Q2 2020 Royalty Pharma PLC Earnings Call

Marshall Urist: On slide 10, as you may recall, we said at the time of our IPO that we expected to deploy capital of around $1.5 billion per year on average over the longer term to acquire new royalties. So far in 2020, we have already announced royalty transactions that exceed this figure. Most of the $1.7 billion in investments is represented by the four transactions shown here, which are our deals for Rizdiplam, IDFA, and Previmis, and two new agreements further expanding our collaboration with Biohazard. These products are all unique, ranging from migraine to rare disease, from virology to cancer, reflecting our unique ability to invest across therapeutic areas. The most recent was two deals with Biohaven for up to $450 million, and they truly show the power of the Royalty Pharma model. There are two distinct transactions.

Ladies and gentlemen, thank you for standing by welcome to the royalty pharma second quarter 2020 earnings Conference call.

Now I turn the call over to George go fix senior Vice President head of Investor Relations in Communications. Please go ahead Sir.

Thank you operator, and good morning, and good afternoon, everyone on the call.

Thank you for joining us to review royalty Pharmas second quarter results you can find this line to this call on the Investor page of our website royalty pharma dot com.

On slide three I'd like to remind you that information presented in the call contain forward looking statements that involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially.

I refer you to work that's one perspective on file with the four description of these risk factors.

With that please advance to fly for our speakers on the call today are probably Legarreta founder and Chief Executive Officer, Marshall Europe, SVP research investments and Terry Quinn VP, Chief Financial Officer, Pablo will discuss key highlights for the quarter after which Marshall will provide an update on recent.

Marshall Urist: First, we're investing up to $250 million in exchange for additional royalties on NERDTEC and Zabedge. We were also eligible to receive milestone payments of up to 2.95 times the funding amount following regulatory approval of VEGIPAN, including a 1.9 times multiple on regulatory approval of VEGIPAN in my group. Second, we're investing $200 million between 2021 and 2024 in commercial launch preferred equity, providing important funding for BioHaven to accelerate the commercial launch efforts of NERTC. We believe this transaction is a great example of the creative, flexible solutions that Royalty Pharma can provide its partners, creating a true win-win collaboration. With Ristoflam, we made a $650 million investment in an exciting SMA product that will serve a large need for patients with this devastating disease by giving them an effective oral option. As you may have seen, this product was approved with a broad label on Friday and given the brand name Everest.

The acquisition Terry will then review the financials.

And after concluding remarks, and probably we will hold acuity session for tight or Vice Chairman and George Lloyd will also join the queue and exists.

With that I'd like to turn the call overt problem.

Thank you George it's a pleasure for me to open our first earnings call. It's a public company.

2020, she has truly been a landmark year for royalty pharma, we shut up very successful IPO, raising $1.9 billion or net proceeds.

Positioning us well to execute on our next phase of growth.

At the same time, we continue to deliver excellent financial results with strong double digit growth in adjusted cash received an adjusted cash flow, what we view I started top and bottom line.

Meanwhile, we expanded our portal for your through new royalty transactions, an important regulatory approvals.

Lastly, we strengthened our corporate governance would be a board appointments of Bonnie Basner coffee angled bird Henry Fernandez and Ted Love.

Our Ford me, you appointees bring a huge amount of financial business and scientific expertise expertise to the board as well as strong leadership their guidance will be important as we continue to build our position as the partner of choice for funding innovation across the life Sciences R&D.

Ecosystem.

On slide seven the IPO really was a major milestone for royalty pharma and a logical next step in the evolution of our business.

Marshall Urist: Now, without getting too deep into the details on a deal-by-deal basis, I would highlight that each of these transactions scores highly on our list of key criteria we look for in our acquisitions. That is, each represents differentiated transformative medicine in an area of high patient need. Each has a marketer who we believe is motivated and capable of optimizing the commercial potential of the product, and each has a long duration of IP protection.

Our mission is to be the leading funder of innovation in life Sciences, and the capital provided by the IPO as well as access to the deepest equity markets will be important tools and our mission.

In addition, we now have a much broader shareholder base to grow with us over time.

And that's I mentioned up front, we continue to deliver strong financial performance I am proud on our first earnings call to reported growth of the magnitude you see on slide eight with 20, 24% growth and second.

Marshall Urist: We remain excited by our pipeline and the unique opportunities in front of us to continue to add attractive royalties to our already diversified portfolio. With that, I will hand over to Terry. Thanks, Marshall.

Border adjusted cash receipts and 47% growth in adjusted cash flow. This type of growth speaks to our unique position within the bio pharma ecosystem as what does the extraordinary innovation currently taken place in the industry.

Terrance P. Coyne: We had a strong quarter with total royalty receipts of 20% compared to Q2 2019 on a pro pharma basis. As you can see on this chart, each of our top five products and franchises delivered very strong double-digit growth. In particular, royalties from our largest franchise, Cystic Fibrosis, grew 59% this quarter.

I will hand, I will hand over now to Marshall to tells you about some of our exciting recent acquisitions.

Thank you Pablo and good morning, and good afternoon to everyone.

On slide 10, as you May recall, we said at the time of our IPO, we expected to deploy capital of around $1.5 billion per year on average over the longer term to acquire new royalty.

So far in 2020, we've already announced royalty transaction that exceed this figure.

Most of the $1.7 billion and investment is represented by the four transactions shown here, which are our deals for risk the plan I defect and have a mess and two new agreements further expanding our collaboration with Biogen.

Terrance P. Coyne: One point to mention on this slide: other products include the $21 million one-time distribution related to our Iliac collaboration. Slide 13 shows how our royalty receipts translated to strong, adjusted cash flow in the quarter. As you're aware, adjusted cash receipts is a key non-GAAP metric for us, which we arrive at after deducting distributions to non-controlling interest.

These products are all uni ranging from migraine to rare disease from by Rolla, Genie cancer, reflecting our unique ability to invest across therapeutic area.

Most recent with two deals with bio haven for up to $450 million and truly shows the tower at the royalty pharma model there are two distinct transaction.

Terrance P. Coyne: Adjusted cash receipts amounted to $462 million in the quarter, growth of 24% compared with Q2 2019 on a pro forma basis. When we move left to right, operating and professional costs of $44 million equated to 9.6% of adjusted cash receipts, in part reflecting IPL expectations. R&D funding was modest given the completion of our Eyebrance Adjuvant Breast Cancer funding in 2019.

First we're investing up to $250 million in exchange for additional royalties on Nortech ended batches.

We're also eligible to receive milestone payments of up to 2.95 times the funding amount.

Following regulatory approval, but that's the vet, Japan, including a 1.9 times multiple on regulatory approval of the vet, Japan in migraine.

