding payments that are made to counterparties over time as the related product candidates undergo clinical trials with our counterparties.
We also have certain milestone payable to our counterparties that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones. These contingent milestone payments are not considered contractual obligations.
We also have certain milestones payable to our counterparties that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones. These contingent milestone payments are not considered contractual obligations. In 2024, we paid regulatory milestones of $50 million related to olpasiran and $25 million related to Cobenfy.
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.
We have historically funded our investments through operating cash flows, equity contributions and debt. 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.
The table below presents Adjusted EBITDA and Portfolio Cash Flow for 2023 and 2022, each as calculated according to their respective definition in our Credit Agreement (in thousands): Years Ended December 31, 2023 2022 Portfolio Receipts $ 3,048,713 $ 2,789,293 Payments for operating and professional costs (243,012) (222,969) Adjusted EBITDA (non-GAAP) $ 2,805,701 $ 2,566,324 Interest paid, net (97,564) (145,157) Portfolio Cash Flow (non-GAAP) $ 2,708,137 $ 2,421,167 Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP.
The table below presents Adjusted EBITDA and Portfolio Cash Flow, each as calculated according to its respective definition in our Credit Agreement (in thousands): Years Ended December 31, 2024 2023 Portfolio Receipts $ 2,801,446 $ 3,048,713 Payments for operating and professional costs (236,225) (243,012) Adjusted EBITDA (non-GAAP) $ 2,565,221 $ 2,805,701 Interest paid, net (113,088) (97,564) Portfolio Cash Flow (non-GAAP) $ 2,452,133 $ 2,708,137 Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP.
As changes in sell-side equity research analysts’ consensus sales estimates are updated on a quarterly basis, the effective rate of return changes. For example, if sell-side equity research analysts’ consensus sales forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods.
For example, if sell-side equity research analysts’ consensus sales forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods.
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.
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.
The gains on available for sale debt securities were primarily driven by the change in fair value of the funded amount of the Development Funding Bonds that were issued to us by MorphoSys.
The gains on available for sale debt securities were primarily driven by the changes in fair value of the MorphoSys Development Funding Bonds.
Our ability to satisfy our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control.
Our ability to satisfy our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control. 65 Cash Flows The following table and analysis of cash flow changes presents a summary of our cash flow activities for 2024 as compared to 2023 (in thousands).
Average 2023 2022 2021 2020 2019 Announced Transactions Upfront payments $ 2,011,200 $ 2,109,000 $ 1,963,000 $ 2,161,000 $ 2,069,000 $ 1,754,000 Potential payments/milestones 933,600 1,850,000 1,443,000 705,000 375,000 295,000 Total announced transaction value $ 2,944,800 $ 3,959,000 $ 3,406,000 $ 2,866,000 $ 2,444,000 $ 2,049,000 Capital Deployment Approved/marketed royalties $ 1,746,738 $ 1,875,232 $ 1,920,958 $ 1,684,769 $ 1,404,222 $ 1,848,509 Development-stage royalties (1) 568,286 316,689 507,399 823,374 835,986 357,981 Total Capital Deployment (2) $ 2,315,024 $ 2,191,921 $ 2,428,357 $ 2,508,143 $ 2,240,208 $ 2,206,490 (1) Development-stage royalties include: direct R&D funding arrangements and funding arrangements executed through our joint venture partnership with the Avillion Entities, investments in development-stage product candidates and investments in debt securities primarily made in connection with acquisitions of royalties on development-stage products from the seller.
Average 2024 2023 2022 2021 2020 Announced Transactions Upfront payments $ 2,125,400 $ 2,325,000 $ 2,109,000 $ 1,963,000 $ 2,161,000 $ 2,069,000 Potential payments/milestones 973,200 493,000 1,850,000 1,443,000 705,000 375,000 Total announced transaction value $ 3,098,600 $ 2,818,000 $ 3,959,000 $ 3,406,000 $ 2,866,000 $ 2,444,000 Capital Deployment Approved/marketed royalties $ 1,732,145 $ 1,775,545 $ 1,875,232 $ 1,920,958 $ 1,684,769 $ 1,404,222 Development-stage royalties (1) 693,762 985,364 316,689 507,399 823,374 835,986 Total Capital Deployment (2) $ 2,425,907 $ 2,760,909 $ 2,191,921 $ 2,428,357 $ 2,508,143 $ 2,240,208 (1) Development-stage royalties include: direct R&D funding arrangements and funding arrangements executed through our joint venture partnership with the Avillion Entities, investments in development-stage product candidates and investments in debt securities primarily made in connection with acquisitions of royalties on development-stage products from the seller.
