Q1 2021 Royalty Pharma PLC Earnings Call

George Grofik: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Farma's first quarter results. You can find the line for this call on the investors page of our website at Royaltyfarmor.com.

George Grofik: Moving to slide three, I would like to remind you that the information presented in this call contained forward-looking statements that involve known and unknown risks, uncertainties, and other factors, which could cause actual results to differ materially. I refer you to our 10K on file with the SEC for a description of these risks. With that, please advance to slide four. Our speakers on the call today are Pablo Legaretta, founder and chief executive officer; Marshall Eurist, EVP, co-head of research and investments; Jim Reddick, EVP, co-head of research and investments and chief scientific officer; and Terry Coyne, EVP, chief financial officer.

George Grofik: Pablo will discuss the key highlights, after which Marshall and Jim will provide an update.

George Grofik: provide an update on our royalty acquisitions and portfolio. Kerry will then review the financials, and after concluding remarks from Pablo, we will hold a Q&A. Chris Haidt, our vice chairman, will also join the Q&A session. And with that, I'd like to turn the call over to Paul.

Pablo Legorreta: Thank you, George, and welcome to everyone on the call. I am delighted to report a great start to the year for Royalty Pharma, building on our strong momentum in 2020. Our financial performance in the first quarter was excellent, with strong double-digit top line and bottom-line growth. In addition, we continue to execute well against our strategy.

Pablo Legorreta: We announced up to 787 million new royalty transactions, as well as an exciting new thematic index collaboration with MSCI. And looking ahead, our pipeline continues to be very active as the demand for royalty funding for life sciences innovation is exceptionally strong. Lastly, we're also raising our guidance for adjusted cash receipts for 2021. On slide 7, you can see our financials in a little more detail. In the first quarter, we delivered 37% growth in both adjusted cash receipts and adjusted cash flow, which we consider to be our top and bottom lines, respectively.

Ladies and gentlemen, thank you for standby and lots of the royalty pharma first quarter 2021 financial results Conference call.

And now like to turn the call over to George growth U S.

S E T head of Investor Relations and Communications. Please go ahead Sir.

Good morning, and good afternoon to everyone on the call.

Thank you for joining us to review of royalty pharma as first quarter results you can find the signs of the call on the investors page of our website and royalty pharma dotcom.

Moving to slide three I would like to remind you. The information presented in the call contains forward looking statements that involve known and unknown risks uncertainties and other factors may cause actual results to differ materially.

And I refer you to our 10-K on file with the SEC for a description of these risks.

Pablo Legorreta: This excellent momentum positions us as well to deliver another year of strong performance, as Terry will speak to when he discusses our race guidance for this year. So overall, I'm extremely pleased with our start to 2021, and for reasons we will highlight during this presentation, we continue to believe our prospects look very promising. Before I hand it over to Marshall and Jim to update you on the royalty portfolio, I would like to elaborate a bit more on a recently announced collaboration with MSCI to develop and market thematic indexes in life science, biotechnology, and the pharmaceutical space.

With that please advance to slide for our speakers on the call today are Pablo and like the Russell founder and Chief Executive Officer, Mark for the Euro EVP and co head of research and investments, Jim Radick, EVP and co head of research and investments and Chief Scientific Officer.

And Terry Cohen, EVP, and Chief Financial Officer.

Pablo will discuss the key highlights after which Marshall and Jim will provide an update on our royalty acquisitions and portfolio.

Terry will then review the financials and after concluding remarks from Pablo we will hold the Q&A session.

Chris Wright, our Vice Chairman will also join the Q&A session and with that I'd like to turn the call over to Pablo.

Pablo Legorreta: Thematic investing is a fast-growing category of assets under their management globally, and we believe we can leverage our unique skill set, based on our deep scientific and clinical knowledge and our data analytics capabilities to develop novel indexes in partnership with MSCI, an innovative index provider. We see this collaboration as having a number of benefits for royalty pharma. First, it is expected to create a recurring and growing license revenue stream from global life sciences under management linked to these indexes.

Thank you George and welcome to everyone on the call.

I am delighted to report a great start to the year for royalty pharma.

Building off for a strong momentum in 'twenty, and 'twenty or financial performance and the first quarter was excellent with strong double digit topline and bottom line growth.

In addition, we continued to execute well against our strategy we.

Announced up to some I've heard and 87 million and royalty transactions as well as an exciting new thematic index collaboration with MSCI.

And looking ahead, our pipeline continues to be very active as the demand for royalty of funding of life Sciences and innovation.

Pablo Legorreta: Second, we believe it expands our commitment and recognition as a leading funder of innovation in the biopharmaceutical industry. And third, we expect that the upfront costs required will be minimal as we already have the capabilities in place to contribute to this important new collaboration. In terms of the financial contribution, we expect this collaboration to start small and play out over a longer period of time. That said, Metric Index investing is a rapidly growing area with more than $400 billion of assets under management, of which approximately $100 billion are invested in ETFs and $300 billion in mutual funds. With health care representing an important segment of the economy, contributing around 18% to US GDP, we think this collaboration could be an attractive source of recurring cash flow over With that, I will hand it over to you, Marshall.

Exceptionally strong lastly, we're also raising our guidance for adjusted cash receipts for 2020 one.

On slide seven you can see your financials and a little more detail.

And the first quarter, we delivered 37% growth in both adjusted cash receipts and the adjusted cash flow.

What we consider to be our top and bottom lines respectively.

Excellent momentum positions us well to.

To deliver another year of strong performance of steroid will speak to when he discusses our raised guidance for this year.

So overall I'm extremely pleased with our start to 'twenty to 'twenty, one and for reasons. We will highlight during this presentation. We continue to believe our prospects look very promising.

Before I hand, it over to Marshall and Jim to update you on the royalty portfolio I would like to elaborate a bit more on the recently announced collaboration with MSCI to develop and market thematic indexes and life Sciences biotechnology and from the pharmaceutical spaces.

Marshall Urist: Thank you, Pablo, and good morning and good afternoon to everyone every day. We're really excited about the royalty acquisitions we have announced so far in 2021. And I'd like to take a couple minutes to highlight two of our recent transactions, which expanded our portfolio of innovative high-growth therapy. Beginning on slide 10, in April we learned, we announced the acquisition of Glacost Smith-Cline's royalty interest in the Cabo Xanthinan products, Cabometics, and Cometian.

The American investing is the fast growing category of assets under management globally, and we believe we can leverage our unique skill set.

Based around our deep scientific and clinical knowledge, and our data and analytics capabilities to develop novel indexes and partnership with MSCI, and and and and all but the index provider.

Marshall Urist: For an upfront payment of $342 million and potential milestones of $50 million based on approvals in lung and prostate cancer, we will receive a 3% royalty on worldwide net sales. Kabumetics is a leading PKI approved for renal cell carcinoma and hepatocelular carcinoma, and is marketed by Ex-Elexus in the U.S. and by Ipsen and TKTA outside the U. Most recently, Cabometics received regulatory approvals in the U.S. and Europe for use in combination with the PD1 inhibitor optivo and first-line renal cell carcin. Kabametics is also in a number of ongoing combination studies in kidney, liver, lung, and prostate cancer.

We see this collaboration.

<unk> a number of benefits to royalty pharma first it is expected to create a recurring and growing and license revenue stream on global life Sciences and their management linked to the indexes second we believe it expands our commitment and recognition as the leading fonder.

Of innovation and the biopharmaceutical industry and third we expect the upfront costs required will be minimal as we already shop and the capabilities in place to contribute to this important new collaboration.

Marshall Urist: Overall, we see a tremendous opportunity for this therapy to improve treatment outcomes for a large and growing number of cancers. And, as reported by X-Lexis last week, the early launch in first-time kidney cancer in combination with Obdivo is off to a good start. In terms of the financials, the street expects Cabobetics and cometric sales to grow from just over $1 billion in 2020 to $3 billion by 2025, and we are excited to add this important therapy to our portfolio, which is expected to deliver an attractive return for Ruralty pharma as well.

In terms of the financial contribution we expect this collaboration to start small and play out over a longer period of time.

That said the medic index investing is a rapidly growing area with more than 400 billion of assets under management of which approximately 100 billion or invested in Etfs, and 300 billion and mutual funds with.

What the shelf kept representing unimportant one segment of the economy contributing to around 18%.

Two Jewish the U S. GDP with think of this collaboration could be an attractive source of recurring cash flow overtime.

Marshall Urist: Now moving to slide 11, we're excited by the opportunity for Oxulomo, a transformative medicine that significantly improves the lives of patients suffering from the ultra-rare genetic disorder primary hyper-oxyluria type 1 or pH 1. Oxulomo is an RNA interference therapeutic that lowers levels of oxalates that are abnormally elevated in pH 1, resulting in kidney stones and ultimately kidney failure. Oxluma was approved in the U.S. and Europe in November 2020 and is marketed by El Nilem, a company that has pioneered RNA interference therapies and successfully launched other rare disease medicines.

With that I will hand, it over to you Marshall.

Thank you Pablo and good morning, and good afternoon to everyone and we're really excited about the royalty acquisitions, we have announced so far in 2020, one and I'd like to take a couple of minutes. The highlight two of our recent transactions, which expanded our portfolio of innovative high growth therapies beginning.

Beginning on slide 10 in April we learn we announced the acquisition of Blackstone net claims royalty interest and the Cabozantinib products, Cabo medics and kinetic for an upfront payment of $342 million and potential milestones of $50 million based on approvals and lung and prostate cancer, we will receipt of 3% royalty.

Marshall Urist: Last month, we acquired Dicern as a mid-to-high single-digit royalty interest in Ocullumo for an upfront payment of $180 million and $60 million of potential sales-based milestones. Following its launch at the end of last year, the uptake has been encouraging, and we are optimistic that the number of patients that could benefit from OXLUMO should expand with increased awareness and diagnosis. Consensus estimates show sales of $333 million in 2025, and Alnilam has described a potential market opportunity in excess of $500 million. Similar to Kablametics, we expect OXLomo to generate an attractive return for royalty pharma. And with that, I will hand it over to Jim.

And worldwide net sales.

