Royalty Pharma : Q2 2025 Pre-Quarterly Results Communication

Published: 2025-06-27 09:33:13 ET RPRX

Published on 06/27/2025 at 09:33

Portfolio Receipts is a key performance metric that represents Royalty Pharma's ability to generate cash from its portfolio investments, the primary source of capital for new portfolio investments. Portfolio Receipts includes Royalty Receipts and Milestones and other contractual receipts. As noted during

Royalty Pharma's first quarter 2025 earnings call, Portfolio Receipts in the second quarter of 2025 is expected to be between $700 million and $725 million, representing growth of 15% to 19% compared to the second quarter of 2024.

Royalty Pharma focuses on certain non-GAAP liquidity measures that represent sources of capital that are critical for investors to understand its business. These measures, presented as supplemental measures to GAAP financial information, include Adjusted EBITDA and Portfolio Cash Flow.

Prior-period results, details on selected royalty terms, as well as consensus sales estimates associated with select royalties are available for download on the Quarterly Results page of the company's website under Supplemental Financial Information (link here).

Table 1 provides Portfolio Receipts for the second quarter of 2024 and first quarter of 2025.

Table 1 - Portfolio Receipts Highlights (unaudited)

($ in millions)

Second Quarter 2024

First Quarter 2025

Products:

Cystic fibrosis franchise

195

250

Trelegy

Tysabri

Evrysdi

Xtandi

Imbruvica

Promacta

Tremfya

Cabometyx/Cometriq

Spinraza

Trodelvy

Erleada

Other products(5)

105

Royalty Receipts

605

788

Milestones and other contractual receipts

Portfolio Receipts

608

839

Amounts may not add due to rounding. For footnote references, see 'Notes' on page 8.

Portfolio Receipts is defined as the sum of Royalty Receipts and Milestones and other contractual receipts. Royalty Receipts includes variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to Royalty Pharma. 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 are attributed to Royalty Pharma.

Royalty Receipts generally lags product performance by one quarter. Royalty Receipts can be estimated by applying the company's publicly disclosed royalty rates to the preceding quarter's marketer-announced net sales on a product-by-product basis and applying the percentage attributable to Royalty Pharma (i.e. royalty net of the legacy non-controlling interests). Tables 2 and 3 include reported net sales performance of selected approved products in the first quarter of 2025 and the royalty terms, where disclosed.

In instances where royalty rates are tiered, they typically reset at the beginning of the year and lower rates may apply in the earlier quarters of the year until pre-specified sales thresholds have been reached. As a result, royalty rates for certain products or franchises (such as the cystic fibrosis franchise and Promacta) have the potential to increase during the calendar year, with second quarter Royalty Receipts (reflecting first quarter sales) often including royalties on sales at the lowest royalty tier and first quarter Royalty Receipts (reflecting fourth quarter sales) often including royalties on sales at the highest royalty tier.

In May 2025, Camber Pharmaceuticals announced the launch of Eltrombopag (the first AB-rated generic for Promacta). Royalty Pharma's guidance for 2025 Portfolio Receipts considers a range of commercial scenarios across its portfolio, including for the launch of Promacta generics.

In the second quarter of 2025, Royalty Pharma began receiving Royalty Receipts for Skytrofa and Niktimvo based on first quarter 2025 sales. Royalty Pharma is entitled to receive a 9.15% and 13.8% royalty on U.S. net sales of Skytrofa and Niktimvo, respectively. These Royalty Receipts will be recorded in Other products.

In June 2024, PTC Therapeutics exercised its option to sell half of its retained royalties on Roche's Evrysdi to Royalty Pharma. Royalty Pharma began receiving the increased royalty in the third quarter of 2024 based on Evrysdi's second quarter 2024 sales. The incremental royalty totaled $5 million and $6 million in the third and fourth quarters of 2024, respectively, and $6 million in the first quarter of 2025.

The royalty on Entyvio expired in 2024 and Royalty Pharma will not collect additional payments. In 2024, Other products included $21 million of royalties on Entyvio ($12 million and $9 million recorded in the first and third quarters, respectively).

($ in millions)

Marketers

Revenues First Quarter 2025

% Change Year/Year

Products

Cystic fibrosis franchise(1)

Vertex

2,746

Trelegy(2)

GSK

854

Tysabri

Biogen

382

(12)

Evrysdi(3)

Roche

467

Xtandi(3)

Pfizer, Astellas

1,373

Imbruvica(4)

AbbVie, Johnson & Johnson

1,003

(11)

Promacta

Novartis

546

Tremfya

Johnson & Johnson

956

Cabometyx/Cometriq(5)

Exelixis, Ipsen, Takeda

679

Spinraza

Biogen

424

Trodelvy

Gilead

293

(5)

Erleada

Johnson & Johnson

771

Notes:

Sales in Q1 2025 include an insignificant amount from Journavx, as reported by Vertex, for which Royalty Pharma is not entitled to receive royalties.

Trelegy revenues represent sales in U.S. dollars as reported by GSK. Trelegy growth rate represents year-over-year growth as reported by GSK in British pounds.

Sales for Xtandi and Evrysdi reported in foreign currency by the respective marketers are translated to U.S. dollars at the average exchange rates for each quarter. Growth rates represent year-over-year growth as reported by each marketer.

Sales for Imbruvica include U.S. revenues reported by AbbVie and ex-U.S. revenues reported by Johnson & Johnson.

Sales for Cabometyx/Cometriq include revenues reported by Exelixis in U.S. dollars, revenues reported by Ipsen in Euro and revenues reported by Takeda in Japanese yen. Sales reported in foreign currency are translated to U.S. dollars at the average exchange rates for each quarter.

