Q3 2021 Royalty Pharma PLC Earnings Call
[music].
Operator: Thank you for standing by. Welcome to the Royalty Pharma third quarter 2021 earnings conference call. I would like to turn the call over to George Gropick, SBP, Head of Investor Relations and Communications. Please go ahead, sir.
Ladies and gentlemen, thank you for standing by and welcome to the royalty pharma third quarter 2021 earnings Conference call I would now like to turn the call over to George <unk> SVP head of Investor Relations and Communications. Please go ahead Sir.
George Grofik: Thank you, Josh. Good morning, good afternoon to everyone on the call, and welcome to Realty Farmer's third quarter results conference call. You can find the slides for this call on the investors page of our website at royaltyfarmah. Moving to slide three, I would like to remind you that the information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. I refer you to our 10K on file with the SEC for a description of these risk factors.
Thank you Josh good morning, good afternoon to everyone on the call and welcome to royalty pharma third quarter results Conference call. You can find the slides to this call on investor's page of our website at royalty pharma Dot com.
Moving to slide three I'd like to remind you that information presented in this call contain forward looking statements that involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially.
I refer you to our 10-K on file with the SEC for a description of these risk factors.
George Grofik: And with that, please advance to slide four. Our speakers on the call today are Pablo Legeretta, founder and chief executive officer; Jim Reddick, EVP, co-head of research and investments and chief scientific officer; Marshall Uris, EVP, co-head of research and investment; Terry Coyne, EVP, Chief Financial Officer; and Pablo will discuss the key highlights, after which Jim and Marshall will provide an update on the property portfolio and upcoming Terry will then review the financials, and after concluding remarks from Pablo, we will hold a Q&A. Chris Hight, our vice chairman, will also join the Q&S. And with that, I'd like to turn the call over to Pablo.
With that please advance to slide four.
Our speakers on the call today are Pablo like Arezzo, founder and Chief Executive Officer, Jim <unk>, EVP and co head of research and investments and Chief Scientific Officer, Marshall Europe, EVP and co head of research and investment.
Harry <unk> EVP Chief Financial Officer.
And Pablo will discuss the key highlights after which Jim and Marshall will provide an update on our royalty portfolio and upcoming events Terry.
Terry will then review the financials and after excluding remarks from Pablo we will hold a Q&A session, Chris <unk>, Our Vice Chairman will also join the Q&A.
With that I'd like to turn the call over to Pablo.
Pablo Legorreta: Thank you, George, and welcome to everyone on the call. I am delighted to report another quarter of strong financial performance and strategic execution. We delivered double-digit tops and bottom line growth to mark the end of the term for our HIV Royals. We maintain a robust and active deal pipeline.
Thank you George and welcome to everyone on the call.
I am delighted to report another quarter of strong financial performance and execution.
Delivered double digit top and bottom line growth. Despite the end of the firm for our HIV Royall.
We maintain a robust and active deal pipeline.
Pablo Legorreta: We expect to build on our strong year-to-date momentum with transactions announced so far of 2.8. We saw important progress in our development stage portfolio with positive phase three results for PTO27 in asthma and the breakthrough designation granted by FDA to Gantaneromap in Alzheimer. Lastly, based on the strong business dynamics, we're again raising our guidance for adjusted cash receipts for 2021. On slide seven, you can see our financials in a little more detail.
We expect to build on our strong year to date momentum with transaction announced so far of $2 8 billion.
We saw important progress in our development stage portfolio with positive phase III results for <unk>, seven and asthma and the breakthrough designation granted by FDA.
They never map in Alzheimer's.
Lastly, based on the strong business dynamic, we're again raising our guidance for adjusted cash flow for 2021.
On slide seven you can see our financial and a little more detail.
Pablo Legorreta: In the third quarter, we delivered 24% growth in adjusted cash receipts, our top line, and 12% growth in adjusted cash flow, our bottom line. This strong momentum puts us in a tremendous position to deliver another year of strong financial performance in 2021, as Terry will speak to when he discusses race guidance for the current year.
In the third quarter, we delivered 24% growth in adjusted cash receipts, our top line and 12% growth in adjusted cash flow our bottom line.
Strong momentum puts us in a tremendous position to deliver another year of strong financial performance in 2021.
Jerry will speak to when would this when he discusses our raised guidance for the current year.
Pablo Legorreta: Slide 8 sets our track record of impressive growth since our IPO in June 2020. I am really proud of this slide as it underscores the power of our business model. As you can see in this graphic, we have reported six consecutive quarters of double-digit bottom-line growth and very strong top-line growth as well. I mentioned earlier the loss of our HIV royalties, which were our fourth largest source of royalties in 2020, accounting for 13% of total royalty receipt.
Slide eight.
Our track record of impressive growth.
IPO in June 2020.
I am really proud of this slide.
Underscores the power of our business model.
You can see in this graph, which we have reported six consecutive quarter of double digit bottom line growth and very strong top line growth as well.
I mentioned earlier the loss of our HIV royalties, which were our fourth largest source of royalties in 2020 accounting for 13% of total royalty receipt.
Pablo Legorreta: We have digested this impact and still delivered around 20% top and bottom line growth in the first nine months of 2021. This speaks to the spread and breadth of our existing portfolio and the momentum of a recent royalty transaction. It is also a part of what makes Royalty Pharma a unique investment in life science. Our impressive ability to grow through expirations and continually diversify the portfolio with value-enhancing royalty acquisitions sets us apart from other biopharma companies. With that, I will hand over to Jim to update you on our royalty portfolio.
We have digested this impact and still deliver around 20% top and bottom line growth in the first nine months of 2021.
This speaks to the strength and breadth of our existing portfolio and the momentum we're a recent royalty transactions.
It is also a part of what makes royalty pharma a unique investment in life Sciences.
Our impressive ability to grow through exploration and continue to diversify the portfolio with value enhancing memorial acquisitions truly sets us apart from other biopharma companies.
With that I will hand over to Jim to update you on our royalty portfolio.
Jim Reddick: Thank you, Pablo, and hello, everyone. Today, Marshall and I want to spend a few minutes updating you on our
Thank you Pablo and Hello, everyone today, Marshall and I want to spend a few minutes updating you on our development stage portfolio before highlighting some important upcoming events.
Jim Reddick: updating you on our development stage portfolio before highlighting some important upcoming events.
Jim Reddick: Slide 10 lays out the significant patient and commercial potential.
Slide 10 lays out the significant patient and commercial potential for <unk>. Seven. This is astrazeneca is investigational asthma therapy for which royalty pharma has been co funding clinical development through a $1 billion since 2018.
Jim Reddick: potential for PTO27. This is AstraZeneca's investigational asthma therapy for which Rolty Pharma has been co-funding clinical development through Avilion since 2018. We were attracted to PTO27 as it is a potential first-in-class, fixed-dose combination of Budescinoid and an inhaled corticosteroid and albuterol, a short-acting beta-2 agonist.
We were attracted to <unk> seven as a potential first in class fixed dose combination of Budesonide and inhaled corticosteroid and albuterol, a short acting beta two agonist.
Jim Reddick: It targets both the symptoms and the underlying inflammation in asthma. We were therefore delighted last month when Astrosinica announced that
It targets, both the symptoms and the underlying inflammation and asthma.
We were therefore delighted at last months, when Astrazeneca announced that the two pivotal phase III trials with PTO, two seven known as Denali and mandala met all the primary endpoint Astrazeneca plans to release detailed data at an upcoming medical meeting any regulatory filing is expected in the first half of 2022.
Jim Reddick: that the two pivotal phase three trials of PTO 27 are known as benignolidated.
Jim Reddick: and Mandala met all the primary endpoints. Astorzeneca plans to release detailed data at an upcoming medical meeting, and a regulatory filing is expected in the first.
In return for our role in funding the clinical program royalty pharma is entitled to receive royalties in the low single digits. In addition to success based milestones.
Given the scale of the addressable market as well as the unmet need for novel rescue therapies in asthma consensus estimates project that sales for <unk> seven will exceed $1 billion. So this has the potential to become a meaningful new royalty stream for royalty pharma.
Jim Reddick: task of 2022. In return for our role in funding the clinical program, RoePYFARMA is entitled to royalties in the low single digits in addition to success-based milestones. Given the scale of the addressable market as well as the unmet
On slide 11, including <unk>, seven our investment and development stage therapies. Since 2012 is approximately $7 $7 billion.
Over that period, we've been very successful in backing winners, especially when compared with industry benchmarks with a 79% approval rate by the number of investments.
Jim Reddick: For novel rescue therapies and asthma, consensus estimates project that sales for PTO27 will exceed $1 billion, so this has the potential to become a meaningful new loyalty stream for royalty pharma. On slide 11, including PTO27, our investment in development stage therapies since 2012 is approximately $7.7 billion. Over that period, we've been very successful in backing winners, especially when compared with industry benchmarks, with a 79% approval rate by the number of investments, the number of investments, and a 95% approval rate by the value of our investments.
Number of investments in the 95% approval rate by the value of our investments.
<unk> is another example of royalty farmers' ability sometimes years before a potential commercial launch to identify opportunities of unmet need in therapeutic areas that are overlooked we're considered well served or generic sized and asthma inhaler therapies for earlier stage patients are commonly viewed as a market segment that is satisfy.
By generic inhalers. However, PTO two seven is a novel combination inhaler that uniquely facilitates steroid delivery to suppress inflammation at times of increased increased asthma symptoms to prevent subsequent exacerbations.
Biotechs near Texas is another example, where the market was felt to be satisfied by existing drugs. However, the strong launch of the oral <unk> inhibitors, including nurse Jackie has revealed significant unmet need among people suffering from migraine.
Jim Reddick: PTO27 is another example of Rope Farm's ability, sometimes years before a potential commercial launch, to identify
And we look forward to identifying more opportunities like <unk> and <unk> in the years to come.