<unk> is the leading Teekay I approved for renal cell carcinoma, and have had a sale of carcinoma and is marketed by X elected and the U S and by Ipsen and Takeda outside the U S. Most recently Cabo net extra received regulatory approvals and the U S and Europe for use in combination with the PD, one inhibitor Opdivo and first line renal cell person.

And.

<unk> is also and a number of ongoing combination studies and kidney liver lung and prostate cancer overall, we see a tremendous opportunity for this therapy to improve treatment outcomes for a large and growing number of cancer patients and as reported by excellent just last week. The early launch and first line kidney cancer and combination with that.

Jim Reddick: Thanks, Marshall, and good morning, everyone. As shown on slide 13, we have seen strong progress from our portfolio in the first quarter.

Jim Reddick: in the first quarter, and there are multiple upcoming clinical and regulatory events that could impact our portfolio throughout 2021. So far in 2021, we have seen an important development for our migraine portfolio with the start of the Phase 2-3 study on BioHaven's intranasal Zavitapant. As a reminder, we agreed in August 2020 to fund the development of this therapy by providing up to $250 million to Biohaven. Should this therapy be approved for migraine, we will receive 1.9 times the funded amount, or $475 million, which would be paid over a 10-year period, and also a royalty on sales.

The bow is off to a good start.

In terms of the the financials the street expects Cabo medics, and and co metrics sales to grow from just over $1 billion in 2020 to $3 billion by 2020 five and we are excited to add this important therapy to our portfolio and expect it to deliver and attractive return for royalty pharma as well.

Now moving to slide 11, we're excited by the opportunity for us and them out of transformative medicine and that significantly improves the lives of patients suffering from the ultra rare genetic disorder primary hyper auxiliary at type one or ph, one I slim out of isn't RNA interference therapeutic which lowers the level of oxalate theyre abnormally elevated.

Jim Reddick: Additionally, in the first quarter, Bio Haven filed for European approval of its oral migraine therapy, NERTTT. And lastly, European regulators approved Roche's Eversdy for SMA, as well as Biocryst or Ledeo for hereditary angioedema. In April, the FDA granted full approval for Trodelby in triple negative breast cancer and accelerated approval for urethelial cancer. In addition, we saw the European approval of a subcutaneous formulation of Typhabri.

And ph, one, resulting in kidney stones, and ultimately kidney failure.

And I was approved and the U S and Europe in November 'twenty, and 'twenty and is marketed by an island of company that has pioneered the RNA interference therapies and successfully launched other rare disease medicine.

Last month, we acquired day center, and it's mid to high single digit royalty interests and a slim out for an upfront payment of $180 million and $60 million of potential sales based milestone following its launch at the end of last year. The uptake has been encouraging and we are optimistic that the number of patients that could benefit from <unk>.

Jim Reddick: For the rest of the year, I would call out the upcoming

Jim Reddick: Clinical data on Cabometics in first-line, hepaticellular carcinoma, and in prostate cancer, the readout for Trudelevy and hormone receptor positive breast cancer, as well

And those should expand and increase awareness and diagnosis consensus estimates show sales of $333 million and 2025 and on the island has described the potential market opportunity and excess of $500 million similar to Cabo medics, we expect the accident to generate an attractive return for royalty pharma and with that I will hand it over.

Terrance P. Coyne: as well as the phase three results of PTO27, the combination asthma therapy that we have funded through a billion dollars that would be marketed by AstraZeneca. So, in short, you can see the multiple milestones over the coming quarters showing the continued development of our portfolio, with that alternative to Terry. Thanks, Jim.

The channel.

Thank you Marshall and good morning, everyone.

And as shown on slide 13, we have seen strong progress from our portfolio and the first quarter and there are multiple upcoming clinical and regulatory events that could impact our portfolio of throughout 2021.

Terrance P. Coyne: Let's move to slide 15. We delivered a very strong first quarter with total royalty receipts of 19% year over year. As you can see, royalties from our largest franchise, Cystic Vibrosis, grew 68% this quarter. This substantial growth was driven by two factors.

So far and 2021 we have seen an important development for migraine portfolio with the start of the phase two three study and by the hidden intranasal the Virgin pet.

Terrance P. Coyne: First, the continued strong performance of the franchise led by growth of trifacta, Triapha in the U.S., and Cftrio in the EU, the impact of which was enhanced by our acquisition of the residual loyalty interest from the Cystic Fibrosis Foundation in November of last year. And second, a one-time adjustment related to Vertex's agreement with the French authorities around reimbursement for our Camby that reduced royalty receipts in the first And Bruvica, Extandi, and Promacta also contributed double-digit growth in the quarter. We are also pleased with the contribution from several recently approved therapies, including Tridelvy, Everisdy, and NIRTKK ODT.

As a reminder, we agreed in August 2020 to fund the development of this therapy by providing up to $250 million to buy and Haven should this therapy would be approved and migraine. We all received one nine times, the funded amount or $475 million, which would be paid over a 10 year period and also a royalty on sales.

Additionally, in the first quarter final Haven filed for European approval of its the world migraine therapy <unk> ODT.

And lastly, the.

The European regulators approved roche's and risky grants and a.

As well as biocryst or the day of for hereditary angioedema.

And April the FDA granted full approval for true Dolby and triple negative breast cancer and accelerated approval in Europe. The illegal cancer. In addition, we some of the European approval of the.

Terrance P. Coyne: NERTech is becoming an increasingly important contributor to our business after we received a $16 million payment from Biohaven on the Series A preferred equity this quarter. This payment was triggered by the approval of the product last year and is the first of 16 consecutive quarterly payments we will receive. We also experienced a couple of headwinds this quarter.

Subcutaneous formulation of the Tysabri.

For the rest of the year I would call out of the upcoming clinical data on Cabo medics and first line of hepatic failure and carcinoma.

Terrance P. Coyne: Specifically, the HIV franchise was down significantly, primarily as a result of the LOEs for Travada and Tripla, as well as a lower percentage of combination sales attributable to enter cytivine in the United States. We expect similar dynamics to impact the HIV franchise in the second quarter, leading to a year-over-year decline. Taken together, the portfolio drivers mentioned previously, as well as contributions from several recently approved products, more than offset the impact of declines in royalties for the HIV franchise, delivering strong growth in total royalty receipts.

And in prostate cancer the.

Readouts for true Dolby and hormone receptor positive breast cancer as well as the phase III results of the PTO to set and the combination as the therapy that we have funded through the $1 billion that would be marketed by astrazeneca.

So and sure.

You can see the multiple milestones over the coming quarters, showing the continued development of our portfolio.

And with that I'll turn it to Gary.

Thanks, Jim.

The slide 15.

We delivered a very strong first quarter with total royalty receipts of 19% year over year.

And you can see royalties from our largest franchise cystic fibrosis grew 68% this quarter. This.

Terrance P. Coyne: Slide 16 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-gap metric for us, which we arrive at after deducting non-controlling interest. This amounted to $524 million in the quarter, growth of 37% compared to last year's first quarter. As Pablo noted earlier, we did have a high base of comparison in the first quarter of 2020 that increased our growth rate in the first quarter of 2021. Excluding this item, year-over-year at Justy Cashers, Stee growth would still have been 22%.

And this substantial growth was driven by two factors first the continued strong performance of the franchise led by growth of Tri factor try catheter and the U S and Caf trio and the EU the.

The impact of which was enhanced by our acquisition of the and residual royalty interest from the cystic fibrosis Foundation and November of last year and <unk>.

And.

The one time adjustment related to vertex of agreement with the French authorities around reimbursement for our candy that reduced royalty receipts in the first quarter of 2020.

And Bruce Leica, extending and Promacta also contributed double digit growth and the quarter.

Terrance P. Coyne: When we move left to right, operating in professional costs of $42 million equated to 8% of adjusted cash receipts. This percentage is lower than in the past couple of quarters, which included certain IPO expenses, as well as expenses related to our bond offer. The net interest of $63 million reflected the first semi-annual interest payment following our $6 billion unsecured note offering in 2020. As a reminder, the next semi-annual interest payment is due in September, meaning our net interest expense will be de minimis in the second and fourth quarters.

We're also pleased with the contributions from several recently approved therapies, including <unk> and risky and near Cat the ODT.

And aerotech is becoming an increasingly important contributor to our business. After we received the $16 million payment from violate and on the series a preferred equity. This quarter. This payment was triggered by the approval of the product last year and is the first of 16 consecutive quarterly payments we will receive.

We also experienced a couple of headwinds this quarter, specifically the HIV franchise was down significantly primarily as a result of the low <unk> for Truvada and the triplet as well as a lower percentage of combination sales attributable to emtricitabine and the United States.

Terrance P. Coyne: After other items of $7 million, we reported adjusted cash flow, our bottom-line earnings, of $409 million, or $67 per share. This translates to an adjusted cash flow margin of 78.1%, again highlighting the strong cash conversion in our business model. Turning to our balance sheet on slide 17, we ended the quarter with cash and marketable securities of $1.8 billion. The decrease of just over $200 million since the start of the year reflects the $521 million deployed on royalty acquisitions, which was largely offset by the strong adjusted cash flow I just described. We finished the quarter with $6 billion in investment-grade debt, which, alongside our undrawn $1.5 billion revolving credit facility, gives us a strong liquidity position.

We expect similar dynamics to impact the HIV franchise, and the second quarter, leading to year over year decline.

Taken together the portfolio of drivers mentioned previously as well as contributions from several recently approved products more than offset the impact of declines and royalties for the HIV franchise, delivering strong growth and total royalty receipts.

Slide 16 shows how our royalty and receipts translates to strong adjusted cash flow and the quarter.

As Youre aware adjusted cash receipt to the key non-GAAP metric for us, which we arrived that after deducting noncontrolling interests.

This amount at the $524 million and the quarter growth of 37% compared to last year's first quarter as Pablo and had it earlier.

We did recognize the high basis of comparison and the first quarter of 2020 that increased our growth rate and the first quarter of 2021.

