Q2 2024 Royalty Pharma PLC Earnings Call

CREDITS

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Royalty Pharma's second quarter earnings conference call. I would like now to turn the conference over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

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George Grofik: Ladies and gentlemen, thank you for standing by. Welcome to Royalty Farmer's second quarter earnings conference call. I would like now to turn the conference over to George Grofik, Senior Vice President, Head of Investor Relations and Communications.

Operator: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's second quarter 2024 results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com. 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 from these statements. I refer you to our 10-K on file with the FCC for a description of these risks.

George Grofik: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's second quarter 2024 results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com. 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 from these statements. I refer you to our 10-K on file with ESPC for a description of these risks.

Operator: All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP liquidity measures will be used to help you understand our financial performance. The reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. Pablo will discuss the key highlights, after which Marshall and Chris will provide portfolio updates, highlighting three important recent transactions. And with that, I'd like to turn the call over to Pablo.

George Grofik: All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP liquidity measures will be used to help you understand our financial performance. The reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. And with that, please advance to slide four. Our speakers on the call today are Pablo Legorreta, founder and chief executive officer; Marshall Urist, EVP, head of research and investments; Chris Hite, EVP, vice chairman; and Terry Coyne, EVP, chief financial officer.

Speaker Change: Please go ahead, sir.

Speaker Change: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's second quarter 2024 results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com.

Speaker Change: Moving to slide three, I'd like to remind you that information presented in this call contains four looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these statements. I refer you to our 10-K on-file with the SEC for a description of these risks.

Speaker Change: All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements.

Speaker Change: non-GAAP liquidity measures will be used to help you understand our financial performance. The reconciliation of these measures to our non-GAAP , to our GAAP financials is provided in the earnings press release available on our website.

George Grofik: Pablo will discuss the key highlights, after which Marshall and Chris will provide portfolio updates, highlighting three important recent transactions. Terry will then review the financials, and following concluding remarks from Pablo, we will hold a Q&A. And with that, I'd like to turn the call over to Pablo.

Speaker Change: And with that, please advance to slide four. Our speakers on the call today are Pablo Legorreta, founder and chief executive officer, Marshall Urist, EVP, head of research and investments, Chris Hite, EVP vice chairman, and Terry Coyne, EVP, chief financial officer.

Pablo: Pablo will discuss key highlights, after which Marshall and Chris will provide portfolio updates, highlighting three important recent transactions. Terry will then review the financials, and following concluding remarks from Pablo, we will hold a Q&A session. And with that, I'd like to turn the call over to Pablo.

Pablo Legorreta: Slide six summarizes our strong business momentum in the second quarter. This represents our recurring cash flows and are driven by our high-quality portfolio of more than 35 commercial products. Turning to capital allocation, we had a very active quarter for new royalty transactions. More specifically, we increased our royalty exposure to the blockbuster EBRS-C for spinal muscular atrophy and to Africampton, an exciting cardiovascular therapy, which is expected to be filed with regulators imminently.

Pablo Legorreta: Thank you, George, and welcome to everyone on the call. I am delighted to report a successful quarter of execution against our vision to be the leading partner funding innovation in life science. Slide six summarizes our strong business momentum in the second quarter. In terms of the financials, we delivered 12% growth in portfolio receipts, our top line. This was significantly above our guidance of high single-digit growth, which we provided last quarter. The bedrock of this strong performance was an impressive 11% growth in royalty received.

Pablo: Thank you, George, and welcome to everyone on the call. I am delighted to report a successful quarter of execution against our vision to be the leading partner funding innovation in life sciences.

Pablo: Slide six summarizes our strong business momentum in the second quarter.

Terry: In terms of the financials, we delivered 12% growth in portfolio receipts, our top line. This was significantly above our guidance of high single-digit growth, which we provided last quarter.

Pablo: The bedrock of this strong performance was an impressive 11% growth in royalty receipts. This represents our recurring cash flows and are driven by our high-quality portfolio of more than 35 commercial products.

Pablo Legorreta: This represents our recurring cash flows and are driven by our high-quality portfolio of more than 35 commercial products. Turning to capital allocation, we had a very active quarter for new royalty transactions. Capital deployment was approximately $2 billion, including the cash to be paid for U.S. royalties on Varanego, which was just approved a couple of days ago.

Pablo: Turning to capital allocation, we had a very active quarter for new royalty transactions.

Pablo: Capital deployment was approximately $2 billion, including the cash to be paid for U.S. royalties on Waranego, which was just approved a couple of days ago. In addition, we continued to pursue our balanced capital allocation strategy, and we stepped up the pace of share repurchases.

Pablo Legorreta: In addition, we continue to pursue our balanced capital allocation strategy, and we stepped up the pace of share repurchases, given the disconnect of our share price with our strong fundamental outlay. Looking at our portfolio, we acquired royalties on six therapies in the quarter, including one approved and five development stage therapies. More specifically, we increased our royalty exposure to the Blockbuster Ebrisi for spinal muscular atrophy and to Africamtin, an exciting cardiovascular therapy, which is expected to be filed with regulators imminently.

Pablo: given the disconnect of our share price with our strong fundamental outlook.

Pablo: Looking at our portfolio, we acquired royalties on six therapies in the quarter, including one approved and five development stage therapies.

Pablo: More specifically, we increased our royalty exposure to the blockbuster EBRSI for spinal muscular atrophy and to Africamtin, an exciting cardiovascular therapy, which is expected to be filed with regulators imminently.

Pablo Legorreta: Chris will expand on this detail as well as highlight the multiple upcoming events for our development stage portfolio, which has the potential to unlock significant value for Royalty Pharma. Lastly, I'm happy to report that we're raising our full year 2024 guidance by 3% at the midpoint, following our excellent performance in the first six months of the year, driven by the strong momentum of our diversified portfolio. We now expect portfolio receipts to be between $2.7 billion and $2.775 billion, which compares with our previous guidance of five to nine percent.

Pablo Legorreta: Chris will expand on this detail as well as highlight the multiple upcoming events for our development stage portfolio, which has the potential to unlock significant value for Royalty Pharma. In this regard, we were pleased to see FDA approval of Voronegol this week, as well as the positive phase 3 results for Celtorexant in depression and for Trenfalla in Crohn's disease, all of which could represent important new growth drivers for Royalty Pharma. Lastly, I'm happy to report that we're raising our full-year 2024 guidance by 3% at the midpoint, following our excellent performance in the first six months of the year, driven by the strong momentum of our diversified portfolio.

Pablo: Chris will expand on these details, as well as highlight the multiple upcoming events for our development stage portfolio, which has the potential to unlock significant value for Royalty Pharma.

Chris: In this regard, we were pleased to see FDA approval of Voronego this week, as well as the positive phase 3 results for Celtorexant in depression and for Trenfalla and Crohn's disease.

Pablo: all of which could represent important new growth drivers for Royalty Pharma.

Speaker Change: Lastly, I'm happy to report that we're raising our full year 2024 guidance by 3% at the midpoint, following our excellent performance in the first six months of the year, driven by the strong momentum of our diversified portfolio.

Pablo Legorreta: We now expect portfolio receipts to be between $2.7 billion and $2.775 billion. This is based on expected growth in royalty receipts of around 9 to 12 percent, which compares with our previous guidance of 5 to 9%. Consistent with our standard practice, this guidance is based on our current portfolio and does not include the benefit of future transactions.

Speaker Change: We now expect portfolio receipts to be between $2.7 billion and $2.775 billion. This is based on expected growth in royalty receipts of around 9 to 12 percent.

Speaker Change: which compares with our previous guidance of 5 to 9%. Consistent with our standard practice, this guidance is based on our current portfolio and does not include the benefit of future transactions.

Pablo Legorreta: Slide seven shows our impressive track record of strong growth since our IPO. As I noted earlier, we delivered 11% growth in royalty receipts in the second quarter. Taken together with our double-digit performance in royalty receipts in the first quarter, this sets us up well to deliver our new full-year guidance. This consistent track record of strong growth speaks to our ability to execute successfully against our strategy in the growing market for biopharma royalties.

Speaker Change: Slide 7 shows our impressive track record of strong growth since our IPO. As I noted earlier, we delivered 11% growth in royalty receipts in the second quarter.

Speaker Change: Taken together with our double-digit performance in royalty receipts in the first quarter, this sets us up well to deliver our new full-year guidance.

Speaker Change: This consistent track record of strong growth speaks to our ability to execute successfully against our strategy in the growing market for biopharma royalties.

Pablo Legorreta: Slide eight shows that we continue to be the clear leader in the market for large royalty transactions, with two more transactions north of $500 million announced this year. Of the 26 royalty transactions to date valued at $500 million or more, we have executed 20 with a market share of 77%. You will also note that half of our transactions have taken place in the four years since our IPO. This, in part, reflects an important competitive advantage of our business, namely our scale and rapid access to substantial capital.

Speaker Change: Slide 8 shows that we continue to be the clear leader in the market for large royalty transactions.

Speaker Change: with two more transactions north of $500 million announced this year. Of the 26 royalty transactions to date valued at $500 million or more, we have executed 20, with a market share of 77%.

Pablo Legorreta: You will also note that half of our transactions have taken place in the four years since our IPO. This also reflects the talent and creativity of our team as we strive to create win-win solutions for our partners in the growing biopharma royalty market. Finally, it reflects the acceleration of the biopharma royalty market as a whole.

Speaker Change: You will also note that half of our transactions have taken place in the four years since our IPO. This, in part, reflects an important competitive advantage of our business, namely our scale and rapid access to substantial capital.

Pablo Legorreta: It also reflects the talent and creativity of our team as we strive to create win-win solutions for our partners in the growing biopharma royalty market. Finally, it reflects the acceleration of the biopharma royalty market as a whole, where we are the clear market leader. With that, I will hand it over to Marshall.

Speaker Change: It also reflects the talent and creativity of our team as we strive to create win-win solutions for our partners in the growing biopharma royalty market.

Speaker Change: Finally, it reflects the acceleration of the biopharma royalty market as a whole, where we are the clear market leader.

Marshall Urist: Thanks, Pablo. I want to focus today on the value of repeat business to our model and why we are so excited about acquiring a royalty on Serviers for a side nip, now available commercially as an ego boost. Slide 10 shows an important aspect of what differentiates us from our competition, namely, repeat business with our partners. Recently, we completed our second transaction with IGEOS and our third transaction with Cytokinetics and PTMS. If we go back further, we have a strong track record of completing multiple transactions with our partners.

Speaker Change: With that, I will hand it over to Marshall.

Marshall: Thanks, Pablo. I want to focus today on the value of repeat business to our model and why we are so excited about acquiring a royalty on Serviers for a side bid, now available commercially as for an ego.

Marshall: Slide 10 shows an important aspect of what differentiates us from our competition, namely repeat business with our partners. Recently, we completed our second transaction with IGOS and our third transactions with Cytokinetics and PTC.

Speaker Change: If we go back further, we have a strong track record over nearly two decades of completing multiple transactions with our partners.

Marshall Urist: Slide 11 shows that of the approximately $15 billion of transactions we have announced since 2020, around $6 billion, or nearly 40%, have been with Repeat Partners. Our partner-centric approach is one of our core values at Royalty Pharma. It brings multiple benefits, including speed of execution and in-depth knowledge of both the product and our partners, resulting in a higher probability of transacting both the first and subsequent deals as our partners grow over time.

Speaker Change: Slide 11 shows that of the approximately $15 billion of transactions we have announced since 2020, around $6 billion, or nearly 40%, has been with repeat partners.

Operator: Our partner-centric approach is one of our core values at Royalty Pharma. It brings multiple benefits, including speed of execution and in-depth knowledge of both the product and our partners, resulting in a higher probability of transacting both the first and subsequent deals as our partners grow over time.

Speaker Change: Our partner-centric approach is one of our core values at Royalty Pharma. It brings multiple benefits, including speed of execution and in-depth knowledge of both product and our partner, resulting in a higher probability of transacting both the first and subsequent deals as our partners grow over time.

Marshall Urist: Slide 12 summarizes our recent transactions with IGS to acquire their royalty on U.S. net sales of Cervier's Boranigo, which we believe has blockbuster commercial potential in the treatment of low-grade glioma. We will pay $905 million following Borenigo's FDA approval on Tuesday, which was based on its remarkable phase 3 results and high unmet patient needs. We are entitled to a 15% royalty on U.S. sales up to $1 billion, which steps down to a 12% royalty on sales greater than $1 billion.

Speaker Change: Slide 12 summarizes our recent transaction with AGIES to acquire their royalty on U.S. net sales of Cervier's Boranigo, which we believe has blockbuster commercial potential in the treatment of low-grade glioma.

Operator: We will pay $905 million following Borenigo's FDA approval on Tuesday, which was based on the remarkable phase 3 results and high unmet patient needs. We are entitled to a 15% royalty on US sales, up to $1 billion, which steps down to a 12% royalty on sales greater than $1 billion. Furthermore, Fort Indigo has a long duration of patent protection with royalties through 2038, and we forecast peak sales greater than $1 billion and expect an IRR in the teens.

Speaker Change: We will pay $905 million following Borenigo's FDA approval on Tuesday, which was based on the remarkable phase 3 results and high unmet patient need.

Speaker Change: We are entitled to a 15% royalty on U.S. sales up to $1 billion, which steps down to a 12% royalty on sales greater than $1 billion.

Marshall Urist: Furthermore, Fort Indigo has a long duration of patent protection with royalties through 2038, and we forecast peak sales greater than $1 billion and expect an IRR in the teens. And fourthly, Fort Indigo is another great example of our ability to consistently execute large transactions, as we have completed 10 transactions of $500 million or more and four transactions of $1 billion or greater just since our IPO in 2020. As Pablo discussed earlier, we have strong competitive advantages that have allowed us to remain the clear market leader for large royalty transactions.