Jim Reddick: identify opportunities of unmet need in therapeutic areas that are overlooked or considered well-served or genericized. For example, in asthma, inhaler therapies for earlier stage patients,
A rigorous evaluation process is the primary reason for our high success rate, we conduct extensive due diligence both through our experienced research and investments team internally, but also through leading external experts to gain comfort on the science and the patient need.
Jim Reddick: are commonly viewed as a market segment that is satisfied by generic inhalers.
Jim Reddick: However, PTO27 is a novel combination inhaler that uniquely facilitates steroid delivery to suppress inflammation at times of increased need.
Starting point is always strong clinical benefit where the need is large but we also benefit from being agnostic to therapy therapy area. So that we can choose from the most compelling opportunities available across the industry.
Jim Reddick: at times of increased asthma symptoms to prevent subsequent exacerbations.
A few additional successes are highlighted on the slide including <unk> and more recently, a risky and today, we have a portfolio of nine development stage therapies.
Jim Reddick: Bicex, NERTech is another example where the market was felt to be satisfied by
So to close here PTO to seven builds on our track record of successful investment and development stage therapies, and we will continue to pursue this important business stream of development stage opportunities, while maintaining an appropriate balance with royalties unapproved medicines in order to optimize our overall risk return profile and I will now turn it over.
Jim Reddick: However, the strong launch of oral CGRP inhibitors, including NERTX,
Jim Reddick: including NIRTEC, has revealed a significant unmet need among people suffering from migraine.
Jim Reddick: And we look forward to identifying more opportunities like PTO27 and NERTech in the years to come. Our rigorous evaluation process is the primary reason for our high success rate. We conduct extensive due diligence both through our experienced research and investment team internally but also through leading external experts
To Marshall to discuss upcoming events.
Thanks, Jim and good morning, Slide 13 lays out the upcoming clinical and regulatory events for our portfolio over the next 12 months or so for the balance of 2021, we expect phase III results for intranasal <unk> in migraine and looking to next year 2022 is likely to be a very milestone rich year with a number of important phase III readouts.
For our portfolio. These include phase III results for <unk> in third line HR positive metastatic breast cancer from <unk> in combination with Opdivo and <unk> in first line.
Jim Reddick: to gain comfort with the science and patient need. Our starting point is always strong clinical benefit where the need is large, but we also benefit from being agnostic to therapy area so that we can choose from the most compelling opportunities available across the industry. A few additional successes are highlighted on the slide, including Trudevie and, more recently, Eberrisby. And today, we have a portfolio of nine development stage therapies. So to close, PTO27 builds on our track record of successful investment in development stage therapies, and we will continue to pursue this important business stream of development stage opportunities while maintaining an appropriate balance with royalties on approved medicines in order to optimize our overall risk return profile. And I will now turn it over to Marshall to discuss upcoming events.
Renal cell carcinoma, as well as in prostate and lung cancer from fire in ulcerative colitis in front again to narrow mabin, all timers <unk> in rheumatoid arthritis and sell direct in depression.
Turning to regulatory action this quarter and we expect a regular a European regulatory decision entre Lv in triple negative breast cancer in 2022, we expect a filing on PT Ot seven as Jim mentioned earlier and also European regulatory decision on <unk>, Japan in migraine, where it will be marketing out of the brand name <unk>. We're pleased to see the news of a partnership.
Between bio Haven, and Pfizer to market by Jerry outside of the U S bias, there will be a strong partner to maximize the reach of this new class of medicines.
Around the world in some we expect to see a number of important milestones over the next year. If positive many of these could add significantly to the long term outlook for our adjusted cash flow.
Now before turning it over to Terry I wanted to make a few final comments on our portfolio's Medicare exposure given the proposed U S drug pricing legislation reform.
That was that has been receiving significant investor attention. While nothing has been finalized our business in aggregate has minimal Medicare exposure across part D and part D and based on the draft language, we would expect only one or two products <unk> and <unk> to be in the top drugs by Medicare spending and as a reminder, <unk> royal.
Marshall Urist: renal cell carcinoma, as well as in prostate and lung cancer, Trumphia in ulcerative colitis and Crohn's, Gantinarimab in Alzheimer's, Otylamab in rheumatoid arthritis, and cell terexan in depression. Turning to regulatory actions, this quarter, we expect a European regulatory decision on Trudelvey and triple negative breast cancer. In 2022, we expect a filing on PTO27, as Jim mentioned earlier, and also a European regulatory decision on remedya in Japan and migraine, where it will be marketed under the brand name, Videra.
T duration is through 2027 to 2028.
From what we have seen in their proposed legislation. Our initial view is that we would anticipate only a very small headwind to our business without considering any increase in volume from potentially improve patient access.
But more importantly, this potential change to the U S drug pricing legislation highlight some strengths of our business model and strategy.
First the fact that we're continually adding new product royalties to our portfolio means that we're uniquely positioned to rapidly react to any changes to the reimbursement environment environment in our forecast and valuations.
Marshall Urist: We're pleased to see the news of a partnership between Biohaven and Pfizer to market Videra outside of the U.S. Pfizer will be a strong partner to maximize the reach of this new class of medicine around the world.
Second our therapeutic area agnostic business model means that the full span of Biopharma innovation is open to us without the constraints of legacy therapeutic area R&D or commercial infrastructure of course will continue to monitor the developments in Washington, and respond appropriately and with that I'll hand, it over to Terry.
Thanks, Marshall, let's move to slide 15.
Total royalty receipts grew 21% versus a year ago period.
Marshall Urist: In sum, we expect to see a number of important milestones over the next year. If positive, many of these could add significantly to the long-term outlook for our adjusted cash flow. Now, before turning it over to Terry, I wanted to make a few final comments on our portfolio's Medicare exposure given the proposed U.S. drug pricing legislation reform that has been receiving significant investor attention. While nothing has been finalized, our business, in aggregate, has minimal Medicare exposure across Part V and Part D. And based on the draft language, we would expect only one or two products in Burvica and Extandy to be in the top drugs by From what we have seen in the proposed legislation, our initial view is that we would anticipate only a very small headwind to our business without considering any increase in volume from potentially improved patient access.
Growth drivers in the quarter included our largest franchise cystic fibrosis as well as tysabri payments from bio Haven, new royalties and a onetime milestone payment of $45 million related to Sanofi diabetes therapy <unk>.
These positive factors more than offset the decline in royalty receipts from our legacy HIV franchise.
As mentioned on last quarter's call.
With milestone we received this quarter was previously expected in 2022.
For your modeling consideration, we would therefore expect the other products royalty receipts line in 2020 to be between $200 million to $250 million.
Slide 16 shows how our royalty receipts translated to strong adjusted cash flow in the third quarter.
As you are aware adjusted cash receipts as a key non-GAAP metrics for us, which we arrive at after deducting noncontrolling interests.
This amounted to $587 million in the quarter growth of 24% compared with last year's third quarter as Pablo noted earlier.
When we move left to right operating and professional costs of $54 million equated to nine 1% of adjusted cash receipts.
<unk> with the revised full year guidance I will speak to momentarily.
R&D funding remained at a low level the major step up in net interest to $65 million reflected the semiannual interest payment associated with our $6 billion unsecured note offering in 2020.
Marshall Urist: But more importantly, this potential change to U.S. drug pricing legislation highlights some strengths of our business model and strategy. First, the fact that we're continually adding new product royalties to our portfolio means that we're uniquely positioned to rapidly react to any changes to the reimbursement environment in our forecast and valuation. Second, our therapeutic area agnostic business model means that the full span of biopharma innovation is open to us without the constraints of legacy therapeutic area R&D or commercial infrastructure. Of course, we'll continue to monitor the developments in Washington and respond appropriately. And with that, I'll hand it over to Terry. Thanks, Marshall.
As a reminder, these payments are paid in the first and third quarters.
The other line was $27 million, which largely which was largely attributable to a $16 million a onetime cash payment related to our bond offering in July.
Adjusted cash flow, our bottom line earnings was $441 million or <unk> 73 per share.
This translates to an adjusted cash flow margin of 75, 2%.
Given that the quarter included the semiannual interest payment, which was equivalent to around 11% of adjusted cash receipts and the one time bond payment. This margin underscores the strong cash conversion in our business model.
On slide 17, we continue to maintain our financial firepower, despite the $2 $3 billion of capital deployed on royalty acquisitions year to date.
At the end of September we had $2 billion in cash and marketable securities.
Terrance P. Coyne: Let's move to slide 15. Total royalty receipts grew 21% versus the year-ago period. Growth Drivers in the Quarter included our largest franchise, Cystic Fibrosis, as well as Taisabri, payments from Biohaven, new royalties, and a one-time milestone payment of $45 million related to Sanofi's Diabetes Therapy Salifa. These positive factors more than offset the decline in royalty receipts from our legacy HIV franchise. As mentioned on last quarter's call, the Sleekwood milestone we received this quarter was previously expected in 2022.
Two our position at the end of 2020.
Major cash inflows over the nine months included adjusted cash flow of $1 3 billion plus.
Plus the $1 $3 billion of net proceeds from our innovative debt financing in July.
As a reminder, this bond issuance included a $600 million social bond, which reflects our commitment to ESG and corporate social responsibility, which we discussed on last quarter's call.
These combined inflows of $2 6 billion were broadly offset by the capital we deployed on royalty acquisitions and dividends and distributions.
<unk> limited change over the period on a net basis.
We currently have seven $3 billion in investment grade debt with leverage of two seven times EBITDA on a net basis and 376 times EBITDA on a total basis and a weighted average coupon of two to two 4%.
Terrance P. Coyne: For your modeling consideration, we would therefore expect the other products royalty receipts line in 2022 to be between $200 to $250 million. Slide 16 shows how our royalty receipts translated to strong adjusted cash flow in the third 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.
Our $1 5 billion revolving credit facilities untapped, which in addition to cash on hand gives us a strong liquidity position, making us very well positioned to execute on our business plan.
My final slide sets out our raised full year 2021 guidance. We now expect adjusted cash receipts to be in the range of $2. One 1 billion to $2. One 3 billion, an increase of approximately $20 million at the midpoint of our previous guidance.