Second we're investing 200 million Dollarss between 2021 and 2024 in commercial launch preferred equity providing important funding for bio haven to accelerate the commercial launch efforts for nerve cat.

Terrance P. Coyne: Net interest of $31 million reflects the improved cost of debt from our refinancing earlier this year and decreased nearly 50% from last year's second quarter on a pro forma basis. This resulted in adjusted cash flow, which we view as our bottom line earnings, of $369 million, or $0.61 per share. This is an adjusted cash flow margin of 80%, highlighting the strong financial leverage in our business model. Looking at our balance sheet on slide 14, we ended June with cash and marketable securities of $2.8 billion, driven mainly by the adjusted cash flow I just described and the IPO proceeds of $1.9 billion. Other cash movements, including loyalty acquisitions, debt refinancing proceeds, and other distributions, largely balanced out. We finish the quarter with $5.9 billion of total debt that is investment grade rated, equating to net debt of $3.2 billion.

We believe this transaction is a great example, at the creative flexible solution that will keep arm I can provide its partners, creating a true when when collaboration.

With regard to plant, we made a 650 million dollar investment in an exciting SDMA pot that will serve a large need for patients with this devastating disease by giving them an effective oral option.

As you May have seen this product was approved with a broad label on Friday and given the brand name ever is.

Now without getting too deep into the detailing a deal by deal basis I would highlight that each of these transaction scores highly on our list. The key criteria, we look for in our acquisition.

That is each represents a differentiated transformative medicine in an area of high patient need.

Each has a marketer who we believe is motivated and capable of optimizing the commercial potential of the product.

And each has a long duration of IP protection.

We remain excited by our pipeline unique opportunities in front of us to continue to add attractive royalties, who are already diversified portfolio with that I will hand over to Terry.

Terrance P. Coyne: Our current interest expense is approximately 1.8%, and taken together with leverage of 1.9 times adjusted EBITDA on a net basis and 3.5 times adjusted EBITDA on a gross basis, we are very well positioned to execute on our business. On slide 15, my final slide, we're pleased to provide you with full year 2020 guidance. We expect adjusted cash receipts to be in the range of $1.72 to $1.76 billion, and our operating costs are expected to be approximately 10% of adjusted cash receipts.

Thanks, Marshall, let's move to slide 12.

We had a strong quarter total royalties received up 20% compared to Q2 19 on a pro forma basis.

As you can see on this chart each of our top five products and franchise delivered very strong double digit growth.

In particular.

Realty's from our largest franchise cystic fibrosis grew 59% this quarter.

One point to mention on this slide other products include the 21 million dollar onetime distribution related to our affiliate collaboration.

Slide 13 shows how our royalty received translated to strong adjusted cash flow in the quarter.

Terrance P. Coyne: Importantly, this guidance is based on our portfolio as of today and does not take into account any future transactions announced after the date of this release. With that, I would like to hand the call back to Pablo for his closing. Thanks, Terry.

As you're aware adjusted cash receipts, the key non that non-GAAP metric for us.

Which we arrive at after deducting distributions to Noncontrolling interests.

Adjusted cash receipts amounted to $462 million in the quarter growth of 24% compared with Q2 19 on a pro forma basis.

When we moved left to right operating professional costs at 44 million equated to 9.6% adjusted cash receipts in part reflecting IPO expenses.

Pablo Legorreta: I want to bring this all together in the context of our strategic plan and how we are delivering against it. As a reminder, we have three main business streams through which we plan to sustain growth, further diversify our revenues, and continuously extend the duration of our portfolio. First, we will continue to seek to capture a leading share of available royalty acquisitions for approved products, which is our traditional area of expertise. Second, we will target select late-stage clinical development opportunities, both in terms of royalty deals and of direct R&D funding. Third, we will participate in M&A by acquiring non-strategic royalties to help acquirers fund deals or by partnering with these companies or, in very select instances, acquiring companies outright in order to gain new royalties.

R&D funding with modest given the completion of our Ibrance patch and breast cancer funding in 2019.

Net interest to 31 million, reflecting improved cost of debt from our refinancing earlier this year and decreased nearly 50% from last year's second quarter on a pro forma basis.

This resulted in adjusted cash flow, which we view as our bottom line earnings a $369 million for 61 cents per share.

This is an adjusted cash flow margin, 80%, highlighting the strong financial leverage in our business model.

Looking at our balance sheet on slide 14, we ended June with cash and marketable securities and $2.8 billion driven mainly by adjusted cash flow I, just described and the IPO proceeds of $1.9 billion.

Other cash movements, including loyalty acquisition debt refinancing proceeds and other distribution largely balance out.

We finished the quarter with $5.9 billion total debt that is investment grade rated equating to net debt of $3.2 billion.

Pablo Legorreta: This slide summarizes how we're executing against our strategy. When we think about the magnitude of growth, we're delivering double-digit momentum, and I am particularly pleased with a 24% growth in adjusted cash receipts and 47% growth in adjusted cash flow. We're also successfully diversifying our growth with the royalty acquisitions Marshall described. And, of course, we're confident that we can continue to grow the portfolio and add additional products. As of today, we have royalties on more than 45 products, and only one royalty, namely Cystic Fibrosis, is greater than 20% of our total royalty received. Given our simple business model, this diversification is true on both our top and bottom lines, which we believe is quite unique. Lastly, we have maintained a waiter average life of our portfolio of around 15 years, well above the industry average, with the help of FDA approvals of Tasvaric and Follicular Lymphoma, Neurotic and Migraine, and Trodelby and Triple Negative Breast Cancer, as well as our new Royalty Acquisition.

Our current interest expense is approximately 1.8%.

Taken together with leverage at 1.9 times adjusted EBITDA on a net basis and 3.5 times adjusted EBITDA on a gross basis, we're very well positioned to execute on our business plan.

On Slide 15, My final slide we're pleased to provide you with full year 2020 guidance.

We expect adjusted cash receipts to be in the range of 1.72 to 1.76 billion and our operating costs are expected to be approximately 10% of adjusted cash receipts.

Importantly, this guidance is based on our portfolio as of today does not take into account any future transactions announced after the date of this release.

With that I would like to can handle the call back the problem for his closing comments.

Thanks Terry.

I want to bring this altogether in the context of Arts strategic plan and how we are delivering against it.

A reminder, which you have three main business streams through which we plan to sustain growth further diversify revenues and containers the extended duration of our portfolio.

First we will continue to seek to capture a leading share of available royalty acquisitions were approved product, which is our traditional area of expertise second we will target select late stage clinical development opportunities both in terms of royalty deals and Gulf direct R&D funding.

Third we will participate in M&A by acquiring nonstop music royalties to helped by choirs fund deals or by partnering with this company or even in very select instances acquiring companies companies outright in order to gain you royalties.