Below is a summary of the sensitivity of our current year results in relation to the royalty duration for our top three financial royalty assets for which we did not increase our investment during 2023 based on net carrying value as of December 31, 2023.
Below is a summary of the sensitivity of our current year results in relation to the royalty duration for our top three financial royalty assets that are uncapped based on net carrying value as of December 31, 2024.
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 will continue to decline over time as the assets in Old RPI and RPI ICAV expire. 2. A de minimis interest in RPCT held by RPSFT. In December 2023, we acquired the remaining interest in RPCT owned by RPSFT, at which time RPSFT ceased to hold a non-controlling interest in RPCT.
Our operating performance is a function of our liquidity as our operations have historically been financed primarily with cash flows generated by our royalties. We use the cash generated by our existing royalties to fund investments in new royalties. We consider a variety of metrics in assessing the performance of our business.
Portfolio Overview Our business model is different from that of traditional operating companies in the biopharmaceutical industry. Our operating performance is a function of our liquidity as our operations have historically been financed primarily with cash flows generated by our royalties. We use the cash generated by our existing royalties to fund investments in new royalties.
A 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).
A 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, 2024 2023 Net cash provided by operating activities (GAAP) $ 2,768,986 $ 2,987,802 Adjustments: Proceeds from available for sale debt securities (1), (2) 19,786 1,440 Distributions from equity method investees (2) 23,641 43,882 Interest paid, net (2) 113,088 97,564 Development-stage funding payments - ongoing 2,000 2,000 Development-stage funding payments - upfront and milestone — 50,000 Distributions to legacy non-controlling interests - Portfolio Receipts (2) (362,280) (376,987) Adjusted EBITDA (non-GAAP) $ 2,565,221 $ 2,805,701 Interest paid, net (2) (113,088) (97,564) Portfolio Cash Flow (non-GAAP) $ 2,452,133 $ 2,708,137 (1) In the fourth quarter of 2023, we began receiving quarterly repayments on tranche one of the Cytokinetics Commercial Launch Funding.
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.
Following the acquisition, personnel costs will comprise the most significant component of G&A expenses. 53 Equity in (earnings)/losses of equity method investees Equity in (earnings)/losses 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.
Indentures governing the Notes contain certain covenants with which we were in compliance as of December 31, 2023 . Senior Unsecured Revolving Credit Facility Our subsidiary, RP Holdings, as borrower, initially entered into the Amended and Restated Credit Agreement (the “Credit Agreement”) on September 15, 2021, which provides for an unsecured revolving credit facility (the “Revolving Credit Facility”).
Senior Unsecured Revolving Credit Facility Our subsidiary, RP Holdings, as borrower, initially entered into the Amended and Restated Credit Agreement (the “Credit Agreement”) on September 15, 2021, which provides for an unsecured revolving credit facility (the “Revolving Credit Facility”).
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.
Additionally, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility. A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 10–Borrowings of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
In 2022, we became an indirect owner of an 82% economic interest in Royalty Pharma Investments ICAV (“RPI ICAV”), which was previously owned directly by Old RPI. 47 In December 2023, RPI 2019 ICAV acquired the remaining interest in RPCT owned by RPSFT and as such RPSFT no longer holds a non-controlling interest in RPCT.
In 2022, we became an indirect owner of an 82% economic interest in Royalty Pharma Investments ICAV (“RPI ICAV”), which was previously owned directly by Old RPI. 49 In December 2023, RPI 2019 ICAV acquired the remaining interest in RPCT owned by Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), at which time RPSFT ceased to hold a non-controlling interest in RPCT.
The therapies in our portfolio address therapeutic areas such as rare disease, cancer, neuroscience, infectious disease, hematology and diabetes, and are delivered to patients across both primary and specialty care settings. The table below shows Portfolio Receipts, including royalty receipts by product and milestones and other contractual receipts for 2023 and 2022 (in thousands).
The therapies in our portfolio address therapeutic areas such as rare disease, cancer, neuroscience, infectious disease, hematology and diabetes, and are delivered to patients across both primary and specialty care settings.
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.
We invest in approved products and development-stage product candidates that have generated robust proof of concept data. 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.