Terrance P. Coyne: This amounted to $587 million in the quarter, growth of 24% compared with last year's third quarter, as Pablo noted earlier. Moving left to right, operating in professional costs of $54 million equated to 9.1% of adjusted cash receipts, consistent with the revised full-year guidance I will speak to momentarily. R&D funding remained at a low level.
The increase in our guidance was driven by strong underlying performance of our portfolio.
Our new adjusted cash receipt guidance represents growth of between 17% and 18%.
Over the $1 8 billion, we delivered in 2020.
Turning to operating costs, we now expect these to be approximately 9% of adjusted cash receipts, which is at the low end of our previous guidance to between 9% and 10%.
This guidance implies a step up in costs at this line in the fourth quarter due to the timing of various expenses.
Terrance P. Coyne: The major step up in net interest to $65 million reflected the semi-annual interest payment associated with our $6 billion unsecured note offering in 2020. As a reminder, these payments are paid in the first and third quarters. The other line was $27 million, which was largely attributable to a $16 million one-time cash payment related to our bond offering in July. Adjusted cash flow, our bottom line earnings, was $441 million, or 73 cents per share. This translates to an adjusted cash flow margin of 75.2%.
Net interest paid for the year is still expected to be around $130 million, but you should note. We expect net interest paid and 22 2022 to increase to around 170 million. Following the bond offering in July that I just discussed.
In line with our established practice. This guidance is based on our portfolio as of today does not take into account any future acquisitions.
With that I'd like to hand, the call back to Pablo for his closing comments.
Thanks Barry.
Let me close by first.
Raised the rating how delighted I am with how our.
Business has progressed in 2021 and by secondly, inviting you Gordon Ignarro Investor day in the spring of 2022.
We're very excited by the opportunity to engage with investors would lay out why we're so excited about the future growth prospects for the business. We plan to include a detailed discussion of the outlook for royalty funding in life Sciences innovation.
Terrance P. Coyne: Given that the quarter included the semi-annual interest payment, which was equivalent to around 11% of adjusted cash receipts and the one-time bond payment, this margin underscores the strong cash conversion in our business model. On slide 17, we continue to maintain our financial firepower despite the $2.3 billion of capital deployed on royalty acquisitions year to date. At the end of September, we had $2 billion of cash and marketable securities, similar to our position at the end of 2020.
Our updated capital deployment objectives, and long term growth targets.
Of course, you will have plenty of opportunity to ask questions and interact with management.
We very much drop that we can hold our investor day in person, but we will of course be guided by the pandemic backdrop as we want all participants to feel comfortable and above all safe.
Whether in person or virtual <unk>.
Confident we'll have a compelling presentation and I hope as many of you as possible, we'll be able to join us on that.
Terrance P. Coyne: Major cash inflows over the nine months included adjusted cash flow of $1.3 billion plus the $1.3 billion of net proceeds from our innovative debt financing in July. As a reminder, this bond issuance included a $600 million social bond, which reflects our commitment to ESG and corporate social responsibility, which we discussed on last quarter's call. These combined inflows of $2.6 billion were broadly offset by the capital we deployed on royalty acquisitions and dividends and distribution. Hence the limited change over the period on a net basis.
We will follow up with additional detail.
Perfect.
We're closer to the event.
With that I would like to open the call for questions back to you George.
Thank you Pablo.
And Josh will now open up the call here.
Two questions.
If you could please take the first question.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Our first question comes from Chris Schott with Jpmorgan you May proceed with your question.
Oh, great. Thanks, so much for the questions I guess my first question was for Pablo Terry.
CF is obviously emerged as a controversy in the story and I, you've talked about the ability to significantly diversify your business away from.
Any potential risk that may emerge here over the next kind of five or 10 years.
Terrance P. Coyne: We currently have $7.3 billion in investment-grade debt with leverage of 2.7 times EBDA on a net basis and 3.76 times EBDA on a total basis, and a weighted average debt coupon of 2.24%. Our $1.5 billion revolving credit facility is untapped, which, in addition to cash on hand, gives us a strong liquidity position, making us very well positioned to execute on our business. My final slide sets out our raised full year 2021 guidance.
Just elaborate a bit more on the framework that you are thinking about about how quickly the company can diversify its business I think about your capital deployment rates et cetera.
And maybe as part of that I think you've talked about every billion dollars of capital deployed translating to about $170 million of adjusted cash receipts. Five years later I think that was based on deals over the past few years is that a decent lens to think about as we think about how quickly capital deployment could translate to adjusted cash.
Receipts going forward or the type of deals that you are looking at now having either different payoff timelines are just different profiles than what we've been thinking about in the past. Thanks. So much.
Chris Thanks for your question and let me make some initial remarks and Terry can cause.
I'll just talk a bit more specific about cystic fibrosis.
Terrance P. Coyne: We now expect adjusted cash receipts to be in the range of $2.11 billion to $2.13 billion, an increase of approximately $20 million at the midpoint of our previous guidance. The increase in our guidance is driven by the strong underlying performance of our portfolio. Our new adjusted cash receipt guidance represents growth of between 17% and 18% over the $1.8 billion we delivered in 2020. Turning to operating costs, we now expect these to be approximately 9% of adjusted cash receipts, which is at the low end of our previous guidance for between 9% and 10%. This guidance implies a step-up in cost at this line in the fourth quarter due to the timing of various expenses. However, net interest paid for the year is still expected to be around $130 million.
I think.
Activation, we made about $170 million.
Cash receipts five years out per billion is actually pretty.
<unk>.
We've looked at many periods in the amount of capital invested over different periods of time.
And there is a range, but I think it's a fairly <unk>.
Reasonable and also conservative number that you could use to model out what happens with our capital deployment.
The other comment to make is that we actually have been doing really well when you look at.
Investments every year every quarter in capital deployed.
No.
You have seen by following us.
We had initially guided to.
$1 5 billion of capital deployed per year about 7 billion.
Over five years after our IPO and if you just look at the last three years.
Terrance P. Coyne: But you should note, we expect net interest paid in 2022 to increase to around $170 million following the bond offering in July that I just discussed. In line with our established practice, this guidance is based on our portfolio as of today and does not take into account any future acquisition. With that, I'd like to hand the call back to Pablo for his closing comments. Thanks, Terry.
We deployed $2 3 billion in 2019 too.
$2 4 billion in 2020, which was the year of our IPO last year and this year. So far we're at two eight so we're obviously exceeding.
A meaningful way.
Half of capital deployed we're obviously in excess of 2 billion per year and this year $2 eight.
<unk>.
We're very excited about the way the business has progressed.
We're now.
Pablo Legorreta: Let me close by first expressing how delighted I am with how our business has progressed in 2021, and secondly, inviting you to our Ignoreal Investor Day in the spring of 2022. We're very excited by the opportunity to engage with investors who will lay out why. We're so excited about the future growth prospects for the business. We plan to include a detailed discussion of the outlook for royalty funding in life sciences innovation, our updated capital deployment objectives, and our long-term growth targets.
Very close to.
Over 5 billion of capital deployed.
Towards that $7 billion.
Goal.
$5 billion deployed.
A matter of sort of 18 months or so.
So I think.
We also have a very very.
Broad rich exciting pipeline ahead of us and just see the tailwind that exist in this industry are so strong but I think.
We feel very confident of.
Delivering.
Pablo Legorreta: And, of course, you will have plenty of opportunity to ask questions and interact with us. We very much hope that we can hold our investor day in person, but we will, of course, be guided by the pandemic backdrop as we want all participants to feel comfortable and, above all, safe, whether in person or virtual. I am confident we will have a compelling presentation, and I hope as many of you as possible will be able to join us on the day. We'll follow up with additional details on a specific date as we're closer to the event. With that, I would like to open the call for questions. Back to you, George.
On.
Our guidance and expectation is that investor.
So I see it.
It is.
There's no question that that deploying this amount of capital per year is going to make.
The reliance on our cystic fibrosis royalties much lower.
So much lower than what it is now.
That's going to happen fairly quickly. If you just look out three years five years, its going to start to diminish and we're adding as you know really exciting product with very interesting growth dynamic than really a pure product marketed by some of the strongest companies.
Sciences.
Yes.
There were some vacation with very high quality very exciting product, but Barry why don't you add some of this whole comments about.
George Grofik: Thank you, Pablo. And Josh will now open up the call to your questions. Can you please take the first question?
Yes sure Thanks, Chris it's a.
Good question.
So I think first off we saw the data that was disclosed by vertex.
Operator: Thank you. As a reminder, to ask a question, you'll need to press Star 1 on your telephone. To withdraw your question, press the Pounder.
In a few months ago, we think it's difficult to draw too many conclusions on a phase II study with relatively low patient numbers, where the full data hasnt been presented.
But based on the topline data there was nothing we saw that suggest the efficacy of our Texas, New Triple is superior to try CAFTA.
Operator: Our first question comes from Chris Schott with JPM. You may proceed with your question. Oh, great. Thanks so much for the questions. I guess my first question was for Pablo or Terry.
We also believe that due to rate of Kalydeco is simply kalydeco and it should be royalty bearing at the same rate as kalydeco.
That's the case, our royalty on the new vertex triple where the Deuterate of Kalydeco intend to capture components are royalty bearing will be 8% and this isn't much different than a royalty entre catheter, which is a little over 9%.
Christopher Schott: CF has obviously emerged as a controversy in the story, and you've talked about the ability to significantly diversify your business away from, you know, any potential risks that may emerge here over the next, you know, kind of, you know, five or ten years. Can you maybe just elaborate a bit more on the framework that you're thinking about, about how quickly the company can diversify its business, think about your capital deployment rates, et cetera?
But hypothetically speaking, even if <unk> kalydeco is not royalty bearing and only the tend to capture portion is royalty bearing our royalty on the new vertex triple would be 4%.
We continue to believe that even if a new triple is approved <unk> will play a significant role in the treatment of CF over the long term given the impressive long term safety and efficacy it's achieved.