Speaker Change: Furthermore, 4Ingo has a long duration of patent protection with royalties through 2038, and we forecast peak sales greater than $1 billion and expect an IRR in the teens.

Operator: And fourthly, Fort Inigo is another great example of our ability to consistently execute large transactions, as we have completed 10 transactions of $500 million or more and four transactions of $1 billion or greater just since our IPO in 2020. As Pablo discussed earlier, we have strong competitive advantages which have allowed us to remain the clear market leader for large royalty transactions.

Speaker Change: Importantly, for Inigo, there's another great example of our ability to consistently execute large transactions, as we have completed 10 transactions of $500 million or more and 4 transactions of $1 billion or greater just since our IPO in 2020.

Speaker Change: As Pablo discussed earlier, we have strong competitive advantages which have allowed us to remain the clear market leader for large royalty transactions.

Marshall Urist: Slide 13 provides an overview of why we think Guarnico could represent a blockbuster commercial opportunity. First, there's high unmet patient need with overall survival of approximately 10 years for relatively young patients with low-grade glioma and no approved targeted therapy. Second, IVH mutations are estimated to drive low-grade gliomas in over 70% of patients, resulting in an estimated 1,500 incident and 10,000 prevalent U.S. patients addressable by Bornego. Third, we expect Bornego to have a long duration of treatment of over two years, given the median 27 months of progression-free survival in Phase III and manageable safety profile.

Pablo: Slide 13 provides an overview of why we think Guarnico could represent a blockbuster commercial opportunity.

Marshall Urist: First, there's high unmet patient need with overall survival of approximately 10 years for relatively young patients with low-grade glioma and no approved targeted therapy. Second, IVH mutations are estimated to drive low-grade gliomas in over 70% of patients, resulting in an estimated 1,500 incident and 10,000 prevalent U.S. patients addressable by Bornego. Third, we expect Bornego to have a long duration of treatment of over two years, given the median 27 months of progression-free survival in Phase III and the manageable safety profile.

Marshall Urist: Fourth, there are no other potentially competing therapies in late-stage clinical development. We have performed deep due diligence, including a comprehensive demand survey that indicates physician excitement for Bornego and expected broad and deep uptake across many subsets of low-grade glioma patients. Lastly, given that low-grade glioma patients tend to be relatively young and are in EGOS orphan status from the FDA, we do not expect any impact from the IRA. However, we see additional upside from the launch ramp, duration of therapy, and depth of prescribing across patient segments in low-grade glioma. And with that, I'll hand it over to Chris.

Speaker Change: First, there's high unmet patient need with overall survival of approximately 10 years for relatively young patients with low-grade glioma and no approved targeted therapies.

Speaker Change: Second, IVH mutations are estimated to drive low-grade gliomas in over 70% of patients, resulting in an estimated 1,500 incidents and 10,000 prevalent US patients addressable by bornego.

Speaker Change: Third, we expect Boron Ego to have a long duration of treatment of over two years given the median 27 months of progression-free survival in Phase 3 and manageable safety profile.

Chris Shibutani: Fourth, there are no other potentially competing therapies in late-stage clinical development. We have performed deep due diligence, including a comprehensive demand survey that indicates physician excitement for Bornego and expected broad and deep uptake across many subsets of low-grade glioma patients. Thanks, Marshall.

Speaker Change: Fourth, there are no other potentially competing therapies in late-stage clinical development. We have performed deep due diligence, including a comprehensive demand survey which indicates physician excitement for Bornego and expected broad and deep uptake across many subsets of low-grade glioma patients.

Chris: Lastly, given that low-grade glioma patients tend to be relatively young and more in egos orphan status from the FDA, we do not expect any impact from the IRA. We see additional upside from the launch ramp, duration of therapy, and depth of prescribing across patient segments in low-grade glioma. And with that, I'll hand it over to Chris.

Chris Hite: Thanks, Marshall. I want to expand on our recent transactions involving Eva RISD and AFI-CAMPTON and highlight the broader potential of our growing development stage pipeline. Slide 15 highlights our growing partnership with PTC on EverRISK. We gained our first exposure to this exciting therapy in 2020 when we acquired 43% of PTC's royalty interest for $650 million. In 2023, we entered into a second royalty transaction with PTC. In this case, in return for an upfront payment of $1 billion, we acquired 67% of PTC's remaining royalty. It also extended the royalty duration from the early 2030s to 2035 to 2036.

Chris Shibutani: I want to expand on our recent transactions involving Eva RISD and AFI-CAMPTN and highlight the broader potential of our growing development stage pipeline. In 2023, we entered into a second royalty transaction with PTC. In this case, in return for an upfront payment of $1 billion, we acquired 67% of PTC's remaining royalty. We made our third investment. In total, it takes our investment to $1.9 billion across the three transactions. Furthermore, the option structure means PTC retains the right to sell the remainder of its Everestian royalties to us by the end of 2025. Given a consensus forecaster tracking to $3 billion plus by 2030, we now expect to receive annual peak royalties on Everest Day of around $350 million.

Chris: Thanks, Marshall. I want to expand on our recent transactions involving Eva RISD and AFI Campton and highlight the broader potential of our growing development stage pipeline.

Chris: Slide 15 highlights our growing partnership with PTC on EverRISD.

Chris: We gained our first exposure to this exciting therapy in 2020, when we acquired 43% of PTC's royalty interest for $650 million.

Chris: in two thousand and twenty-three we entered into a second royalty transaction with ptc in this case in return for an upfront payment of one billion dollars we acquired sixty-seven percent of pc's remaining royalty

Chris: It also extended the royalty duration to 2035 to 2036 from the early 2030s.

Chris Hite: Importantly, this transaction included a joint option structure for the remainder of PTC's royalty interest. This would allow PPC to sell all of its residual royalty to us by the end of 2025 in return for a $500 million payment less royalties received in June of this year as part of that option structure. We made our third investment. In return for a payment of $242 million, we acquired additional royalties on EverRISD, which we will start to receive in the third quarter of 2024. This new investment is expected to deliver an unlevered return in the low double digits.

Chris: Importantly, this transaction included a joint option structure for the remainder of PTC's royalty interest.

Chris: This would allow PTC to sell all of its residual royalty to us by the end of 2025 in return for a $500 million payment unless royalties received.

Chris: as june of this year is part of that option structure we made our third investment

Chris: In return for a payment of $242 million, we acquired additional royalties on Everestie, which we will start to receive in the third quarter of 2024.

Chris Hite: In total, it takes our investment to $1.9 billion across the three transactions and increases our effective royalty rate to 7.2% to 14.5%. This makes Evariz the third largest investment in our history after Cystic Fibrosis and Tysabri. Furthermore, the option structure means PTC retains the right to sell the remainder of its Everestian royalties to us by the end of 2025. For those less familiar, Everesti is the global leader in the treatment of a rare disease called spinal muscular atrophy, or SMA.

Chris: This new investment is expected to deliver an unlevered return in the low double digits.

Chris: In total, it takes our investment to $1.9 billion across the three transactions and increases our effective royalty rate to 7.2% to 14.5%.

Chris: This makes Evarizbe the third largest investment in our history after Cystic Fibrosis and Tysovary.

Chris: Furthermore, the option structure means PTC retains the right to sell the remainder of its Everestian royalties to us by the end of 2025.

Chris: For those less familiar, Everesti is the global leader in the treatment of a rare disease called spinal muscular atrophy, or SMA.

Chris Hite: Roche recently reported in the first six months of 2024 approximately $940 million, growing by 25%. Given a consensus forecast for tracking to $3 billion plus by 2030, we now expect to receive annual peak royalties on Everest Day of around $350 million. 516 is another great example of repeat business and highlights how we have strengthened our long-standing partnership with cytokinetics, including our May 2024 transaction. We have provided access to more than $1 billion in total funding across three deals. As a reminder, Cytokinetics recently presented the Pivotal Phase III results for Aficamp, which we believe demonstrate its potential to be the best-in-class therapy for hypertrophic cardiomyopathy.

Speaker Change: g recently reported in the first six month of two thousand andtwenty four approximately nine hundred and forty million dollars growing by twenty-five percent

Speaker Change: Given a consensus forecast for tracking to $3 billion plus by 2030, we now expect to receive annual peak royalties on Everest Day of around $350 million.

Chris Shibutani: 516 is another great example of repeat business and highlights how we have strengthened our longstanding partnership with cytokinetics. We have provided access to more than $1 billion in total funding across three deals. As a reminder, Cytokinetics recently presented the Pivotal Phase III results for Aficamp, which we believe demonstrate its potential to be the best-in-class therapy for hypertrophic cardiomyopathy. We've also provided launch and development funding, of which $200 million has been drawn, and an additional $350 million remains available.

Chris: Slide 16 is another great example of repeat business and highlights how we have strengthened our long-standing partnership with cytokinetics.

Speaker Change: Including our May 2024 transaction, we have provided access to more than $1 billion in total funding across three deals.

Chris: As a reminder, Cytokinetics recently presented the Pivotal Phase III results for apicampin

Chris: which we believe demonstrates its potential to be the best-in-class therapy for hypertrophic cardiomyopathy.

Chris Hite: Following our most recent transaction, we are now entitled to a 4.5% royalty on net sales up to $5 billion and a 1% royalty on sales above $5 billion. Based on Research Analyst Consensus, Affie Kampsen has the potential to generate peak annual royalties for Royalty Pharma in excess of $180 million. We've also provided launch and development funding, of which $200 million has been drawn, and an additional $350 million remains available. The return on this funding is based on fixed payments expected to range between 1.9x to 2.4x over time.

Chris: Following our most recent transaction, we are now entitled to a 4.5% royalty on net sales up to $5 billion and a 1% royalty on sales above $5 billion.

Affie Kampsen: Based on research analyst consensus, Affie Kampsen has the potential to generate peak annual royalties to Royalty Pharma in excess of $180 million.

Chris: we've also provided unch in development funding of which two hundred million has been drawn and an additional three hundred and fifty million remains available

Chris Shibutani: The return on this funding is based on fixed payments expected to range between 1.9x to 2.4x over time, highlights our ability to structure creative funding solutions, and underscores the breadth of our funding capability. In particular, I would point to the upcoming FDA action dates for CAR-XD and schizophrenia and tromphion ulcerative colitis in Crohn's. FDA and EMA Regulatory Filing for AFI Cancer

Chris: The return on this funding is based on fixed payments expected to range between 1.9x to 2.4x over time.

Chris Hite: Taken together, our third transaction with Cytokinetic highlights our ability to structure creative funding solutions and underscores the breadth of our funding capability. On slide 17, I want to now move to the multiple important clinical and regulatory events which we expect for our exciting development stage portfolio over the next 12 months or so. In particular, I would point to the upcoming FDA action dates for CAR-XD and schizophrenia and tromphion ulcerative colitis in Crohn's. FDA and EMA Regulatory Filings, and Long-Term Safety Data for TEVA 749 Schizophrenia.

Chris: Taken together, our third transaction with Cytokinetics highlights our ability to structure creative funding solutions.

Chris Hite: We also expect phase 1, 2B results for Roshus, Trontenumab, and Alzheimer's before the end of this year. And in 2025, we expect outcome data for Pellicarson, which has the potential to be a very significant royalty for our portfolio. As you can see, these events have the potential to unlock very significant value for Royalty Pharma. Slide 18 shows our late stage development pipeline by potential peak sales and the associated royalties we could expect to receive.

Chris: and underscores the breadth of our funding capabilities

Chris: On slide 17, I want to now move to the multiple important clinical and regulatory events which we expect for our exciting development stage portfolio over the next 12 months or so.

Chris: In particular, I would point to the upcoming FDA action dates for CAR-XD and schizophrenia and trymphion, ulcerative colitis, and Crohn's.

Chris: FDA and EMA regulatory filing for Afi Kampton

Chris Shibutani: We also expect the Phase 1-2B results for Roshus, Trontenumab, and Alzheimer's before the end of this year. And in 2025, we expect outcome data for Pellicarson, which has the potential to be a very significant royalty for our portfolio. As you can see, these events have the potential to unlock very significant value for Royalty Pharma. As you saw on my previous slide, many of these assets will have major potential de-risking events in the next 12 months or so. Importantly, the programs listed here all have first- or best-in-class potential and are supported by world-class marketing.

Speaker Change: and Long-Term Safety Data for TEVA 749 Schizophrenia.

Chris: We also expect the Phase 1-2b results for Roshus, Trontenumab, and Alzheimer's before the end of this year.

Chris: and in two thousand and twenty-five we expect outcome data for pell carsison which we which has a potential to be a very significant royalty for our portfolio

Chris: As you can see, these events have the potential to unlock very significant value for Royalty Pharma.

Chris: Slide 18 shows our late stage development pipeline by potential peak sales and the associated royalties we could expect to receive.

Chris Hite: As you saw on my previous slide, many of these assets will have major potential de-risking events in the next 12 months or so. Importantly, the programs listed here all have first or best-in-class potential and are supported by world-class marketing. The majority have multi-blockbuster potential, and in aggregate, we estimate the combined peak sales at over $25 billion on a non-risk-adjusted basis. Based on the respective royalty rates, this could potentially translate to over $1.2 billion in annual peak royalties to Royalty Pharma, with Freck Salomat and El Paso potentially being the largest individual contributors. We expect many of these products to contribute to our attractive compounding growth in the years ahead. Now, I would like to hand this over to Terry.

Chris: As you saw on my previous slide, many of these assets will have major potential de-risking events in the next 12 months or so.

Chris: Importantly, the programs listed here all have first or best-in-class potential and are supported by world-class marketers.

Chris: The majority have multi-blockbuster potential, and in aggregate, we estimate the combined peak sales at over $25 billion on a non-risk-adjusted basis.

Chris: Based on the respective royalty rates, this could potentially translate to over 1.2 billion in annual peak royalties to Royalty Pharma.

Chris: with Freck Salomat and El Paso potentially being the largest individual contributors.