Terrance P. Coyne: Taken together with leverage of 2.4 times EVA on a net basis and 3.4 times EVA on a gross basis, we remain well positioned to continue to fund important innovation in biopharmaceuticals. My final slide provides our 2021 full-year guidance. We now expect adjusted cash receipts to be in the range of $1.94 to $1.98 billion, an increase from our previous guidance. This new adjusted cash receipt guidance represents an increase of between 8 to 10% over the $1.8 billion we delivered in 2020 and reflects a number of pushes and pulls.

Excluding this item year over year, adjusted cash of sneakers would've still been 22%.

When we move left to right operating and professional cost of $42 million equated to 8% of adjusted cash receipts.

And this percentage is lower than in the past couple of quarters, which included certain IPO expenses as well as expenses related to our bond offering.

Net interest of $63 million reflected the first semiannual interest payment following our $6 billion unsecured note offering in 2020.

Terrance P. Coyne: In particular, this raised guidance reflects the new royalty acquisitions Marshall spoke about, as well as the strength of our portfolio, all set by declines in HIV that were more substantial than we initially expected. We are quite encouraged to see that despite headwinds within our HIV franchise, which we do not expect to be a contributor to our business beyond 2021, we are still able to increase guidance to year-over-year growth of 8 to 10 percent.

As a reminder, the next semiannual interest payment is due in September.

Net interest expense will be de Minimis, and the second and fourth quarters.

After other items of $7 million.

We reported adjusted cash flow, our bottom line earnings of $409 million for 67 per share.

And this translates to an adjusted cash flow margin of 78, 1% again, highlighting the strong cash conversion and our business model.

Turning to our balance sheet on slide 17, we ended the quarter with cash and marketable securities of $1 $8 billion the day.

Terrance P. Coyne: Looking forward to the second quarter, we expect just cash receipts, excluding new investments, to be at a similar level as the second quarter of last year. Turning to operating costs, we expect these to be approximately 9 to 10% of adjusted cash receipts for the year, which is unchanged from our prior guidance. Consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account any future acquisitions. With that, I would like to hand the call back to Pablo for his closing comment.

Decrease of just over $200 million since the start of the year reflects the $521 million deployed on and royalty acquisitions, which was largely offset by the strong adjusted cash flow I just described.

We finished the quarter with $6 billion of investment grade debt, which alongside of our Undrawn $1 5 billion dollar revolving credit facility gives us the strong liquidity position.

Taken taken together with leverage of two four times EBITDA on a net basis and 3.4 times EBITDA on a gross basis, we remain well positioned to continue to fund important innovation and Biopharma.

Pablo Legorreta: Thanks, Terry. So, in conclusion, we're experiencing a really strong start to the year. We continue to be very excited about the growing role of royalty funding to advance health outcomes for patients globally, as well as the powerful dynamics in our business. With that, I would like to open the call to Q&A back to you, George.

My final slide provides our 2021 full year guidance.

We now expect adjusted cash receipts to be and the range of $1 94 to $1 $98 billion and.

And increase from our previous guidance.

Our new adjusted cash receipt guidance represents an increase of between 8% to 10% over the $1 $8 billion. We delivered in 2020 and reflects the number of pushes and pulls.

George Grofik: Thanks, Pablo. We'll now open the call to your questions. Operator, please take the first question.

In particular this raise guidance reflects the new royalty acquisitions Marshall spoke about as well as the strength of our portfolio.

Operator: Ladies and gentlemen, to ask a question, please press star than one. If your question has been answered and you'd like to remove yourself from the queue, you may press the pound key. Our first question comes from Christopher Schott with J.P. Morgan. Your line is open.

And all set by declines and HIV that were more substantial than we initially expected.

And we're quite encouraged to see that our that despite.

<unk> headwinds with our within our HIV franchise, which we do not expect to be a contributor to our business beyond 2021.

We are still able to increase guidance for year over year growth of 8% to 10%.

Stephen Michael Scala: Good morning. This is Chris Narrow on behalf of Chris Schott.

Stephen Michael Scala: So the first question is a high-level one on inflation. How does the potential for higher inflation impact RELP Farmers' business model going forward? And specifically, how do you view the balance between the cost of funding and for future transactions and the potential for lower sector valuations? The second one's on synthetic royalty deals. Ruralty Farm introduced synthetic royalty deals several years ago and has completed several transactions, but this remains a fairly small portion of the Ruralty market overall. How much of these transactions do you see as part of your business mix going forward, and how much traction have you received negotiating synthetic Royalty deals with your potential partners? Thanks so much.

Looking forward for the second quarter, we expect adjusted cash receipts, excluding new investments to be at a similar level as the second quarter of last year.

Turning to operating costs, we expect these to be approximately 9% to 10% of adjusted cash receipts for the year, which is unchanged from our prior guidance.

Consistent with our standard practice. This guidance is based on our portfolio as of today and does not take into account any future acquisitions.

With that I would like to hand, the call back to Pablo for his closing comments.

Thanks, Terry so in conclusion, we're experiencing a really strong start to the year. We continued to be very excited about the growing the role of royalty of funding to advance the shelf outcomes for patients globally as well as the powerful dynamics of our business with that I would like to open the call to Q&A back to you and <unk>.

George Grofik: Terry, would you mind taking the first question, and maybe Marshall can take the second one?

Stephen Michael Scala: Yeah, and maybe before I answer the first one, I just, could you just sort of clarify the question? I want to make sure I understand it.

<unk>.

Thanks, Pablo and we'll now open the call for your questions.

Please take the first question.

Ladies and gentlemen asked the question. Please press Star then one if your question has some the answers and you'd like to remove yourself from the queue. You May press. The pound key our first question comes from Christopher Schott with J P. Morgan Your line is open.

Stephen Michael Scala: Yeah, so with the higher inflation, we're seeing the potential for kind of a negative impact on sector valuations. So I'm just trying to think through all the pushes and pulls on Ruralty Farmer's business model and what impact inflation may have on your business going forward. Okay.

Good morning. This is Christina on for Chris Schott, So first question's a high level one on inflation and how does the how does the potential for higher inflation impacts of royalty pharma is business model going forward and specifically how do you view the balance between the cost of funding and the for future transactions and the potential for lower sector.

Terrance P. Coyne: Okay, understood. Others could weigh in as well, but, you know, I would say our view is that if valuations across the sector are impacted by higher inflation, then that could actually increase our opportunity set as companies look for alternative ways to fund themselves beyond just the traditional equity capital markets. We think that that could actually enhance our business. That makes sense. Good morning.

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The second one's on synthetic royalty deals royalty pharma introduced synthetic royalty deal several years ago and has completed several transactions, but this remains a fairly small portion of the royalty market overall.

And how much of these transactions are you.

Marshall Urist: On the second, happier question on synthetic royalties. So, yeah, thanks for the question. We, as we've talked about in the past, are really excited about the potential for synthetic royalties as a new and, you know, ultimately important way of funding drug development and innovation in our sector. You know, we are very active there, and it is expected to become an important and increasingly important part of our business over time. I think, as you've seen in the past, we do have a very, um, a very, you know, high bar when we look at new opportunities, and we're going to maintain that going forward.

Do you see.

Part of your business mix going forward and how much traction have you received negotiating synthetic royalty deals with your potential partners. Thanks, so much.

Terry would you might section of the first question and maybe Marshall can take the second one.

Yeah.

Maybe before it for I answer the first one I just could you just sort of clarify the question.

I wanted to make sure I understand the question.

Yes.

With the higher inflation.

Seeing the potential for kind of net.

The negative impact on sector valuations.

We're just I'm, just trying to think through or the other.

Marshall Urist: So, you know, I think this is exciting. We are seeing a lot of traction there, actually, and, you know, I would remind everyone of our last transaction there with Biocryst at the end of last year. Oradeo's launch there is off to a great start. So we think the biocryst team is doing a great job with that launch, and I think you'll continue to see us do those deals in the future and continue to add to our portfolio through synthetic royalties over the coming years.

And as and pulls on royalty pharma as a business model.

And what impact of inflation may have one of your business going forwards.

Okay understood so yeah.

Other should could could weigh in as well, but I would say.

Our view is.

And if valuations across the sector.

And are impacted by higher inflation and that could actually increase our opportunity set.

As companies look for alternative ways to fund themselves beyond just the traditional equity capital markets.

That could actually.

Enhance our business.

Geoffrey Meacham: Our next question comes from Jeff Meacham with Bank of America. Your line is open.

That makes sense and festival.

Good morning, and I'm the second half of your question on synthetic royalty so yeah.

Yes. Thanks for the question, we as we talked about in the past we are really excited about the potential.

Geoffrey Meacham: Hey, guys, good morning, and thanks for the questions. I just have a few. The first one is, how much of a contributor can the MSCI collaboration ultimately be? I just want to know if you guys have any more details about how it could generate cash for royalty. And the second question is, you know, Terry, you mentioned that the HIV erosion was worse than you guys originally modeled. I know you typically look at consensus numbers per each product, but going forward, are there, you know, additional analyses that you could conduct? I'm just trying to think of all the inputs and outputs to what you guys provide as guidance and how that could be enhanced. Thank you.

For synthetic royalties and they knew and ultimately important way of funding drug development and innovation and our sector.

We are very active there and expect it to become an important and increasing part of our business over time.

And as you've seen in the past.

We do have a very.

Hey, Barry.

High bar when we look at when we look at new opportunities and we're going to maintain that growing going forward. So.

I think this is I think it's exciting we are seeing a lot of traction there and actually and I would I would remind everyone of our last transaction there with biocryst and at the end of last year.

Pablo Legorreta: So I'll take the first question, Jeff. Thank you for the question, and good to hear from you. And I think just very briefly on HIV. I mean, this is the end of this investment, so it really is not going to matter much regarding the future. But Terry can give you more information there. So regarding MSCI, if I step back a little bit, just, you know, from a big picture perspective, let me just mention a few things.

Orlando's launch there is off to a great start. So we think the we think the Biocryst team is doing a great job with that launch and I think youll continue to see US do those deals in the future and continue and continue to add to our portfolio through through synthetic royalties over the coming years.

Yes.

Thanks for taking the questions.

And next question.

