Q1 2025 Royalty Pharma PLC Earnings Call
Investor Relations.
And communications. Please go ahead Sir.
Good morning, and good afternoon to everyone on the call. Thank you for joining us to review royalty pharma first quarter 2025 results you can find the press release with our earnings results and slides to this call on the investors page of our website at royalty pharma dotcom.
Moving to slide three I'd like to remind you that information presented in this call contains forward looking statements that involve known and unknown risks.
Certainties and other factors that may cause actual results to differ materially from statements. We refer you to our most recent 10-K on file with the SEC for a description of these risks.
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 results and 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 like Russell founder and Chief Executive Officer Marshall Europe.
Terry Quaint: He had a research and investment and Terry Quaint EVP Chief Financial Officer.
Terry Quaint: Pablo will discuss the key highlights after which Marshall will provide a portfolio update and Terry will review the financials.
Terry Quaint: Following concluding remarks from Pablo we will hold a Q&A session in which we'll be joined by Chris White EVP Vice Chairman.
Pablo: And with that I'd like to turn the call over at Chipotle.
Speaker Change: Thank you George and welcome to everyone on the call I am happy to report a successful start to 2025 as we execute against our vision to be the leading partner funding innovation in life Sciences.
Speaker Change: Moving to slide six we delivered excellent financial performance in the first quarter, while continuing to expand our portfolio and returning substantial capital to shareholders.
Speaker Change: In terms of the financials, we delivered 12% gross royalty receipts.
Speaker Change: This represents a recurring cash flow.
Speaker Change: And the strong performance in the quarter reflects the quality of our diversified portfolio.
Speaker Change: <unk> and other contractual receipts, which are more variable and included.
Speaker Change: And then a larger payment this quarter lifted growth and portfolio receipts, our topline to 17%.
Speaker Change: Turning to capital allocation in January we announced an evolution to a more dynamic capital allocation framework.
Speaker Change: This flipped flexible framework allows us to scale our efforts to address the discount of our share price to intrinsic value, while also pursuing attractive royalty acquisitions.
Speaker Change: At that time, we also announced our intention to repurchase up to 2 billion of shares in 2025, depending on market conditions.
Speaker Change: What about authorized total of 3 billion consistent with this we repurchased 723 million of our shares in the first quarter at the same time, we deployed capital of just over 100 million on value, creating a royalty sections and we increased our dividend in line with our commitment to mid single digit growth.
Speaker Change: Looking at our portfolio, we expanded our development stage pipeline through a new phase III R&D funding collaboration with bio <unk> Biogen for Lyft to fill them up in lupus as Marshall will discuss this as a potential blockbuster therapy in a disease space with unmet patient need and we're excited to add this.
Speaker Change: Through our portfolio.
Speaker Change: We also received encouraging regulatory and clinical news on several portfolio of therapies, including FDA and EC approval of clarified that in Crohn's and EC approval.
Speaker Change: It'll threads of colitis.
Speaker Change: Positive phase III results for a coffee bar and threat syndrome, and confirmation that Roche is advancing towards 10 them up into phase III in Alzheimers disease.
Speaker Change: Lastly, I'm pleased to raise our 2025 full year guidance, we now expect portfolio receipts to be between $2 97, 5 billion and $3 125 billion.
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Speaker Change: Based on expected growth.
Speaker Change: Portfolio receipts of around 6% to 12%.
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Speaker Change: Guidance increase is driven by the strength of our diverse portfolio.
Speaker Change: And the tailwind from weakening U S dollar.
Speaker Change: Consistent with our sharp Thunder practice, our guidance is based on our current portfolio and does not include the benefit of any future transactions.
Speaker Change: Slide seven shows our impressive track record.
Speaker Change: <unk> double digit growth since our IPO as I noted earlier, we delivered 12% growth in royalty receipts in the first quarter. This is at the high end of the run rate.
Speaker Change: Included in our full year guidance and sets us up well to deliver another successful.
Speaker Change: So in 2025.
Speaker Change: Overall, our track record underscores our ability to execute successfully and consistently against our strategy and the growing market for biopharma royalties with that I will hand, it over to Marshall.
Marshall: Thanks, Paula I wanted to focus today on some exciting updates to our development stage portfolio first the R&D funding partnership we recently announced at Biogen and second the encouraging phase two results with Echo pipe Ham interest income.
Marshall: Pablo mentioned, we were also excited to see Roche advanced container mapped the phase III for Alzheimer's disease, we could receive a royalty averaging in the mid single digits.