Remember many CF patients take 30 to 50 pills per day for their disease. So it's not clear how important the potential once daily option really be without a material improvement in efficacy, especially when considering the long experienced patients will have had with trade captain.
Christopher Schott: And maybe as part of that, I think you've talked about every billion dollars of capital deployed translating to about 170 million in adjusted cash receipts five years later. I think that was based on, you know, deals over the past few years. Is that a decent lens to think about as we think about how quickly capital deployment could translate to adjusted cash receipts going forward, or the type of deals that you're looking at now having either different payoff timelines or just different profiles than what we've been thinking about in the past? Thanks so much.
That being said we believe.
Ignite that theres potential for preferred Texas, new triple to capture share of the market in the back half of the decade, and we appreciate that investors want to understand the risk to our adjusted cash receipts under downside scenarios. So we estimate that if the new vertex Triple was approved in only the Tesla captured component of the new trip Triple as Roy.
Multi bearing our adjusted cash receipts towards the end of the decade could be reduced by a couple hundred million dollars versus per year versus what they would have been if all components of the new triple royalty bearing.
So to put this into context, our adjusted cash receipts this year.
<unk> to be in the range of $2, one one to $2 3 billion and as Pablo just mentioned, we are investing billions of dollars per year, adding adding dozens of products to the portfolio every five years, many of which will be blockbusters.
Pablo Legorreta: Chris, thanks for your question. And I'll make some initial remarks, and Terry can take over. I'll just talk a bit more specifically about cystic fibrosis.
We have products that faced loss of exclusivity or lose market share to competitors every year and this is actually I think a great example, this year, our HIV royalty expired in our adjusted cash receipts from HIV are expected to decline by nearly $150 million in 2021, and we are still expected to grow total adjusted cash.
Pablo Legorreta: So I think the calculation we made about 170 million cash receipts five years out per billion is actually pretty reasonable. We've looked at, you know, many periods and the amount of capital invested over different periods of time. And there is a range, but I think it's a fairly reasonable and also conservative number that you could use to model.
Received by 18% at the midpoint of our guidance. This really highlights the resilience of our business model and we continue to believe that royalty pharma is uniquely positioned to overcome these risks.
Yes.
So Chris I think the comment Terry made were excellent.
Importantly for investors really.
Understand well.
And then zinc.
<unk>.
<unk>.
Pablo Legorreta: out what happens with our capital deployment. Now, the other comment to make is that, you know, we actually have been doing really well when you look at investments every year, every quarter in capital deployed. And, you know, as you have seen by following us, we initially guided to $1.5 billion of capital deployed per year, about $7 billion over five years after our IPO. And if you just look at the last three years, we deployed $2.3 billion in 2019, $2.4 billion in 2020, which was the year of our IPO last year. And this year so far, we're at 2.8.
Things like a potential loss of a pattern HIV $150 million of revenue.
<unk> strong the performance has been this year savings through that exploration and field delivering.
High double digit growth in our business and this is something that I've seen over and over again over two decades, we lost our <unk> platform no issue and we lost many other patents Humira, which was a big one and we just sailed through that so I think the business has this incredible resilience that's very unique.
That.
Few businesses.
Have in life Sciences, combined with very very strong predictable growth and I'll stop there.
Great. Thanks, so much for the color.
Thank you. Our next question comes from Andrew Baum with Citi. You May proceed with your question.
Thank you.
Full of questions. Firstly, you commented on plastics and Triple perhaps you could comment on any thoughts you have on the <unk> portfolio.
Pablo Legorreta: So we're obviously exceeding in a meaningful way the billion and a half of capital deployed. We're obviously in excess of $2 billion per year, and this year, 2.8. So, you know, we're very excited about the way the business has progressed. We're now, you know, very close to, I mean, we're over $5 billion of capital deployed towards that $7 billion goal, and five billion deployed in a matter of sort of 18 months or so.
Take the positive data problematic, but it will still be interesting and then second could you talk about whether you are seeing any increased competition pushing out asset prices for some of the more attractive royalty deals maybe you could talk some more focus I note that Blackstone is building a presence in the area within <unk>.
And they certainly have the balance sheet to compete.
Pablo Legorreta: So, you know, I think, and we also have a very, very, you know, broad, rich, exciting pipeline ahead of us, and just the tailwinds that exist in this industry are so strong that I think, you know, we feel very confident of, you know, delivering on, you know, our guidance and expectations that investors have. So I think, you know, it is just going to happen. You know, there's no question that deploying this amount of capital per year is going to make the reliance on royalties much lower, much, much lower than what it is now. And that's going to happen fairly quickly. If you just look out, you know, in three years, five years, it's going to start to diminish.
But more broadly what are you seeing is there any near term risk scores to see opportunities available say board, but that's more than room for one.
Yes.
Sorry to again comment on the Avi question, but.
With regards to your question about competition.
This is a topic that has been.
In People's minds, the investors, Mike again for two decades.
We were private it was our private investors and now that we're public it's our public investors and what's been really great to see is how.
Competition comes and goes.
It's been of all times in flavors.
Many investors that joined.
Or try to enter the market ended up exiting and there's been many of them and I think.
Terrance P. Coyne: And, you know, we're adding, as you know, really exciting products with really interesting growth dynamics and really top-tier product markets by some of the strongest companies in life sciences. So it's, you know, diversification with very high quality, very exciting products. But Terry, why don't you add some additional comments about Kia? Yeah, sure. Thanks, Chris.
So obviously, new competitors and strong competitors.
But I think we have some incredibly unique attributes.
That make us very very unique and very strong.
The low cost of capital that we have with <unk>.
But we are able to borrow at fixed rates are up 2%.
The ability of us to invest.
<unk> and <unk>.
Unapproved products I'm thinking.
Single product risk of 300 400 $500 million.
Terrance P. Coyne: It's a good question. So, first off, we saw the data that was disclosed by Vertex a few months ago, and we think it's difficult to draw too many conclusions on a phase two study with relatively low patient numbers where the full data hasn't been presented. But based on the top line data, there was nothing we saw that suggested the efficacy of vertex's new triple is superior to TriCAPT. We also believe that Deuterated Colitico is simply Colitico, and it should be royalty-bearing at the same rate as Colitico.
And not really being concerned with that because of the scale the size of our portfolio. The fact that we generate.
2 billion plus of revenue per year, that's growing with a very strong 90% EBITDA margin allows us to take risks.
You can.
And I would also just like to remind you that from an overall cost of capital. We think our cost of capital is somewhere in the 5% to 7% range. We also have a structure, where we are very tax efficient plus you know, which makes us very competitive and many of the other and trends in the market when they are.
Terrance P. Coyne: That's the case, our royalty on the new vertex triple, where the Deuterate of Kaleitko and Tesecafter components, our royalty bearing, would be 8%. And this isn't much different than our royalty on TriCastal, which is a little over 9%. But, hypothetically speaking, even if Deuteria Colitico is not royalty-bearing, and only the tessicafter portion is royalty-bearing, our royalty on the new vertex triple would be 4%. We continue to believe that even if a new triple is approved, Tricaptal will play a significant role in the treatment of CF over the long term, given the impressive long-term safety and efficacy it
Structured as private equity funds and are asking investors to give them capital that's going to be and this is important capital that's going to be locked up for 357 years with low liquidity.
Investors will not invest.
The.
People are raising the money fund.
Are not promising clean mid and high teens recurrent people don't give you money if you cannot deliver.
Teens return, if theres more liquidity and if the money is locked up for some period of five so.
No.
One thing that we sold repeatedly investors is that for many of the really attractive high quality royalties in the approved product.
To be able to.
Complete a transaction and have the failure of the royalty that can be a company at University of hospital really be willing to sell the asset.
You have to buy it at high single digit low double digit returns, which we can very easily get through and still have very attractive returns because when we lever that high single digit low double digit return. We're now in the high teens, even 20, IRR levered very predictably.
Terrance P. Coyne: Remember, many CF patients take 30 to 50 pills per day for their disease, so it's not clear how important the potential once daily option will really be without a material improvement in efficacy and safety, especially when considering the long experience patients will have had with Triccathic.
Very stable, but we can do that because of our cost of capital to someone with a fun, having promise investors teens returns.
Terrance P. Coyne: That being said, we recognize that there's potential for Pervert Texas New Triple to capture a share of the market in the back half of the decade, and we appreciate that investors want to understand the risk to our adjusted cash receipts under downside scenarios. So we estimate that if the new vertex triple is approved and only the TESA capture component of the new triple is royalty-bearing, our adjusted cash receipts towards the end of the decade could be reduced by a couple hundred million dollars per year versus what they would have been if all components of the new triple were royalty-bearing. So to put this into context, our adjusted cash receipts this year are estimated to be in the range of 2.11 to 2.13 billion.
So difficult for them to be able to buy a royalty at high single digit low double digits.
Will deliver attractive returns to their investors.
Given what they promise those returns and given the lack of leverage low cost leverage. So we got a lot of really strong.
And also other things that are intangible the net where we have our relationships. The team we have which has worked together very cohesively.
More than a decade.
And so on so I'll stop there and maybe Barry can add some comments about abbvie.
Yeah. So.
It's certainly something that we're following at this point.
Tough to say, we haven't seen any data.
I think just to sort of go back to the point I made earlier try captisol has been transformative for many patients with CFS. So we think it sets a really high bar.
We'll be we'll be interested to see the data that.
Terrance P. Coyne: And as Pablo just mentioned, we're investing billions of dollars per year, adding dozens of products to the portfolio every five years, many of which will be blocked. We have products that face loss of exclusivity or lose market share to competitors every year. And this is actually, I think, a great example.
Hopefully hopefully they disclose.
In the beginning I guess of 2022.
But we think that capital will continue to play.
<unk> important role in the treatment of CF over.
Over the long term.
Operator, we will take your questions. Thank.
Thank you. Our next question comes from Greg Fraser with Securities. You May proceed with your questions.
Good morning folks thanks for taking the question.
