Q3 2024 Royalty Pharma plc Earnings Call
The End
Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to the royalty farmer, third quarter earnings conference call. I will now introduce you to the call over to George Grofik, Senior Vice President, head of Investor Relations and Communications. Please go ahead, sir.
George Grofik: Good morning, you're good afternoon to everyone on the call. Thank you for joining us to review Rosie Farmer's third quarter of 2024 results. You can find the press release for the earnings results in flying through this call on the investors page of our website at www.royalteformat.com.
George Grofik: Moving to slide three, I would like to remind you that information presented in this call contains forward-looking statements that involve known in end-owned risks. Uncertainties and other factors in a cost-factual result to differ materialy from these statements.
Speaker Change: I refer you to our most recent 10Q on file with the SEC for 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 statement.
Speaker Change: Non-GAAP equity measures will be used to help you understand our financial results. The reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website.
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.
George Grofik: Pablo will discuss key highlights after which Marshall and Chris will provide portfolio updates focusing on progress with synthetic royalty transactions. Terry will then review the financials and following concluding remarks from Pablo we will hold a Q&A session.
George Grofik: And with that, I'd like to turn the call over to Pablo.
Pablo Legorreta: Thank you, George, and welcome to everyone on the call. I am delighted to report another excellent quarter of execution against our strategy as the leading funder of innovation in life sciences.
Speaker Change: Slide 6 summarizes our continued business momentum in the third quarter.
Speaker Change: In terms of the financials, we delivered 15% growth in portfolio receipts, our top line, and also in royalty receipts.
Speaker Change: As a reminder, royalty receipts represent a recurring cash inflows and are driven by our high-quality portfolio of more than 35 commercial products.
Speaker Change: According to Capital Allocation, we continue to be very active in acquiring new royalties and our pipeline remains robust.
Speaker Change: On a year-to-date basis, our capital deployment now stands at approximately $2.6 billion. In addition, as part of our balanced capital allocation strategy, and given our strong fundamental outlook, we repurchased another $95 million of our shares in the quarter.
Speaker Change: Looking at our portfolio.
Speaker Change: We have recently acquired royalties on three novel therapies.
Speaker Change: Two of these came through synthetic royalty transactions, an important opportunity which Marshall and Chris will expand on. We're also delighted to see our portfolio progress nicely.
Speaker Change: with the FDA approvals of Covenfi and Schizophrenia and Guaranigo and Glioma and Trimphalia and Ulcerative Colitis.
Speaker Change: We expect each of this to be important new growth drivers for the Royal Department.
Speaker Change: Lastly, I am happy to report we're raising our full year 2024 guidance following our strong performance in the first nine months of the year, driven by the momentum of our diversified portfolio.
Speaker Change: We now expect portfolio receipts to be between $2.75 billion and $2.8 billion. This update is based on expected growth in royalty receipts of around 11-13%, which compares with our previous guidance of 9-12%.
Speaker Change: Consistent with our standard practice, this guidance is based on our current portfolio and does not include the benefit of future transactions.
Speaker Change: As I noted earlier, we delivered 50% growth in royalty receipts in the third quarter, which brings our year-to-date growth to 14%.
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.
Speaker Change: With that, I will hand it over to Marshall.
Marshall Urist: Thanks, Pablo. I want to focus today on three exciting recent royalty transactions.
Marshall Urist: Slide 9 summarizes our transaction with Syndex announced this week to acquire a synthetic royalty on Nick Timbo in the U.S.
Speaker Change: Ekimbo is the first FDA-approved anti-CSF1R antibody for chronic graft-versus-host disease, or chronic GVHD, and launch is expected no later than early in the first quarter of 2025.
Speaker Change: Insight is already the market leader in chronic GVHD with Jackify and will co-commercialize the therapy with Syndex.
Speaker Change: We paid $350 million up front in return for a 13.8% royalty on U.S. net sales of Nictimbo and we expect the royalty will have a duration extending to the late 2030s to project an IRR in the low double digits.
Speaker Change: Turning to slide 10.
Speaker Change: For those less familiar, chronic GVHT.
Speaker Change: is a serious immune-driven multi-organ disorder that is estimated to develop in about 42% of stem cell transplant recipients.