Chris: We expect many of these products to contribute to our attractive compounding growth in the years ahead.

Operator: Thanks, Chris. Let's move to slide 20. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 11% in the second quarter, reflecting the strength of our diversified portfolio, including a modest contribution from Milestones and other contractual receipts. Portfolio receipts, the top line, grew by 12% to $608 million, equated to 7.9% of portfolio receipts. Moving further down the column, we've consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties, this amounted to $574 million in the quarter, equivalent to a margin of around 94%.

Terry Coyne: Thanks, Chris. Let's move to slide 20. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 11% in the second quarter, reflecting the strength of our diversified portfolio. The key drivers of growth were the strong performance of our base business, notably our Cystic Fibrosis franchise, Trelegy, Trimphaea, and Ebris, including a modest contribution from Milestones and other contractual receipts. Portfolio receipts, our top line, grew by 12% to $608 million.

Speaker Change: With that, I would like to hand it over to Terry.

Terry: Thanks, Chris. Let's move to slide 20.

Speaker Change: this slide shows how our efficient business model generates substantial cash flow to be reinvested

Chris: As you heard from Pablo, royalty receipts grew by 11% in the second quarter, reflecting the strength of our diversified portfolio.

Speaker Change: The key drivers of growth were the strong performance of our base business, notably our Cystic Fibrosis franchise, Trelegy, Trimphaya, and Ebrisdi.

Chris: including a modest contribution from milestones and other contractual receipts. Portfolio receipts, our top line, grew by 12% to $608 million.

Terry Coyne: As we move down the column, Operating Professional Costs equated to 7.9% of portfolio receipts. Net interest received, at $14 million, reflected the semi-annual timing of our interest payment schedule, with payments falling due in the first and third quarters.

Speaker Change: As we move down the column, Operating Professional Costs,

Chris: equated to 7.9% of portfolio receipts.

Speaker Change: net interest received fourteen million dollars reflected the semi-onnual timing of our interest payment schedule with payments falling due in the first and third quarters

Terry Coyne: Moving further down the column, we've consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to adjust the DBITDA, less net interest paid, or as we call it, portfolio cash flow. This amounted to $574 million in the quarter, equivalent to a margin of around 94%. This high level of cash conversion once again underscores the efficiency of our business model.

Chris: Moving further down the column, we have consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties,

Chris: We look to adjust the DBDOT plus net interest paid, or as we call it, portfolio cash flow.

Chris: This amounted to $574 million in the quarter, equivalent to a margin of around 94%.

Chris: This high level of cash conversion once again underscores the efficiency of our business model.

Terry Coyne: Capital's commitment in the second quarter was $951 million, and as Marshall highlighted, we will pay $905 million this month following the FDA approval of Oronego. This will take our total for the year to approximately $2 billion. Slide 21 shows that we continue to maintain a significant financial capacity for future royalty acquisitions. In total, we have approximately $3 billion available through a combination of cash on our balance sheet, the cash our business generates, and access to the debt market.

Chris: Capital's appointment in the second quarter was $951 million and as Marshall highlighted, we will pay $905 million this month following the FDA approval of Oronego.

Operator: This will take our total for the year to approximately $2 billion, following the $905 million payment related to Voronego. This will take our cash in equivalence to $860 million on a pro forma basis, when we turn to our borrowing position. Our weighted average maturity is around 13 years, which aligns with the duration of our royalty portfolio. Our total and net pro forma leverage stands at around three times, and we have stated that we would be prepared to take our leverage up to four times if the right opportunity arose. Furthermore, we have the additional undrawn financial capacity from the $1.8 billion revolver.

Marshall: This would take our total for the year to approximately $2 billion.

Speaker Change: Slide 21 shows that we continue to maintain significant financial capacity for future royalty acquisitions.

Chris: In total, we have approximately $3 billion available through a combination of cash on our balance sheet, the cash our business generates, and access to the debt markets.

Terry Coyne: At the end of the second quarter, we had cash in equivalence of just under $1.8 billion, following the $905 million payment related to Voronego. This will take our cash in equivalence to $860 million on a pro forma basis when we turn to our borrowing position. We issued $1.5 billion of notes in the second quarter, which increased our outstanding investment-grade debt to $7.8 billion, with a weighted cost of debt of 3.1 percent.

Chris: At the end of the second quarter, we had cash in equivalents of just under $1.8 billion.

Chris: following the 905 million dollar payment related to Voronego. This will take our cash and equivalents to 860 million dollars on a pro forma basis.

Chris: when we turn to our borrowing position.

Chris: We issued $1.5 billion of notes in the second quarter, which increased our outstanding investment-grade debt to $7.8 billion, with a weighted cost of debt of 3.1 percent.

Terry Coyne: Our weighted average maturity is around 13 years, which aligns with the duration of our royalty portfolio. Our total and net pro forma leverage now stands at three times, stands at around three times, and we have stated that we would be prepared to take our leverage up to four times if the right opportunity arose. Furthermore, we have the additional undrawn financial capacity from the $1.8 billion revolver. As Pablo noted, despite a busy quarter for royalty acquisitions, we also took advantage of the fundamental disconnect in our share price and stepped up the pace of share repurchases in the second quarter.

Chris: Our weighted average maturity is around 13 years, which aligns with the duration of our royalty portfolio.

Chris: Our total and net pro-forma leverage

Chris: now stands at three times, stands at around three times, and we have stated that we would be prepared to take our leverage up to four times if the right opportunity arose.

Chris: Furthermore, we have the additional undrawn financial capacity from the $1.8 billion revolver.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Royalty Pharma's second quarter earnings conference call.

Chris: As Pablo noted, despite a busy quarter for royalty acquisitions, we also took advantage of the fundamental disconnect in our share price and stepped up the pace of share repurchases in the second quarter.

George Grofik: I would like now to turn the conference over to George Grofik, Senior Vice President, Head of Invest Relations, and Communications. Please go ahead, sir. Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's second quarter of 2024 results. You can find the press release with our earnings results and slides. This is Paul on the investor's page of our website at RoyaltyPharma.com. Moving to slide three, I'd like to remind you that information presented in this call contains four looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these statements.

Terry Coyne: On a year-to-date basis, we have spent $115 million on buybacks. Slide 22 is a reminder of our capital allocation strategy and how we expect this to drive shareholder value creation. At our Investor Day in 2022, we outlined that over a five-year period, through a combination of cash generation and our debt capacity, we expected to have access to around $20 billion of capital. As you can see on this slide, we expect to deploy the majority of our capital on value-enhancing royalty acquisitions, with a target of $10 to $12 billion invested over the period.

Operator: On a year-to-date basis, we have spent $115 million on buybacks. Slide 22 is a reminder of our capital allocation strategy and how we expect this to drive shareholder value creation. At our Investor Day in 2022, we outlined that over a five-year period, through a combination of cash generation and our debt capacity, we expected to have access to around $20 billion of capital. As you can see on this slide, we expect to deploy the majority of our capital on value-enhancing royalty acquisitions, with a target of $10 to $12 billion invested over the period.

Pablo: On a year-to-date basis, we have spent $115 million on buybacks.

Speaker Change: Slide 22 is a reminder of our capital allocation strategy and how we expect this to drive shareholder value creation.

Pablo: At our Investor Day in 2022, we outlined that over a five-year period, through a combination of cash generation and our debt capacity, we expected to have access to around $20 billion of capital.

George Grofik: I refer you to our 10K on file with ESC for description of these risks. All four looking statements are based on information currently available to Royalty Pharma, and we've seen no obligation to update any such four looking statements, non-gap liquidity measures will be used to help you understand our financial performance, the reconciliation of these measures to our non-gap financials is provided in the earnings press release available on our website. And with that, please advance the slide four.

Chris: As you can see on this slide, we expect to deploy the majority of our capital on value-enhancing royalty acquisition.

Terry Coyne: As many of you are aware, we are on track to meet or exceed this target, having announced transactions of $9.4 billion with actual capital deployment of $6.6 billion since 2022. The difference represents contingent payments uncertain of our investment.

Operator: As many of you are aware, we are on track to meet or exceed this target, having announced transactions of $9.4 billion with actual capital deployment of $6.6 billion since 2022. The difference represents contingent payments uncertain of our investment.

Chris: with a target of $10 to $12 billion invested over the period.

Pablo: As many of you are aware, we are on track to meet or exceed this target, having announced transactions of $9.4 billion with actual capital deployment of $6.6 billion since 2022.

Terry Coyne: We aim to balance this primary focus on royalty acquisitions with returning capital to shareholders through a combination of dividends and share repurchases. Regarding the latter, the board authorized a multi-year share buyback program of up to $1 billion in March 2023, of which we have spent just over $400 million to date. While investing in royalties is our number one priority, we use our share buyback program tactically for repurchases when we see a disconnect between our intrinsic value and the current stock price.

Operator: We aim to balance this primary focus on royalty acquisitions with returning capital to shareholders through a combination of dividends and share repurchases. Regarding the latter, the board authorized a multi-year share buyback program of up to a billion dollars in March of 2023, of which we have spent just over $400 million to date. While investing in royalties is our number one priority, we use our share buyback program tactically for repurchases when we see a disconnect between our intrinsic value and the current stock price.

Chris: The difference represents contingent payments uncertain of our investment.

Chris: We aim to balance this primary focus on royalty acquisition with returning capital to shareholders through a combination of dividend and share repurchases.

George Grofik: Our speakers on the call today are Pablo Legareta, Founder and Chief Executive Officer, Marshal Yours, EVP, Head of Research and Investment, Chris Tight, EVP Vice Chairman, and Terry Coyne, EVP Chief Financial Officer. Pablo will discuss the key highlights after which Marshal and Chris will provide portfolio updates highlighting three important recent transactions. Terry will then review the financials and following concluding remarks from Pablo, we will hold a Q&A session.

Chris: Regarding the latter, the board authorized a multi-year share buyback program of up to $1 billion in March of 2023, of which we have spent just over $400 million to date.

Pablo: While investing in royalties is our number one priority, we use our share buyback program tactically for repurchases when we see a disconnect between our intrinsic value and the current stock price.

Terry Coyne: We believe our intrinsic value is well in excess of the current stock price, and as a result, we have repurchased $115 million of our shares from the second quarter through today. By executing this capital allocation strategy, we are confident we will continue to deliver on our mission of accelerating innovation in life sciences while generating strong returns and creating significant shareholder value. Slide 23 provides our Raised Full Year 2024 Financial Guidelines. We now expect portfolio receipts to be in the range of $2.7 to $2.775 billion. Let me walk you through our assumption.

Operator: We believe our intrinsic value is well in excess of the current stock price, and as a result, we have repurchased $115 million of our shares from the second quarter through today. By executing this capital allocation strategy, we are confident we will continue to deliver on our mission of accelerating innovation in life sciences while generating strong returns and creating significant shareholder value. Slide 23 provides our Raised Full Year 2024 Financial Guide. Let me walk you through our assumptions.

Pablo Legorreta: And with that, I'd like to turn the call over to Pablo. Thank you, George, and welcome to everyone on the call. I am delighted to report a successful quarter of execution against our vision to be the leading partner funding innovation in life sciences. Slide six summarizes our strong business momentum in the second quarter. In terms of the financials, we delivered 12% growth in portfolio receipts are top lines. This was significantly above our guidance of high single digit growth, which we provided last quarter.

Pablo: We believe our intrinsic value is well in excess of the current stock price. And as a result, we have repurchased $115 million of our shares from the second quarter through today.

Chris: By executing against this capital allocation strategy, we are confident we will continue to deliver on our mission of accelerating innovation in life sciences while generating strong returns and creating significant shareholder value.

Chris: Slide 23 provides our raised full year 2024 financial guidance.

Pablo Legorreta: The bedrock of this strong performance was an impressive 11% growth in royalty receipts. This represents our recurring cash flows and are driven by our high quality portfolio of more than 35 commercial products. Turning to capital location, we had a very active quarter for new royalty transactions capital deployment was approximately $2 billion, including the cash to be paid for US royalties on Warren Ego, which was just approved a couple of days ago.

Chris: We now expect portfolio receipts to be in the range of $2.7 to $2.775 billion.

Operator: First, within our top-line guidance, we expect to deliver growth in royalty receipts of around 9% to 12%. The increase from our previous guidance of 5% to 9% reflects the strong momentum of our diversified portfolio. Second, when we move to portfolio, we face a high base of comparison as a result of the $525 million of biohaven-related payments we received last year. Lastly, our guidance assumes a negligible foreign exchange impact. Turning to operating costs, payment for operating professional costs is expected to be approximately 8% to 9% of portfolio receipts in 2024.

Terry Coyne: First, within our top-line guidance, we expect to deliver growth in royalty receipts of around 9% to 12%. The increase from our previous guidance of 5% to 9% reflects the strong momentum of our diversified portfolio. Second, when we move to the portfolio, we face a high base of comparison as a result of the $525 million of biohaven-related payments we received last year.

Speaker Change: Let me walk you through our assumptions.

Pablo: First, within our top-line guidance, we expect to deliver growth in royalty receipts of around 9% to 12%.

Chris: The increase from our previous guidance of 5% to 9% reflects the strong momentum of our diversified portfolio.

Chris: Second, when we move to portfolio receipts,

Pablo Legorreta: In addition, we continue to pursue our violence capital location strategy, and we stepped up the pace of share repurchases, given the disconnect of our share price with our strong fundamental outlook. Looking at our portfolio, we acquired royalties on six therapies in the quarter, including one approved and five development stage therapies. More specifically, we increased our royalty exposure to the blockbuster abrasie for spinal muscular atrophy and to Africa, and an exciting cardiovascular therapy, which is expected to be filed with regulators imminently.

Chris: We face a high base of comparison as a result of the $525 million of biohaven-related payments we received last year.