I wanted to follow up on the diversification question, where would you say the bigger that gets.
Terrance P. Coyne: This year, our HIV royalty expired, and our adjusted cash receipts from HIV are expected to decline by nearly $150 million in 2021. But we're still expected to grow total adjusted cash receipts by 18% at the midpoint of our guidance. This really highlights the resilience of our business model, and we continue to believe that Royalty Farm is uniquely positioned to overcome these risks. So Chris, I think the comments you made were excellent and important for investors to really, you know, understand well.
Connect is between street thinking in your plan is that the growth potential of the current portfolio or your ability to significantly expand the portfolio over the next few years.
I think.
Growth is definitely an area, where I think.
Investors and analysts have not appreciated.
The ability of royalty pharma to deliver.
Consistent predictable high growth.
Which is very unique.
In life Sciences, there's really not many businesses that have this characteristic we have <unk>.
Growth that is attractive and has three very interesting attributes one is.
But high level of growth.
Terrance P. Coyne: And then, you know, things like a potential loss of a patent, HIV, $150 million of revenue, and how, you know, strong the performance has been this year sailing through that expiration and still delivering, you know, high double-digit growth in our business. And this is something that, you know, I've seen over and over again over two decades. You know, we lost our refluxent pattern, no issue, and we lost many other patents, Humira, which was a big one, and we just sailed through that. So I think the business has this incredible resilience that's very unique, you know, that few businesses have in life sciences combined with very, very strong predictable growth. And I'll stop there. Great.
The diversity of growth again very unique so.
Our growth is not relying on one or two drugs, which is what you often see with biotech companies that are launching a product in that yes. They will experience some growth, but it's all reliant on one or two products.
And even big companies I mean, we've seen situations where in PD. One for example, there were expectations that one of the PD ones was going to be much bigger than the other that didn't pan out and obviously it hurt the growth of the company and have that drug.
And.
And again that played out over the last five seven years, but.
And it really shows how even some of the big companies are reliant on 1234 drug to drive the growth and obviously also very reliant on your drug to drive brokerage stability because they have.
Obviously lower margin in our case, because our growth is derived from.
A very broad portfolio well diversified portfolio.
Much more predictable and also our bottom line is much more predictable for the same reason because of our 90% margin.
But then the other thing that's very unique with Royal departments. The duration of growth. We have a portfolio that has 15 years of winter Robert duration of.
Christopher Schott: Great. Thanks so much for the color.
Operator: Thank you. Our next question comes from Andrew Baumwood City. You may proceed with your question. Thank you.
When you weigh our revenues by Patterson's experiential, which is very very unique many companies big companies have weighted average duration of therapy.
Andrew Baum: A couple of questions. Firstly, you commented on Perthexismetriple. Perhaps you could comment on any thoughts you have on AdV's portfolio. I take the positive data problematic, but it would still be interesting. And then, second, could you talk about whether you are seeing any increased competition, pushing up asset prices, for some of the more attractive royalty deals? Maybe you could talk to Morphosis.
Eight 910 years, but its rare to see.
Duration as long as ours. So there is no question that I think growth is an element that is not well understood appreciate it.
The ability for us to do.
Floyd capital consistently and add continue to add blockbusters to our portfolio.
In our road show, we had a few slides, but really shows how we have 22 blockbusters in our portfolio, which is three times as many as any of the big pharma and seven products that have revenues of $3 billion or more which again is about three times.
Pablo Legorreta: I know that Blackstone is building a presence in that area, including with Saran and Altlis, and they certainly have the balance sheets to compete. But more broadly, what are you seeing, is there any near-term risk, or are just the opportunities available so broad that there's more than room for one? Yes, I'll ask Terry to again comment on the Avey question, but, you know, with regard to your question about competition, this is a topic that has been in people's minds, investors' minds, again, for two decades.
The number of drugs. That's held 3 billion are more typical big pharma has.
And.
Again, what's interesting is that because of our openness the openness of our business model, where we're not constrained by third party classes.
Or also.
Salesforce in one or two therapeutic classes or five therapeutic classes.
Critical infrastructure critical groups and teams and a few therapeutic classes, we can't really look at the entire life sciences landscape and deployed capital and add blockbusters at a much faster rate than.
Pablo Legorreta: And, you know, when we were private, it was our private investors, and now that we're public, it's our public investors. And what's been really great to see is how, you know, competition comes and goes. And, you know, it's been of all kinds and flavors.
Many of the big companies can develop them. So it's a very unique business.
One way to think about it is that we really have if you think of royalty pharma via Empire.
Life Sciences.
R&D infrastructure and landscape that is constantly developing new drugs.
Us to actually.
Either fine of them create a greater royalty or an acquirer or acquire royalty that exist.
On a product that is already developed.
Pablo Legorreta: You know, many investors that joined or tried to enter the market ended up exiting, and there have been many of them. And I think there are obviously new competitors and strong competitors, but I think we have some incredibly unique attributes that make us very unique and very strong. You know, the low cost of capital that we have with, you know, debts that we are able to borrow at fixed rates of 2%. The ability of us to invest billions of dollars in unapproved products, taking, you know, single product risks of 300, 400, 500 million, and not, you know, really being concerned with that because of the scale and the size of our portfolio.
Could also be being developed but we have the entire R&D landscape all the entire industry, where we can actually deploy capital again, so that's very unique and I think investors have really not well understood that.
It's what drives.
He has driven the success of the department of the very strong growth over overextend the prototype.
Great. Thanks for the color.
Thank you. Our next question comes from Steve Scala with Cowen You May proceed with your questions.
I have a few questions all focused on your upside opportunities. So first how well royalty pharma benefit from the Abbvie <unk> patent decision and potential extension.
It stands and if you could provide any quantification of the benefit that would be helpful. Similarly.
How do you think about Pfizer's partnership with bio Haven for O U S rights to <unk> Tec as far as impact on your business again any high level quantification would be helpful. And then lastly, with <unk> looking to have even bigger potential as time goes on I would like to get a few points clarified.
Pablo Legorreta: The fact that we generate, you know, $2 billion plus of revenue per year that's growing with a very strong 90% EBDA margin allows us to take risks where, you know, very few can. And I would also just like to remind you that, from an overall cost of capital, we think our cost of capital is somewhere in the 5 to 7% range. We also have a structure where we are very tax-efficient, as you know, which makes us very competitive.
Are your rights to the asset global and secondly is the royalty the same whether the sales are in <unk> or <unk> shuttle. Thank you.
Yes, I think Marshall is ideal to answer.
The last two questions.
EBIT for the first one so go ahead Marshall.
Yes, Steve Thanks for thanks for the question so.
I was trying to write them down as youre going through so first one on the improvement.
On the improve it got patent news. So the first point there just to level set for everyone is that we had previously expected our improving ROI.
Royalty to expire between 2027 and 2029 and then we recently got the.
Pablo Legorreta: And many of the other entrants in the market, when they're structured as private equity funds and are asking investors to give them capital that's going to be, and this is important, and capital that's going to be locked up for three, five, seven years with no liquidity, those investors will not invest if the people raising the money in a fund are not promising a teen, mid, and high-team return. People don't give you money if you cannot deliver, you know, teams return if there's no liquidity and if the money is locked up for some period of time.
About the court decision that upheld some of Abbvie improve it got patents and now Abbvie has publicly disclosed that they don't expect generic entry.
In the U S until March 32032, and so our position is that we are entitled to royalties on <unk> in the U S until 2032 so.
Hard to quantify that necessarily at this point, but I think you can kind of look at your model in the forecast and think about what that might what that might mean.
For for the model. So hope that hope that's helpful. I think your second question was on the Pfizer Bio Haven.
Relationship and our perspective on that is certainly driven by a long history of <unk> products play out over over years and years and really appreciating what the global opportunity for medicines can be.
Pablo Legorreta: So, as you know, one thing that we repeatedly sold to investors is that for many of the really attractive high-quality royalties in a proof product, you know, to be able to complete a transaction and have the seller of the royalty, which can be a company, a university, a hospital, really be willing to sell the asset. You have to buy it at high, single-digit, low-bubble-digit returns, which we can very easily get to and still have very attractive returns, because when we lever that high single-digit, low-deg return, we're now in the high-teens, even 20s, levered, very predictably, very stable.
And oftentimes that even bigger than what's in the U S. But it certainly takes companies with.
Very broad deep infrastructure in multiple companies to get the drug out there to as many patients in countries as possible and I think we can't think of a better partner for bio Haven to help make that happen.
Then Pfizer and so we were very happy to see the news and I think as we think about the impact on our business certainly our our royalties are our global on that and so.
Can't help but enhance the value of our ex U S.
The <unk> portion of the royalties on on on your Tac and whatever else may come from the presentation from that from that collaboration.
So then the third question was on Gan to narrow mab and so I think there. The first question is just very simply is our royalty on worldwide sales and the answer to that is yes, and then on the shuttle so on the shuttle we haven't gotten.
Terrance P. Coyne: But we can do that because of our cost of capital. Someone with a fund having promised investors' teams returns, it's super difficult for them to be able to buy a royalty at high, single-digit, low-digit, and still deliver an attractive return to their investors, given what they promised us returns and given the lack of leverage, low-cost leverage. So we have a lot of really strong and also other things that are intangible. The network we have of relationships, the team we have which has worked together very cohesively for more than a decade, and so on.
In Q specific details as to.
Exactly how that works beyond to say that yes.
That the shuttle is royalty bearing to to royalty pharma still early it sounds like Roche is.
It sounds like Roche is moving it along which is great and we will look forward to further developments there.
Thank you.
Thank you. Our next question comes from Geoff Meacham with Bank of America. You May proceed with your question.
Hey, guys. Thanks, so much for the question.
Terrance P. Coyne: So, you know, I'll stop there, and maybe Terry can add some comments about Abby. Yeah, so certainly something that we're following. At this point, it's just tough to say because we haven't seen any data yet. I think just to sort of go back to the point I made earlier, Tricaptis has been transformative for many patients with CF. So, you know, we think it sets a really high bar. We will be interested to see the data that, hopefully, they will disclose in the beginning of 2022. But yeah, we think that TriCathal will continue to play a very important role in the treatment of CF.