Speaker Change: Importantly, it can cause severe symptoms for patients and even mortality. With nearly 50% of chronic GVHD patients requiring at least 3 lines of therapy, there is clear unmet need for additional treatment options like Nictimvo, which has a differentiated mechanism of action.
Speaker Change: and demonstrated impressive efficacy and encouraging safety in Phase 3.
Speaker Change: Based on the unmet need and compelling clinical results in 3rd line chronic GVHD, the FDA approved Nictembo in August and we see an attractive commercial opportunity based on the current label.
Speaker Change: We also note the most recent new medicine for chronic GVHD, Sanofi's Reziroc, which launched in 2021, is annualizing at greater than $500 million in sales.
Speaker Change: Slide 11 summarizes a couple of additional smaller recent transactions totaling around $300 million in announced value.
Speaker Change: Both therapies address non-MET and non-MET patient needs, have a compelling differentiated profile, and the consensus projects each to be a blockbuster generating attractive returns for royalty formula.
Speaker Change: The Synthetic Royalty on Europipath marks our second transaction with Ascendis. The product is FDA approved for hypothyroidism and we look forward to launch next year.
Speaker Change: In the second transaction shown here, we acquired a pre-existing royalty from Brain Biotech AG on a promising oral therapy ducrexivant for hereditary angioedema in phase 3 development by Farberis.
Speaker Change: Across the two transactions, the combined peak royalty potential based on consensus would be greater than $100 million annually to our royalty receipts, providing additional momentum to the already attractive long-term growth outlook for our portfolio. And with that, I'll hand it over to Chris.
Chris Hite: Thanks, Marshall. Having just heard about two recent examples of synthetic royalties, I wanted to drill down a little further on this opportunity.
Chris Hite: Slide 13 describes why we believe synthetic royalties are such an attractive funding modality.
Chris Hite: We pioneered this innovative solution in which we create new royalties as a non-dilutive funding solution for our partners.
Chris Hite: There are many reasons why this approach has benefits for our partners.
Chris Hite: whether they are small biotechs or big pharma companies.
Chris Hite: Not only does this allow us to tailor a solution to meet our partner's needs,
Chris Hite: It provides independent validation of the asset and allows the partner to retain operational control.
Chris Hite: Furthermore, it aligns our long-term interests with those of our partners.
Chris Hite: And lastly, we can add value to our proprietary analytics like claims analysis or real-world evidence data.
Chris Hite: something that we're really investing in and feel will be very important in the future.
Chris Hite: It's a true win-win approach, and we believe synthetics will be increasingly utilized in the coming years.
Chris Hite: Slide 14 shows that. Historically, biopharma funding has been dominated by equity, licensing deals, and debt.
Chris Hite: Synthetic royalties has been a small part, just 3% of the overall funding picture over the last five years.
Chris Hite: From our ongoing partnership discussions, we now see the synthetic royalties are being routinely discussed at the board level and C-suites as an important and growing funding modality.
Chris Hite: Our expectation is that synthetics will continue to be a fast-growing business opportunity in the coming years.
Chris Hite: Consistent with this growing opportunity, we announced synthetic royalty transactions of $775 million in 2023, which represented a doubling since the year of our IPO.
Chris Hite: In 2024, we have already achieved another record year with the value of synthetic transactions at $800 million.
Chris Hite: With the advantages I described and the huge funding required for life sciences innovation, we see tremendous scope for further growth in the synthetic royalty funding.
Speaker Change: With that, I'd like to hand it over to Terry.
Terry Coyne: Thanks, Chris. Let's move to slide 16.
Terry Coyne: This slide shows how our efficient business model generates substantial cash flow to be reinvested.
Speaker Change: As you heard from Pablo, royalty receipts grew by 15% in the third quarter, reflecting the strength of our diversified portfolio.
Terry Coyne: The key drivers of growth were the strong performance of Trilogy, Ebrizdi, the Cystic Fibrosis Franchise, and Trampia.
Terry Coyne: There was minimal income from milestones and other contractual receipts, so portfolio receipts, our top line, also grew by 15%, to $735 million.
Terry Coyne: As we move down the column, operating professional costs equated to 7.5% of portfolio receipts.
Terry Coyne: Net interest paid of $62 million reflected the semi-annual timing of our interest payment schedule, with payments in the first and third quarters.
Terry Coyne: This does not reflect interest on the $1.5 billion incremental debt that we raised this past summer.