Terry Coyne: Milestones and other contractual receipts are therefore expected to decline from around $600 million in 2023 to approximately $30 million in 2024. Lastly, our guidance assumes a negligible foreign exchange impact. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisition. Turning to operating costs, payment for operating professional costs is expected to be approximately 8% to 9% of portfolio receipts in 2024.

Chris: Milestones and other contractual receipts are therefore expected to decline from around $600 million in 2023 to approximately $30 million in 2024.

Chris: Lastly, our guidance assumes a negligible foreign exchange impact.

Chris: Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisitions.

Pablo Legorreta: Chris will expand on these details as well as highlight the multiple upcoming events for our development stage portfolio, which has the potential to unlock significant value for Royalty Pharma. In this regard, we were pleased to see FDA approvals of Juan Ego this week, as well as the positive phase three results for self-direction in depression and for tranfaya and Crohn's disease, all of which could represent important new growth drivers for Royalty Pharma.

Chris: Turning to operating costs, payment for operating professional costs are expected to be approximately 8% to 9% of portfolio receipts in 2024.

Terry Coyne: Interest paid for the full year 2024 is expected to be around $150 million, with a de minimis amount to be paid in Q4. This does not take into account any interest received on our cash balance. It was $21 million in the first six months of the year. It also does not reflect the interest payments on the $1.5 billion of notes issued in June of 2024 for which the first payment is due in the first quarter of 2025.

Chris: Interest paid for full year 2024 is expected to be around $150 million, with a de minimis amount to be paid in Q4.

Operator: This does not take into account any interest received on our cash balance. It also does not reflect the interest payments on the $1.5 billion of notes issued in June of 2024 for which the first payment is due in the first quarter of 2025.

Chris: This does not take into account any interest received on our cash balance.

Chris: which was 21 million dollars in the first six months of the year.

Chris: It also does not reflect the interest payments on the $1.5 billion of notes issued in June of 2024 for which the first payment is due in the first quarter of 2025.

Pablo Legorreta: Lastly, I'm happy to report that we're raising our full year 2024 guidance by 3% at the midpoint, following our excellent performance in the first six months of the year, driven by the strong momentum of our diversified portfolio. We now expect portfolio receipts to be between 2.7 billion and 2.775 billion. This is based on expected growth in Royalty receipts of around 9 to 12%, which compares with our previous guidance of 5 to 9%.

Terry Coyne: To close, we are very pleased to be able to raise guidance based on the excellent momentum of our diversified royalty portfolio and continued successful execution against our strategy. With that, I would like to hand the call back to Pablo.

Chris: To close, we are very pleased to be able to raise guidance based on the excellent momentum of our diversified royalty portfolio and continued successful execution against our strategy.

Chris: With that, I would like to hand the call back to Pablo.

Pablo Legorreta: Let me begin my concluding remarks by saying how proud I am of the performance in the first six months of 2024. We delivered double-digit growth in royalty receipts, expanded our portfolio, including our exciting development stage pipeline, and we maintained our leadership position in the royalty market, which is growing rapidly and being driven by powerful secular tailwinds. My final slide highlights our incredible track record of consistently identifying exciting ways of biopharma innovation and finding ways to participate.

Pablo: Thanks, Terry.

Pablo: Let me begin my concluding remarks by saying how proud I am of the performance in the first six months of 2024.

Pablo: We deliver double-digit growth in royalty receipts, we transcend our portfolio, including our exciting development stage pipeline, and we maintained our leadership position in the royalty market, which is growing rapidly and being driven by powerful secular tailwinds.

Pablo Legorreta: Consistent with our standard practice, this guidance is based on our current portfolio and does not include the benefit of future transactions. Slide 7 shows our impressive track record of front growth since our IPO. As I noted earlier, we delivered 11% growth in Royalty receipts in the second quarter. Taken together with our double digit performance in Royalty receipts in the first quarter, this sets us up well to deliver our new, full year guidance.

Pablo: My final slide highlights our incredible track record of consistently identifying exciting ways of biopharma innovation.

Pablo Legorreta: The roster of therapies listed here includes some of the most transformative and commercially successful in the history of our industry, from Ritoxan, the first monoclonal antibody for cancer, to Gilead's HIV franchise, to Humira, to more recent life-changing therapies, such as Trikafta for cystic fibrosis or Ebrizdi for spinal muscular atrophy. And when we look ahead, we expect to see a number of the exciting therapies we discussed today join this list, transforming the lives of patients with brain cancer, cardiovascular disease, multiple sclerosis, and schizophrenia, among others.

Pablo: and Finding Ways to Participate. The roster of therapies listed here include some of the most transformative and commercially successful in the history of our industry.

Pablo Legorreta: This consistent track record of strong growth speaks for ability to execute successfully against our strategy in the growing market for bioformer royalties. Slide 8 shows that we continue to be the clear leader in the market for large Royalty transactions. With two more transactions north of 500 million dollars announced this year of the 26 Royalty transactions to date valued at 500 million or more, we have executed 20 with a market share of 77%.

Pablo: from Ritoxan, the first monoclonal antibody for cancer, to Gilead's HIV franchise, to Humira, to more recent life-changing therapies such as Trikafta for cystic fibrosis or Ebrisdi for spinal muscular atrophy.

Chris: And when we look ahead, we expect to see a number of the exciting therapies we discussed today join this list, transforming the lives of patients with brain cancer, cardiovascular disease, multiple sclerosis, and schizophrenia, among others.

Pablo Legorreta: The ability to identify new waves of innovation and to constantly replenish our portfolio with novel transformative therapies is in our DNA. Taken together with our simple but powerful business model and our deep access to capital, we're confident we will continue to deliver attractive, compounding growth over the remainder of this decade and beyond. With that, we would be happy to take your questions. Operator, please take the first question. Thank you. To ask a question, please press Star 1-1 on your telephone and wait for your name to be announced.

Pablo: The ability to identify new ways of innovation and to constantly replenish our portfolio with novel transformative therapies is in our DNA.

Pablo Legorreta: You will also note that half of our transactions have taken place in the four years since our IPO. This in part reflects an important competitive advantage of our business, namely our scale and rapid access to substantial capital. It also reflects the talent and creativity of our team as we strive to create win-win solutions for our partners in the growing bioformer royalty market. Finally, it reflects the acceleration of the bioformer royalty market as a whole, where we are the clear market leader.

Operator: Taken together with our simple but powerful business model and our deep access to capital, we're confident we will continue to deliver attractive, compounding growth over the remainder of this decade and beyond.

Pablo: taken together with our simple but powerful business model and our deep access to capital, we're confident we will continue to deliver attractive compounding growth over the remainder of this decade and beyond.

Operator: Operator, please take the first question. Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw the question, please press star 1-1 again. And the first question will come from Chris Shibutani on Goldman Sachs. Your line is now open.

Speaker Change: With that, we would be happy to take your questions.

Speaker Change: Operator, please take the first question. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw the question, please press star 11 again.

Marshall Urist: With that, I will hand it over to Marshall. Thanks, Paula. I want to focus today on the value of repeat business to our model and why we are so excited about acquiring a royalty on surveys for a site that now available commercially as for an ego.

Speaker Change: And the first question will come from Chris Shibutani with Goldman Sachs. Your line is now open.

Chris Shibutani: Great. Thank you very much. I appreciate the strong performance and the guidance raised here. One aspect that everyone is keen to understand is how you're seeing the outlook in terms of what's available to you. I know you have a consistent model, scientific discipline, but what are you seeing in terms of receptivity, valuations, opportunities, just the general environment overall to continue to gather more royalties? Thank you.

Marshall Urist: Slide 10 shows an important aspect of what differentiates us from our competition, namely repeat business with our partners. Recently, we completed our second transaction with Ajio's and our third transactions with cytokinetics and PT. DC. If we go back further, we have a strong track record over nearly two decades of completing multiple transactions with our partners. Slide 11 shows that it is approximately $15 billion of transactions we have announced since 2020 around $6 billion for nearly 40% has been with repeat partners.

Operator: Thank you for the question. And I'll ask Marshall maybe to add, or Chris, maybe Chris is the better one, to add a little bit to what I'm going to say. But I think there are two key things that are happening with our business. One is the massive capital needs that innovation requires in life sciences, both from the biotech ecosystem, 8,000 or so biotech companies out there, and the large pharmas, which in some of our materials in the past, we actually have quantified this at about $200 plus billion invested per year in R&D in life science.

Pablo Legorreta: Thank you for the question. And I'll ask Marshall maybe to add, or Chris, maybe Chris is the better one, to add a little bit to what I'm going to say.

Speaker Change: thank you for the question and i'll ask marshall maybe to add or chrrism maybe chris is the better to adda little what i'm going to say but i think there's two key things that are happening with our business

Pablo Legorreta: But I think there are two key things that are happening with our business. One is the massive capital needs that innovation requires in life sciences, both from the biotech ecosystem, 8,000 or so biotech companies out there, and the large pharmas, which in some of our materials in the past, we actually have quantified this at about $200-plus billion invested per year in R&D in life sciences. And, you know, so it's a massive figure that's growing.

Marshall Urist: Our partner-centric approach is one of our core values at Royalty Pharma. It brings multiple benefits, including speed of execution and in-depth knowledge of both products and our partner, resulting in a higher probability of transacting both the first and subsequent deals as our partners grow over time.

Speaker Change: One is the massive capital needs that

Speaker Change: Innovation Requires in Life Sciences.

Chris Shibutani: both from the biotech ecosystem, 8,000 or so biotech companies out there.

Speaker Change: and the large pharma.

Speaker Change: which you know in some of our materials in the past we actually have quantified this at about 200 plus billion dollars invested per year in R&D in life sciences.

Marshall Urist: Slide 12 summarizes our recent transaction with IGS to acquire their Royalty on U.S, net sales of Serbia's Boraniga, which we believe has blockbuster commercial potential in the treatment of low-grade glioma. We will pay $905 million following Boraniga's FDA approval on Tuesday, which was based on the remarkable Phase III results in high-on-met patient need. We are entitled to a 15% Royalty on U.S, sales up to $1 billion, which steps down to a 12% Royalty on sales greater than $1 billion.

Pablo Legorreta: There's another $100 billion invested by academic institutions, but, you know, that's not something we fund. That's funded by the government. But when you look at the investment by the corporate side, it's this $200 billion that is required every year. And when we look at the decade that is in front of us, we're talking about about $3 billion, $3 trillion, you know, the capital needed to fund the ecosystem. So that's one thing.

Speaker Change: and you know so it's a massive figure growing there's another hundred billion invested by academic institutions but you know that's not something we fund that's funded by government

Pablo: But when you look at the investment by the corporate side, it's this $200 billion that is...

Pablo: required every year. When we look at the, you know, decade that is in front of us...

Marshall Urist: Furthermore, Boraniga has a long duration of patent protection with Royalty in 32038 and we forecast peak sales greater than $1 billion and expect an IRR in the teens. Importantly, Boraniga is another great example of our ability to consistently execute large transactions, because we have completed 10 transactions of $500 million or more and four transactions of $1 billion or greater just since our IPO in 2020.

Pablo: We're talking about a $3 trillion capital need to fund the ecosystem.

Pablo Legorreta: The second thing that is definitely an important driver is the acceptance today among biotech companies of using royalties to fund late-stage clinical trials, what we call synthetic royalties, which have developed in a very attractive way. There are so many companies now that know that this is a very attractive way to fund their business and that reach out to us, or we go out and visit them, get to know them, and have discussions with them about funding their business.

Pablo: So that's one thing. The second thing that is definitely an important driver is the acceptance today among...

Speaker Change: Biotech companies are using royalties to fund late-stage clinical trials, what we call synthetic royalties, that have...

Marshall Urist: As public discussed earlier, we have strong competitive advantages which have allowed us to remain the clear market leader for large Royalty transactions.

Pablo: developed in a very attractive way. There's so many companies now that know that this is a very attractive way to fund their business and that reach out to us. Or we go out and visit them, get to know them, and have discussions with them about funding their business. And then there's also, you know, now

Marshall Urist: Slide 13 provides an overview of why we think Boraniga could represent a blockbuster commercial opportunity. First, there is high-on-met patient need with overall survival of approximately 10 years for relatively young patients with low-grade glioma and no approved targeted therapies. Second, IVH mutations are estimated to drive low-grade gliomas in over 70% of patients resulting in an estimated 1,500 incident and 10,000 prevalent U.S, patients addressable by Boraniga. Third, we expect Boraniga to have a long duration of treatment of over two years given the median 27 months of progression-free survival in phase three and manageable safety profile.

Pablo Legorreta: And then there's also, you know, now... real acceptance from the side of the big pharma to drive this growth. And you've seen us do transactions with Merck for the schizophrenia program, recently with PEVA, another schizophrenia drug, and other transactions.

Marshall Urist: Fourth, there are no other potentially competing therapies in late-stage clinical development. We have performed deep due diligence, including a comprehensive demand survey which indicates physician excitement for Boraniga and expected broad and deep uptake across many subsets of low-grade glioma patients. Lastly, given that low-grade glioma patients tend to be relatively young and Boraniga's organ status from the FDA, we do not expect any impact from the IRA. We see additional upsets in the launch ramp, duration of therapy, and depth of prescribing across patient segments in low-grade glioma.

Pablo: Real acceptance.

Pablo: from the side of the big pharma to drive this growth. And you've seen us do transactions with Merck.

Chris Shibutani: for the Schizophrenia Program, recently Teva, another schizophrenia drug, and other transactions. But, you know, that's my answer to your question. Chris, do you want to add anything to that?

Chris Hite: Thank you, Pablo, and thanks for the question, Chris. The deal pipeline continues to be very robust. The timing of new acquisitions is always, as you know, difficult to predict and can be highly variable, but we have shown over our history that we can deploy a lot of capital, particularly over a multi-year period, and that's really the way we encourage you to think about it, and just as a reminder, we've deployed about 10.4 billion since 2020 and announced transactions of about 14.7 billion.