Pablo Legorreta: One is it's a business that I've followed for decades because, I know well, have had a relationship with a chairman and CEO for decades. And I recall in conversations with him many years ago where I said to him, I think your business is really, really interesting. Because if you think about it, you know, the index is really what they produce is a royalty on global assets under management. The way the index creators and publishers, MSC, being, in my view, the most creative of the three big ones. The way they get compensated is that all of the asset managers that license their indexes pay them a basis point, you know, three, five, six basis points on the assets managed by the specific fund.

Our next question comes from Geoff Meacham with Bank of America. Your line is open.

Hey, guys. Good morning, and thanks for the question just have a few.

The first one is how much of a contributor can the MSCI collaboration ultimately be I. Just wanted to know if you guys had any more detail about.

How is it could generate cash for royalty.

And the second question is Terry you mentioned of the HIV erosion was worse than you guys originally modeled.

You typically look at consensus numbers for each product, but going forward are there additional analyses that you could conduct and I'm just trying to think of all the inputs and outputs to what you guys provided as guidance and how that could be enhanced thank you.

Pablo Legorreta: So if you have, you know, Capri Fidelity, or a Mundi that is licensing those indexes, they would pay MSCI basis points, as I said, on their assets under management. And if you think about it over long periods of time, assets under management grow, they could fluctuate from one quarter to the next because of volatility and the markets. But if you look over a 5, 10, 20-year period, you know, there's obviously significant growth in assets under management. Why? Because economies grow, people save more. So it's a very interesting dynamic. There are many people out there.

So I'll take the first question Jeff. Thank you for the question and good to hear you.

And I think just very briefly on HIV I mean this is the end of this investment. So it really is not going to drive a much regarding the future, but I can give you more.

Uh huh.

The information there so regarding the MSCI.

If I step back a little bit just from a big picture perspective, Let me just mentioned and a few things one is it's a business that I've provided for decades because.

Well how about the.

Our relationship with the chairman and CEO of decades and.

Recall.

And the conversations with him many years ago, where I said to him and I think your business is really really interesting because if you think about it.

Pablo Legorreta: And I recall in a conversation with Henry, I said to him, I love your business. You really have this royalty on global assets under management. So that, you know, the relationship continued.

The index is really what they what they produce as royalty on global assets under management the way in the.

Pablo Legorreta: He's obviously on our board now, and about a year ago, we started to discuss the opportunity in life sciences because it's an incredibly important part of the world economy, and maybe broader than life sciences, you know, all health care and growing, and highly complex. So if you just take, you know, biopharma, for example. We have the big pharma, there's an index there, and we have biotech, also with an index.

Creators and publishers MSCI and my view of the most creative of the three big ones.

And the way they get compensated is that all of the asset managers that license the index of pay them.

Basis points three of five six basis points on the assets managed by the specific fund. So if you have copper you fidelity a movie that is licensing of those indexes.

Pablo Legorreta: But it's probably, as far as it goes, there might be one or two other small indexes that are maybe not that common, or investors don't pay too much attention to. But if you think of biotech, with more than 8,000 biotech companies and, you know, 3,000 that are public, highly complicated. You know, you have companies that focus on one product, and there might be oncology or multiple sclerosis companies that have, you know, technology platforms, either gene therapies or, you name it. You know, it's highly complex. So it's very difficult for investors to really understand how to invest in biotech. Obviously, they do it by investing in mutual funds.

And would pay.

MSCI.

Basis points, so as I said on there.

Assets under management, and if you think about it over long periods of time assets under management growth they could fluctuate from one quarter to the other because of the volatility and the market, but if you look over a 510 20 year period.

And so obviously.

The significant growth and assets under management and why because of economies grow people save more so so it's a very interesting dynamic there and.

And our conversation with Henry and said to him I Love. Your business you really have this royalty and global assets under management. So the.

Our relationship continued the Qs, obviously, and our board now and a year ago, we started to discuss about the opportunity and life Sciences, because it's an incredibly important part of the world economy, and maybe maybe broader than life Sciences healthcare.

Pablo Legorreta: But if you then look at indexes and life sciences, so if you look at indexes in general, you know, we all grew up with indexes that were sector indexes, like utilities, banks, insurance companies. And a very interesting new trend, a recent trend, is indexes that are thematic, where, you know, investors can invest based on a specific theme they like. And when we saw this in life sciences, we just thought that there was just an incredible opportunity to start to create an index.

And growing.

And highly complex of you just take.

Biopharma for example, and we have the big pharma is there of Sun Index, there and we have biotech also with and index and biotech, but it's probably as far as it goes there might be one or two other small indexes that are maybe not the common or investors don't pay too much attention to but if you think of biotech with more than 8000 and biotech.

Pablo Legorreta: That would actually track better what's going on in specific themes within life sciences. For example, you could create an oncology index. You could create an early stage biotech index where investors could invest in early stage biotech that offers huge upside potential but is risky. And if you do it by investing in an ETF that gives exposure to early stage biotech, it's much safer than actually picking one or two stocks where, you know, it could be tough, and you could lose money.

The companies and 3000 and better public.

Highly complex you have companies that focus on one product and then there might be and oncology or and multiple sclerosis companies that have the.

And that was the platforms either of gene therapies or you name. It it's highly complex. So it's very difficult for investors really too.

I understand how to invest in biotech obviously.

And they do it by investing and mutual funds.

Pablo Legorreta: So, you know, and if you just think about it, we could create indexes that maybe track Chinese companies, indexes that are going to track other things. It could be a CRO index or, you know, a hospital index.

But if you then look at index is and life Sciences.

And index is in general.

All grew up with index says that we're sector index.

Utilities banks insurance companies and a very interesting new trends recent trend is indexes that are somatic ware.

Pablo Legorreta: And, you know, so from our perspective, at Royalty Farm, what's so interesting for us is that we're going to apply our knowledge built over decades, there's a knowledge base and expertise we have, and just monetize it, create, from that knowledge that we already have, we're going to create a revenue stream for us. That is really a royalty on, you know, investment in life sciences, global assets under their management, invested in life sciences, linked to these indexes. It's going to be a sharing of the top line.

The investors can invest based on the specific team day theme, they like and when we saw this and life Sciences. We just thought that there was just an incredible opportunity to start to create index says that would actually tracked better what's going on and specific themes within life Sciences. So you could create and oncology index you could create an early stage biotech.

The index, where and restaurants could invest and early stage biotechs that offer of huge upside potential but are risky and if if you do it by investing and an ETF for that gives the exposure too early.

Pablo Legorreta: We're going to get a percentage of the top line, but it's not quite, you know, sort of 50-50, because obviously we recognize that this is, you know, a very significant business for MSCI, and they actually have all of the infrastructure worldwide to distribute these indexes, but it's a decent size royalty, not far from, you know, an equal share. So it's very exciting to us. It will start small, but if we look, you know, into the future, maybe three, five years, 10 years from now, I think it will be an important revenue contributor.

Early stage biotech, it's much more interesting safer than actually picking one or two stocks where it could be.

And and you could lose money so so and.

And if you just think about it we could create index says that maybe attract Chinese companies.

The indexes that are going to track other aspects of it could be a <unk> index.

Our hospital and index and.

So from our perspective of royalty pharma of what's so interesting for US is that we're going to apply our knowledge build over over the decades, there's knowledge base and expertise, we have and just monetize it create from that knowledge that we already have.

Pablo Legorreta: And another really important thing is that the cost for us is very marginal because we're already have a lot of this knowledge. We're actually investing in the new group that we created, the strategy and analytics group, trying to even enhance our knowledge base. So, you know, for us to actually provide this and the service we need to provide in the collaboration with MSCI, it's going to be half a million, million-dollar incremental investment, which is well worth it.

We're going to create a revenue stream for us that is really a royalty on an investment in life Sciences. The global assets under management has invested and life sciences linked to this indexes and.

Pablo Legorreta: And maybe just to finish, to give you a sense of why this is exciting, if we look at all of these robotic technologies that are changing the world, and here I'm talking about, you know, technology in general, the internet, all of the things that we always talk about, but also biotech, very important. It is estimated that the...

And.

It's gonna be a sharing of the top line, we're going to get a percentage of the top line, but it is not quite sort of 50 50, because obviously, we recognize that this is a.

A very significant business for MSCI and its actually.

They have all of the infrastructure worldwide to distribute this index this but it's a decent size of royalty and not far from and equal sharing so it's very exciting to us.

Pablo Legorreta: Creation of value, if you look at the market cap created by all of these disruptive technologies, which is about $10 trillion in 2020, it's expected to get over $60 trillion in additional market cap created by all of the new companies that end up, you know, going public and then, you know, achieving nice growth. This is expected to get up to about $16 trillion by the mid-2030s. And if we look at thematic investing, it's sort of, you know, achieving.

It will start.

Low, but if we look into the future maybe three of five years 10 years from now I think it will be an important revenue contributor and another really important thing is that it's actually.

The cost for us is very marginal because we're already the.

We have a lot of this knowledge, we're actually investing.

And with the new and new group that we created the <unk>.

Pablo Legorreta: A $400 billion market where you have about $100 billion invested in ETFs and $300 billion invested in mutual funds. And that is growing very fast. It was about $150 billion in 2015, and it will be $400 billion, you know, in 2020. So that gives you a sense of the growth opportunity. And I hope that answers your question, Jeff.

Strategy and the analytics group.

Trying to even enhance more of our knowledge base, so for us to actually provide this and and and and this.

The service, we need to provide and the collaboration with MSCI.

B half of millions of millions of dollars incremental investment and which is well worth it and maybe just to finish to give you a sense of why this is exciting it will.

Terrance P. Coyne: And then Jeff on HIV and, you know, how we think about consensus. We still do feel, you know, generally pretty comfortable with using consensus for sort of the guidance that we provide. HIV is a little unique in that there's sort of two factors. There's net sales of Gilead's products, but then there's also the percent of those sales that is attributable to EMPRestidabine, and that's the part that came in much lower than we initially anticipated.

Look at.

All of the disruptive technologies that are changing of the world and here I'm talking about you know just technology in general.

The software.

For net all of the things that we always talk about but also of biotech very important.

And it is estimated that.

And the.