This slide summarizes cover executing against our strategy. When we think about the magnitude of growth, we're delivering double digit momentum and I'm, particularly pleased with a 24% growth in adjusted cash receipts and 47% growth in adjusted cash flow.

Pablo Legorreta: On my final slide, this is what we plan to deliver as a result of successfully executing our strategy and deploying an estimated $7 billion in capital from 2020-2025. Our long-term goal is to grow adjusted cash receipts at a compound rate of between 6-9%, with around half coming from our existing business and half from new royalty transactions. We target returns in excess of our cost of capital over the period while maintaining a weighted average duration for our portfolio at more than 10 years. We expect to pay around 25% of adjusted cash flow in dividends, beginning with an initial quarterly dividend of 15 cents, and to maintain our investment grade credit rating.

We're also successfully diversifying our growth with the royalty acquisitions Marshall described and of course, we're confident that we can continue to grow the port affordable and not additional products.

To date, we shall royalties on more than 45 products and only one royalty named namely cystic fibrosis is greater than 20% over total loyal to receive.

Given our simple business model. This diversification is true on both our top and bottom lines, which we believe is quite unique lastly, we have maintained a way to robbers life of our portfolio of around 15 years, well above the industry average.

With the help of if the approval of 'cause American Follicular lymphoma, nerds chicken migraine, and so they'll be in triple negative breast cancer as well as our new loyalty acquisition.

On most on my final slide this is what we plan to deliver as a result of successfully executing our strategy and deploying an estimated 7 billion and capital from 2020 to 2025, our long term goal is to grow adjusted cash receipts that compound rate of between six and.

George Grofik: Based on this outlook and our unique position at the heart of funding the golden age of life sciences innovation, I am as excited about the future of Royalty Pharma today as I was when I founded the business back in 1996. With that, I would like to open the call to questions. Back to you, George. Thank you, Pablo, and we'll now open up the call to your questions. Operator, could the team please... Ladies and gentlemen, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key.

<unk> percent with around half coming from our existing business and half from new royalty transactions.

We target returns in excess of our cost of capital over the period, while maintaining a weird or ravaged duration for that portfolio at more than 10 years.

We expect to pay around 25% of adjusted cash flow and dividends.

Beginning with an initial quarterly dividend of 15 cents and to maintain our investment grade credit ratings.

Based on this outlook and our unique position at the heart of funding the Golden age of life Sciences innovation I I'm as excited about the future royalty pharma today as I was when it founded the business back in 1996.

Operator: Please stand by while we compile the Q&A. Our first question comes from Geoff Meacham of Bank of America. Your line is open. Hey guys, thanks for the question and congratulations on a successful IPO. I just had a couple questions.

With that I would like to open the call to Q and a back to you George.

Thanks problem and when I look onto the call to your question operator, Please take the first question.

Ladies and gentlemen to ask a question you need to press star one of your telephone to withdraw your question press the pound key please stand by what we compile the kuni roster.

My first question comes from Geoff Meacham of Bank of America. Your line is open.

Hey, guys. Thanks for the question and congrats on a successful IPO.

Just had a couple of questions.

One for Pablo as you look at the portfolio how much does it changing policy environment inform your assumptions of growth or IR are just curious if you had an implicit discount.

Geoffrey Meacham: One for Pablo, as you look at the portfolio, how much does a changing policy environment inform your assumptions of growth or IRR? Just curious if you have an implicit discount, you know, for future deals. And then for Terry or Marshall, for future deals, I know it's IRR driven, but is there a separate consideration of therapeutic area? Obviously, some categories are subject to faster disruption or competition. It seems like orphan assets fit your model well, but I want to get your thoughts on that.

For future deals.

And then for carrier or Marshall Marshall for future deals I know its IR driven but is there a separate consideration of therapeutic area. Obviously, some categories are subject to faster disruption or competition. It seems like orphan assets fit your model well, but I want to get your thoughts on that thanks guys.

Pablo Legorreta: Thanks, guys. Thank you, Geoff, and good to hear from you. So, with respect to your first question, I think if you look at the transactions that we've been able to close this year, the return expectations that we have on all of these transactions are very much in line with, and in some cases, even slightly exceed the return expectations that we have for approved and unapproved products. And let me remind you what they are.

Thank you, Jeff and good to hear you. So with respect to your frequent first question I think if you look at the transactions that we've been able to close this year.

The return expectations that we have on all of this run sanctions.

Very much in line and in some cases, even exceeding slightly.

The return expectations that we have four approved an unapproved products and let me remind you what they are.

Pablo Legorreta: We expect returns for approved products in the high single-digit, low double-digit range. And when you look at some of the recent transactions, they are actually north of 10 percent. So, we believe those returns to be very attractive because you have to remember that those are unlevered returns. For unapproved investments, they are well in excess of that, actually, in the mid to high teens.

We expect a returns for approved products on the high single to low double digit returns and when you look at some of the recent transactions. They are actually north of 10%. So we believe those returns to be very attractive. Because also you have for remember those are unlevered returns.

For unapproved.

Investments.

We are well in excess of that actually in the mid to high teens and again when you look at the transactions, particularly the recent correct friend section that we just announced with bio Haven, we're funding so bad jump on when you combine a bug different aspects of of the 250 million.

Pablo Legorreta: And again, when you look at the transactions, particularly the recent transaction that we just announced with BioHaven, where we're funding Save Japan, when you combine the different aspects of the $250 million Save Japan clinical funding agreement, you will see that we start with sort of a low double-digit return looking at the multiple fixed payments, and the return then goes to the mid to high teens when you count the royalties that we have negotiated both on Save Japan and NER So we are actually very pleased with what we're seeing. And I think the last thing I will say is that one of the things that is obviously driving this very attractive execution are the very strong tailwinds that we have, the very significant capital needs in the biotech industry, and other things that we've discussed in the past. So, let me turn it over now to Marshall for him to provide additional perspective. Thanks, Pablo, and good morning, Geoff.

Walter So that's a button clinicals funding agreement you will see that we started with sort of a low double digit return looking up the multiple of fixed payments and the return then goes to the mid to high teens when you count.

The the royalties that were that we have negotiated both on so they Japan and NERC at which we of course are very excited about it because of it swung launch. So we are actually very pleased with what we're seeing and I think <unk>. The last thing I will say is that one of the things things that it's obviously driving does very attractive execution.

Is the very strong.

Tailwinds that we have.

The very significant capital needs in the biotech industry and other things that we've discussed in the past. So let me turn it over now to Marshall for him to provide additional perspective.

Yeah, Thanks, Pablo and good morning, Jeff Jeff to your question on therapeutic areas in product. It for Relpy pharma, you know our focus and the focus of our strategy has always been to find.