Products

Estimated Royalty Duration(1)

Royalty Rates(2)

% Attributable

to Royalty Pharma(3)

Cystic fibrosis franchise(4)

2039-2041

Blended royalty of slightly over 9% for Trikafta;

See footnote 4

86.5%

Trelegy(5)

2029-2030

Tiered royalty of 6.5% on first $750 million, up to 10% on sales >$2.25 billion

100.0%

Tysabri

Perpetual

Tiered payments of 18% on first $2 billion and 25% on sales >$2 billion

82.4%

Imbruvica

2027-2032

Downward tiered mid-single digit royalty

82.4%

Evrysdi(6)

2035-2036

Tiered royalty of 7.2% on first $500 million, up to 14.5% on sales >$2 billion

100.0%

Xtandi

2027-2028

Slightly less than 4% royalty

82.4%

Promacta

2025-2028

Upward tiered 4.7% to 9.4% royalty

82.4%

Tremfya

2031-2032

Upward tiered mid-single digit royalty

100.0%

Cabometyx/Cometriq(7)

2026-2029

3% royalty

100.0%

Spinraza(8)

2030-2035

Upward tiered 2.8% to 3.8% royalty, increasing to 5% to 6.8% in 2028

100.0%

Trodelvy

Perpetual

Tiered royalty of 4.15% on first $2 billion, down to 1.75% on sales >$6 billion

82.4%

Erleada

2032

Low-single digit royalty

86.7%

Notes:

Durations shown represent Royalty Pharma's estimates as of December 31, 2024, 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. There can be no assurances that royalties will expire when estimated.

The royalties in Royalty Pharma's portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements. Royalty rates apply to annual worldwide net sales unless otherwise stated.

Ownership percentages for cystic fibrosis franchise and Erleada represent blended percentages across multiple royalty interests based on 2024 Royalty Receipts.

Royalty is perpetual. Royalty Pharma estimates royalty duration of 2039-2041 due to expected Alyftrek patent expiration and potential generic entry thereafter leading to sales decline. Royalty Pharma estimates 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. Royalty Pharma believes that deuterated ivacaftor (deutivacaftor) is the same as ivacaftor and is therefore royalty-bearing, which would result in a blended royalty of approximately 8% 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.

Royalty Pharma will pay Theravance Biopharma, Inc. 85% of the royalties in respect of ex-U.S. sales after June 30, 2029 and 85% of the royalties in respect of U.S. sales after December 31, 2030. Royalties are tiered based on sales at 6.5% up to $750 million, 8% between $750 million and $1.25 billion, 9% between $1.25 billion and $2.25 billion, and 10% over $2.25 billion.

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. Royalty Pharma's royalty rates are expected to be reduced by 8% in the early 2030s. Royalty entitlement does not reflect PTC exercising the option to sell its remaining 9.5% of the Evrysdi royalty.

Royalty Pharma is 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.

Royalty Pharma's royalty interest in Spinraza will revert to Ionis after receiving aggregate Spinraza royalties equal to $475 million or $550 million, depending on the timing and occurrence of certain events. Royalty Pharma is 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.

As of March 31, 2025, Royalty Pharma had cash and cash equivalents of $1.1 billion and total debt with principal value of $7.8 billion.

In January 2025, Royalty Pharma's Board of Directors authorized a share repurchase program under which Royalty Pharma may repurchase up to $3.0 billion of its Class A ordinary shares. Royalty Pharma intends to repurchase $2.0 billion of its shares in 2025, subject to market conditions. The total value of shares repurchased will depend on the discount to the intrinsic value at which its Class A ordinary shares are trading. This share repurchase program replaced the unused capacity under the previous share repurchase program that was announced in March 2023.

During the first quarter of 2025, Royalty Pharma repurchased approximately 23 million Class A ordinary shares for $723 million. The weighted-average number of diluted Class A ordinary shares outstanding for the first quarter of 2025 was 578 million as compared to 597 million in the first quarter of 2024.

Table 4 - Liquidity Summary (unaudited)

($ in millions)

Second Quarter 2024

First Quarter 2025

Portfolio Receipts

608

839

Payments for operating and professional costs

(48)

(102)

Adjusted EBITDA (non-GAAP)

560

738

Interest received/(paid), net

(127)

Portfolio Cash Flow (non-GAAP)

574

611

Amounts may not add due to rounding.

Adjusted EBITDA and Portfolio Cash Flow are supplemental non-GAAP liquidity measures. Table 4 provides a summary of the non-GAAP liquidity measures and Table 5 provides a reconciliation of each non-GAAP measure to the most directly comparable GAAP financial measure, which is net cash provided by operating activities.

Adjusted EBITDA is calculated as Portfolio Receipts minus payments for operating and professional costs. In the second quarter of 2024, payments for operating and professional costs were $48 million (which represented 7.9% of Portfolio Receipts). In the first quarter of 2025, payments for operating and professional costs were higher than usual because of an approximately $33 million onetime payment related to the management fee on the sale of the MorphoSys Development Funding Bonds, while the proceeds from the sale of these bonds are not included in the calculation of Portfolio Receipts.

Net interest paid/received reflects the weighted average cost of borrowings on the company's senior unsecured notes and interest received on the company's cash balances. Based on the semi-annual interest payment schedule of Royalty Pharma's outstanding notes, interest paid was $139 million in the first quarter of 2025 and is anticipated to be $119 million in the third quarter of 2025, with de minimis amounts expected in the second and fourth quarters of 2025, assuming no additional debt financing in 2025, including no drawdown on the revolving credit facility. 2025 guidance for interest paid does not reflect the impact of the internalization completed in May 2025. In the first quarter of 2025, Royalty Pharma received interest of $12 million on its cash and cash equivalents, which partially offset interest paid.

Disclaimer

Royalty Pharma plc published this content on June 27, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on June 27, 2025 at 13:32 UTC.