Creation of value. If you look at the market cap created by all of this disruptive technologies, which is about 10 trillion daughters, and 2020. It is expected to get over 60 trillion dollars.

And and additional market cap created all of the new companies that ends up going public and then you know.

Terrance P. Coyne: But as Pablo mentioned, you know, HIV has been an amazing investment for us, but it's not a part of our future, and we're really encouraged to see that the growth across the rest of the business has more than offset those substantial declines within HIV. Okay, great. Thanks guys for all the detail.

Achieving nice growth. This is expected to get up to about 16 trillion by the mid 2000, and <unk> and if we look at Sematic investing it's already of 400 billion.

Market, where you have about 100 billion invested in.

Jim Reddick: Great. Thanks so much for taking the question. I had one on Tridelvey. There's been some discussion recently about the impact of prior CDK-4-6 treatment that that could have on the efficacy of the drug and the ongoing H.R. positive phase 3 trial. In fact, if you look back at the Phase 1-2 data in HR-positive, there is a bigger benefit for the drug in people that were naive to CDK-4-6

And Etfs, and 300 billion invested and mutual funds.

So and that is growing very fast it was about 150 billion in 2015, and its 400 billion.

And you know and 2020, so that gives you a sense of the growth opportunity.

And I hope that answers your question Jeff.

And then Jeff on on the HIV and.

And.

And how we think about consensus we still do you feel.

Jim Reddick: Sure, hey, turn, good morning. So on Tridelby, thanks for the question. We've certainly been, you know, following all of the kind of debate out there. And, you know, it's certainly interesting. You know, I'd say bigger picture first, just bigger picture. Taking a step back, we think Trudelvie is exciting and is and will be an important therapy. You know, and certainly HR positive is one aspect of that.

Candidly pretty comfortable with using consensus for sort of.

The the guidance that we provide.

One of the unique and that there's sort of two factors. There's there's net sales of <unk>.

Gilead products, but then there's also the percentage of the sales that is attributable to Emtricitabine and that's actually the part that actually came in.

And much lower than and we had initially anticipated, but as Pablo mentioned.

Jim Reddick: But if you think that, taking a step back, there's a lot more there in terms of, you know, growth within triple negative, as well as the latter and then other indications. So, you know, this has been a real kind of win-win for us in terms of adding this to our portfolio and as a great example of the power of a synthetic royalty transaction. You know, that being said with respect specifically to the HR positive trial, you know, we have, you know, we know what you guys know about this.

HIV has been and amazing investment for us.

But it's not it's not a part of our future and we're really encouraged to see that the.

The growth across the rest of the business and more than offset the.

The substantial declines within HIV.

Okay, great. Thanks, guys for all of the detail.

Yeah.

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

Great. Thanks, so much for taking the question I had one on <unk>.

Jim Reddick: So I think we're following this, you know, and look forward to the readout this year. Gilead obviously took a close look at this, I think, as they have talked about, and has powered the trial adequately for what will hopefully be a positive readout later this year. So I think, you know, something that is interesting, but regardless, you know, we think there's a lot of growth and future for Trudelby.

There's been some discussion recently about the impact of prior CDK for six treatment.

And that that could have on the efficacy of the drug and the ongoing HR positive phase III trial and the.

If you look back of the phase one two data and nature of positive there was a bigger benefit for the drug and people that were naive to CDK for six versus those that were previously exposed. So just wondering Marshall if you could.

Comment and if you of any perspective on the on this this trials I know, it's a pretty important growth driver for the future opportunity here. Thank you.

Sure Hey, good morning, so entre of Lv and thanks for the question and we've certainly been following the following all of the the.

Jim Reddick: Thank you, parents. Operator, we'll pick the next question. Our next question.

Operator: Our next question comes from Greg Gilbert with Tourist Securities. Your line is open.

And I'm kind of debate out there and it's sort.

Stephen Michael Scala: Good morning, team. A couple of strategy questions. You've made it clear that you would continue to...

The interesting.

And I'd say bigger picture and first just bigger picture, taking a step back.

Stephen Michael Scala: consider development stage deals for products in pipelines. But what's your appetite to invest in earlier stage, but maybe more platform-oriented, technology?

We think true ELV is and it is an exciting and going to be and is and will be and important therapy and <unk>.

And the HR positive is one aspect of that but if you think taking a step back you know there's a lot more there in terms of growing within triple negative.

Stephen Michael Scala: That could later spawn multiple products and multiple areas where you're not sure what those areas are.

And as well as bladder and then other indications so.

Stephen Michael Scala: products are yet. And then back to the MSCI arrangement, a really interesting announcement there. Are there other themes under consideration in the near-termers, the goal to sort of observe these two and see how they go? But maybe as an offshoot of that, is this?

This has been a you know a real kind of a win win for us in terms of adding this to our portfolio in terms of a great example of the power of the synthetic royalty transaction.

That being said with respect specifically to the HR positive trial.

We have.

We know what you guys know about this so I think we're following this and look forward to the readout this year.

Stephen Michael Scala: effort potentially helpful to your core business in sourcing new deals unrelated to the MSCI collaboration. Thank you.

Gilead, obviously took a close look at this I think as they have talked about and it has powered the trial adequately.

Stephen Michael Scala: to your core business in sourcing new deals unrelated to the MSCI collaboration. Thank you.

Pablo Legorreta: Problem? Oh, sorry, sorry, I was muted. So Jim can provide the answer to the question related to early stage investment, and I'll answer your question about MSCI. So I think what this really shows is how the royalty pharma model is actually not constrained. You know, we can be creative and look for ways to actually create new sources of revenue like we have with this MSCI collaboration. And, you know, I think there could be other things that, over time, develop like this that could create sources of revenue.

For for what will hopefully be a positive readout later this year, so I think and something that is interesting, but regardless we think.

There's a lot of growth and future Richard L. B.

Okay.

Yeah.

Thank you parents the operator next question.

Our next question comes from Gregg Gilbert with two of Securities. Your line is open.

Pablo Legorreta: For us, it's interesting because, you know, it will give us potentially, you know, an exposure, economic exposure, to other parts of life sciences where we are not likely to invest. So the focus, as you know, is, you know, therapeutics. We can, and probably will, over time invest in other things that are not therapeutics, like it could be, you know, diagnostics and devices. But we're very careful there because we want to make sure that these assets have very long life cycles, which, you know, is an important thing that therapeutics do. have

Good morning Kim.

The strategy question. So you've made it clear that you would continue to consider development stage deals for products and <unk>.

Pipelines, but what's your appetite to invest and earlier stage, but maybe more platform oriented.

<unk> technologies that could later spawn multiple products and multiple areas, where you're not sure what those areas of products are yet.

And then back to the MSCI arrangement really interesting announcement there are there other themes under consideration and the near term or is the goal to sort of observe these two and see how they go.

Jim Reddick: But, you know, we will also potentially, you know, we're able to create indexes that are going to track those things, like devices and diagnostics, but also, as I said, could be an index for CROs or other things. So that's obviously in the index category, but there could be other things. And maybe just one other thing that occurred to me just to give people a sense of the economics here. So if you have a fund that has $10 billion of assets under management, and MSCI is, you know, is going to charge somewhere between three and six basis points.

But maybe as an offshoot of that is is this effort potentially helpful to your core business and sourcing new deals unrelated to the MSCI and collaboration thank you.

Yes.

Pablo are you and Oh, sorry, sorry, I was muted growth Jim Jim can provide the answer.

Jim Reddick: It generates, you know, three to six million dollars in revenue per year. Now, if that fund doubles or triples over time, the revenues will double or triple. And I think what's also very interesting for us about this is that it's perpetual. You know, as you know, the royalties that we invest in have a life of 10, 12, 15 years, sometimes a little bit more, but they expire, and we need to replace them.

The other question related to the early stage and.

Investment investments and I'll answer your question.

About MSCI. So I think what this really shows is how royalty pharma model, it's actually not constrained we can be creative and look for ways to actually.

Creating new sources of revenue like we have with the MSCI com.

Jim Reddick: In the case of the indexes, this is perpetual. It will go on for many years, you know, forever. So, with that, I'll turn it over to Jim to give you a little bit more perspective on our strategy regarding earlier stage investment.

The collaboration.

And.

I think there could be other things of that overtime develop.

And like this that.

Create sources of revenue for us it's interesting because.

Jim Reddick: Hey, Greg, thanks for the question. Yes, it's a good question on, you know, going earlier in the stage and looking at, you know, whether there are opportunities to, you know, invest in platforms and, you know, potentially bring in multiple products at a time. I do think that, you know, over the years, we've demonstrated that we're creative and, you know, really kind of pushed the envelope in the royalty industry for going earlier and finding, you know, ways that are risk-aware to go into earlier stages of development.

It will give us potentially.

You know.

And the exposure economic exposure to other parts of life Sciences, where we are not likely to invest.

And so the focus as you know is.

Sir of predicts we can and probably will over the time invest and the other things that are out there of predicts like it could be.

The diagnostics and devices, we're very careful there because we wanted to make sure that this.

And I said to have very long lifecycle of switch.

As an important thing, which the therapeutics do have but you know the.

We will also potentially.

We're able to create indexes that are going to track of those things like devices and and diagnostics, but also as I said could be an index for <unk> or other things. So that's obviously and the index category, but there could be other things and maybe just one other thing that occurred to me just to give people a sense of the economics here. So if you would.

Jim Reddick: You know, we kind of push the envelope into pre-approval. We've since then done products that are even pre-phase three in a smart way and gotten returns on those. We actually made an investment just recently as part of the Orla-Dio investment. We made an investment in Biotrish, actually, the drug called 9930, which was in phase one slash two right now.

Have a farm that has $10 billion of assets under management and the MSCI is going to charge somewhere between three and six.

Basis points. It generates three to 6 million of revenue per year now of the fund doubles or triples overtime the <unk>.

Jim Reddick: So, you know, that's an example of us going early as a part of a larger deal. So there are a variety of creative structures that we're looking at right now that, you know, can give us some exposure to exciting new platforms and modalities and perhaps kind of groupings of products. So I think that, um, we'll just leave it at, you know, we're exploring those as a way to, you know, keep the opportunities coming.