Chris Hite: But that's my answer to your question. Chris, do you want to add anything to that? Sure. Thanks, Pablo.

Pablo: Thanks, Pablo, and thanks for the question, Chris. The deal pipeline continues to be very robust.

Chris Shibutani: The timing of new acquisitions is always, as you know, difficult to predict and can be highly variable, but we have shown over our history that we can deploy a lot of capital, particularly over a multi-year period, and that's really the way we encourage you to think about it.

Operator: And just as a reminder, you know we've deployed about 10.4 billion since 2020 and announced transactions of about 14.7 billion, and the value of those transactions has increased every year. And if you think about our deal funnel, we've seen a significant increase in opportunities, as witnessed by our in-depth reviews in 2023, up over 130 percent since 2019.

Pablo: And just as a reminder, we've deployed about $10.4 billion since 2020 and announced transactions of about $14.7 billion.

Chris Hite: 2020, and the value of those transactions has increased every year, and if you think about our deal funnel, we've seen a significant increase in opportunities, as witnessed by our in-depth reviews in 2023, up over 130 percent since 2019. So, we're super excited about the quality of the deals that we've done and certainly the ones and the opportunity set that we're looking at currently.

Pablo: since two thousand and twenty

Pablo: and the value of those transactions has increased every year. And if you think about our deal funnel, we've seen a significant increase in opportunities as witnessed by our in-depth reviews in 2023, up over 130% since 2019.

Chris Tight: And with that, I'll hand it over to Chris. Thanks, Marshall. I want to expand on a recent transaction involving Everest V and Kathy Campton and Highlight's broader potential for growing development stage pipeline. Highlight 15 highlights are growing partnership with PTC on Everest V. We gained our first exposure to this exciting therapy in 2020 when we acquired 43% of PTC's royalty interest for $650 million.

Pablo: So, we're super excited about the quality of the deals that we've done and certainly the one and the opportunity set that we're looking at currently.

Operator: And our next question comes from Chris Schott with J.P. Morgan. Your line is now open.

Speaker Change: Great, thank you.

Speaker Change: And our next question comes from Chris Schott with J.P. Morgan. Your line is now open.

Operator: Hi, this is Hardik Parikh and for Chris Schott. Just wanted to ask about, you issued about $1.5 billion of debt in June, and you just said you're willing to kind of raise that leverage to about 4x. How do you think about raising additional debt going forward as you invest beyond your internal cash flow? And then, if this deal kind of flow continues to exceed your internal targets, is 4x a reasonable probability?

Chris Tight: Awards. In 2023, we entered into a second royalty transaction with PTC. In this case, in return for an upfront payment of $1 billion, we acquired 67% of PTC's remaining royalty. It also extended the royalty duration to 2035 to 2036 from the early 2030s. Importantly, this transaction included a joint option structure for the remainder of PTC's royalty interest. This would allow PTC to sell all of its residual royalty to us by the end of 2025, in return for a $500 million payment, less royalties received.

Hardik Parikh: Hi, this is Hardik Parikh and for Chris Schott, just wanted to ask about, you issued about $1.5 billion of debt in June and you just said you're willing to kind of raise that leverage to about 4X. How do you think about raising additional debt going forward as you invest beyond your internal cash flow? And then...

Speaker Change: If this deal kind of flow continues to exceed your internal targets, is the 4X a reasonable probability?

Terry Coyne: Right, thank you for the question. Terry, would one of you take this question?

Terry Coyne: Yeah, so just a reminder, you know; we're fortunate that the business generates pretty significant cash flow every quarter. And so that's going to be the first source of, you know, how we're going to fund new investments. But, you know, over time, we have used leverage when the right opportunities come along. And when I put out that, when I mentioned that four times number, that's for, you know, if there was a large acquisition that came along that we needed to fund and we were really excited about it, then we would take it up to four times.

Speaker Change: rightthank you for the question terry one of you take this question please

Chris Tight: In June of this year, as part of that option structure, we made our third investment. In return for a payment of $242 million, we acquired additional royalties on every RISD, which we will start to receive in the third quarter of 2024. This new investment is expected to deliver an unlearned return in the low-double digits. In total, it takes our investment to $1.9 billion across the three transactions and increases our effective royalty rate to 7.2% to 14.5%.

Speaker Change: Yeah, so just a reminder that we're fortunate that the business generates pretty significant cash flow every quarter.

Speaker Change: And so that's going to be the first source of, you know, how we're going to fund new investments.

Pablo: um

Pablo: but

Speaker Change: You know over time we have used leverage when the right opportunities come along and when I put out that when I mentioned that four times number

Pablo: That's for, you know, if there was a large acquisition that came along.

Terry Coyne: But that's certainly not the level that we plan to operate at. You know, over the last couple of years, we've been in the low threes or even lower than that. So, you know, I think that that's probably more of a normal range. But from time to time, we will take it higher if the right opportunities come along. And by the way,

Pablo: that we needed to fund, and we were really excited about it, then we would take it up to four times. But that's certainly not the level that we plan to operate at. You know, over the last couple of years, we've been...

Chris Tight: This makes every RISD the third largest investment in our history after a cystic fibrosis and tights ovary. Furthermore, the option structure means PTC retains the right to sell the remainder of its ever-is-y royalties to us by the end of 2025. For those less familiar, RISD is the global leader in the treatment of a rare disease called spinal muscular atrophy or SMAG. RISD recently reported in the first six months of 2024 for approximately $940 million growing by 25%. Given that consensus forecasts are tracking to $3 billion plus by 2030, we now expect to receive annual peak royalties on every RISD of around $350 million.

Pablo: in the low threes or even lower than that. So, you know, I think that that's probably more of a normal range. But, you know, from time to time, we will take it higher if the right opportunities come along.

Operator: And by the way, that higher level of leverage is totally consistent with our investment grade rating, which is really, really important to us.

Terry Coyne: And by the way, that higher level of leverage is totally consistent with our investment grade rating, which is really, really important to us.

Pablo: And by the way, that higher level of leverage is totally consistent with our investment grade rating, which is really, really important to us.

Operator: And our next question comes from Terrence Flynn with Morgan Stanley. Your line is open.

Speaker Change: Thank you.

Speaker Change: And our next question comes from Terrence Flynn with Morgan Stanley . Your line is open.

Operator: Great, thanks for taking the questions; maybe two for me. Slide 18 was very helpful in terms of framing the future opportunity for some of the pipeline assets here. LP little a, you know, represents about a third of the revenue opportunity based on your numbers, so maybe just, you know, a question for Marshall that could remind us of your confidence level in seeing positive phase 3 data from Novartis next year. And then the second question relates to the CF franchise. Van de Kafter has a PDUFA date in January now, so any update on the timing of when we might have visibility on how the royalty situation might play out here with Vertex? Thank you.

Speaker Change: great thanks for taking the questions maybe two for me slide eighteen was very helpful in terms of framing the future opportunity for some of the pipeline assets here l p little a you know represents about a third of the the revenue opportunity based on your numb so maybe just you know question for marally could remind us in your confidence level in seeing positive face three data

Chris Tight: 5.16 is another great example of repeat business and highlights how we have strengthened our longstanding partnership with cytokinetics, including our May 2024 transaction. We have provided access to more than $1 billion in total funding across three deals. As a reminder, cytokinetics recently presented the pivotal phase three results for AFI-Campson, which we believe demonstrated potential to be the best-in-class therapy for hypertrophic cardiomyopathy. Following our most recent transaction, we are now entitled to a 4.5% royalty on that sales up to 5 billion and a 1% royalty on sales above 5 billion.

Speaker Change: from novartus next year and then the second question relates to the cf franchise

Speaker Change: banickafter has a produufiddate in january now so any update on timing of when we might have visibility on how the um the royalty situation might play out here with vertex thank you

Marshall Urist: Marshall, the first question that Terrence suggested is for you, and the second one is for Terry.

Speaker Change: Marshall, the first question that Terrence suggested is for you and the second one for Terry please.

Marshall Urist: Yep, good morning. Thanks, Terrence. Good question.

Marshall Urist: So on LT, just as a reminder, or just as a quick reminder for everyone, this is an emerging new class of cardiovascular drugs. We actually have two opportunities in this space from the two leading programs, one from Novartis, Novartis' program in Pellicarson, where we expect data on outcomes sometime next year, and then Amgen's program, Olpasteran, which we have, which we expect data on outcomes the following year in 2020 And it is an exciting opportunity that we eagerly await the data. I will point to a few things that, you know, we see as attractive.

Speaker Change: Good morning. Thanks, Terrance. Good question. So, on LP little a, just as a reminder,

Chris Tight: Based upon research analyst consensus, AFI-Campson has the potential to generate peak annual royalties to royalty farming in excess of $180 million. We have also provided launch and development funding of which 200 million has been drawn and an additional 350 million remains available. The return on this funding is based on fixed payments expected to range between 1.9x to 2.4x over time. Taken together, our third transaction with cytokinetics highlights our ability to structure creative funding solutions, and Honor scores the breadth of our funding capabilities.

Speaker Change: Just as a quick reminder for everyone, this is an emerging new class of cardiovascular drugs. We actually have two opportunities in this space from the two leading programs. One from Novartis' program in Pell-Carson, where we expect outcomes data sometime next year. And then Amgen's program, Olpasteran, which we expect data the following year in 2026.

Speaker Change: And it is an exciting opportunity that we eagerly await the data. I point to a few things that, you know, that we see as attractive. I think first of all, both drugs provide pretty profound reductions in LP little a, so the data to date on the biomarker is really compelling.

Marshall Urist: I think, first of all, both drugs provide pretty profound reductions in LP little a. So the data to date on the biomarker is really compelling. Second, there's a lot of clinical epidemiological genetic data that links LP little a to risk of cardiovascular disease and having cardiovascular events. Finally, you know, if you look at what's in LP little a, it does have a lot of parallels to LDL, which is obviously a highly validated target.

Chris Tight: On slide 17, I want to now move to the multiple important clinical and regulatory events, which we expect for our exciting development stage portfolio over the next 12 months or so. In particular, I was appointed the upcoming FDA action dates for a car exchange schizophrenia in terms of flying ulcerative colitis and Crohn's. FDA and EMA regulatory filing for AFI Campton, and long-term safety data for Teva 749 and schizophrenia.

Speaker Change: second there's a lot of clinical epidemiological genetic data that links ly little way to risk of cardiovascular disease and having cardiovascular events

Speaker Change: Finally, you know, if you look at what's in LP little a it does have a lot of parallels to LDL Which is obviously a highly validated target. And so you put all of that together and I think we're really excited about

Marshall Urist: And so you put all of that together, and I think we're really excited about seeing that data over the next couple of years. But I think an important thing to just keep in mind, you can take a step back from our pipeline chart, is that LPA is exciting and could be a meaningful contributor for us. But as we continue to build the portfolio, we will continue to add other really exciting pipeline opportunities like that, like you've seen us do this year with Rexalamab, for example. And that's just part of our business that we'll continue to add and continue to build to the portfolio with really exciting opportunities.

Chris Tight: We also expect the phase 12B results for Rochis-Tron Tenamab and Alzheimer's before the end of this year. And in 2025, we've spec'd outcome data for a Pelocarsin, which we which has the potential to be a very significant royalty for our portfolio. As you can see, these events have the potential to unlock very significant value for Royalty Pharma. Slide 18 shows our late stage development pipeline by potential peak sales and the associated royalties we could expect to receive.

Speaker Change: about seeing that, about seeing that data over the next couple of years. But I think an important thing to, just to keep in mind, if you take a step back about our pipeline chart, is certainly LPA is, LPA is exciting and could be a meaningful contributor for us. But as we continue to build the portfolio, we will continue to add other really exciting pipeline opportunities like that, like you've seen us do this year with FrexalaMap, for example. And that's just part of our business that we'll continue to add and continue to build to the portfolio with really exciting opportunities.

Terry Coyne: And then, Terrence, on your question about the VANSA triple, there's no update from our side on timing there. But just as a reminder for everyone, we provided in the past sensitivity to just walk through the various different sort of scenarios that could play out here.

Chris Tight: As you saw on my previous slide, many of these assets will have major potentially risking events in the next 12 months or so. Importantly, the programs listed here all have first or best-in-class potential and are supported by world-class marketers. The majority have multi-blockbuster potential, and in aggregate, we estimate to combine peak sales at over 25 billion on a non-risk adjusted basis. Based on the respective royalty rates, this could potentially translate to over 1.2 billion and annual peak royalties to Royalty Pharma, with Frexalumab and Elpatherum potentially being the largest individual contributors. We expect many of these products to contribute to our attractive compounding growth in the years ahead.

Speaker Change: an then interance on your question on on the vansza triple there's no update from our side on on timing there but just as a reminder for everyone

Speaker Change: We provided in the past a sensitivity to just walk through the various different sort of scenarios that could play out here. As you all know, we're paid on all three components of Trikafta.

Terry Coyne: As you all know, we're paid for all three components of Trikafta. There is a debate with the new VANSA-Kaftra triple on whether we're owed royalties on the deuterated Ivacaftra component of that triple. We believe we are, but that is an area of debate.

Speaker Change: There is a debate with the new Banfacaftor triple on whether we're owed royalties on the deuterated Ivacaftor component of that triple. We believe we are.

Terry Coyne: And we feel very strongly about our position there. But what we've also said is that, you know, if we are wrong about the royalty, we are not owed a royalty on that portion, which, by the way, would take our royalty to 4% on the new triple versus 8% if we are owed a royalty. But if we're wrong and there's significant share conversion, 50 to 75% conversion to the new triple over time, the impact on our top line would be a couple hundred million dollars.

Speaker Change: But that is an area, you know, of debate and, you know, we feel very strongly about our position there. But what we've also said is that, you know, if we are wrong,

Terry Coyne: With that, I would like to hand it over to Terry. Thanks, Chris.