And mostly just on the on the strategy and the business model.
First one there are some technologies or therapeutic areas that have evolve rather quickly COVID-19. As example of this I guess a question for maybe for Marshall is how is your diligence process.
Evolve to become a little bit more nimble and is there an increased focus on some of these fast track opportunities in <unk>.
<unk>.
And the second one maybe for Pablo just a follow up to the competition.
And when you look at <unk> seven I mean, it's more of a formulation play than it.
Operator: Operator, we'll take some questions.
A novel mechanism in.
Operator: Thank you. Our next question comes from Greg Frazier with Truist Securities. You may proceed with your question.
As you look across all the high impact opportunities and Biopharma, many being earlier in higher risk what are your thoughts of investments in health care that are outside of the therapeutics realm. Thanks guys.
Operator: Good morning, folks. Thanks for taking the question. I want to follow up on
Operator: I want to follow up on the diversification question. Where would you say the bigger disconnect is between street thinking and your plan?
Marshall do you want to take the first question.
Sure. So I think there are two <unk>.
Good morning, and thanks for the question. So I think there's two aspects to your question.
Pablo Legorreta: Is it the growth potential of the current portfolio or your ability to significantly expand the portfolio over the next few years? I think growth is definitely an area where investors and analysts have not appreciated, you know, the ability of Royalty Pharma to deliver consistent, predictable, high growth, which is very unique. In life sciences, there are really not many businesses that have this characteristic. We have growth that is attractive and has three very interesting attributes. One reason is the high level of growth.
First is how are we thinking about opportunities that.
Can kind of gather momentum quickly like like Covid and Covid has either on the therapeutic side or on the vaccine side and so there is two aspects to that I think the first is our approach to those things is.
Very consistent with how we've always looked at things in the past which is this.
Does it makes sense do we is it meaningful.
Meaningful science for four patients and does it checked that box and second do we think there is a.
<unk> attractive long term opportunity that would be value enhancing Q2, our portfolio and I think we treat things no matter the velocity of how quickly they develop.
Pablo Legorreta: The diversity of growth is, again, very unique. So our growth is not reliant on one or two drugs, which is what you often see with biotech companies that are launching a product. And yes, they will experience high growth, but it's all reliance on one or two products. And even big companies, I mean, we've seen situations where, in PD1, for example, there were expectations that one of the PD1s was going to be much bigger than the other. That didn't pan out.
The same way from that perspective.
The second aspect of your question is a good one too which is how do we structure, our our team and our diligent approach to be able to handle those opportunities if they do come fast and it's not something that we can see coming kind of miles away and so that's a good question and we have been thinking a lot about.
That.
And I think we are evolving to be able to move to move quickly.
Bye bye the internal resources that we've been adding like the strategy and analytics team that.
We've talked a lot about in the past and then also just continuing to expand and deepen our external.
Our external network that that Pablo mentioned as well. So I think we're in good stead, whether or not they are a kind of a slow developing.
Pablo Legorreta: And obviously, it hurts the growth of the company that had, you know, that drug. But, um, and, and, and, and, you know, and again, you know, that played out over the last five, you know, seven years. And it really shows how even some of the big companies are reliant on one, two, three, four drugs to drive growth. And, obviously, also very reliant on a few drugs to drive profitability because they have, you know, obviously lower margins.
A new part of the therapeutics landscape or something that happens quickly.
Jeff maybe just to add to the answer that Marshall provided.
There's really no restriction.
What we can do.
I mean, we've looked in the past of devices and all sorts of.
Technologies that produce royalties.
All of these therapeutics and sometimes it could be.
Not.
Pablo Legorreta: In our case, because our growth is derived from a very broad portfolio, a very well-diversed portfolio, it's much more predictable. And also, our bottom line is much more predictable for the same reason because of our 90% margin.
As you know patents are issued on on many things not only.
The composition of matter patents on the drug, but many other things and they give rise to royalty. So we're very open minded about that.
Anything that that.
Pablo Legorreta: But then the other thing that's very unique with Royal Department is the duration of growth. We have a portfolio that has 15 years of way to reverse duration when you weigh our revenues by patent expiration, which is very, very unique. You know, many companies, big companies, have average durations of, you know, six, eight, nine, ten years, but it's rare to see a duration that's as long as ours. So there's no question that I think growth is an element that is not well understood or appreciated.
Good.
<unk> and <unk>.
Percentages of revenue royalty.
And have looked at so many different things over the year, but I think.
An example of that is like the collaboration within with MSCI, where IBM indexes are going to be created and we've made great progress with MSCI on that.
So start to launch some of the things in the very near term.
A few months.
At the end that's going to generate revenue.
<unk>.
<unk>.
Assets under management and investment in life Sciences, which will grow for many decades.
Pablo Legorreta: And then, you know, the ability for us to deploy capital consistently and continue to add blockbusters to our portfolio. And in our roadshow, we had a few slides that really showed how, you know, we have 22 blockbusters in our portfolio, which is three times as many as any of the big pharma companies, and seven products that have revenues of three billion or more, which, again, is about three times the number of drugs that bring in three billion or more that the typical big pharma company has.
But anyway.
The other comment I would make is that is there anybody that can move quickly very quickly.
To react to opportunities.
And we can do it because.
No we havent, even that is constantly talking to companies.
<unk>.
Just reacting very quickly.
Many cases, we have model builds up already.
Where there is a product that is of interest.
We have a model for solid tumors, where recover every solid tumor.
All of the drugs that are in.
In the market today drugs that are being developed and we have a view on those drugs, so going up where does it come to us we can react very very quickly, but the other thing that is very very unique and talking about things that are underappreciated by investors is that if a company.
Pablo Legorreta: And, you know, again, what's interesting is that because of our openness, the openness of our business model, where we're not constrained by therapeutic classes or also, you know, Salesforce in one or two therapeutic classes or five therapeutic classes and, you know, clinical infrastructure, clinical groups, and teams in a few therapeutic classes, we can really look at the entire life sciences landscape and deploy capital and add blood and absolutely butchers at a much faster So it's a very unique business.
Think of a company like.
Bye.
For Biogen.
Amazon Alzheimers or thinking about a company like Celgene that was in hematology and inflammation.
A company like that once we get into a new therapeutic area.
It can take the five to 10 years. So they can make going to make an acquisition and get into a therapeutic area, but EBIT that takes time, obviously M&A.
M&A is complicated very competitive, but you assets that are attractive for big companies and obviously the issues now with anti trust that is making M&A for big companies difficult. That's why we're so excited about M&A and midcap companies.
Pablo Legorreta: And I think, you know, one way to think about it is that we really have, if you think of royalty pharma, the entire life sciences are in the infrastructure and landscape that is constantly developing new drugs for us to actually, you know, either finance them and create a royalty or an acquire or acquire royalty that exists on a process. That is already developed where it could also be being developed, right?
But.
Leaving aside M&A.
But he wants to.
Diversify and get into a new therapeutic area.
Great.
They have to buy enough that they have to create a clinical development and they have to invest in clinical trials. They have to then launch that it can take five to 10 years in our case, if there are interesting areas for us to invest in.
We can.
So quickly.
If there is a royalty that we're interested in on our approved product that is already generating cash flow. We can have discussions with the holder.
Pablo Legorreta: But we have, you know, the entire R&D landscape of the entire industry where we can actually deploy capital again. So that's very unique. And I think investors have really not understood that. And it's what drives, you know, has driven the success of rail oil performance of very strong growth over an extended period of time.
And potentially acquire if there is a product that is in development that we're interested in a new therapeutic area. We can go and see if we can find those that product and create a royalty and we ended up having an investment in that area in a matter of months.
Months.
Is it going to take a year because more and more because we are following all the pie and then at the right moment, we decided to make a move and we can have an investment very quickly, but the point is that it allows us the openness of the business model and the lack of concentrate.
Operator: Great. Thanks for the caller.
Operator: Thank you. Our next question comes from Steve Scala with Cowan. You may proceed with your question.
A bit constrained perfect biases allows us really.
Operator: Thank you. I have a few questions, all focused on your upside opportunities.
Making investments in the new areas that are exciting.
Steve Scala: How will Royalty Pharma benefit from the Avivimprovica patent decision and potential extension if it stands? And if you could provide any quantification of the benefit, that would be helpful. How do you think about Pfizer's partnership with Bio Haven for OUS rights to NIRTEC as far as impact on your business? Again, any high-level quantification would be helpful. And then lastly, with Gantanarab looking to have even bigger potential as time goes on, I'd like to get a few points clarified. First, what are your rights to the ASEF?
Great he's much more than any company and that's what's so unique about business model business model and so attractive.
As a way for investors to really get exposure to this incredible innovation that's occurring in life Sciences and in many cases in the most exciting new areas.
We were not.
Look at the investments we've made over the recent years and some of the new <unk>.
<unk> therapies.
It was easy for us and quick but anyway, Chris maybe you want to add some additional comments to this given your perspective of decade.
Steve Scala: asset global, and secondly
Helping companies in life Sciences.
Steve Scala: Is the royalty the same whether the sales are in Gantanarimab or Gantanarimab Shuttle? Thank you.
Sure. Thank you Pablo and thanks for the question Jeff.
I think public covered a lot of a lot of that I think there is.
Marshall Urist: Yes, I think Marshall is ideal to answer the last two questions or even the first one. So go ahead, Marshall. Yeah, Steve, thanks for the question. I was trying to write them down as you were going through them. So first one on the imbruvica patent news. So the first point there, just to level the playing field for everyone, is that we had previously expected our imbruvica royalty to expire between 2027 and 29. And then we recently got the news about the court decision that upheld some of AbbVie's imbruburvica patents. And now AbbVie has publicly disclosed that they don't expect generic competition. entry into the U.S. until March 30th, 2032.
The one thing that we really are.