As of December 31, 2023, the future principal and interest payments under our Notes over the next five years and thereafter are as follows (in thousands): Year Principal Payments Interest Payments 2024 $ — $ 156,350 2025 1,000,000 156,350 2026 — 144,350 2027 1,000,000 144,350 2028 — 126,850 Thereafter 4,300,000 1,799,050 Total (1) $ 6,300,000 $ 2,527,300 (1) Excludes unamortized debt discount and issuance costs of $164.7 million as of December 31, 2023, which are amortized through interest expense over the remaining life of the underlying debt obligations.
Debt Service As of December 31, 2024, the future principal and interest payments under our Notes over the next five years and thereafter are as follows (in thousands): Year Principal Payments Interest Payments 2025 $ 1,000,000 $ 257,792 2026 — 226,600 2027 1,000,000 226,600 2028 — 209,100 2029 500,000 209,100 Thereafter 5,300,000 2,544,700 Total (1) $ 7,800,000 $ 3,673,892 (1) Excludes unamortized debt discount and issuance costs of $187.6 million as of December 31, 2024, which are amortized through interest expense over the remaining life of the underlying debt obligations.
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.
We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, future cash flows from operations or the issuance of additional debt.
Spinraza is approved for the treatment of spinal muscular atrophy and pelacarsen is in Phase 3 development by Novartis for the treatment of cardiovascular disease. Liquidity and Capital Resources Overview Our primary source of liquidity is cash provided by operations. For 2023 and 2022, we generated $3.0 billion and $2.1 billion, respectively, in Net cash provided by operating activities .
Ecopipam is in Phase 3 development by Emalex Biosciences for the treatment of Tourette Syndrome. Liquidity and Capital Resources Overview Our primary source of liquidity is cash provided by operations. For 2024 and 2023, we generated $2.8 billion and $3.0 billion, respectively, in Net cash provided by operating activities .
The measurement of income from our financial royalty assets requires significant judgments and estimates, including management’s judgment in forecasting the expected future cash flows of the underlying royalties and the expected duration of the financial royalty asset.
The measurement of income from our financial royalty assets requires significant judgments and estimates, including management’s judgment in forecasting the expected future cash flows of the underlying royalties and the expected duration of each financial royalty asset. Our cash flow forecasts are updated each reporting period primarily using sell-side equity research analysts’ consensus sales estimates.
There have not been any significant changes to the estimated duration of expected future cash flows for our top three financial royalty assets during 2023, 2022 and 2021.
Because these are long-dated financial royalty assets, we have assumed a change of two years in the estimated duration to sensitize the financial statement impact. There have not been any significant changes to the estimated duration of expected future cash flows for our top three financial royalty assets during 2023 and 2022.
Refer to the “Liquidity and Capital Resources” section for additional discussion of the debt financing instruments. 54 Other income, net Other income, net of $366.2 million in 2023 was primarily comprised of $230.8 million of gains on available for sale debt securities, $87.1 million of gains on equity securities and $72.3 million of interest income earned on cash held in banks and money market funds.
Other income, net of $366.2 million in 2023 was primarily comprised of $230.8 million of gains on available for sale debt securities, $87.1 million of gains on equity securities and $72.3 million of interest income earned on cash and cash equivalents.
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.
Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold. 63 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.
If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a credit to the provision. 50 The same variables and management’s estimates affecting the recognition of interest income on our financial royalty assets noted above also directly impact the provision.
If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a credit to the provision, or provision income.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIn 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.
Biggest changeThe 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.
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.
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, 2024, 100% of our outstanding Notes have fixed interest rates.
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
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. 76
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.
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 2024 and 2023.
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.
We are subject to interest rate fluctuation exposure related to the Revolving Credit Facility for the amounts drawn. 75 Credit and Counterparty Risk We are exposed to credit risk related to the counterparties with which we do business.
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.
We have a $1.8 billion Revolving Credit Facility with a variable interest rate that had no outstanding borrowing balance as of December 31, 2024.
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.
As of December 31, 2024 and 2023 , Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 34% and 32% of our current portion of financial royalty assets, respectively, and represented the largest individual marketer and payor of our royalties.
As 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.
As of December 31, 2024, we held cash and cash equivalents of $929.0 million, of which $360.7 million was cash and $568.3 million was invested in interest-bearing money market funds. As of December 31, 2023, we had 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.
Removed
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.

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