Terry Coyne: Let's move to slide 20. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 11 percent in the second quarter, reflecting the strength of our diversified portfolio. The key drivers of growth were the strong performance of our base business, notably our Scythic Fibrosis franchise, Trellogy, Termphaya, and Eversity, including a modest contribution from milestones and other contractual receipts. Portfolio receipts are top line, grew by 12 percent to $608 million.

Speaker Change: and the royalty, we are not over royalty on that portion, which by the way would take our royalty to 4% on the new triple versus 8% if we are over royalty. If we're wrong and there's significant share conversion.

Speaker Change: fifty to seventy-five percent conversion to the new triple over time that the impact on on our top line would be a couple of hundred million dollars

Terry Coyne: And so, you know, from that perspective, when you think about the growth of the business and all of the assets that we're adding and the growth that's embedded in the new assets, I mean, if you look at our pipeline, today, we highlighted that over $1 billion of potential new royalties there. So, you know, this is something we feel good about our position, but, you know, it's a couple hundred million dollars either way. And it's not going to be particularly material over the long term for royalty farming.

Speaker Change: And so, you know, from that perspective, when you think about the growth of the business and all of the assets that we're adding, and the growth that's embedded from the new assets, I mean, if you look at our pipeline.

Terry Coyne: As we look down the column, operating professional costs equated to 7.9 percent of portfolio receipts. Net interest received a $14 million reflected the semi-annual timing of our interest payment schedule, with payments falling due in the first and third quarters. Moving further down the column, we've consistently stated that when we think of the cash generated by the business to then be redeployed and to value enhancing royalties, we look to adjust the debit dot plus net interest pay, or as we call it portfolio cash flow. This amount of $574 million in the quarter equivalent to a margin of around 94 percent. This high level of cash conversion once again underscores the efficiency of our business model.

Speaker Change: today we highlighted that one over one billion dollars of potential new royalties there so

Speaker Change: This is something we feel good about our position, but it's a couple hundred million dollars either way, and it's not going to be particularly material over the long term for Royalty Pharma.

Operator: And the next question comes from Michael DiFiore with Evercore. Your line is now open.

Speaker Change: And the next question comes from Michael DiFiore with Evercore. Your line is now open.

Operator: Hi guys, thanks so much for taking my question and congrats on the continued progress this quarter. I have two questions for you.

Michael DiFiore: Hi guys, thanks so much for taking my question and congrats on the continued progress this quarter. Two questions from me. One regarding the CD19 development for autoimmune indications. It continues to become more widespread.

Marshall Urist: One regarding the CD19 development for autoimmune indications continues to become more widespread. I'm wondering if you're seeing any collaboration opportunities in that space, especially since most companies seem to be starting their development on an equal footing here. And separately, with regard to your portfolio receipt guidance on slide 23, it says that it reflects a range of scenarios for the launch of promactogenerics and biosimilar tisabrin. So to the extent that you can, could you elaborate further on this, especially if your current thinking about the competitiveness of biosimilar Tysabri is changed?

Terry Coyne: Capital's appointment in the second quarter was 951 million dollars, and as Marshall highlighted, we will pay 905 million dollars this month following the FDA approval of Oranigo. This will take our total for the year to approximately 2 billion dollars.

Speaker Change: Wondering if you're seeing any collaboration opportunities in that space, especially since most companies seem to be starting their development on equal footing here.

Operator: And separately, with regard to your portfolio receipt guidance on slide 23, it says that it reflects a range of scenarios for the launch of pro-magnetic generics and biosimilar Tysabri. So to the extent that you can, could you elaborate further on this, especially if your current thinking about the competitiveness of biosilver tisabrate has changed?

Speaker Change: And separately, with regard to your portfolio receipt guidance on slide 23, it says that it reflects a range of scenarios for the launch of ProMag to generics and biosimilar Tysabri.

Terry Coyne: Slide 21 shows that we continue to maintain significant financial capacity for future Royalty acquisitions. In total, we have approximately 3 billion dollars available to recombination of cash on our balance sheet, the cash on our business generate, and access to the debt markets. At the end of the second quarter, we had cash and equivalents of just under 1.8 billion dollars, following the 905 million dollar payment related to Oranigo. This will take our cash and equivalents to 860 million dollars on a pro forma basis.

Speaker Change: So, to the extent that you can, could you elaborate further on this, especially if your current thinking about the competitiveness of biosimilar Tysabri has changed? Thank you.

Marshall Urist: So Marshall, why don't you take the question on CD19, and then Terry will take the question on guidance and the contributors to growth.

Speaker Change: So Marshall, why don't you take the question on CD19 and then Terry will take the question on the guidance and the contributors to the growth.

Marshall Urist: Absolutely, Mike, good morning. So on CD19, we'd agree with you, we've been watching closely all of the really exciting, exciting clinical data that's been emerging there between the cell therapies and biospecifics, and certainly something that, you know, we are continuing to follow and understand kind of how the various players and the various programs are going to play out. And, you know, we will certainly look for opportunities that make sense for us in that space because the data is certainly compelling.

Operator: Absolutely, Mike, good morning. So on CD19, we'd agree with you, we've been watching closely all of the really exciting, exciting clinical data that's been emerging there between the cell therapies and biospecifics, and certainly something that, you know, we are continuing to follow and understand kind of how the various players and the various programs are going to play out. And, you know, we will certainly look for opportunities that make sense for us in that space because the data is certainly compelling.

Marshall: the morning so nineteen we agree with you you know we've been watching closely the really exciting exciting clinical data that's been that that's been emerging there between the south therap and bias and certainly something that you we are continuing to follow and understand kind of how the how the various players in the various programs are going to play out and you know we will certainly look for opportunities that makes sense for us in that space the data is certainly compelling but we're going to stick to the approach that we that we've had in terms of building in terms of build the portfolio which is being educated and smart about

Terry Coyne: When we turn to our borrowing position, we issued 1.5 billion dollars of notes in the second quarter, which increased our outstanding and investment grade debt to 7.8 billion dollars, with a weighted cost of debt of 3.1%. A weighted average maturity is around 13 years, which aligns with the duration of our Royalty portfolio. Our total and net pro forma leverage now stands at three times, and we have stated that we would be prepared to take our leverage up to four times if the right opportunity arose. Furthermore, we have the additional undrawn financial capacity from the 1.8 billion dollar revolver.

Operator: But we're going to stick to the approach that we have had in terms of building the portfolio, which is, you know, being educated and smart about emerging science, really exciting emerging science like that, but also having our discipline where we wait for the right thing to come along where we can really drive a win-win for us and our partners, but certainly not losing sight of all the exciting innovation that's happening.

Marshall Urist: But we're going to stick to the approach that we have had in terms of building the portfolio, which is, you know, being educated and smart about emerging science, really exciting emerging science like that, but also having our discipline where we wait for the right thing to come along where we can really drive a win-win for us and our partners, but certainly not losing sight of all the exciting innovation that's happening.

Terry Coyne: As Pablo noticed, despite a busy quarter for Royalty acquisitions, we also took advantage of the fundamental disconnect in our share price, and stepped up the pace of share purchases in the second quarter. On a year-to-day basis, we have spent $115 million on buybacks.

Speaker Change: emerging science really exciting emerging science like that but also having our discipline where we wait for the right thing to come along where we can really drive a winingwin for us in our partner but certainly not lost on us all the exciting innovation that's happening there

Terry Coyne: And then, Mike, on your question about the guidance, we were really excited to raise the guidance, and I think it just speaks to the strong momentum of our portfolio. But like all businesses with as many products as we have, there are some that face various headwinds.

Speaker Change: And then, Mike, on your question on the guidance, yeah, we were really excited to raise the guidance. And I think, you know,

Terry Coyne: Slide 22 is a reminder of our capital allocation strategy and how we expect this to drive shareholder value creation. At our investor day in 2022, we outlined it over a five-year period to a combination of cash generation and our debt capacity. We expected that access to around $20 billion of capital. As you can see on this slide, we expected to play the majority of our capital on value enhancing Royalty acquisition, with a target of $10 to $12 billion invested over the period.

Speaker Change: It just speaks to the strong momentum of our portfolio. But, you know, like all businesses with as many products as we have, there are some that face various headwinds. So the two that we called out were Promacta,

Terry Coyne: So the two that we called out were Promacta and Tysabri. We don't have perfect visibility on when potential generics of Promacta or biosimilars of Tysabri could launch. And so that's why we wanted to make sure that we highlighted it. And we basically say, in those situations, we have the same information that you do.

Marshall: and Tysabri. We don't have, you know, perfect visibility on, you know, when

Marshall: potential generics of PERMACTA or biosimilars of case AVERY could launch.

Terry Coyne: As many of you are aware, we are on track to meet or exceed this target, having announced transactions of $9.4 billion with actual capital deployment of $6.6 billion since 2022. The difference represents contingent payments uncertain of our investment. We aim to balance this primary focus on Royalty acquisition with returning capital to shareholders for a combination of dividend and share repurchases. Regarding the latter, the board authorized a multi-year share buyback program with about $2 billion in March through 2023, of which we have spent just over $400 million to date.

Marshall: and so that's why we wanted to wanted to make sure that we highlighted and we basically go in those situations we have the same information that you do so we we're going of what the companies have said

Terry Coyne: So we're going off of what the companies have said, and we highlighted that we do look at sensitivities around those potential biosimilar launches of competitive products. In the case of Tysabri, I think one of the things that we've highlighted in the past is that this is a unique product, and we think that it's going to be more durable over time just because of some of the unique aspects of that product. We've seen it holding well outside of the U.S. despite biosimilar competition. But it does seem like it's coming to the U.S., and so we'll be watching that closely as well.

Operator: Very helpful; thank you.

Marshall: and and so we highlighted that we did we do look at sensitivities around those potential

Marshall: by a similar law potential launches of competitive products indicates that fevery i think one of the that we've highlighted in the past is but this is a unique product and

Marshall: we think that it's going to be more durable over time just because of some of the unique aspects of that product we've seen it's been holding in well outside of outside of the u s despite by bioandmore competition

Terry Coyne: While investing in Royalty's is our number one priority, we use our share buyback program tactically for repurchases when we see a disconnect between our intrinsic value and the current stock price. We believe our intrinsic value is well in excess of the current stock price. And as a result, we have repurchased $115 million of our shares from the second quarter through today, by executing against this capital allocation strategy. We are confident we will continue to deliver on our mission of accelerating innovation in life sciences, while generating strong returns and creating significant shareholder value.

Speaker Change: and you know I think we you know that but there it does seem like it's coming in the US and so you know we'll be we'll be watching that closely as well

Operator: And the next question comes from Michael Nedelkovich with TD Cohen. Your line is open.

Speaker Change: all very helpful thank you

Speaker Change: And the next question comes from Michael Nedelkovich with TD Cohen. Your line is open.

Operator: Thank you. Thanks for the question. My question is on CAR-XT. I'm curious if you have a sense of whether we've passed the point at which the FDA might expect to ask for an advisory committee. And when it comes to competition, particularly from other muscarinics, Do you have a base case assumption around what we should expect long-term and more imminently from the readout on Cerebellum's compound now

Michael Nedelkovich: Thank you, thanks for the question. My question is on CAR XT. I'm curious if you have a sense whether we've passed the point at which we might expect the FDA to ask for an advisory committee, and when it comes to competition, particularly from other muscarinics,

Terry Coyne: Slide 23 provides our raced full-year 2024 financial guidance. We now expect portfolio receipts to be in the range of $2.7 to $2.775 billion. Let me walk you through our assumptions. First, within our top line guides, we expect to deliver growth in royalty receipts of around 9% to 12%. The increase from our previous guides of 5% to 9% reflects the strong momentum of our diversified portfolio. Second, when we move to portfolio receipts, we face a high-based comparison as a result of the $525 million of biohaving-related payments we received last year.

Speaker Change: did you have a base case assumption around what we should expect long term and more imminently from the readout on sarabell's compound now ab come

Marshall Urist: Sir, Marshall, this is a question for you. Absolutely. Good morning. Thanks for the question.

Marshall Urist: Absolutely. Good morning, thanks for the question. So I think on your first question about CAR-XP and some of the specifics around the adcom, I think that's certainly a better question for Bristol. And second, on competition, you know, I think what happened with CAR-XP is, you know, it is exactly the kind of opportunities that we hope to create when we invest in really important new medicines like CAR-XP. And more broadly, thinking about your question about competition, about the competitive landscape in this class, where this is a first-in-class exciting medicine with really profound impact on patients that is now in the hands of Bristol, which has the company to really maximize its impact on patients and create, you know, the most attractive commercial opportunity possible.

Speaker Change: Thanks.

Marshall: sir marshall this is a question for you

Marshall: absolutely good morning thanks for the question so i think i' your first question on on carx t and some of the specific str on the hadcome i think that's certainly a better question for or bristle

Speaker Change: And second, on competition, you know, I think what's happened with CAR-XP is, you know, it is exactly the kind of opportunities that we hope to create when we invest in really important new medicines like CAR-XP, and more broadly, thinking about your question about competition, about the competitive landscape in this class, where, you know, this is a first-in-class of an exciting, of a medicine with really, you know, with a really profound impact on patients that is now in the hands of Bristol, which has the company to really maximize its impact on patients and create, you know, the most attractive commercial opportunity possible. So certainly, when we made this investment,

Terry Coyne: Milestones and other contractual receipts are therefore expected to decline from around $600 million in 2023 to approximately $30 million in 2024. Lastly, our guidance assumes a negligible foreign exchange impact. Importantly and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisition. Turning to operating costs, payment for operating professional costs are expected to be approximately 8% to 9% of portfolio receipts in 2024.

Marshall Urist: So certainly, when we made this investment, we assumed there would be others in this, in this class, just given what was visible in the pipeline and the importance of this mechanism. But I think we are really excited to be part of this part of this product, a really great additional portfolio, and we're excited to see what's gonna happen with it commercially at the launch. And Bristol, also, in terms of their public statements, it seems like they share that enthusiasm.