Terry Coyne: with the first interest payments for those new tranches expected in the first quarter of 2025.
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
Chris Hite: We look to portfolio cash flow, which is adjusted EBITDA plus net interest paid.
Terry Coyne: This amounted to $617 million in the quarter, equivalent to a margin of around 84%.
Terry Coyne: This high level of cash conversion once again underscores the efficiency of our business model.
Terry Coyne: Capital's deployment in the third quarter was $1.2 billion, which in addition to the transaction we just announced with Syndex, takes our total for the year to approximately $2.6 billion.
Terry Coyne: Slide 17 shows that we continue to maintain significant financial capacity for future royalty acquisitions.
Terry Coyne: 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 third quarter, we had cash in equivalence of $950 million.
Terry Coyne: In terms of our borrowing position, we have investment-grade debt outstanding of $7.8 billion. As a reminder, we have a weighted average cost of debt of 3.1% and a weighted average maturity around 12 years, which closely aligns with the duration of our royalty portfolio.
Terry Coyne: Our leverage now stands at around three times total debt to EBITDA, to adjusted EBITDA.
Terry Coyne: We also have undrawn financial capacity from our $1.8 billion revolver.
Speaker Change: As Pablo noted, we continue to take advantage of the fundamental disconnect in our share price and repurchase $95 million of our shares in the quarter, taking our total spend on buybacks to $180 million in the first nine months of 2024.
Terry Coyne: Slide 18 is a reminder of our capital allocation strategy and how we expect this to drive shareholder value creation.
Terry Coyne: 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.
Terry Coyne: As you can see on this slide, we expect to deploy the majority of our capital on value-enhancing royalty acquisitions.
Terry Coyne: with a target of $10 to $12 billion invested over the period.
Terry Coyne: As of today, we are on track to meet or exceed this target, having announced transactions of $10 billion with actual capital deployment of $7.2 billion in less than three years.
Terry Coyne: The ADA balances primary focus on royalty acquisitions with returning capital to shareholders through a combination of dividends and share repurchases.
Terry Coyne: regarding the latter.
Terry Coyne: The board authorized a multi-year share buyback program of up to a billion dollars in March 2023, of which we have spent approximately $484 million through the third quarter.
Terry Coyne: while investing in royalties is our number one priority.
Terry Coyne: We use our share buyback program tactically for repurchases when we see a disconnect between our intrinsic value and the stock price.
Terry Coyne: By executing against this capital allocation strategy, we are confident we will continue to deliver our mission of accelerating innovation in life sciences, while generating strong returns and creating significant shareholder value.
Terry Coyne: Slide 19 provides our raised for year 2024 financial guide.
Terry Coyne: We now expect portfolio receipts to be in the range of $2.75 billion to $2.8 billion.
Terry Coyne: Let me walk through our assumptions.
Terry Coyne: First, within our overall top-line guidance, we expect to deliver in royalty receipts, growth in royalty receipts, around 11% to 13%.
Terry Coyne: The increase from our previous guidance of 9% to 12% reflects the strong momentum of our diversified portfolio.
Terry Coyne: Second, when we move to portfolio receipts, we face a high base of comparison as a result of the $525 million of accelerated bioeven 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.
Terry Coyne: Lastly, our guidance assumes a negligible foreign exchange impact.
Terry Coyne: Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefits of any future royalty acquisitions.
Terry Coyne: Hearing the operating costs payments for operating professional costs are now expected to be approximately eight and a half percent of portfolio receipts in 2024
Terry Coyne: Interest paid for full year 2024 is expected to be around $160 million, with a de minimis amount to be paid in Q4.
Terry Coyne: This does not take into account any interest received on our cash balance, which was $37 million in the first nine months of the year.
Terry Coyne: It also does not reflect interest payments on the $1.5 billion of notes issued in June of 2024 for which the first payment will be paid in the first quarter of 2025.
Terry Coyne: My final slide drills down further on our expected portfolio receipts and loyalty receipts performance in 2024.
Terry Coyne: Starting with the left-hand side, you can see the high base of comparison due to the approximately $600 million of milestones and other contractual receipts we received in 2023, which was primarily due to the accelerated biohaven-related payments.
Terry Coyne: However, if we start from loyalty receipts, which we consider the recurring cash inflows of our business.
Terry Coyne: You see a base of $2.45 billion in 2023.