And this will double or triple.

And I think.

And what's also very interesting for us.

This is that it's perpetual.

As you know the royalties that we invest and have a life of 10, 12, 15 years, sometimes a little bit more but they expire and we need to replace them and the case of the index says. This is perpetual Hill will go on for many of them.

Forever. So so with that I'll turn it over I will turn it back to Jim to give you a bit more perspective on our strategy regarding earlier stage investments.

Jim Reddick: But we do think it's a good thing for us to, you know, be apprised of. And actually, part of the reason that we wanted to form the strategy and analytics team is to make sure that we're using data in the best way to make sure we know where all the promising opportunities are and to really kind of be mining opportunities earlier than we are. we would do so before as a way of, you know, A, following them from an earlier stage, but B, seeing if there might be opportunities for us to invest earlier.

Hey, great. Thanks for the question.

Yes, it's a good question on <unk>.

Going earlier stage and looking at.

Whether there are opportunities to.

And platforms and.

Potentially bring in multiple products at a time.

And I do think that over the years, we've demonstrated that we are creative and it really kind of pushed the envelope and.

Jim Reddick: Our next question comes from Kathy Minor with Coven and Company. Your line is open.

The royalty.

The industry for going earlier and.

And finding.

Is that a risk.

Kathy Minor: Thank you very much for taking the questions. Just a couple.

<unk>.

To go into earlier stages of.

Kathy Minor: First, could you just clarify on the HIV royalty expires this year, or is it sometime during the year? And are there any other notable royalties that expire in 2021? The second question is on the adjusted cash receipts guidance that you gave. You said the increase was based both on the existing portfolio and on some of your recent additions, but is there also any change in your expectations for distributions? And the last question is a little more big picture. Do you expect drug pricing reform to increase or decrease the number, magnitude, and potential of royalties? Thank you.

And of development, we kind of push the envelope into pre approval.

And we've since then done products that are.

Even pre phase III.

And the smart way and getting returns on those.

Actually made and investments just recently.

As part of the or the day of investment we've made an investment and by rich.

Factor D drug called 90, 930 of which was in phase one and it's nice to right now.

So that's an example of US going early in the part of the larger deal. So there are a variety of creative structures that we're looking at right now of that.

Terrance P. Coyne: Terry, can you take the questions, please?

And can give us some exposure to exciting new platforms and modalities and perhaps.

Terrance P. Coyne: Yes. So on your question on HIV, what we've said is that we expect it to substantially end in 2021, and we have not been more specific than that. Your question on... On distributions as it relates to adjusted cash receipts, I assume you're referring to the distributions to non-controlling interests. And on the back of our deck, we actually lay out, you know, what those different non-controlling interests are or were for the quarter. And so that's a pretty good guide for you for, you know, how to think about what they'll look like going forward. And then your last question was on drug pricing, and I think that Marshall's probably the best person to answer that one. Sure, thanks, Terry. Good morning.

And kind of groupings of products.

So I think the tab.

So I think that.

We'll just leave it at.

And we're exploring those as the way too low.

Keep the keep the opportunities coming but we do think it's Ed.

The good thing for us to be apprised of and actually part of the reason that we wanted to form the strategy and analytics team.

And as to make sure that we are using data.

And the best way to make sure we know where all of the promising opportunities are and to really kind of be mining opportunities earlier than we would before.

<unk> of a following them.

From an earlier stage, but b.

Seeing as there might be opportunities for us to invest earlier.

Thanks, a lot.

Marshall Urist: Thanks for the question on this. So, you know, specifically on how we think the outcome of what may happen on the drug pricing front could impact our opportunity set for royalties. And, you know, regardless of what happens, I think we're, we are very optimistic about the size of our, about the size of our market, the number of companies that are going to be looking for, you know, potential funding.

Okay.

Our next question comes from Kathy Miner with Cowen and company. Your line is open.

Thank you very much for taking the questions just a couple of.

First could you just clarify on the HIV that the royalty expires this year and it is it sometime during the year and are there any other notable royalty expired during 2021.

Second question is on the adjusted cash receipts guidance that you gave you said the increase was base both on the existing portfolio and on some of your reach and interesting but is there any.

Marshall Urist: I think certainly we're all watching what is going to happen in Washington and all of the stops and starts and puts and takes that we've seen. But, you know, I think we are focused on two things.

Any change and your expectations for distributions.

And the last question is a little more big picture do you expect drug pricing reform can increase or decrease the number of magnitude and potential of royalties.

Marshall Urist: You know, one is, I think, in terms of our current portfolio, we are, you know, we are, we have a portfolio that's highly diversified, you know, across products, therapeutic areas, marketers, geographies, payer types, all. You know, all different types of types of diversification, and we've really focused on important drugs that really impact patients' lives, and so regardless of what happens, I think we feel good about where our portfolio stands now.

And.

Sharon can you taking the questions. Please.

Yes.

And so on your question on the HIV. What we've said is that we expect it to substantially and in 2021, and we have not and more specific from that.

Your question on.

On distributions as it relates to adjusted cash receipts I assume youre, referring to the distributions to noncontrolling interests.

Marshall Urist: I think looking forward, we really don't think that whatever happens will meaningfully impact the number of new opportunities for us. When you look at the rate of company formation over the last few years, you know, we see that as a really encouraging leading indicator of the number of companies and the number of opportunities for us, the amount of innovation, how much is happening right now. We think those are all kind of overwhelmingly positive in terms of how things may look going forward.

And in the back of our GAAP, we actually lay out what those different noncontrolling interests.

Our or were for the quarter and so that's the.

That's a pretty good guide for for you for.

And how to think about what they'll look like going forward.

And then your last question was on.

Drug pricing and I think that Marshall is probably the best person to answer that one.

Marshall Urist: So I think, you know, certainly, for all of us who have been around the industry for a long time, we are continuing to follow what's happening on the policy front. But, you know, but we think all the positives and tailwinds for our business are, you know, remain and will remain in years to come.

Sure. Thanks, Gary Good morning, and thanks for thanks for the question not necessarily so.

And typically to your question of how we think.

The what the outcome of what may happen on the on.

On the drug pricing front could impact our opportunity set for work for royalties and.

Regardless of what happens I think where we are very optimistic about.

About the size of our about the size of our market. The number of companies that are going to be looking for.

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

Looking for.

And looking for potential potential funding I think certainly we're all watching what is going to happen in Washington, and all of the stops and starts and puts and takes that we've seen but I think we would.

David Risinger: Yes, thanks very much, and thank you for the comprehensive update. I have two questions. First, regarding the MSCI industry's global recurring revenue opportunity, could you just put that in a little bit more financial perspective? I mean, it makes a lot of strategic sense for you. I think you had mentioned, Pablo, three to six basis points on assets for MSCI. You know, what could royalty pharma realize? And should we think about this as being a potentially $5 million revenue opportunity in a couple of years for royalty pharma or a $20 million revenue opportunity, just so that we have some context?

And we're focused on two things one is I think in terms of our current portfolio. We are we are and we have a portfolio that's highly diversified.

Cross products therapeutic areas marketers geographies payer types, all all different types of <unk>.

Types of diversification and we've really focused on important drugs that are that really impacts of patients' lives and so regardless of what happens I think we feel good about where our where our portfolio stands now I think looking forward.

And we really.

Don't think that whatever happens will meaningfully impact meaningfully impacted the number of new opportunities for us when you look at the.

David Risinger: That would be appreciated. And then second, Vertex has been saying at recent investor conferences that it's excited about novel cystic fibrosis candidate development, including potentially reducing royalties as part of that. Could you remind us about your position and next developments to watch? Thanks very much.

The rate of company formation over the last few years, we see that as a really encouraging leading indicator of the number of companies.

And the number of opportunities for us the amount of innovation and how much is happening right. Now we think those are all kind of overwhelmingly positive and in terms of how things may look may look going forward. So I think certainly.

Pablo Legorreta: Thank you, David. So with respect to MSCI, I actually would like, at this stage, to just be very cautious about, you know, the revenue contribution, just because it's something totally new to us that, you know, we would like to, you know, understand better. And we do believe that revenue contribution, this year, probably we won't get anything. Why?

Day for all of US who have been around the industry for for a long time, we are continuing to follow what's happening on the policy front, but.

But we think all of the all the positives and tailwind for our business are remain and will remain and years to come.

Pablo Legorreta: Because the indexes have to be created, then they have to be sold to, you know, the team at MSCI and ourselves. We'll start to talk to some of the major investors in life sciences to actually see if they want to license the indexes, but, you know, what you will start to see is maybe some of the bigger ones, a Black Rock or a Mundi or others, might create an ETF if we launch an oncology index and an oncology ETF where we launch an early stage biotech index, maybe, you know, an early stage biotech ETF, and then mutual funds. So it will take time.

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

Yes, thanks, very much and.

Thank you for the comprehensive update so I have two questions first regarding the MSCI indices.

Global recurring revenue opportunity.

Could you just put that and a little bit more financial perspective, and it makes a lot of strategic sense for you I think you had mentioned Pablo three to six basis points.

And on assets for MSCI.

What could royalty pharma realize and.

Should we think about this as being a potentially $5 million revenue opportunity and a couple of years for royalty pharma or $20 million revenue opportunity. Just so that we have some context that would be appreciated and then second vertex has been advocating at <unk>.

Pablo Legorreta: And I even think that the revenue next year is probably going to be very small because, again, it's all in the launch phase, but, you know, at some point, this will gain momentum. And if you just look at the fact that today there are 400 billion invested in thematic indexes, 100 billion in ETFs, and 300 billion in mutual funds, you know, and a lot of that is technology because there is really, you know, life sciences is behind. It hasn't really happened yet.

Recent investor conferences that is excited about.

Novel, Cystic fibrosis candidate development, including potentially reducing royalties as part of that could you remind us about your position and and next developments to watch thanks very much.

Pablo Legorreta: So, you know, could that 400 billion grow over the next 10 years to a trillion? I think it probably will. And, you know, what share of that is going to be life sciences? And then, you know, then you have to sort of go through the economics that MSCI will get and then what we will get. So, you know, I think this is something that, looking in, you know, the second half of this decade, could become important, but maybe, you know, as time evolves and we get a better sense of how this could grow, we could be a little bit more specific at this stage.