Marshall: we assumed there would be others in this in this class just given what was visible in the pipeline and the importance of this mechanism but i think we are really excited to be part of this

Terry Coyne: Interest paid for full-year 2024 is expected to be around $160 million with a diminimous amount to be paid in Q4. This does not take into account any interest received on our cash balance, which was $21 million in the first six months of the year. It also does not reflect the interest payments on the $1.5 billion of notes issued in June of 2024 for which the first payment is due in the first quarter of 2025.

Speaker Change: part of this part of this product a really great edition of portli andwere excited to see what's going to happen with it commercially in the launch and bristol also in terms of their public statements it seems like they share that enintousi other

Operator: And our next question comes from Di Zhao with UBS. Your line is open.

Terry Coyne: To close, we are very pleased to be able to raise guidance based on the excellent momentum of our diversified royalty portfolio and continued successful execution against our strategy.

Speaker Change: and our next question comes from de al with u b s your line is open

Operator: Hey, good morning. This is on behalf of Ash from EBS. Thanks for taking our question. I just want to ask, have you considered maybe splitting your fund into two different investment entities? Clearly, you are rich, on a large scale, and have like a lion's share of the rural investment market. So if you look into the active asset management space, a lot of large at scale funds have like a right to capacity constraint and split into like two, like hero and capital groups. So, for instance, if you were dividing up your portfolio into like commercial only and clinical only drugs, do you think you can get your creditors to provide you with better terms, perhaps?

Vy: Hey, good morning. This is Vy on behalf of Ash from UBS. Thanks for taking our question. I just want to ask, have you considered maybe splitting your fund into two different investment entities? Clearly, you are rich, on a large scale, and have like a lion's share of the royalty investment market. So, if you look into the active asset management space, a lot of large at-scale funds have like a right to capacity constraint and split into like two, like, like hero and capital groups. So, like, for instance, if you were dividing up your portfolio into commercial only and clinical only jobs, do you think you can get your creditors to provide you with better terms? Perhaps? Thanks.

Pablo Legorreta: With that, I would like to hand the call back to Pablo. Thanks, Terry.

Speaker Change: Hey, good morning. This is Vy on behalf of Ash from EBS. Thanks for taking our question. I just want to ask, have you considered maybe splitting your fund into two different investment entities?

Pablo Legorreta: Let me begin my concluding remarks by saying how proud I am of the performance in the first six months of 2024. We deliver double-digit growth in royalty receipts, with trends in our portfolio, including our exciting development stage pipeline, and we maintain our leadership position in the royalty market, which is growing rapidly and being driven by powerful secular tailwinds. My final slide highlights our incredible track record of consistently identifying exciting ways of biopharma innovation and finding ways to participate.

Speaker Change: clearly you are rac like a large scale and have like a lying share rural and nationalal market to see you look into the active like as imaginement sthas a lot of like large as scale funds have like a line to capacity ststrgth as to like to like

Speaker Change: like Hero and Capital Group. So like for instance, if you were dividing up your portfolio into like commercial only and clinical only drugs, do you think like you can get your creditors provide you better terms perhaps? Thanks.

Pablo Legorreta: The roster of therapies listed here includes some of the most transformative and commercially successful in the history of our industry. From retoxin, the first monoclonal antibody for cancer to Giliath's HIV franchise to Chimera. To more recent live-changing therapies such as Kafta for sytics fibrosis, or at brisd for final most garats.

Speaker Change: So, Chris, do you want to take this question? I think in terms of getting our lenders and the rating agencies to give us, you know, better...

Chris: actually, the lenders, better terms than the rating agencies to give us, you know, a better

Chris: Rating. I think, you know, the business we have is so strong.

Pablo Legorreta: University. And when we look ahead, we expect to see a number of the exciting therapies we discussed today join this list, transforming the lives of patients with brain cancer, cardiovascular disease, multiple sclerosis, and schizophrenia among others. The ability to identify new ways of innovation and to constantly replenish our portfolio with novel transformative therapies is in our DNA taken together with a simple but powerful business model, and our deep access to capital we're confident we will continue to deliver attractive, compounding growth over the remainder of the decade and beyond.

Speaker Change: When you look at Royalty Pharma and compare it to many other players in life sciences, companies in life sciences,

Chris: We have a really incredible portfolio with, I think, 15 or 16 blockbuster products, you know, that is, like...

Speaker Change: When you look at the big pharmas, they typically have more like 10, we have 15 or 17, like 1.5 to 1.7 times more bug busters in our portfolio than the big pharmas. And then we have super, super strong diversification, like really well diversified portfolio.

Speaker Change: You know

Speaker Change: It's better than even some of the big pharmas that may be more reliant on, you know, one or two products for the vast majority of their, for more than half of their revenues.

Operator: With that, we will be happy to take your questions. Thank you.

Chris: So I think, you know, in terms of our credit rating and our cost of debt capital, it's pretty efficient. It's very, very attractive. But Chris, I'll pass it on to you for the other parts of the question.

Operator: Please take the first question. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw the question, please press star 11 again.

Pablo Legorreta: I think you covered it, Pablo. I think that covers the answer there.

Chris: I think you covered it, Pablo. I think that that covers the answer there.

Pablo Legorreta: And the first question will come from Chris Shibutani with Goldman Sachs. Your line is now open. Great. Thank you very much. I appreciate the strong performance and the guidance raised here. One aspect that everyone is keen to understand is how you're seeing the outlook in terms of what's available to you. I know you have a consistent model scientific discipline, but what are you seeing in terms of receptivity, valuations, opportunities, just the general environment overall to continue to gather more royalties.

Chris: thank you

Chris: Great, thanks. Thank you.

Speaker Change: and our next question comes from chris shot with jp more in your line is now open

Chris: there this is hard ic again said one more question on worring you mention peak sales estimates of one billion and i'was just wondering how do you kind of see those sales ramping so is there like a bolis of patients that can lead to a quick launch or on other end is there some more kind of groundwork to ask be laid for that for the launch

Pablo Legorreta: Thank you. Thank you for the question. And I'll ask Marshall maybe to add or Chris maybe Chris is the better one to add a little bit to what I'm going to say. But I think there's two key things that are happening with our business. One is the massive capital needs that innovation requires in life sciences. You know, both from the biotech ecosystem, eight thousand or so biotech companies out there. And the large farmers, which you know in some of our materials in the past.

Marshall: yes thank you marshall you should take you this question

Speaker Change: yeah thanks for the follow questionussian on n ly really happy to see the approval this week and the strong label behind it and know we're excited to see to servey launch the products so specifically with their question to about the commercial potential and do we talked about a billion dollars in peak failes you know there are you know there are multiple there are kind of multiple ways in multiple drivers that play that i think you asked about one about ramp like we mentioned you know there one of the attractive things that we thought about this opportunity was that wasn't just about incident patient who are coming on therether there are a lotof preval ent patients

Pablo Legorreta: We actually have quantified this at about 200 plus billion dollars invested per year in R&D in life sciences. And you know, so it's a massive figure growing. There's another hundred billion invested by academic institutions, but you know that's not something we fund. That's funded by government. But when you look at the investment by the corporate side, it's this 200 billion that that is required every year. When we look at the, you know, decade that is in front of us, we're talking about about a three billion dollar, three trillion dollar, you know, capital need to fund the ecosystem.

Chris: you know, who are existing out there, who are following up with WATCH and WAIT with their doctor, who we believe could come on to therapy.

Marshall: in the relatively near term. So, you know, we do think that's an exciting opportunity, but, you know, like we always do when we look at products, we consider lots of different scenarios. So like we mentioned, you know, there are, you know, certainly there's the core glioma indication. There are some, you know, some indications around that, some patient populations around that, that are also attractive. And then we talked about duration of therapy as another important driver here that has some upside, that has upside as well, potentially. So, you know, there's lots of ways. I think that Bornego is gonna help patients, but also be an attractive commercial opportunity, and we're looking forward to the launch.

Chris Tight: So that's one thing. The second thing that is definitely an important driver is the acceptance today among biotech companies of using royalties to fund late stage clinical trials. What we call synthetic royalties that has developed in a very attractive way. There's so many companies now that know that this is a very attractive way to fund their business and that reach out to us. Or we go out and visit them get to know them and have discussions with them about funding their business.

Chris Tight: And then there's also, you know, now real acceptance from the side of the big Varma to drive the, you know, this growth. And you've seen us do transactions with Merck for the schizophrenia program recently with Peva, another schizophrenia drug and other other transactions. But, you know, that's my answer to your question. Chris, do you want to add anything to that? Sir, thank you, Pablo, and thanks for the question, Chris. The deal pipeline continues to be very robust.

Marshall: Thank you again.

Pablo: i show no further questions at this time i would now like to turn the call back over to pablo for closing remarks

Chris Hite: Thanks.

Pablo Legorreta: So, Chris, do you want to take this question? I think in terms of getting our lenders and the rating agencies to give us, you know, better terms, actually, the lenders better terms than the rating agencies to give us, you know, better rating. I think, you know, the business we have is so strong, you know, like when you look at Royalty Pharma and compare us to many other players in life sciences, companies in life sciences, we have a really incredible portfolio with, I think, 15 or 16 blockbuster products, you know, that is like, when you look at the big pharma, they typically have more like 10, we have 15 or 17, like 1.5 to 1.7 times more blockbusters in our portfolio than the big pharma.

Pablo Legorreta: And then we have super, super strong diversification, like a really well diversified portfolio, better than even some of the big pharma that may be more reliant on one or two products for the vast majority of their revenues. So I think, you know, in terms of our credit rating and our cost of debt capital, it's pretty efficient. It's very, very attractive. But Chris, I'll pass it on to you for the other parts of the question. I think you...

Pablo: Sir, thank you, operator, and thank everyone on the call for your continued interest in Royalty Pharma. I'll just close by saying that the team at Royalty Pharma and myself are incredibly excited.

Chris Hite: I think you covered it, Pablo. I think that covers the answer there.

Speaker Change: about many things going on with our business. One is the very strong performance. You saw us increase our guidance just now in the middle of the year by a meaningful amount, over $100, $175 million on the $2.6, $2.7 billion base.

Chris Tight: The timing of new acquisitions, as always, as you know, difficult to predict and can be highly variable, but we have shown over our history that we can deploy a lot of capital, particularly in a multi-year period, and that's really the way we encourage you to think about it. And just as a reminder, we've deployed about 10.4 billion in since 2020 and announced transactions of about 14.7 billion since 2020. And the value of this transaction has increased every year.

Operator: And our next question comes from Chris Schott with J.P. Morgan. Your line is now open.

Operator: Hey guys, this is Hardik again. You mentioned peak sales estimates of $1 billion, and I was just wondering how you kind of see those sales ramping up? So is there like a bolus of patients that can lead to a very quick launch, or on the other end, is there some more kind of groundwork that has to be laid for the launch?

Marshall Urist: Yes, thank you. Marshall, you should take this question. Absolutely. Yeah, thanks.

Marshall Urist: Absolutely. Yeah, thanks for the follow-up question on Bornego. We're obviously really happy to see the approval this week and the strong label behind it, and we're excited to see Servier launch the product. So, specifically with your question about the commercial potential, and we talked about a billion dollars in peak sales, there are kind of multiple ways and multiple drivers that play into that.

Marshall Urist: I think you asked about one, about RAMP, like we mentioned. One of the attractive things that we thought about this opportunity was that it wasn't just about incident patients who are coming on therapy. There are a lot of patients who are existing out there, who are following up with watch and wait with their doctor, who we believe could come on to therapy in the relatively near term. So, you know, we do think that's an exciting opportunity.

Marshall Urist: But, you know, like we always do when we look at products, we consider lots of different scenarios. So, as we mentioned, there are, you know, certainly there's the core glioma indication. There are some, you know, some indications around that, some patient populations around that, that are also attractive. And then we talked about duration of therapy as another important driver here that has some upside, that could have upside as well, potentially. So, you know, there are lots of ways I think that Bornego is going to help patients but also be an attractive commercial opportunity. And we're looking forward to the launch.

Operator: I have no further questions at this time. I would now like to turn the call back over to Pablo for closing remarks.

Speaker Change: We're also super excited about the opportunities we're seeing in very high quality assets and our ability to continue to dominate this market.

Pablo Legorreta: Sir, thank you, operator, and thank everyone on the call for your continued interest in Royalty Pharma. I'll just close by saying that the team at Royalty Pharma and myself are incredibly excited about many things going on with our business. One is the very strong performance.

Pablo Legorreta: You saw us increase our guidance just now in the middle of the year by a meaningful amount, over $100-$175 million on the $2.6-$2.7 billion base. We're also super excited about the opportunities we're seeing in very high-quality assets and our ability to continue to dominate this market. We are very excited about the very strong relationships we're building with management teams in biotech and pharma and our continued ability to partner with them and deploy capital.

Pablo: I'm very excited about the very strong relationships we're building with management teams in biotech and pharma and our continued ability to partner with them and deploy capital.

Pablo Legorreta: And I believe that when you look at the price today of our stocks, there's significant upside because it really only reflects the value of our portfolio. And this business has really two components, the portfolio that we own, and then the ability of this team that, you know, helps me run the business and their, you know, very strong qualifications, their experience, their network, the connections they have throughout the industry, and that come to work every day at Royalty Pharma to deliver for you, our investors, and make this a great business and a successful business over the very long term. So I'll finish with that and just say that if you have any other questions, please feel free to reach out to George Grofik. Thank you, everyone.

Chris Tight: And if you think about our deal funnel, we've seen a significant increase in opportunities that's witnessed by our in-depth reviews in 2023 up over 130% since 2019. So we're super excited about the quality of the deals that we've done and certainly the one in the opportunity set that we're looking at currently. Great, thank you.