Have you started to really look at is the total addressable market and.
The.
Cumulative.
<unk> spend of the sector over the next decade is roughly over two trillion dollars. When we look at that as just a huge opportunity to get involved in whether it's new new technologies as you as you highlight.
New opportunities.
<unk> royalties.
Given how fractured the R&D environment is in the sector.
The actual new royalties that will be created through that spend we just look at this as a tremendous opportunity in the therapeutic space, but if theres other royalties that exist.
Outside of that.
Not necessarily opposed to that either.
Marshall Urist: And so, you know, our position is that we are entitled to royalties on in Burrubica in the U.S. until 2032. So, you know, hard to quantify that necessarily at this point, but I think you can kind of look at your model in the forecast and think about what that might, what that might mean for the model. So I hope that's helpful. I think your second question was on the Pfizer Bio Haven, Thank you, relationship and you know our perspective on this is certainly driven by you know a long history of seeing products play out over over years and years and really appreciating what the global opportunity for medicines can be and oftentimes that's even bigger than what's in the U.S., but it certainly takes companies with you know, very broad, deep infrastructure in multiple companies to get the drug out there to as many patients in countries as possible.
Okay, great. Thanks, guys.
Thank you. Our next question comes from America Apart.
Evercore you May proceed with your question.
Hi, guys. Thanks for taking my question I have two if I may perhaps firstly on M&A side.
It looks like you've been fairly quiet since the Morpheus deal announcement in June and I Wonder if we should perceive that as a sign of perhaps something bigger that's in the works that'd be very curious.
And then secondly on the sort of big catalysts on your pipeline heading into next year again to narrow mab phase III, assuming phase III goes well do you expect this to be a multibillion dollar product. Thank you very much.
Good to hear you Omer.
Interesting question about more proceeds so I think.
And M&A in general I think.
Sure.
Global investors is that.
And Chris just mentioned two trillion dollars of investment in R&D in life Sciences over the next decade, and that's going to be about a trillion over the next five years.
Marshall Urist: And I think, you know, we can't think of a better partner for Biohaven to help make that happen than Pfizer. And so we were, you know, very happy to see the news. And I think, you know, as we think about the impact on our business, certainly our, you know, our royalties are global on that. And so, you know, it can't help but enhance the value of our XUS, um, you know, of the XUS portion of the royalties on NIRTEC and whatever else may come from the presentation, from that, from that collaboration.
The industry when you look at how much is spent.
It's about 300 billion per year 200 billion by biotech.
Large pharma big pharma globally, and another 100 billion by governments.
I'm, sorry government NIH.
Foundation.
So it's an incredible number I mean, when you look at many many other industries around the planet.
Investing in the tens of billions of dollars per year in R&D.
One of the few industries that.
Marshall Urist: So then the third question was on Gantanaromab, and so I think there the first question is just very simply, you know, our royalty on worldwide sales, and the answer to that is yes. And then on the shuttle, we haven't gotten into specific details as to exactly how that works, beyond to say that, yes, that the shuttle is royalty-bearing to royal pharma. Still early.
Invest at a scale of hundreds of billions of dollars.
Randy.
For years Life Sciences, and we're at the Middle of this is.
Is becoming the partner of choice.
Help companies fund part of that investment so that's obviously a huge opportunity but.
So.
<unk>.
The more conventional deals that we're doing.
Every.
Quarter every year.
Probably we will have us invest.
Probably more than $2 billion per year.
Marshall Urist: Sounds like Roche is moving it along, which is great, and we'll look forward to further developments there. Thank you. Thank you. Our next question comes from Jeff Meacham with Bank of America. You may proceed with your question.
And then the ones that are going to be difficult to predict M&A transaction.
Are we going to have.
One or two per year or one or two every two or three year.
Hard to tell but the reality is that one interesting new.
Operator: Hey guys, thanks so much for the question.
Operator: I have two, and mostly just on the strategy and the business model. So the first
Things that we're realizing could become a really important driver of opportunity for us is mid cap M&A.
Operator: There are some technologies or therapeutic areas that have evolved rather quickly. COVID is an example of this.
What happened with morphosis and that is going to add to the more conventional deals that we're able to do every year.
I think.
There are some big things out there now for those things to really happen the FERC to align there has to be.
Geoffrey Meacham: I guess the question for Marshall is, how has your diligence process evolved to become a little bit more nimble, and is there an increased focus on some of these fast-track opportunities in biopharma? And the second one, maybe for Pablo, just to fall in line with the competition, you know, when you look at PTO27, I mean, it's more of a formulation play than, say, a novel mechanism. And as you look across all the high-impact opportunities in biopharma, many being earlier and higher risk, what are your thoughts on investments in healthcare that are outside of the therapeutics realm? Thanks, guys.
No.
A deal where two companies.
Once we transact.
And we are then able to potentially partner with one of them to help them. So.
They are difficult transactions to be honest, but it's things, where we have experienced and we've been successful and I think it's something that I spend personally a lot of time looking at because that's where I think we will have also very very attractive opportunity.
In front of us.
I guess that was there another question sorry, I meant the other question maybe it was gone.
Yes, Mike.
One was around your expectation for against narrow map commercial opportunity if the trial holds.
Marshall Urist: Marshall, do you want to take the first question? Sure, so there are two. Hey Jeff, good morning, and thanks for the question.
Yeah Marshall.
Hey, good morning.
<unk> so like we mentioned in the script, we're really excited now to have this as part of the portfolio.
Marshall Urist: So I think there are two aspects to your question. You know, the first is, you know, how are we thinking about opportunities that, you know, can kind of gather momentum quickly like COVID, like COVID has, on the therapeutic side or on the vaccine side? And so there are two aspects to that. I think the first is, you know, our approach to those things is very consistent with how we've always looked at things in the past, which is, you know, does this make sense? Do we, you know, is this meaningful, meaningful science for patients? And does it check that box?
Most the morphosis deal and are looking forward to the data next year and to answer your question yes.
Yes.
Our thesis has been that a.
A anti amyloid product in this class a it has a very consistent data set and shows clear efficacy and safety and is supported by a a big global company and has a really attractive sub Q dosing profile like gap to narrow mab any checks out.
Boxes, certainly has the potential to be a multibillion dollar a multibillion dollar product like we mentioned in the past week.
Always looking at a ton of scenarios. So whenever we whenever we bring anything into the portfolio, but certainly this is one that can support multi blockbuster potential.
Marshall Urist: And second, you know, do we think there is an attractive, long-term opportunity that would be value-enhancing to our portfolio? And I think, you know, we treat things, no matter the velocity of how quickly they develop, in the same way from that perspective. You know, the second part of your, the second aspect of your question is a good one, too, which is, you know, how do we structure our team and our diligence approach to be able to handle those opportunities if they do come fast, and it's not something that we can see coming kind of miles away. And so, you know, that's a good question.
Thank you.
Yeah.
Great. Thank you.
Operator, we have time for one last question.
Thank you our last question comes from Matthew Harrison with Morgan Stanley You May proceed with your question.
Hi, Thanks for taking the question this is Charlie on for Matthew.
To I guess follow up question I think one.
Can you just talk about maybe just the ultimate dynamics a little bit.
At a high level, given how pilots at lunch and how that could impact.
In terms of the royalties there and then second maybe you could.
<unk> discussed a little bit about the cystic fibrosis.
Arbitration procedure that you could get to that steps. Thank you.
Jim Jim would you mind, taking the question I am gunslinger map.
And then maybe Terry can also.
Talk about potential.
Marshall Urist: And, you know, we have been thinking a lot about that. And I think we are, you know, evolving to be able to move quickly, through the internal resources that we've been adding, like the strategy and analytics team that, you know, that we've talked a lot about in the past. And then also just continuing to expand and deepen, you know, our external network that Pablo mentioned as well.
Arbitration with respect Tcf.
Sure.
<unk>.
Yes, sorry, I had to.
Recall the question.
So I.
Biogen.
Has had a slower than expected rollout.
It's maybe not that big of a surprise because.
Has had reimbursement issues.
Marshall Urist: So I think we're in good stead whether or not they are kind of a slow developing development, new, you know, part of the therapeutics landscape, or something that happens quickly. Jeff, maybe just to add to the answer that Marshall provided, there's really no restriction as to what we can do.
In its rollout.
<unk> came to market with.
Efficacy package that.
Kind of viewed by practitioners.
Payers as being suboptimal.
So we're.
Hopeful that.
The product that we're invested in kitchen, or Matt is going to come to market with it.
Pablo Legorreta: I mean, we've looked in the past at devices and all sorts of, you know, technologies that produce royalties, not only therapeutics. And sometimes, as you know, patents are issued on many things, not only, you know, like a composition of matter patent on a drug but many other things, and they give rise to royalties. So we're very open-minded about this, you know, anything that could result in, you know, a percentage of revenue, or royalties. And we have looked at so many different things over the year.
Differentiated.
Profile and one that shows compelling efficacy and some real kind of improvements over.
With that.
That product.
Is is showing so.
Wouldn't view.
Biogen's experience has been.
What is possible with.
With a quality product and the Alzheimer's, which is still a huge unmet need.
I think.
There is a possibility that amyloid acting.
Antibody.
Could be valuable to patients.
Correctly and has good data.
I mean, and maybe I'll add something just very quickly.
Huge unmet medical need as you know really I mean, one of the biggest.
Pablo Legorreta: But I think, and, you know, an example of that is, like, the collaboration we did with MSCI, where, you know, at the end, indexes are going to be created, and we've made great progress with MSDI on that and are starting to launch some of these things in the very near term, in the next, you know, a few months. But at the end, you know, that's going to generate revenue tied to, you know, assets in their management, investment, investment, and life sciences, which will grow for, you know, many decades. But anyway, you know, the other comment I would make is that if there's anybody that can move quickly, very quickly, you know, to react to opportunities.
In.
The world and the pace of need a drug that works in a drug that has the characteristics of <unk>.
Janiero map. So we're very excited about having that in our portfolio because it could become best in class and it could become one of the biggest drugs.