Thank you David So with respect to MSCI I actually would like at this stage to just be very cautious about the.

The revenue contribution just because thats something totally new to us.

We would like to.

Understand better.

And we do believe that revenue contribution.

This year, probably we won't get anything why because of the index would have to be created then they have to be.

Pablo Legorreta: You know, I am very excited because it not only shows what we can do with the royal thermal model in things that were totally unexpected. I mean, nobody thought about this had it in their model, so it's potentially something new for us. And it will also benefit us. There was a question before about whether this would benefit our core business, and absolutely it will. Why?

Sold to the team at MSCI and ourselves.

We'll start to talk to some of the major.

Investors and life Sciences.

Two actually.

See if they want to license the index us, but what you will start to see as maybe some of the bigger ones, a blackrock or a monday or others. They.

Pablo Legorreta: Because, you know, in that effort of us really looking into life sciences and, you know, trying to look, you know, in three, five years as to what are going to be the, you know, important therapeutic areas. And we'll also start to look at, you know, the companies that are starting to invest in that, many of which may have things in, you know, preclinical. But if you start to look at those companies and track them, you know, through an index, you start to see how, you know, the value creation begins or how capital is shifting from, you know, into those areas.

And they might create.

And ETF.

We launched an oncology index and you know.

The GTS, where we launched an early stage biotech and the maybe.

And early stage VI of the ETF and then mutual funds. So it will take time.

And I, even think that the revenue next year is kind of probably very small because again, it's all of the and the launch phase, but at some point this will gain momentum.

And if you just look at the fact that today. There is 400 billion invested and thematic indexes already of 100 billion and.

Etfs and 300 billion of mutual funds.

Pablo Legorreta: They will give us a feel for that. And, you know, just as an illustration, I mean, things like Chinese biotech, for example. We looked at it last fall as we were starting to talk to MSCI about this, and I was blown away to realize that myself and the team have been going to China for the past years to try to explore, you know, if there's anything for us to do in that market.

And a lot of that is technology, because there is really life sciences.

Is behind it Hasnt really happened so could that $400 billion grow over the next 10 years two trillion I think it will probably.

And what share of that is gonna be life Sciences, and then you know then you have to sort of go through the economics of that MSCI will get and then what we will get so.

Pablo Legorreta: And, you know, I was blown away last fall when I checked the market cap of Chinese biotech companies, and it was about 700 billion dollars. I think it, you know, went to size, maybe a trillion dollars, and there are about 800 Chinese biotech companies that are public, 800 biotech companies, which is a very significant number. So it gives you a sense of what's going on in other markets, and it will help us at Royal Trauma to, you know, make sure we're really understanding the space in a very deep way, and we can, you know, understand the trends better. So, you know, that's an additional perspective that I wanted to provide And then, Dave, on your question about

This is something that the looking and and sort of the second half of this decade could become important but maybe you know as time evolves and we get a better sense of how this could grow.

You know, we could be a little bit more specific at this stage I am very excited because it's not only.

Shows what we can do with the royalty from our model and things of that were totally unexpected I mean, nobody thought of this got ahead of them.

And their model, so it's potentially something new for us.

And it also will benefit I mean, there was the question before about whether this will benefit our core business and absolutely and worldwide because.

And that effort of us really looking into.

Terrance P. Coyne: And then, Dave, on your question about the Cystic Fibrosis franchise, we've certainly, you know, heard comments from Vertex about future potential combinations and potential lower royalty rates on those combos. But our position is unchanged, so, you know, as it relates to any combination that includes Deuterated Collideco, our position is that Deuterated Collider Colydeco is simply Collidico, and Collidico is a compound that's royalty-bearing, with regard to any other components of combination products, I think there are, you know, there are a number of factors to consider. So, you know, which components are they, and are they royalty-bearing at what level?

Life Sciences, and and you know trying to look and three of five years as to what are going to be you know the.

And the important sort.

Therapeutic areas and.

And we'll also start to look at the the companies that are starting to invest and that many of which may have things and.

Preclinical, but if you start to look at those companies and track them through and index and you start and see how the.

The the value of it.

Creation begins or how capital the shifting from into those area, yes, It will give us the appeal for that.

And just as an illustration and things of that.

The.

And.

The Chinese biotech for example, we looked at it the last fall as we were starting to talk to.

Terrance P. Coyne: And then, you know, as those combos move forward, it's time to enroll the clinical trials in a population that is, you know, at this point pretty well served, and then the success and timing of potential regulatory approvals and then ultimate uptake versus tricafta, which is a pretty remarkable drug for CF patients. So our view is that we expect CF to be a very important contributor to our business for many years to come. And in the meantime, we're going to keep focusing on executing our business plan and adding innovative new therapies to the portfolio.

And MSCI about this and I was blown away to realize.

Myself and the team have been going to China the it.

Past years to try to explore.

If there is anything for us to the end market and.

And was blown away less the <unk>.

Paul where and when I checked the market cap of Chinese biotech and it was about several hundred billion daughters, and I think it went those guys maybe a trillion dollars and there's about 800 Chinese biotech companies that are public 800, biotech companies, which is a very significant number.

And it gives it gives you a sense of what's going on and other markets and it will help us royalty pharma too.

Umer Raffat: Our next question comes from Uma Rucat, with Evercourt.

Make sure we're really understanding the space.

Michael DiFiore: Hi guys, this is Mike D. Fury on behalf of Omer. Thanks so much for taking my question. Just two for me, just to piggyback on the previous question about Vertex. They've recently been very clear about what their next-gen triple combo may be and that phase three is going to start this year. So my question is, given that things are starting to be more definitive, has anything changed regarding royalty farmers' long-term outlook and potential or willingness?

And in a very.

Deep way and we can understand the trends.

Better.

So the.

That's.

And this whole perspective that I wanted to provide.

And then Dave on your question on.

And the cystic fibrosis franchise.

We've certainly heard.

The comments from vertex about future potential combinations and potential lower royalty rates on those combos.

Michael DiFiore: to do earlier stage deals, just given the more certain step done in future royalties. And secondly, and separately, just the oral CGRP market outlook, especially with Abbe's recent Atoujapan data and preventative migraine, how has your outlook changed regarding the implications for Bio Haven's future royalty potential. Thank you.

And our positions unchanged so as it relates to any combination that includes reiterate of kalydeco.

Our position as the getting rate of Kalydeco is simply Kalydeco and Kalydeco is a collaboration compound that is royalty bearing.

And with regard to any other components of.

Of combination products I think there is.

Michael DiFiore: Thanks for the question, Mike. Terry, can you take the CF question and marshal the migraine, CGRP question? Yeah, Mike, I think so.

And a number of factors to.

Consider so which components are they and are.

Are they royalty bearing and at what level and.

And then.

As the combos and the forward, it's time to time to enroll the clinical trials and a population that is at this point pretty well served.

Terrance P. Coyne: Yeah, Mike, I think, you know, to be honest, I think it's really premature to be talking about any changes to our long-term outlook. I think, you know, what I just said holds: we feel really confident in the long-term performance of the CF franchise. You know, as other products come along, it's all going to be sort of case-dependent, but they are going to have to compete against Tri-Cafthet, which is again, a great drug, and we're entitled to very attractive royalties on Tri-Cathlet. And then, you know, would that change our strategy? No, absolutely not.

And then the success and timing of potential regulatory approvals and then ultimate uptake versus try catheter, which is.

A pretty remarkable drug for CF patients so.

Our view is we expect <unk> to be a very important contributor to our business for many years to come.

And in the meantime, we're going to keep.

Focusing on executing our business plan and adding innovative new therapies to the portfolio.

Terrance P. Coyne: You know, I think we're going to keep doing what we've been doing and keep reinvesting in what we think are the most exciting wave of new products in this industry. And, you know, that's the plan. And, you know, that's what we're going to stick to. Hey, Mike, good morning.

Thank you.

Our next question comes from one of all of that with Evercore. Your line is open.

Hi, guys. This is mighty Fury and for whom and thanks. So much for for taking my question. Just two from me just to piggyback on the previous question before on vertex day again recently been very clear that.

Marshall Urist: Thanks for the questions on the CGRP class. I think there are multiple aspects to it of what you're raising. I think at a high level, you know, we are excited by what we're seeing in the oral CGRP market in terms of the market uptake and the success that, you know, Bio Haven and Abbey are having there. And I think, you know, we've heard AbbVie on prior conference calls this quarter and prior ones really express their enthusiasm and excitement about the potential for this category.

With their nextgen and Triple combo may be and that phase III is going to start this year. So.

And my question is given that things are starting to be more definitive has anything change regarding royalty pharma as long term outlook and potential or willingness to do earlier stage deals just given the more certain and stepped on it and and future royalties and.

And secondly, and.

And then separately.

Just the oral <unk> market outlook, especially with add these recent of tow, Japan data and preventative migraine.

Marshall Urist: You know, and we are certainly excited to be a part of that with Biohaven. I'd remind you that we have multiple, multiple avenues of exposure to this market. Certainly, NERTech, ODT, and the acute market are part of it right now. Biohaven has the, you know, the filing to have the first ever dual label for acute and prevention. And the Paduca for that is coming up.

What's your has your outlook changed regarding the implications for bio Haven and future royalty potential. Thank you.

Thanks for the question, Mike Terry can you take the CF for question and Marshall the.

Migraine.

The <unk> question.

Yeah, Mike I think you know to the.

And as I think it's really premature to be talking about any changes to our long term outlook I think what I, what I just said.

And so we feel really confident and the long term and the long term performance of the CF franchise.

Marshall Urist: So we think that's interesting. And then it would remind you, too, that we did a, you know, our deal with Biohaven from last summer to support the Zavidjapan development program. And they are also, you know, exploring oral Zavidjapan in the prevention market as well.

As other as other products come along it's all of it would be certain case dependent but they aren't going to have to compete against strike half of it which again is a great drug and were entitled to and very attractive royalty is on track catheter.