Marshall Urist: So, Geoff, to your question on therapeutic areas and product fit for Royalty Pharma, you know, our focus and the focus of our strategy has always been to find the most innovative, impactful drugs for patients in each therapeutic area. And, you know, it's not necessarily that there are certain therapeutic areas where we won't invest, or that fit better, or that don't fit for us. You know, we approach everything on a product-by-product basis. Now, certainly, there are areas where we feel that technology cycles, as you alluded to, might be too short, or that there are competitors coming along where we won't invest. [inaudible] OK, thanks, guys.

The most innovative impactful drugs for patients in each therapeutic area and you know it's not necessarily there. There's that there are certain therapeutic areas, where we wont invest or fit better or don't fit for us we approach everything on a product by product basis now certainly there are areas.

Where we feel that technology cycles as you read you might be too short or or that there are competitors coming along where we where we won't where we won't.

Operator: Thank you. Our next question comes from Chris Schott with J.P. Morgan. Great, thanks so much for the questions.

She used to participate but really we are approaching it on a product by product basis, we have done deals in the orphan on the orphan side as you mentioned, but you know we feel like there's going to be exciting opportunities going forward that really fit our model to have durable products and durable competitive advantage is across.

Christopher Schott: The first one is, just when I look at the Biohaven deal, it seems like we're seeing deal terms that are evolving from straight royalties that we saw historically to something that's kind of maybe more complex and creative structures. Is that something unique to some of the recent transactions we're seeing, or is this an evolution of the broader Royalty Pharma model? And then my second question was on leverage. Is there a leverage ceiling we should think about for the company, and does the success of the stock on the IPO impact how you think about potentially using equity to finance transactions? Thanks so much.

Therapeutic areas.

Okay. Thanks, guys.

Thank you. Our next question comes from Chris Schott with Jpmorgan. Your line is open.

Great. Thanks, so much further questions.

The first one is it's just when I look at the final Haven deal. It seems like we're seeing deal terms that are evolving from straight royalties that we saw historically to something that's kind of maybe more complex and creative structures is that something unique to some of the recent transactions were seeing or just an evolution of the broader royalty pharma model and then my second question was on leverage.

Our leverage ceiling, we should think about for the company and does the success of the stock on the IPO impact how you think about potentially using equity to finance transactions. Thanks, so much.

Pablo Legorreta: Thanks Chris, I'll take the first part of your question. So in terms of deal structure, as you probably heard us during the roadshow for the IPO, one of the real unique things about Royalty Pharma and something that has driven very significant growth over decades has been our ability to be very creative in structuring transactions. The recent structure with ViroHaven has different components, and I believe that at the end of the day, what really matters here for us is to invest in really exciting, attractive products. That's really the beginning of a good investment, marketed by strong companies. And then we solve the needs of our partners and ours through creative structuring. And that's exactly what happened here.

Thanks, Chris I'll take the first part of your question so in terms of.

Deal structure as you probably heard us during the roadshow for our IPO one of the real unique things about royalty pharma and something that has driven a very significant growth over decades has been our ability to be very creative and structuring transactions.

And.

The the recent structure.

If I havent has different components and I believe that at the end of the day, what really matters here for us is to invest in really exciting attractive products. That's really the the the beginning of a good investment.

Marketed by strong companies and then we solve.

You know the needs of our partners and hours through creative structuring and you know that's exactly what happened here there was a need for capital to actually a fun of the launch of nerve tick and we put in place something that we feel was very attractive and unique with this preferred.

Pablo Legorreta: There was a need for capital to actually fund the launch of Neurotech, and we put in place something that we feel was very attractive and unique with this preferred commercial launch funding stock, $200 million, where we're going to be investing $200 million over the next four years to support the very strong launch of Neurotech, and then we will receive payments over the next six years. But if you look at, again, the return expectations there, they're fairly attractive at around 12 percent unlevered. And then the other part of the transaction obviously has royalties.

Commercial launch funding a stock of $200 million, where we're going to be investing 200 million over the next four years.

To to support the very strong launch of Neritic, and then we will receive payments over.

The next six years, but if you look at again the return expectations, there, they're fairly attractive around 12% Unlevered and then the other part of the transaction. Obviously has royalties, but then if you look at a transaction like the PTC transaction, it's much more plain vanilla with us just purchasing a meaningful.

Pablo Legorreta: But then if you look at a transaction like the PTC transaction, it's much more plain vanilla, with us just purchasing a meaningful portion of the royalty that PTC had on RISD plans. I think, in the end, being creative is really critical so that we can address the needs of our partners and continue to make very attractive investments in attractive products. And I'll turn it over to Terry now for a response to your question about leverage. Yeah, hi Chris.

Portion of of the royalty that PPC had unrisked deploying so so I think again being creative is really critical so that we can address the needs of our partners and continue to make very attractive investments in attractive products and I'll turn it over to carry no for a response on your question about leverage.

Yeah, Hi, Chris So so in terms of leverage for US. We've we've been very clear that gets it to priority to maintain the into our investment grade rating. So we finished the quarter at 3.5 times total debt to EBITDA.

Terrance P. Coyne: So in terms of leverage, for us, we've been very clear that it's a priority to maintain our investment grade rating. So we finished the quarter at 3.5 times total debt to EBITDA. And I think the way to think about the sort of leverage ceiling is that we can go a little bit above 4 from time to time when we need to, when we find a very attractive royalty asset, but we need to have a clear path to de-levering from there. So I think that around 4 times total debt to EBITDA is the way to think about the ceiling in order to maintain the investment grade rating. But from time to time, like in 2014, we raised debt to go and buy the cystic fibrosis royalties, which were really very important for us at the time, and we had a clear path to de-levering from there. So we took it a little bit above 4 times at that point.

And I think the way to think about the sort of leverage ceiling is that we can go a little bit above four from time to time, when we when we need to when we find a very attractive royalty asset up but we want to have but we need to have a clear path to de levering from there so I think that.

Around four times total debt to EBITDA as a way to think about that the the ceiling in order to maintain the investment grade rating, but from time to time like in 2014, we raised debt to go and buy cystic fibrosis Ah Boy, Lcs, which we're really very important for us at the time and we had a clear path.

Earnings from there. So we did take it a little bit about four times at that point and the rating <unk>, we have a long history.

Policy with the rating agencies and they understand it well.

Terrance P. Coyne: And we have a long history of that policy with the rating agencies, so they understand it well. In terms of using equity for acquisitions, I think the way to think about it is sort of a waterfall. So the business generates a lot of cash. And so we're always going to use cash on our balance sheet first for new investors.

In terms of.

Terms of using equity.

For acquisition I think the way to think about it is you know we is sort of a waterfall. So the business generates a lot of cash and so we're always going to use cash on our balance sheet first.

Hey for for New investments and then after that I think the next thing. We'll look at is is adding debt, while maintaining that investment grade rating and then last component would be additional equity because we do think that.