Terry Coyne: Importantly, we expect strong underlying loyalty receipts growth of between 11% to 30%.
Terry Coyne: driven primarily by the performance of our diversified portfolio.
Terry Coyne: To close, we delivered another strong quarter of financial performance, and we are pleased to be able to raise guidance based on the excellent momentum of our royalty portfolio.
Speaker Change: With that, I'd like to hand the call back to Pablo.
Pablo Legorreta: Thanks, Terry. Let me begin by my concluding remarks by saying how pleased I am with our performance in the first nine months of 2024. We've delivered double-digit growth in royalty receipts.
Terry Coyne: We raised our guidance twice.
Terry Coyne: We significantly strengthened our portfolio, and we maintained our leadership position in the fast-growing royalty market.
Terry Coyne: My final slide highlights that we have announced transactions worth up to $10.1 billion since the start of 2022, with actual capital deployed of $7.0 billion today.
Terry Coyne: What you see here, too, is a healthy balance between approved and development-stage therapies.
Terry Coyne: This extraordinary level of activity highlights the power of our business model as well as the powerful secular tailwinds in our industry.
Terry Coyne: It also puts us on track to meet or exceed our five-year capital employment target of ten to twelve billion dollars.
Terry Coyne: Given this incredible record of delivery against our strategy, I have never been more confident that Royalty Pharma is well-positioned to deliver attractive compounding growth over the remainder of the decade and beyond. With that, we will be happy to take your questions.
Terry Coyne: We will now open up the call to questions. Operator, please take the first question.
Speaker Change: Thank you. If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again. Our first question comes from Chris Scott with J.P. Morgan. Your line is open.
Terry Coyne: Hi, this is Hardik Karik and for Chris Schott. Good morning and congratulations on the results. Just wondering on...
Terry Coyne: How does that compare to your base case scenario?
Terry Coyne: Marshall, this question is for you.
Marshall Urist: Great. Good morning. Thank you for the question. So we were really happy to see the COVENPA approval, and we thought the label looked great and are really excited to see the launch unfold in the quarters to come. You know, I think if you take a step back about, you know, what...
Terry Coyne: Covempi says about how we approach building our portfolio, I think it's a great example of identifying an area where there's
Terry Coyne: lots of unmet patient need, having a product that has differentiated, very differentiated efficacy, and as you point out, safety and tolerability is really going to be able to add value and change the market and a patient population that's badly in need of innovation. So, you know, really exciting to have this, to have this as part of the portfolio. You know, as we've mentioned before, also
Terry Coyne: You know, the fact that now it's in Bristol's hands and they'll be able to really maximize its benefit for patients and its commercial value, you know, is exactly the kind of things that we look for and hope to happen and hope to happen with our products. So, to answer your question, we're really happy with the label and excited about it as a new part of our portfolio.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Jeff Meacham with Citi. Your line is open.
Jeff Meacham: Hey guys, good morning. Thanks so much for the question. I just had a couple. Terry, when I look at the growth in the CF business, you know, it's moderated a bit over the past few years and that could continue going forward or perhaps even get worse. So the question is, you know, does this change the urgency that you guys have for, you know, for newer deals or or how you look at the magnitude of newer investments? I wasn't sure if
Jeff Meacham: if the CF contribution had any impact on your thinking there.
Speaker Change: And second question for Marshall, I guess. When you look at some of the more rapid, high-impact launches...
Speaker Change: past couple years, like I'm thinking about COVID or GLP-1s, you know, the commercial piece for those, you know, categories came together pretty quickly.
Speaker Change: Has your process or sort of your filter evolved to capture more of these types of opportunities that could inflect faster or is it, you know, has it changed at all? Thank you.
Speaker Change: So Jeff, on your CF question,
Speaker Change: CF has been, obviously, a great contributor for Royalty Farm and been a consistent outperformer versus sort of expectations over the last couple years. Certainly, there's sort of a, you know, the law of big numbers at play here.
Speaker Change: But we still think it has nice growth ahead of it. So I think we still see, you know...
Speaker Change: still see it as a nice contributor for Royalty Farm a longer term.
Speaker Change: And as far as urgency to invest away, I think, you know, as assets mature and things roll off or, you know, that's just sort of the natural cycle of any pharmaceutical business.