Pablo: and believe that when you look at the price today of our stock

Pablo Legorreta: There are significant upsides because it really only reflects the value of our portfolio. And this business has really two components, the portfolio that we own and then the ability of this team that, you know, helps me run the business and their, you know, very strong qualifications, their experience, their network, the connections they have throughout the industry. And that come to work every day at Royalty Pharma to deliver for you, our investors, and make this a great business and a successful business over the very long term. So, I'll finish with that and just say that if you have any other questions, please feel free to reach out to George Grofik. Thank you, everyone.

Pablo: There are significant upsides because it really only reflects the value of our portfolio and this business has really two components the portfolio

Pablo: that we own and then the ability of this team that you know

Speaker Change: hels me run the business

Terry Coyne: And our next question comes from Chris Schott with JP Morgan. Your line is now open. Hi, this is Hardik Perikin for Chris Schott. Just wanted to ask about you issued about $1.5 billion of debt in June. And you just said you were willing to kind of raise that leverage to about 4x. How do you think about raising additional debt going forward as you invest beyond your your internal cashflow? And then, you know, if this deal kind of flow continues to exceed your internal targets is the 4x. That's actually reasonable probability.

Speaker Change: umand there

Speaker Change: You know, very strong qualifications, their experience, the network, the connections they have throughout the industry, and that come to work every day at Royalty Pharma to deliver for you, our investors.

Speaker Change: and make this a great business and successful business over the very long term. So I'll finish with that and just say that if you have any other questions, please feel free to reach out to George Grofik. Thank you everyone.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: this concludes today's conference call thank you for participating you may now disconnect

Terry Coyne: Right, thank you for the question. Perry, one of you think this question please. Yeah, so just a reminder that we're fortunate that the business generates pretty significant cashflow every quarter. And so that's going to be the first source of, you know, how we're going to fund new investments. But, you know, over time, we have used leverage when the right opportunities come along. And when I put out that when I mentioned that 4x number, that's that's for, you know, if there was a large acquisition that came along.

Terry Coyne: That we needed to fund and we were really excited about them. We would take it up to 4x. But that's certainly not the level that we plan to operate at, you know, over the last couple of years, we've been in the lowest reach or even lower than that. So, you know, I think that that's probably more of a normal range. But, you know, from time to time, we will take it higher if the right opportunities come along. And, by the way, that higher level of leverage is totally consistent with our investment grade rating, which is really, really important to us.

Terry Coyne: All right, thank you.

Marshall Urist: And our next question comes from parents for land with Morgan Stanley. Your line is open. Great. Thanks for taking the questions, maybe two for me. Slide 18 was very helpful in terms of framing the future opportunity for some of the pipeline assets here. LP Little A, you know, represents about a third of the revenue opportunity based on your numbers.

Terry Coyne: So maybe just, you know, question from Marshall, you could remind us in your confidence level in seeing positive phase three data from Novartis next year. And then the second question relates to the CF franchise. Vance Caffer has a pedophadate in January now. So any update on timing of when we might have visibility on how the, the royalty situation might play out here with vertex. Thank you. Marshall, the first question has Terence suggested is for you in the second one for Terry.

Terry Coyne: Yeah, good morning. Thanks, Terence. Good question. So on L.T. Little A, just as a reminder for, just as a reminder, a quick reminder for everyone. This is an emerging new class of party vascular drugs. We actually have two opportunities in this space from the two leading programs, one from Novartis, Novartis's program in Pelocarson, where we expect data, outcomes data sometime next year, and then Hamgen's program, Opaceran, which we have, which we expect data the following year in 2026.

Terry Coyne: And it is an exciting opportunity that we eagerly await the data. I point to a few things that we see as attractive. I think first of all, both drugs provide pretty profound reductions in L.P. Little A. So the data to date on the biomarker is really compelling. Second, there's a lot of clinical epidemiological genetic data that links L.P. Little A to risk of cardiovascular disease and having cardiovascular events. Finally, you know, if you look at what's in L.P. Little A, it does have a lot of parallels to L.D.L., which is obviously a highly validated target.

Terry Coyne: And so you put all of that together, and I think we're really excited about seeing that data over the next couple of years. But I think an important thing to just keep in mind, you take a step back about our pipeline chart, is certainly L.P.A, is L.P. Little A is exciting and could be a meaningful contributor for us. But as we continue to build the portfolio, we will continue to add other really exciting pipeline opportunities like that, like you've seen us do this year with Frexalema, for example. And that's just part of our business that will continue to add and continue to build to the portfolio with really exciting opportunities.

Marshall Urist: And then, Terence, on your question on the Vanza triple, there's no update from our side on timing there, but just as a reminder for everyone, we provided in the past a sensitivity to just walk through the various different sort of scenarios that could play out here. I, as you all know, were paid on all three components of tri-cafta. There is a new debate with the new Vanza Caster triple on whether we're over royalties on the deuterated Iva Caster component of that triple.

Marshall Urist: We believe we are, but that is an area of debate. And we feel very strongly about our position there. But what we've also said is that if we are wrong and the royalty, we are not out of royalty on that portion, which by the way, would take our royalty to 4% on the new triple versus 8% if we are out of royalty. But if we're wrong and there's significant share conversion, 50 to 75% conversion to the new triple over time, that the impact on our, on our top line would be a couple hundred million dollars.

Marshall Urist: And so, you know, from that perspective, when you think about the growth of the business and all of the assets that we're adding, and the growth that's embedded from the new assets, I mean, if you look at our pipeline, today we highlighted that over $1 billion of potential new royalties there. So, you know, this is something, you know, we feel good about our position. But, you know, it's a couple hundred million dollars either way.

Michael DiFiore: And it's not going to be particularly material over the long term for royalty farms. And the next question comes from Michael DiFiore with Evercore, your line is now open.

Marshall Urist: Hi guys, thanks so much for taking my question and congrats on the continued progress of this quarter. Two questions from me, one regarding the CD-19 development for auto-immune indications, continues to become more widespread, wondering if you're seeing any collaboration opportunities in that space, especially since most companies seem to be starting their development on equal footing here. And separately, with regard to your portfolio receipt guidance on slide 23, it says that it reflects a range of scenarios, launch of pro-mactogenetics and biosomartisabry.

Marshall Urist: So to the extent that you can, could you elaborate further on this, especially if you're current thinking about the competitiveness of biosomartisabry has changed? Thank you. So Mark, so one of you take the question on CD-19 and then Terry will take the question on the guidance and the contributors to the growth.

Marshall Urist: Absolutely, like, good morning. So on CD-19, we'd agree with you. You know, we've been watching closely all of the really exciting, exciting clinical data that's been emerging there between the self- therapies and bi-specific. And certainly something that, you know, we are continuing to follow and understand kind of how the various players and the various programs are going to play out. And, you know, we will certainly look for opportunities that make sense for us in that space because the data is certainly compelling.

Marshall Urist: But we're going to stick to the approach that we've had in terms of building the portfolio, which is, you know, being educated and smart about emerging science, but certainly not lost on all the exciting innovation that's happening there. And then, Mike, on your question on the guidance, you know, we were really excited to raise the guidance. And I think, you know, it just speaks to the strong momentum of our portfolio. But, you know, as like all businesses with as many products as we have, there are some that face various headwinds.

Marshall Urist: So the two that we called out were from active anti-sabry. We don't have, we don't have, you know, further visibility on, you know, when potential generics from after or biosomal or case average could launch. And so that's why we, you know, wanted to, wanted to make sure that we highlighted. And we basically go, you know, in those situations, we have the same information that you do. So we're going off of what the company says that.

Marshall Urist: And so we highlighted that, you know, we did, we do look at sensitivities around those potential biosomal or potential launches of competitive products. In the case of face average, I think one of the things that we've highlighted in the past is that this is a unique product. And we think that it's going to be more durable over time. And just because of some of the unique aspects of that product, we've seen it's been holding in well outside of outside of the US despite five biosomal or competition. And, you know, I think we, you know, but there, it does seem like it's coming in the US. And so, you know, we'll be, we'll be watching that closely as well.

Terry Coyne: All right, very helpful.

Michael Netto Kovic: Thank you. And the next question comes from Michael Netto Kovic with TD Cohen. Your line is open. Thank you. Thanks for the question. My question is on KarexT.

Marshall Urist: I'm curious if you have a sense whether we've passed the point at which we might expect the FDA to ask for an advisory committee. And when it comes to competition, particularly from other muscarinics, do you have a base case assumption around what we should expect long-term and more imminently from the readout on cerebellus compound?

Marshall Urist: Now I have any. Thank you. Sure, Marshall, this is a question for you. Absolutely.

Marshall Urist: Good morning. Thanks for the question. So I think I'm your first question on KarexT and some of the specifics around the adcom. I think that's certainly a better question for Bristol. And second, on competition, I think what's happened with KarexT is exactly the kind of opportunities that we hope to create when we invest in really important new medicines like KarexT. And we're broadly thinking about your question about competition, about the competitive landscape in this class, where this is a first in class of an exciting of a medicine with really profound impact on patients that is now in the hands of Bristol, which has the company to really maximize its impact on patients and create the most attractive commercial opportunity possible.

Marshall Urist: So certainly when we made this investment, we assumed there would be others in this in this class just given the what was visible in the pipeline and the importance of this mechanism. But I think we are really excited to be part of this part of this product, a really great additional portfolio. And we're excited to see what's going to happen with it commercially in the launch in Bristol also in terms of their public statements. You know, it seems to be sure that is the other.

DJO: And our next question comes from DJO with UBS. Your line is open. Hey, good morning. This is the on behalf of Ash from EBS. Thanks for taking our question.

Chris Tight: As you want to ask, have you considered maybe splitting your fund into two different investment entities? Clearly, you are rich like a large scale and have like a line share of the reality investment market. So if you look into the active like as a management space, a lot of like a large scale fund have like a right to capacity constraint and split into like two like like hero and capital groups. So like for instance, if you were dividing up your portfolio into like commercial only and critical only jobs, do you think like you can get your creditors provide your better terms perhaps? Thanks.

Chris Tight: So Chris, do you want to take this question? I think in terms of getting our lenders and the rating agencies to give us, you know, better Terence, actually the Lenders, better Terence and the Rating Agences to give us, you know, a better rating. I think, you know, the business we have is so strong, you know, like, when you look at Royalty Pharma and compare us to many other players and life sciences, companies and life sciences, we have a really incredible portfolio with, I think, 15 or 16 blockbuster products, you know, that is, like, when you look at the big farmers, they typically have more like 10, we have 15 or 17, like 1.5 to 1.7 times more bugbusters in our portfolio than the big farmers.

Chris Tight: And then we have super, super strong diversification, like really well diversified portfolio, you know, better than even some of the big farmers that may be more reliant on, you know, one or two products for the vast majority of their, for more than half of the revenues. So, I think, you know, in terms of our credit rating and our cost of debt capital, it's pretty efficient, it's very, very attractive, but Chris, I'll pass it on to you for the other parts of the question. I think you've covered a Pablo, I think that that covers the answer there.

Chris Tight: Thank you.

Hardik Parikh: And our next question comes from Chris, shot with JP Morgan, your line is now open. Hey guys, this is Hardik again, said one more question on worrying, you know, you mentioned peak sales estimates of 1 billion, and I was just wondering how do you kind of see those sales ramping? So, is there like a boldest of patience that can lead to a very quick launch, or on the other end, is there some more kind of groundwork to have to be laid for the launch?

Marshall Urist: Yes, thank you. Marshall, you should take this question. Absolutely. Yeah, thanks for the follow-up question on Borenigo. We're obviously really happy to see the approval this week and the strong label behind it. And we're excited to see just you survey a launch the product. So specifically with your question to about the commercial potential, and we talked about a billion dollars in peak sales, you know, there are, you know, there are multiple, there are kind of multiple ways and multiple drivers that play into that.

Marshall Urist: I think you asked about one about ramp, like we mentioned, you know, there, one of the attractive things that we thought about this opportunity was that it wasn't just about incident patients who are coming on therapies, there are a lot of prevalent patients, you know, who are existing out there who are following up with watch and wait with their doctor who we believe could could come on to therapy in the relatively near term. So, you know, we do think that's an exciting opportunity, but, you know, like we always do when we look at products, we consider lots of different scenarios.

Marshall Urist: So, like we mentioned, you know, there are, you know, certainly there's the core glioma indication, there are some, you know, some indications around that some patient populations around that that are also attractive. And then we talked about duration of therapy as another, as another important driver here that, that that has some upside, that has upside as well, potentially. So, you know, there are, there's lots of ways, I think if we're in for any goes going to help patients, but also be an attractive commercial opportunity and we're looking forward to the launch.

Operator: Thank you again.

Operator: I show no further questions at this time.

Pablo Legorreta: I would now like to turn the call back over to Pablo for closing remarks.

Pablo Legorreta: Thank you, operator. And thank everyone on the call for your continued interest in Royal Trauma. I'll just close by saying that the team at Royal Trauma and one is a very strong performance. You saw us increase our guidance just now in the middle of the year by a meaningful amount over $175 million on the 2.6, 2.7 billion dollar base. We're also super excited about the opportunities we're seeing in very high quality assets and our ability to continue to dominate this market.

Pablo Legorreta: Very excited about the very strong relationships we're building with management teams in the biotech and pharma and our continued ability to partner with them in deploy capital and believe that when you look at the price today of our stock there's significant upside because it really only reflects the value of our portfolio and this business has really two components, the portfolio that we own and then the ability of this team that helps me run the business and their very strong qualifications, their experience, their network, the connections they have throughout the industry and that come to work every day at Royal Trauma to deliver for you our investors and make this a great business and successful business over the very long term.

George Grofik: So I'll finish with that and just say that if you have any other questions please feel free to reach out to George Grofick. Thank you everyone.

Operator: This concludes today's conference call.

Operator: Thank you for participating. You may now disconnect.