Terrance P. Coyne: And then after that, I think the next thing we'll look at is adding debt while maintaining that investment grade rating. And then the last component would be additional equity, because we do think that the cost of debt is still much lower than the cost of equity. So that's the way that we think about it, the way we've actually managed the business for the last 15 years. Great. Very helpful.

The cost of debt is still a much lower than the cost of equity. So so that's kind of the way that way that we think about it the way they actually manage the business for the last 15 year. So.

Okay very helpful. Thank you.

Thank you. Our next question comes from Steve Scala with Cowen Your line is open.

Operator: Thank you. Thank you. Our next question comes from Steve Scala with Cowen. Your line is open.

Thank you and congratulations on a very solid first quarter out of the gate.

Steve Scala: Thank you, and congratulations on a very solid first quarter out of the gate. We thought the RISDPLAM deal was a great deal for Royalty Pharma, but then Roche priced RISDPLAM well below competitors, which influences sales, which influences royalties. And we don't necessarily believe demand will be higher, but it's more due to Roche's view of social responsibility. So was the price in line with your expectations? And if not, then how does this change your internal forecast?

We saw the Arista plan deal was a great deal for royalty pharma.

But then Welsh priced or is the plan well below competitors, which influences sales which influences royalties.

And we don't necessarily believe demand will be higher but it's more due to roche's view of social responsibility. So what's the price in line with your expectations and if not then how does this change your internal forecasts.

Marshall Urist: Sure, thank you. Marshall, can you take that question? Yes, absolutely. Thanks, Pablo. And good morning, Steve.

Sure. Thank you Marshall can you take that question.

Yes, absolutely thanks, Pablo and good morning steep. So we were obviously very happy to see the approval of ever is the come through on Friday, and with respect to specifically your question on price, while we're not going to get into you know our specific assumptions on any given deal.

Marshall Urist: So, we were obviously very happy to see the approval of Everisd come through on Friday. And with respect to your question on price, well, we're not going to get into, you know, our specific assumptions on any given deal. You know, whenever we look at any transaction or any royalty, especially one like this that is pre-approval, where we don't know the price, we look at a variety of scenarios across pricing and volume and, you know, many, many different variables and have to be comfortable with the investment across all of those. So I would say that, you know, having the approval and now seeing it priced, we remain very excited about both the potential of Everis-D for Thank you. The next question comes from George Gilbert with Truist Securities. Your line is open. Thank you. Good morning, team. It's Greg Gilbert from Truist.

Whenever we look at any transaction or any royalty, especially when like bits that is pre approval, where we don't know the price.

We look at a variety of UBS scenarios across a pricing and volume and you know many many different town you.

You know many different variables and have to be comfortable with the investment.

Across all about so I would say that you know that having the approval and now seeing at price. We remained very excited about both the potential of ever is deeper patient and then also about this product for royalty pharma.

Thank you.

Thank you. Our next question comes from George Gilbert True Securities. Your line is open.

Thanks, Good morning team, it's Greg Gilbert from true Oh.

Ill ask two questions first on capital deployment do you see the potential to put more than 1.5 billion per year to work I realize that's just an average and that will be lumpy, but given your momentum the tailwinds in the industry.

Operator: I'll ask two questions. First, on capital deployment, do you see the potential to put more than $1.5 billion per year to work? I realize that's just an average and that it will be lumpy, but given your momentum, the tailwinds in the industry, your new capital structure, I'm curious if you're tempted to potentially do more. And that's partially a comment on just what you see coming your way these days. My second question is, heading into the election period, I'm sure your partners will individually be scrutinized up and down about their relative exposures to the U.S. in different parts of the system. I was wondering if you had a best estimate you could share with us on your exposure to the U.S. versus the rest of the world, and then within the U.S., how much is government pay versus private pay.

Your new capital structure curious, if your tempted to potentially do more and.

And that's partially comment on just what you see coming your way these days.

My second question is heading into election.

Periods I'm sure your partners will individually be scrutinized up and down about their relative exposures to the U.S. in different parts of the system. I was wondering if you had a best estimate you could share with us on your your exposure to kind of U.S. versus rest of world and then within the U.S., how much is government pay versus private pay.

And if not just frame for us how you think about that thanks.

Thanks for the question Terry can you. Please answer this question.

Yes, sure. So I think the way you know in terms of capital deployment Craig.

One point, yeah, we put out this guidance is investing $7 billion at least $7 billion over the next five years, that's a number that we feel very very comfortable with.

We're off to a really strong start in 2020, Oh, we feel very good about the pipeline and the tailwinds in the industry.

I think.

We we if the opportunities come around.

And that the the right opportunities the quality quality assets that sort of fit the type of things that we're looking to invest and then I think we absolutely when invest more than that but we feel very comfortable with that with the guidance that we've given of investing $7 billion over five years, it's important to really look at the way.

Stephen Michael Scala: And if not, just explain for us how you think about that. Thanks. Sure, thanks for the question. Terry, can you please answer this question?

Terrance P. Coyne: Yeah, sure. So I think the way, you know, in terms of capital deployment, Greg, one point: we put out this guidance of investing $7 billion, at least $7 billion over the next five years. That's a number that we feel very, very comfortable with. We're off to a really strong start in 2020. We feel very good about the pipeline and the tailwinds in the industry. You know, I think we would, if the opportunities came around, and the right opportunities, and quality assets that sort of fit the type of things that we're looking to invest in, then I think we absolutely wouldn't invest more than that. But we feel very comfortable with the guidance that we've given of investing $7 billion over five years. And it's important, though, to really look at the way we look at investments and capital deployment over a multi-year period.

We look at investments and capital deployment is over a multiyear period. So while 20 2020, we've invested or we.

Announced $1.7 billion of acquisition I think we really do look at it over multi years and then your other question about.

Ah exposure to the U.S. So we we don't we don't have always have perfect visibility there, but our desk assets that you asked is between 60 and 65% of our total royalties and then you know with within the U.S.

We again, we don't we don't always have perfect visibility on into different levels of payers.

No I can I would point out that our largest Medicare part D.

Our largest product that would fall under Medicare part D would be tysabri, but I I, we don't know.

With the sort of breakdown is of Tysabri in terms of part B.

I think that for those types of questions, it's probably best to just refer to the marketers.

Thank you.

Thank you. Our next question comes from David Risinger with Morgan Stanley. Your line is open.

Great. Thank you good morning, Pablo and team and congrats on the recent deal announcements as well.

Terrance P. Coyne: So while in 2020, we've invested, or we've announced $1.7 billion in acquisitions, I think we really do look at it over multiple years. And then your other question about our total royalties. And then, you know, within the U.S., again, we don't always have perfect visibility into different levels of payers.