Speaker Change: and I think that what we've shown is the ability to sort of have a lot of resilience
Speaker Change: in the face of any of those typical, you know, headwinds that business would face.
Speaker Change: and I think that it's been by doing the same thing we've been doing.
Speaker Change: which is, you know, this consistent approach of identifying great assets.
Speaker Change: Deploying capital consistently and, you know, focusing on the highest quality assets that will drive the next wave of growth. I think that we've added things like that to our portfolio over the last couple of years with RISD and Trimfaya.
Speaker Change: Trelogy, Covency. So, you know, I think that we'll keep doing more of the same. We feel really good about the opportunity and feel really good about our ability to continue to grow.
Speaker Change: Jeff, I'll maybe just add one other perspective here.
Pablo Legorreta: It's Pablo, but, you know, I will ask you the question, how many businesses, you know, in pharma...
Pablo Legorreta: life sciences, with the kind of diversification we have and, you know, really...
Pablo Legorreta: robust portfolio, that have an ability to actually...
Speaker Change: deliver double-digit growth consistently over a long period of time. And obviously, you have situations, you know, that we all know about.
Speaker Change: some, you know, lily or novel that have benefited from obesity drugs that grew.
Speaker Change: you know significantly over a period of time but but many of those companies always face you know
Speaker Change: very significant cliffs on their products. And in our case, you know, we have more than, you know, actually close to three decades now of consistent double-digit growth in the top line, and that's really unique.
Speaker Change: And then, Jeff, good morning. On your second question on ramp, so I don't think it's changed because of the ramp of those products. And the reason for that is, you know, the shape of the launch has always been something we thought a lot about, because if you think about, you know, royalty investments, you know, the two biggest drivers are, of course, the peak sales and the launch trajectory and the shape at which you get there. And both of those, you know, make a very significant contribution to value. So thinking about the ramp and how products ramp has always been fundamental to our process. And so there's been no change there. In reality, you know, some things can launch quickly, like the examples you point out.
Speaker Change: We have to think a lot about cancer structurally, either because of the payer channel that they're in and getting access or that patients need to be identified or, you know, other sorts of issues. So that's always something our business has demanded that we spent a lot of time thinking about. So, you know, no change. But, you know, certainly when we see things that, of course, have the opportunity to both have, you know, a really attractive peak sales and a
Speaker Change: and a faster launch, that's obviously a more attractive profile.
Speaker Change: And Jeff, maybe adding also here an additional comment, because it seems to me that the question you asked was, you know, in relation to business models that exist in life sciences where there's new opportunities to invest in new, you know, novel therapies that are going to drive significant growth.
Speaker Change: And you should just think how much easier it is for Royalty Pharma to actually take advantage of those new waves of innovation and add to our portfolio over a very short period of time. We can do it over a year or two.
Speaker Change: whereas many of the bigger companies it can take them you know five years or ten years to actually you know participate in a new exciting you know class of drugs and in our case we can do it much much faster given the flexibility of our business model.
Speaker Change: Great. Super helpful. Thanks, guys.
Speaker Change: Thank you. Our next question comes from Uma Rafat with Evercore. Your line is open.
Speaker Change: Hi guys, this is Mike DeFiori in for Omer. Thanks so much for taking my question. Congrats on the quarter. Quick question on Nick Timbo.
Speaker Change: Maybe, could you outline the expected timeline for U.S. market penetration and ramp to peak sales following its early 2025 launch, as well as any thoughts on how we should think about its probability of success in IPF? Thank you.
Speaker Change: and Marty Gold.
Marty Gold: Yeah, thanks, Mike. So, we are really excited, as we talked about in the prepared remarks about NICTEMPO, and, you know, specifically in terms of the launch and market penetration, you know, this is an area with a lot of unmet patient need. We highlighted a recent precedent product, which had a really nice launch as well, and so through our team's extensive diligence, talking to physicians about their patient, you know, the patients that they're caring for and the unmet need. You know, we are hopeful that there will be, you know,
Marty Gold: that there will be material demand for this as the product launches. And we certainly have the benefit of having Insight in the market. As I'm sure you know, they have a very significant presence here and really did a lot to develop the GVHD market with Jacoby. So we are excited about it.
Marty Gold: And then specifically on IPF, you know IPF is still early.
Marty Gold: You know, there are certainly some mechanistic reasons.