And then.

Marshall Urist: You know, we think it's an exciting category and we're excited to have kind of multiple, you know, multiple ways that we can participate in that. Just lastly, I think this also highlights an exciting aspect of the royalty pharma business model in that we can have multiple ways to play or participate in an exciting class like the CGRP. So we also have a royalty on Lily's and Gallity and then also on, you know, multiple oral CGRPs, which we think is a pretty unique aspect of our business model, that we see a class in a market that we like and has a lot of potential.

Would it change our strategy and no absolutely not.

I think organic we're going to keep doing what we've been doing.

And Keith and reinvesting and what we think are the most exciting wave of new products and this industry and that's.

And Thats the plan.

And.

That's what we're going to stick to.

Yes.

Hey, Mike Good morning, Thanks for the questions on the <unk> class. So I think there's multiple aspects to it.

And what you are raising I think at a high level.

We are excited by what we're seeing on the oral <unk> market in terms of the market uptake and the success that bio Haven, and Abbvie are having there and I think.

Marshall Urist: and I think certainly the early launch of the oral CGRPs is bearing that out, that, you know, we have the strategic flexibility to be involved in that in multiple ways. So, you know, we're excited about the outlook for CGRPs and look forward to seeing that play out in the coming years.

We've heard Abbvie on.

The prior conference calls this quarter and prior ones, you know really expressed their enthusiasm and excitement about the potential for a potential of that category.

And we are certainly excited to be a part of that.

Operator: And our last question comes from Andrew Bond with City. Your line is open.

With with Bio Haven.

I remind you that we we have multiple.

Andrew Baum: Global system shocks such as the pandemic seem to be reshaping the relationship between governments and the industry in a number of dimensions. You've already addressed drug pricing, but if you look at IP and lighter comments on vaccine waivers and also tax, you can see how there may be increased risk compared to what we might have envisaged previously. How do you think about those individual characters in terms of the risk for your operating model going forward?

The multiple.

Avenues of exposure to this market certainly miratec ODT and the acute market is is part of it right now.

Hey, Ben has the high you know the the.

The filing to have the first ever dual label for acute and prevention.

And the <unk>.

For that is is coming up so we think thats interesting and then it would remind you too that we did a net.

Andrew Baum: That would be the first question. Then the second question is that there has been an increase in the number of competitors in your space, so patient square, so ex-KKR executives have moved into your space, and they're not just doing WorldTU as well. How are you looking at the competitive environment and the confidence that your mode of cash flows gives you in terms of continuing to secure the most attractive assets? Many thanks.

We of our deal with bio Haven from last summer to support the verge of pad development program and they are also.

Exploring oral the vet, Japan in the prevention market as well so.

We think it's the.

It is an exciting category and we're excited to have kind of multiple.

And multiple ways that we can participate and that just lastly.

Pablo Legorreta: Yeah, so maybe Chris can take the first question. With regard to competition, in fact, all of the facts that have been created, and there's many of them that are addressing sciences, I see those as actually, you know, additive to our effort because what's happening there is that there's a ton of capital that has actually been raised by the SPACs, you know, that are focused on life sciences, many billions of dollars.

I think it's the it's also highlights and the exciting aspects of the royalty pharma business model and that we can have multiple ways to.

Play or participate and an exciting class like the ERP. So we also have a royalty on lilly's and <unk> and then also on multiple of the oral <unk>, which we think is pretty unique.

Aspect of of our business model that we see a class and the market that we like and has a lot of potential and it and certainly the early launch and the early launch of the oral <unk> are bearing that out that we have the strategic flexibility to be involved in that and multiple ways. So.

We're excited about the outlook for <unk> and look forward to seeing that play out and the coming years.

Pablo Legorreta: And again, that's going to fund, you know, private companies, give them the capital they need to continue to invest in research, to bring products forward, and eventually, they could become partners of ours, you know, companies that we could partner with and collaborate to help bring products to market.

Kind of thanks, so much.

And then the last question comes from Andrew Baum with Citi. Your line is open.

Thank you.

Legal system shocks, such as the pandemic seem to be the shaping the relationship between the governments and the industry and the number of dimensions.

Pablo Legorreta: So I think, you know, the more capital that is invested in life sciences, the better. And, you know, one other comment to make about this new index collaboration. You know, in a conversation I had with the MSCI team, the Chairman and CEO mentioned that, you know, in the conversations they've had with world governments, you know, the World Bank, about how, you know, capital flows around the globe in the investment community.

The address drug pricing.

If you look at IP and likes of the comments on the vaccine wafers and also the tax you can see how that may be increased risk compared to what we might've been pits as previously how did you think about those individuals cat does in terms of the risk for your operating model going forward. So that'd be the first question and then the second question is the.

It's been a increase and the number of competitors and Youll space of patients square the X KKR executives of moved and shelf space and not just paying royalties that you can specs as well, how you're looking at the competitive environment and confidence that your.

Pablo Legorreta: And, you know, when markets open, and here markets are not only geographically but also, you know, think about it from an industry perspective, the fact that MSCI creates indexes attracts, you know, many billions of dollars of capital into that space. And I gave the example of, um, maybe an early stage biotech index or an oncology index or you name it; it can be many others. And, you know, then what is likely to happen over time is that, as products are created like ETFs or mutual funds to focus on that specific theme or new market, capital flows, and then, you know, companies end up getting, you know, additional capital to fund their research.

Note of cash flow keeps you in terms of continuing to secure the the most attractive assets. Many thanks.

Yes, so maybe Chris can take.

The the first question with regards to competition.

And in fact.

All of the facts that have and created.

And there's many of them that are investing in the sciences.

I see those as actually.

Uh huh.

Additive to our.

Effort because of what's happening there is that there is a ton of.

Capital of that actually.

<unk> has been raised by by the specs.

You know that our focused and life sciences.

Many billions of dollars and again, that's going to fund.

Pablo Legorreta: It's a very interesting phenomenon, but one that, like, this whole, the development of the medical indexes and life sciences is going to make the whole life sciences investment opportunity more understandable, more accessible to investors, and this will attract capital. So it's quite interesting from that perspective. And I think, you know, it, and so I'll let Chris answer the other question about the impact on life sciences from, you know, big trends.

Private companies give them the capital they need to continue to invest and research to bring products forward and eventually they could become partners of ours.

Companies that we could partner and collaborate to help them eventually bring products to market.

I think the more capital that is invested and.

And life Sciences, the better and you know what.

One other comment to make about.

Chris Shibutani: Sure, thanks, Pablo, and Andrew, thanks for the question. I think as it relates specifically to the intellectual property waiver, you know, we don't see that as something that's going to

This new index collaboration.

And I was and the conversation I had with the the MSCI team the chairman and CEO.

You mentioned that.

And the conversations they've had with <unk>.

Chris Shibutani: impact their business long term. You know, I know the idea's been floated.

World governments.

World Bank show.

Chris Shibutani: You know, and obviously, there's a pandemic. And you know

Couple of flow around the globe and the investment community.

Chris Shibutani: You know, from a compassionate perspective, you want to get as many vaccine doses as possible.

And you know when markets open and share markets not only geographically, but also think about it from an industry perspective.

Chris Shibutani: around the world as you possibly can, and there's probably more efficient ways to actually just transfer excesses

Chris Shibutani: doses.

Chris Shibutani: There, as opposed to trying to waive intellectual property and with know-how, obviously, these vaccines are very difficult to make for the manufacturer, so I think it's probably more efficient ways to

The fact that MSCI creates index is attracts many billions of dollars of capital into that space and I.

Chris Shibutani: to get the vaccines around the world than just waiving intellectual property. We don't see, you know, the need for compassionate use right now.

Gave the example of.

You know, maybe an early stage biotech index or and oncology index or you name. It it can be many others and then what is likely to happen over time is that.

Chris Shibutani: You know, the need for compassionate use right now is impacting intellectual property laws going forward. So we don't see that as impacting our business going forward.

Pablo Legorreta: There are no further questions. I'd like to turn the call back over to Pablo Legeretta for closing remarks.

And as of.

The products are created like Etfs or mutual funds to focus on that specific theme.

Or new market.

The capital flows and then you know.

Operator: Sure, Rob, Bear, thank you. Thank you, too, to everyone on the call for your continuing interest in Royalty Pharma. My team and I look forward to continuing to share our progress with you. If you have any follow-up questions, please feel free to reach out to George. And thank you for joining the call, and I hope everyone has a good week. Thank you.

The company's ends up getting you know.

Additional capital to fund their the research so it's a very interesting phenomenon, but one that like the soul.

The development of thematic indexes and life Sciences, and Theres going to make the whole life sciences investment opportunity more understandable more accessible to investors and this will attract capital. So it is quite interesting from that perspective and.

And and I think.

Operator: Ladies and gentlemen, this has been the end of the program. You may now disconnect. Everyone, have a great day. Thank you.

No.

And so I'll, let Chris answer the other.

Question.

The impact to life sciences from from Big trends.

Sure Thanks, Pablo and Andrew Thanks for the question I think as it relates specifically to the intellectual property waiver.

We don't see that as something that's going to impact your business long term.

And I know the ideas and floated.

You know and obviously there is appended global pandemic and.

From a compassion of perspective do you want to get as many of you vaccine doses around of the world as you, possibly can and theres, probably more efficient ways actually just transfer excess doses. Once the supply is there as opposed to trying to waive of intellectual property and and with Knowhow. It's obviously these vaccines are very difficult to make the manufacturer so and it gets.

And more efficient ways to get the vaccines around the world and just waving intellectual property and we don't see.

And the need for compassionate use right now is impacting in the you know.

The intellectual property laws going forward. So we don't see that is impacting your business going forward.

There are no further questions I'd like to turn the call back over to Pablo like arena for concluding remarks.

Sure up are thank you.

Thank you.

To everyone on the call for your continuing interest and royalty pharma my team and I look forward to continuing to share our progress with you. If you have any follow up questions. Please feel free to reach out to George and thank you for joining the call and I hope everyone has a good week. Thank you.

Ladies and gentlemen, this does conclude the program you may now disconnect everyone have a great day.

And.

[music].