Two questions.

You can discuss the current.

Pricing environment, and royalty farmers' ability to uncover underappreciated investment opportunities and second.

Obviously the.

And then.

Deal.

Yes.

Hello.

Terrance P. Coyne: You know, I would point out that our largest Medicare Part B, or our largest product that would fall under Medicare Part B, would be Tysabri, but we don't know what the sort of breakdown is of Tysabri in terms of Part B. So I think that, you know, for those types of questions, it's probably best to refer to the marketer. Thank you. Thank you. Our next question comes from David Reisinger with Morgan Stanley. Your line is: Great. Thank you. Good morning, Pablo and team, and congratulations on the recent deal announcements as well. I have a few questions to discuss the current pricing environment and Royalty Pharma's ability to uncover underappreciated investment opportunities. And second, obviously, they have been perfect. Bye. [inaudible] and Leigh Brown.

Uh huh.

Oh.

Okay.

You.

Do you see.

Yes.

Uh huh.

Sure.

[laughter].

Right.

There are lots of opportunities for such deals any sort of color on a high return potential deals would be helpful. Thank you.

Sure Marshall can you take the question and we were having trouble hearing all of it David I don't know if maybe Marshall the catch all of the question.

Yeah, David I, Dave I didn't get the first question you broke up and then maybe the second question. If you could summarize it for I think we we actually had trouble hearing it. Unfortunately.

Okay. My apologies is this any better it's a much better okay, great. So with respect to the current biotech pricing environment.

Generally speaking prices for assets are high could you discuss royalty farmers' ability to uncover underappreciated opportunities and then second with respect to creative deals like that Japan Nortech.

Could you characterize opportunities ahead to generate high returns was unique transactions like that thank you.

Operator: Thank you. Thank you. Thank you. Thank you. Do it. Normal.dot Microsoft Office Word Title: Microsoft Office Word Document MSWordDoc Word.

[noise] Marshall.

Absolutely so.

Dave on your first question on the environment out there I just make a couple of points like I said in the script, we're very optimistic about the future and where our pipeline is and all the potential opportunities. We see going forward on this year has been a very busy year for us as we out.

David Reisinger: Document.8, [inaudible] Bye. Are there lots of opportunities for such deals; any sort of color on high-return potential deals would be helpful. Sure, Marshall, can you take the question? And we were having trouble hearing all of it, David.

Lines, you know doing both the traditional royalty transactions as well as the bio Haven deal.

On deals in terms of you know both traditional royalties and then things that are a little bit more creative so we definitely think that even in this environment.

Marshall Urist: I don't know if maybe Marshall did catch all of the questions. David, I didn't understand the first question you broke up, and then maybe the second question, if you could summarize it for us. I think we actually had trouble hearing it, unfortunately.

We are finding exciting opportunities for us and then the second part of your question on maybe it.

The second point I would make excuse me is you know it has obviously been a very strong biotech and biopharma environment over the past several years and eat or even over that longer period of time royalty from its been very successful finding finding exciting attractive opportunities. So I think occur.

David Reisinger: Okay, my apologies. Is this any better? It's much better.

David Reisinger: Okay, great. So, generally speaking, prices for assets are high. Could you just discuss Royalty Pharma's ability to uncover underappreciated opportunities? And then second, with respect to creative deals like Vazagipan and Nertech, could you characterize opportunities ahead to generate high returns with unique transactions like that? Thank you. Absolutely. So Dave, on your first question about the environment out there, I just make a couple of points.

Ross.

Across those types of environments, I think weve really we've been successful in continuing to expand our portfolio.

The second part of your question in terms of I think relate to I creative deals like we announced with with Bio Haven last week and you know I would say absolutely we think that solving problems for our partners, creating win win solutions to support to either pipeline development or.

Commercialization in creative ways and structuring in creative ways is one of our kind of core to our strategy and something that you know we think a lot about always trying to be created and think differently and we believe strongly if we do that that they're going to be many opportunities to.

Marshall Urist: Like I said, in the script, we're very optimistic about the future and where our pipeline is and all the potential opportunities we see going forward. You know, this year has been a very busy year for us, as we outlined, doing both traditional royalty transactions, as well as the Biohaven deal, over the past several years, and even over that longer period of time, Royalty Pharma has been very successful in finding exciting, attractive opportunities. So I think across those types of environments, I think we've been successful in continuing to expand our portfolio. The second part of your question, in terms of, I think, relates to creative deals like we announced with BioHaven last week. And I would say absolutely not.

To do that in the future so hopefully that hopefully that answers your question.

David maybe I'll just provide one additional perspective here, which is that our business model is quite different than what you might be referring to a very competitive environments for M&A given those cars. So do you have attractive assets.

Late stage unapproved products.

In biotech and also a very competitive competitive environment in licensing products from biotechs.

We're coming from a complete different angle them perspective, because as you know what we end up doing in many cases with biotechs for example, this financing.

Marshall Urist: We think that solving problems for our partners, creating win-win solutions to support either pipeline development or commercialization in creative ways, and structuring in creative ways, is one of the key pillars of our strategy and something that we think a lot about, always trying to be creative and think differently. And we believe strongly that if we do that, there are going to be many opportunities to do that in the future. So hopefully, that answers your question.

The late stage.

Development of their products and in those cases, we generally can come in with terms that are very attractive for this companies I loved lives that we would have the knick with youre doing a big deal with a big pharma, which would take a huge a significant portion of the of the economics in a product so for us honestly, it's different than I think it really speak.

Thanks to the strength of our model and how even in an environment, where maybe M&A is expensive and licensing is very competitive if we can feel extremely well deploying capital.

Great. Thank you.

Thank you. Our next question comes from Evan Jacobs with Bbs. Your line is open.

Pablo Legorreta: David, maybe I'll just provide one additional perspective here, which is that our business model is quite different than, you know, while you might be referring to a very competitive environment for M&A, given the scarcity of attractive assets, you know, late-stage and approved products in biotech, and also a very competitive environment for licensing products from biotech. We're coming from a completely different angle and perspective, because as you know, what we end up doing in many cases with biotech, for example, is financing the late stage development of their products, and in those cases, we generally can come in with terms that are very attractive for these companies, a lot less dilutive than equity or doing a big deal with a big pharma, which would take a huge, significant portion of the economics in So for us, honestly, it's different, and I think it really speaks to the strength of our model and how, even in an environment where maybe M&A is expensive and licensing is very competitive, we can still do extremely well deploying capital. Great, thank you.

Hi, Yes, just following up the on the question on leverage a understand your commentary on on over going over four times, the but that's on a gross level on them, although I'm not level.

You are actually under two times Levered wondering if there is a a minimum threshold that you go to and based on that net leverage number is there also a ceiling.