If the profile holds it could be one of the biggest drugs.
Health care.
It's really exciting to have that in our portfolio.
Go ahead Mark.
Sorry.
Yes. This is Terry.
Addressed the CF question. So there is a dispute resolution mechanism in.
In the contract.
Yes.
At this point, it's really not appropriate for us to to.
To discuss any any legal strategy.
Pablo Legorreta: It's us, and we can do it because, you know, we have a team that is constantly talking to companies and, you know, just reacting very quickly to opportunities. In many cases, we have models built up already where, you know, there's a product that is of interest. We have, you know, a model for solid tumors where we cover every solid tumor and, you know, all of the drugs that are in the market today, drugs that are being developed. And we have a view of those drugs.
Thank you.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to <unk> for any further remarks.
Thank you operator.
Thank you to everyone on the call for your continued 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.
To reach out to George and our Investor Relations team. Thank you very much bye.
So this concludes today's conference call. Thank you for participating you may now disconnect.
Pablo Legorreta: So if an opportunity comes to us, we can react very, very quickly. But the other thing that is very, very unique and talking about things that are underappreciated by investors is that if a company, you know, think of a company like, you know, biogen that's in MS and Alzheimer's or think about a company like cell gene that is in hematology and inflammation.
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Pablo Legorreta: If a company like that wants to get into a new therapeutic area, it can take them five to ten years. They can go and make an acquisition and get into a therapeutic area, but even that takes time. You know, obviously, MNA is complicated and very competitive. There are few assets that are attractive for big companies, and obviously, there's issues now with antitrust that is making MNA for big companies difficult.
Pablo Legorreta: That's why we're so excited about M&A in mid-cap companies. But, you know, leaving aside M&A, if a company wants to diversify and get into a new therapeutic area, they have to create or buy an asset. They have to create a clinical development team. They have to invest years in clinical trials. And then they have to then launch it.
Pablo Legorreta: It can take five to ten years. In our case, if there are interesting areas for us to invest in, we can, you know, so quickly. For example, if there's a royalty that we're interested in on our approved product that is already generating cash flow, we can have discussions with a holder and potentially acquire it.
Pablo Legorreta: If there's a product that's in development that we're interested in an East therapeutic area, we can go and see if we can finance that product and create our royalties, and we end up having an investment in that area in a matter of, you know, months or weeks. Sometimes it's going to take a year because, or more, because we follow things all the time, and then at the right moment, we decide to make a move, and we can make an investment very quickly.
Pablo Legorreta: But the point is that it allows us the openness of the business model and the lack of constraints, you know, like therapeutic constraints, therapeutic biases, allows us to really make investments in new areas that are exciting with great ease, much more than any company. And that's what's so unique about this business model and so attractive as a way for investors to really get exposure to this incredible innovation that's occurring in life sciences.
Pablo Legorreta: And in many cases, in the most exciting new areas, you know, we were not, You know, like look at the investments we made over the recent years and some of the new gene therapies, you know, and it was easy for us and quick. But anyway, Chris, hi, maybe you want to add some additional comments to this, given your perspective of decades of helping companies in life sciences? Sure, thank you, Pablo, and thanks.
Chris Shibutani: Sure, thank you, Pablo, and thanks for the question, Jeff. You know, I think the public covered a lot of that. I think there is Now, the one thing that we really have started to really look at is the total addressable market. The cumulative R&D spend of the sector over the next decade is roughly over $2 trillion. And we look at that as just a huge opportunity to get involved in, whether it's new technologies, as you highlight, new opportunities, you know, synthetic royalties, you know, given how fragmented the R&D environment is in the sector, the actual new royalties that will be created through that spend. We just look at this as a tremendous opportunity in the therapeutic space, but if there's other royalties that exist outside of that, you know, we're not necessarily opposed to that.
Operator: Thank you. Our next question comes from a mayor of thought. Evercourt, you may proceed with your question.
Operator: Hi guys, thanks for taking my question. I have two, if I may, perhaps first on the M&A side. It looks like you've been fairly quiet since Morphus's deal announcement in June, and I wonder if we should perceive that as a sign of perhaps something bigger that's in the works. I'd be very curious. And then secondly, on the sort of big catalyst in your pipeline heading it to next year, again, Tenaramat, Phase 3, assuming that Phase 3 goes well, do you expect this to be a multi-billion dollar product? Thank you very much. Good to hear from you, Homer, and an interesting question about morphosis.
Pablo Legorreta: So I think, M&A in general, and what I told investors is that there is, and Chris just mentioned, $2 trillion of investment in R&D in life sciences over the next decade, and it's going to be about a trillion over the next five years. The industry, when you look at how much it's spent, it's about 300 billion per year, 200 billion by biotech and large pharma, big pharma, globally, and another 100 billion by governments, you know, I'm sorry, governments, NIH, you know, and foundations.
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Pablo Legorreta: And so it's an incredible number. I mean, when you look at many, many other industries around the planet, they invest tens of billions of dollars per year in R&R. and The One of the few industries that invest at a scale of hundreds of billions of dollars in R&D per year is life sciences, and we're at the middle of this. The Royal Department Store is becoming the partner of choice to help companies fund part of that investment.
Pablo Legorreta: So it's obviously a huge opportunity. So, you know, sort of the more conventional deals that we're doing, every quarter, every year, probably will have us invest more than a billion and a half, probably more than $2 billion per year. And then the ones that are going to be difficult to predict are MNA transactions. And are we going to have, you know, one or two per year or one or two every two or three years? The year, it's hard to tell.
Pablo Legorreta: But the reality is that, you know, one interesting new thing that we're realizing could become a really important driver of opportunities for us is mid-cap M&A, like what happened with Morphosis. And, you know, that is going to add to the, you know, more conventional deals that we're able to do every year. And I think, you know, there are some big things out there. Now, for those things to really happen, the SARS-CAPs to align, there has to be, you know, a deal where two companies want to transact, you know, and we are then able to potentially partner with one of them to help them.
Pablo Legorreta: So it's, it's, there are difficult transactions, to be honest, but they're things where we have experience and we've been successful, and I think it's something that I personally spend a lot of time looking at because that's where I think we will also have very, very attractive opportunities in front of us. And I guess that was, Was there another question? Sorry, I missed the other question. Maybe it was on Gantirama? And Marshall, my question was around your expectation for the Gantanarama Commercial Opportunity for the Trial. Yes, Marshall. Absolutely. Hey, Omer, good morning.
Marshall Urist: On Canton AirMap, so like we mentioned in the script, we're really excited now to have this as part of the portfolio post the morphosis deal and are looking forward to the data next year. And to answer your question, yeah, you know, our thesis has been that an anti-ambloid product in this class that has, you know, a very consistent data set and shows, you know, clear efficacy and safety and is supported by a, you know, a big global company and has a really attractive subdued dosing profile like Dantanarimab, you know, and it checks all the boxes.
Marshall Urist: All those boxes, you know, certainly have the potential to be a multi-billion dollar product. You know, like we've mentioned in the past, we, you know, we, um, always look at a ton of scenarios whenever we, you know, whenever we bring anything into the portfolio, but certainly this is one that can support multi-blockbuster potential.
Operator: Thank you. We are offered time for one last question.
Operator: Your last question comes from Matthew Harrison with Morgan Stanley. You may proceed with your question. Hi, thanks for taking the question. This is Charlie, Uncle Matthew.
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Operator: Just two, I guess, follow-up questions. I think one is, you just talk about maybe just Alzheimer's dynamics a little bit at a high level, given how biologists launch and how that could impact, you know.
Operator: in terms of the royalties there. And then second, maybe you can discuss a little bit about cysticibrosis, the arbitration procedure if it gets to that step. Thank you. Jim, would you mind taking the question on the Gantinerer Map, and then maybe Terry can also talk about potential arbitration with respect to CF?
Jim Reddick: Sure, I am just
Jim Reddick: Yeah, sorry I had to recall the question. So, I mean, Bayesian, you know, has had a slower than expected pace.
Jim Reddick: would rollout. It's, you know, maybe not that big of a surprise because it, you know, has had its reimbursement issues.
Jim Reddick: in its rollout and came to market with a sort of efficacy package that was kind of
Jim Reddick: was kind of viewed by practitioners and payers as being suboptimal. So we're hopeful that the product that we're invested in, Getsner Mab, is going to
Jim Reddick: differentiated profile and what
Jim Reddick: that shows compelling efficacy and some real kind of improvements over what, you know, that product...
Jim Reddick: that product is showing. So, you know, I wouldn't view what Bygen's experience has been as, you know, what is possible with a quality product in Alzheimer's, which is still a huge unmet need. And, um,
Jim Reddick: You know, I think there is the possibility that an amyloid-acting antibody could be valuable to patients if developed correctly and has good data. I mean, maybe I'll ask something, I'll add
Pablo Legorreta: I mean, maybe I'll add something, I'll add just very quickly. There's a huge unmet medical need, as you know, really, I mean, one of the biggest in the world, and patients need a drug that works and a drug, you know, that has the characteristics of Gantanaromab.
Pablo Legorreta: So, you know, we're very excited about having that in our portfolio because it could become the best in class, and it could become one of the biggest drugs. If the profile holds, it could be one of the biggest drugs in healthcare. So it's really exciting to have that in our portfolio. But go ahead, Marcia, or sorry. I was just going to, yeah, so this is Terry. I'm going to address the CF question. So there is a dispute resolution mechanism in the contract.
Terrance P. Coyne: But at this point, it's really not appropriate for us to discuss any legal strategy. Thank you. Thank you, and I'm not showing any further questions at this time. I would like to turn the call back over to Pablo for any further remarks.
Pablo Legorreta: Thank you, operator. And thank you to everyone on the call for your continued 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 our investor. Thank you very much. Goodbye. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: and the and so on the way. Thank you. Thank you. Thank you. Thank you. Thank you, and so on the same.
Operator: Thank you. Thank you. Thank you, and so on the Thank you, and so on.
Operator: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.