Marty Gold: to be hopeful about it, but it's still early in a Phase 2 trial. You know, we always like opportunities like this where there are opportunities for upside, you know, to our forecast.
Marty Gold: you know, based on something like IPF, or also, you know, you didn't mention it, but, you know, Nick Tembo is being studied in
Marty Gold: being studied in earlier lines of therapy for GVHD. So, you know, our base case and the base investment thesis here was focused on the current approval and, you know, that's going to generate an attractive investment for us, but certainly things like IPF and earlier lines of therapy in GVHD are exciting as well.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from Terrance Flynn with Morgan Stanley. Your line is open.
Terrance Flynn: Great, thanks for taking the question. I know you guys aren't going to provide guidance yet for 25.
Marty Gold: But maybe, Terry, you could just talk high level about some of the puts and takes here. And then, Chris, maybe just, you know, how do you think about a deal environment shaping up for 2025 and any implications from the election here as you think about your business model on the forward? Thank you.
Terry Coyne: Yes, so Terrance, I think it's probably premature to start talking much about 2025 at this point. You know, I think that, you know, we
Terry Coyne: We feel really good about the portfolio that we have. I think that there's, you know, a lot of assets in there that have
Terry Coyne: Nice growth ahead of them
Terry Coyne: a few that are, you know, maturing.
Terry Coyne: But I think that overall, we feel really good about the portfolio and really good about, you know, the opportunity to add great assets as we've been doing throughout this year. I think that, you know, as we usually do, I think we'll probably really delve into 2025 on our fourth quarter call.
Terry Coyne: Terrance, your question about field environment, you know, we
Terry Coyne: We're super excited about what we see. Obviously, this year we've done $2.6 billion already, year-to-date. Pablo gave the numbers since 2022, we've announced $10.1 billion.
Terry Coyne: and D'Avella Volume since 2022.
Terry Coyne: And we've announced
Terry Coyne: $15.5 billion since 2020.
Terry Coyne: We see just an ever-increasing opportunity out there, obviously the demands for capital
Terry Coyne: in the biopharma sector, both large pharma all the way down to small and mid-cap biotech, are immense. And so we can play an increasing role in that, whether that's existing royalties or synthetic royalties. So we're super excited about that. As it relates to the new administration that would come in next year,
Terry Coyne: You know,
Terry Coyne: Too soon to tell, I think, is what I would say, but we've shown the ability to invest a lot of capital, regardless of the administration, just given the needs of the sector for capital. And so we're looking forward to the continued strong environment in the deal sector.
Speaker Change: There's one quick thing to add about next year and then the following years is that we're going to start to see really exciting readouts of some of the you know
Speaker Change: Thank you. Our next question comes from Michael Nedelkovich with TD Cowen. Your line is open.
Michael Nedelkovich: Thanks for the questions. I have two. My first relates to Kobenti. I'm curious if you have an expectation for the upcoming Imraquidine readout from Abzi, and if that agent ends up showing a clinical profile similar to Kobenti, would you view that as a competitive threat or more of a rising tide, lift-all-boats type scenario?
Michael Nedelkovich: And then my second question is on TrinFIA in UC. In your modeling, do you assume significant uptake in front-line UC, or do you think that TrinFIA will primarily compete in sort of second or third-line biologic space? Thank you.
Marshall Urist: Do you want to take those two questions, Marshall? Sure. Yeah, good morning. So, your line was a little rough, but I think I got both of the questions. So, specifically on the upcoming readout for a competitive product at AbbVie, Imraklidine, to Covempi, and Schizophrenia. So, you know, our approach when we think about new classes like this, especially where there are, you know, multiple development programs, is we do think a lot about the competition. And in this case, certainly we assumed that there would be competition in this space, in this sector.
Speaker Change: Thank you.
Michael Nedelkovich: given the importance of the mechanism and the unmet need. So, you know, that was in our base case and certainly we expected to be multiple members of this class like we've seen before in multiple classes in psychiatry and I think
Michael Nedelkovich: given the scale of the unmet need to have two companies investing and developing this next generation of agents and developing the market beyond what's available today.
Michael Nedelkovich: is a good thing. So that was how we thought about that was how I thought about Emrak-Ladeen. And then for Tremfaya, you know, I think our view here is you have a great combination of one of the strongest marketers in the world in inflammatory bowel disease.