That you won't go above just want to understand sort of that run rate level that we should be thinking about a and then secondly, understanding that you know you'd be loads to.

Provide any details on ongoing discussions for future deals, but if there's any way of giving color around a how many deals we can expect over the next.

Six to 12 months.

That that would be very helpful. As far as how many you have sort of in the pipeline that ruling.

That kind of color would be would be helpful.

Sure Terry can you answer both questions. Please.

Sure. So in terms of the net leverage you're right that it that it. It's it's obviously much lower than that take gross leverage.

We always we added the rating agencies, though it's typically look at it on on a gross basis because the net number given you know the how we deploy capital over time that number's going to be much more volatile.

We obviously always want to have.

Net leverage that.

Substantially larger than our gross leverage, but we don't have specific target there, but we do always want to keep you know cash on the balance sheet. So we can go and pursue investment opportunities.

Operator: Thank you. Our next question comes from Navin Jacob with UBS. Your line is open.

Navin Jacob: Hi, Yes, just following up on the question on leverage. I understand your commentary on going over four times, but that's on a gross level. On a net level, you're actually under two times leveraged. I'm wondering if there is a minimum threshold that you go to, and based on that net leverage number, is there also a ceiling that you won't go above? I just want to understand sort of that run rate level that we should be thinking about.

But yeah I think that's the way we've always looked at it and the way the rating agencies always looked at it is on a gross basis given the volatility if the net number as we deploy capital over time.

And then your second question.

On the pipeline.

Hey, it's taught them, it's very challenging for us as you can imagine for competitive reasons.

To get into specifics on the pipeline. We're we're we're very happy we feel like the discussion that really only accelerated.

Through this difficult environment I think you know a lot more companies continue to think about royalties as a way to finance themselves whether it be selling.

Passive whole teeth that they already oh or using or creating synthetic royalties on their pipeline. So we feel really good about sort of the the discussions we're having but it's it's obviously for us it's quite unpredictable when we're actually going to transact on thing and sort of.

Terrance P. Coyne: And then secondly, understanding that you'd be loath to provide any details on ongoing discussions for future deals, but if there's any way of giving color around how many deals we can expect over the next six to 12 months, that would be very helpful as far as how many you have sort of in the pipeline that is brewing, that kind of color would be helpful. Sure, Terry, can you answer both questions, please? Sure. So...

Can't really provide much more specifics there unfortunately.

Thanks, so much.

Thank you and your next question comes from whomever spot from Evercore. Your line is now open.

Hi, Thanks, so much for taking my question look so there's some very obvious strength.

The business model, there's there's the economics on breakthrough drugs and I feel like a lot of that was very not be isn't clear, but maybe focusing a little more specifically onto royalty pharma specific issue first I know debate on the possibility of a possible big Lowi with both 2027, which is on the cystic fibrosis.

Terrance P. Coyne: In terms of net leverage, you're right that it's obviously much lower than gross leverage. We and the rating agencies, though, typically look at it on a gross basis because the net number, given how we deploy capital over time, that number is going to be much more volatile. We obviously always want to have net leverage that's substantially lower than our gross leverage, but we don't have a specific target there, but we do always want to keep cash on the balance sheet so we can pursue investment opportunities.

And my question was if you could give a specific color on why you think the royalties are not tied tons and instead tied to the components of truck NAFTA and I ask because.

FCC after birth, specifically on whether it be agreement was tied to duration of patents or not.

Murtech responded very definitively thing yet.

Well, that's Burke and secondly, maybe the funds for Kerry Kerry I know and on the nature of GAAP revenue.

And the nature of some of the GAAP expenses unexpected actually close make that not bay reflective of current pro forma but that doesn't change. The fact that the income statement that are all departments and putting it probably want to most novel there.

Terrance P. Coyne: But yeah, I think that the way we've always looked at it and the way the rating agencies have always looked at it is on a gross basis, given the volatility of the net number as we deploy capital over time. And then your second question on the pipeline. It's very challenging for us, as you can imagine, for competitive reasons, to get into specifics on the pipeline. But we're very happy. We feel like the discussions have really only accelerated in this difficult environment.

Business and my question is.

Do you envision a path.

To get some sort of alignment with FCC on being able to record non-GAAP EPS numbers.

Sure So I [laughter].

Sorry go ahead, sorry, what did you take that progression.

Yeah, So oh.

Unfortunately, I I don't know if it was my line, but I didn't hear your second question could you repeat it please.

Terrance P. Coyne: I think a lot more companies continue to think about royalties as a way to finance themselves, whether it be selling passive royalties that they already own or creating synthetic royalties on their pipeline. So we feel really good about the discussions we're having, but, obviously, for us, it's quite unpredictable when we're actually going to transact on things, and so we can't really provide much more specifics there, unfortunately. Thank you. And our next question comes from Umer Raffat from Evercore. Your line is now open.

Oh no problem I lost my question basically was Terry the them Wayne GAAP revenues are accounted for.

As well as.

The gap expected cash flows.

Being in the Opex line those two things are not exactly reflective of current period performance, but that's still doesn't change. The fact that the income statement constructing method or royalty pharma is the most novels there isn't all of large caps.

Including the way builder accounted for in the routine course of doesn't cetera. So my question is could you envision a path Mary whereby royalty pharma could get some sort of alignment with FCC, which enables it to report any non-GAAP EPS number seven for cash EPS number.

Okay sure. So so on your first question on aren't you mentioned in an L. we for for for vertex product. So I think we've been we've been very clear that the royalties are not tied to patent and that's based on the contract. So I don't think we can really say any.

Operator: Hi, thanks so much for taking my question. Look, there are some very obvious strengths of the business model. There's the economics on breakthrough drugs, and I feel like a lot of that is very obvious and clear. But maybe focusing a little more specifically on two Royalty Pharma-specific issues. First, I know there's debate on the possibility of a possible big LOE risk post-2027, which is from cystic fibrosis.

Thing other than that it's not it's simply not tied to Pat So as long as there are sales and Oh.

Products that we that our royalty bearing and we will and we will get royalties. So indicates a try CAFTA, we expect to get full royalties through 2037.

On your second question on a on our financials.

I think that we what we what we are focused on is the cash measures. Because we think they are most reflective of the performance of the business and that's what we would you know we where we have pointed to as what what management looks at a and we're really happy with how we're performing.

Umer Raffat: And my question was, if you could give specific color on why you think the royalties are not tied to patents and instead tied to the components of Trikafta. And I asked because SEC asked for it specifically on whether the agreement was tied to the duration of patents or not. Rotex responded very definitively, saying, yes, it was time to pass.

On those measures we did show in the slide deck, a cash per share a metric as well and we think that that that's what we're going to continue to focus on a as far as you know discussions with the with the assay see I think you know the.

GAAP income statement is the GAAP income statement and that we don't anticipate that that's going to change and we'll continue to provide these adjusted cash base measures are going forward as well.

Umer Raffat: So that's first. And secondly, maybe this one's for Terry. Terry, I know the nature of GAAP revenues and the nature of some of the GAAP expenses on expected cash flows make this not very reflective of current performance, but that doesn't change the fact that the income statement that Royalty Pharma is reporting is probably one of the most novel, And my question is, can you imagine a path to get some sort of alignment with FEC on being able to report to a non-FEC number instead of a currency? Thank you. Thanks. Go ahead, Terry.

Thank you.

Thank you NAS reminder, ladies and gentlemen to ask a question at this time you May press Star one.

And our next question comes from Terence Flynn from Goldman Sachs. Your line is now open.

Hi, good morning, Congrats an IPO as well and thanks for taking the questions I guess two for me, obviously home a captive is an important upcoming phase three read out you guys get royalties. There just wondering if you can speak at a high level about what drew you to this asset and how you see this this market evolving and where this would fit and.

Second is on your equity Stakes, obviously, that's part of the creative structures that you've talked about.

What or how do you think about selling those equity Stakes is this all returns based or how do you think about ultimately divesting those stakes. Thank you.

Terrance P. Coyne: Why don't you take the two questions? Yeah, so, Umer, unfortunately, I don't know if it was my line, but I didn't hear your second question. Could you repeat it, please?

Thank you for the question Marshall can you take the first question and Terry you can answer the question on equity Stakes.

Sure Hey.

Umer Raffat: Oh, no problem. My question basically was, Terry, the way GAAP revenues are accounted for as well as the GAAP expected cash flows being in the OPEC line, those two things are not exactly reflective of current period performance. But that still doesn't change the fact that the income statement constructed method for Royalty Pharma is the most novel there is in all of the large GAAPs, including the way deals are accounted for in the routine course of business, etc. So my question is, could you envisage a path, Terry, whereby Royalty Pharma could get some sort of alignment with the SEC, which enables it to report a non-GAAP EPS number instead of Okay, sure.

Good morning. Thanks, a question on Omecamtiv, So just finishing at a very high level on that one we are always looking for exciting products it up novel Cyan.

In markets, where there's a lot of unmet patient need and I think omecamtiv as I'm sure. You know is extremely exciting from a science perspective, nothing in heart failure as eight directly acting on the cardiac muscle had been developed to date and so we think that is exciting and interesting can get real.

May be a complement and differentiated to what is available in heart failure. Today on again, obviously heart failure is an area that does have a lot of unmet need there haven't been you know a lot of truly new classes of drugs that are.

Terrance P. Coyne: So, in your first question, you mentioned an LOE for Virtex products. So, I think we've been very clear that the royalties are not tied to patents, and that's based on the contract. So, I don't think we can really say anything other than that. It's simply not tied to patents.

There are there and also very large market and something that can you can support.

Lot Buster or multi blockbuster status for drugs. So you know it did check all of all of those boxes for us and we are looking forward to the to the results. This fall.

Terrance P. Coyne: So, as long as there are sales of products that are royalty-bearing, then we will get royalties. So, in the case of Trikafta, we expect to get full royalties through 2037. On your second question about our financials, I think that what we are focused on is the cash measures because we think they are most reflective of the performance of the business. And that's what we have pointed to as what management looks at. And we're really happy with how we're performing on those measures. We did show in the slide deck a cash per share metric as well. And we think that that's what we're going to continue to focus on. As far as discussions with the SEC are concerned, I think the gap income statement is the gap income statement. And we don't anticipate that that's going to change.

And then on the question on on our equity position Terence.

The way we look at it is were.

Similar to how we invest in royalties were focused on what we view as intrinsic value and so you know if it if it's an equity position was approaching what we view is intrinsic value or exceeded that than we would certainly ah think about selling.

Those positions at that time.

Thank you Nick concludes our question and answer session for today I'd like to turn the conference back over to Pablo Nevada for closing remarks.

Sure. Thank you operator, thank you to every one of the called for your interest in royalty pharma My team and I are tremendously excited about our future as a public company and we look forward.

To sharing our progress with you as we build our unique leadership role in funding the life Sciences innovation and ecosystem.

Terrance P. Coyne: And we'll continue to provide these adjusted cash-based measures going forward as well. Thank you. And as a reminder, ladies and gentlemen, At this time, you may press star 1.

I've any follow up questions. Please feel free to reach out to George with that we will conclude the call today. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may now disconnect.

Operator: And our next question comes from Terrence Flynn from Goldman Sachs. Your line is now open. Hi, good morning, congrats on the IPO as well, and thanks for taking the questions. I guess, too, for me, obviously, Omicamptive is an important upcoming phase three readout. You guys get royalties there.

[music].

Terence Flynn: Just wondering if you can speak at a high level about what drew you to this asset and how you see this market evolving and where this would fit. And the second is on your equity stakes. Obviously, that's part of the creative structures that you've talked about.

Terence Flynn: What are, how do you think about selling those equity stakes? Is this all returns-based, or how do you think about ultimately divesting those stakes? Thank you. Thank you for the question. Marshall, can you take the first question, and Terry, can you answer the question on equity stakes?

Marshall Urist: Sure, hey. Good morning, Terence. Thanks for the question on omacamptive. So speaking at a very high level on that one, we are always looking for exciting products with novel science in markets where there's a lot of unmet patient need. And I think omacamptive, as I'm sure you know, is, is extremely exciting from a science perspective; nothing in heart failure as a, you know, directly acting on the cardiac muscle has been developed to date. And so we think that is exciting and interesting and could really be a compliment and differentiated to what is available in heart failure today. And obviously, heart failure is an area that does have a lot of unmet need. There haven't been, you know, a lot of truly new classes of drugs that are there and also a very large market and something that can support blockbuster or multi-blockbuster status for a drug.

Marshall Urist: So, you know, it did check all of all of those boxes for us, and we are looking forward to the results this fall. And on the question about our equity position, Terrence, the way we look at it is, similar to how we invest in royalties, we're focused on what we view as intrinsic value. And so, you know, if an equity position was approaching what we viewed as its intrinsic value or exceeded that, then we would certainly think about selling those positions at that time.

Terrance P. Coyne: Thank you. And that concludes our question and answer session for today. I'd like to turn the conference back over to Pablo Legorreta for closing remarks. Sure. Thank you, Operator. And thank you to everyone on the call for your interest in Royalty Pharma. My team and I are tremendously excited about our future as a public company, and we look forward to sharing our progress with you as we build our unique leadership role in funding the life sciences, innovation, and ecosystem. If you have any follow-up questions, please feel free to reach out to George. With that, we will conclude our call today. Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may now disconnect.

[music].

Yeah.

[music].