Michael Nedelkovich: a great product, Tremfaya, with strong data behind it. And so, you know, we think and, you know, I think some of Jensen's comments support this.
Michael Nedelkovich: that IBD and UC within that are going to be significant growth drivers for the product. So, I think if you think about first line versus second and third line, you know, that is hard to generalize about simply just because of the asset situation and the payers. But I think the important thing for Royalty Pharma as we look forward is, of course, that we do see a very meaningful opportunity for Trump-FIA and IBD.
Speaker Change: All right, thank you.
Speaker Change: Thank you. Our next question comes from Chris Shibutani with Goldman Sachs. Your line is open.
Chris Shibutani: Great, thank you very much. With the synthetic royalties and the opportunity there.
Chris Shibutani: that you announced, particularly with Syndax.
Chris Shibutani: and then juxtaposing this against the fact that
Chris Shibutani: historically...
Michael Nedelkovich: you've been able to adapt.
Michael Nedelkovich: some of the deal structures and expand upon relationships.
Michael Nedelkovich: Can you just educate us a little bit in terms of some of the parameters that were set up here? In particular, the 2.35 times cap.
Michael Nedelkovich: and how that is defined in the context of additional.
Michael Nedelkovich: potential additional opportunities for NICTIMBO? And is it structured in a way that lets you to, you know, continue to specifically adopt the opportunity with NICTIMBO? Or if you were to go back essentially to SYNDAX and do another deal, would it have to be for another product? Thank you.
Speaker Change: Thank you for the question. Chris, do you want to take that question?
Chris Hite: Yes, sure. Thanks for the question, Chris.
Chris Hite: You know, the synthetic royalty opportunity is, as I mentioned in my prepared remarks, you know, we try to tailor every transaction to really create a win-win situation for our partners. And one of the things I didn't mention in the prepared remarks is how many sort of repeat deals we do with existing partners.
Chris Hite: So if you think of the number of deals we would do with Biohaven or cytokinetics or PTC
Michael Nedelkovich: or BioQuest over the years, you know, there are a number of times where we really try to create win-win situations.
Michael Nedelkovich: and the partners come back to us for more capital.
Michael Nedelkovich: You know, so in the Syndex-specific situation, you're correct that there is a 2.35 cap, so, you know, basically that, you know, once we were, if we, you know, when we achieve the 2.35, that would end their obligations to us.
Michael Nedelkovich: But every deal is different, you know, many, many of their transactions are not cap transactions, most are not, and we just see a tremendous opportunity in that sector to continue to fund partners and new partners out there.
Speaker Change: Thank you. Our next question comes from Ash Verma with UBS. Your line is open.
Ash Verma: Hi, good morning. Thanks for taking my question. Just going back to Nick Timbo, what are your thoughts on the IV administration and whether that becomes a bottleneck for adoption?
Speaker Change: Are these GVST patients develop the disease effectively more than 100 days after the transplant? So majority of these patients don't necessarily need to visit the hospital. So do you think that the depenetration of portals will be an impediment for NICTEMO adoption? Thanks.
Speaker Change: Sure, thanks for the question, Marshall.
Speaker Change: I asked a good morning. Thanks for the question.
Speaker Change: So, the core of the question is, NICTIMFO, is IV administered? You know, some of the other options...
Speaker Change: that a lot of patients have already experienced, you know, the
Speaker Change: options that are out there. And that was the and that was sort of the core of our view is that you have a significant number of patients who are still carrying
Speaker Change: you know, a significant symptom burden and so are in need of further therapy. And so, you know, this is a significant, this is a serious condition can cause, you know, a pretty heavy symptom burden for patients. And so if you need another treatment, you know, Nictimbo is going to be kind of the only option if you've been through, you know, steroids and Jakafi and Resirox. So, you know, that's kind of the core of our view. And so that's how, you know, the IV administration was something that we thought about, but we're excited about the commercial opportunity there and given the unmet patient need for patients who have failed other therapies.
Speaker Change: Thank you. I'm showing no further questions at this time. I'd like to turn the call over to Pablo Legorreta for any closing remarks.
Pablo Legorreta: Thank you, operator, and thank you to everyone on the call for your continued interest in Voyos Pharma. If you have any follow-up questions, please feel free to reach out to George. Thank you, everyone.