Marshall: Beginning with little film that is.
Marshall: The potential first in class medicines currently in phase III development by Biogen for two types of lupus, <unk>, systemic lupus or SLE and cutaneous lupus where sealy.
Thank you for watching!
Marshall: Basically results are expected in 2026 and 2020, so relatively near term.
Speaker Change: Fortunately for our shareholders. This partnership is clearly within our product selection and capital allocation framework and in fact, a risk reward profile given compelling phase II data that was published in the New England Journal Medicine with blockbuster commercial potential and Biogen is capable hands.
In terms of financials, we will provide biogen with R&D funding of up to $250 million over six quarters to support the advancement of latest Bill and Matt and returned for a mid single digit royalty and milestone.
Speaker Change: Slide 10 highlights why we are so excited biolytic they'll announce commercial potential.
Speaker Change: There are 600000 people living with lupus in the U S and greater than 3 million patients globally.
Speaker Change: Today only two biologics are currently approved to treat SLE and there are no biologic specifically approved for Sealy.
Speaker Change: Together, the two approved biologics reported around $2 $4 billion in combined sales last year, so already a blockbuster market.
Speaker Change: We expect many more of lupus patients will benefit from advanced therapies in the years to come our internal analyses show only about 10% of U S. Lupus patients currently receive biologics when we compare this to more mature immunology markets like inflammatory bowel disease psoriasis and RA.
Speaker Change: Biologic penetration reaches 40% to 60% instead of the lupus market has significant room for growth.
Speaker Change: This will be driven by medical guidelines that are shifting to support earlier stage use of biologics in lupus and the introduction of new options likely to filling that summarized we think critical amount of has the potential to significantly improve outcomes for people living with lupus.
Speaker Change: The exciting blockbuster opportunity and a great addition to our development stage pipeline.
Speaker Change: On slide 11, I want to highlight the positive phase III results that were recently reported for Echo Pie Pammy Tourette syndrome.
Speaker Change: Echo Pie Pam is a first in class potential therapy with a novel mechanism of action, which we believe.
Speaker Change: It has a high probability of clinical and commercial success as echoed by Pam is being developed by <unk> Biosciences, a private company. Many of you might have missed this positive development.
Speaker Change: As a reminder, we have hired a royalty interest and echo pipe aimed at the start of 'twenty 'twenty four for an upfront payment of $49 million and up to $44 million in contingent regulatory milestones in return, we are entitled to meaningful tiered royalties of 6% to 10%.
Speaker Change: In February of this year intellectual ported positive top line phase III data.
Speaker Change: The study showed a clinically and statistically significant benefit for echo Python and maintaining reduction at the vocal and motor tics, They characterized tourette syndrome as compared to placebo.
Speaker Change: The results were inconsistent across pediatric and adult patients and in terms of safety Echo pipeline was generally well tolerated consistent with earlier clinical studies.
Speaker Change: Based on these results <unk> plans to meet with the FDA and other global regulators to discuss the submission of a new drug application later this year.
Speaker Change: Turning to the opportunity for eco Pan we believe it addresses unmet need there has not been a new option for patients in over a decade and it could be the first drug ever exclusively developed for dress.
Speaker Change: Our proprietary analytics support a large tourette syndrome population with over 120000 diagnosed patients.
Speaker Change: Currently receive medical therapy, suggesting that new treatments like Apple pay Bam could expand the market.
Speaker Change: All told we believe echo pipe and can improve the lives of tourette patients and represents a meaningful commercial opportunity, where we hold a sizeable fixed at 10% royalty.
Terry Quaint: With that I'd like to hand, it over to Terry.
Terry Quaint: Marshall, let's move to slide 14.
Terry Quaint: This slide shows how our efficient business model generates substantial cash flow to be reinvested.
Terry Quaint: As you heard from public royalty receipts grew by 12% in the first quarter, reflecting the strength of our diversified portfolio.
Terry Quaint: The key drivers of growth were the strong performance in the cystic fibrosis franchise trilogy, and expanding and the 2020 for acquisition of royalties or an ego.
Terry Quaint: Income from milestones and other contractual receipts amounted to $51 million included a $27 million milestone payment on air Supra.
Terry Quaint: As a consequence portfolio receipts, our topline grew by 17.
Terry Quaint: 17% to $839 million.
Terry Quaint: As we move down the column.
Terry Quaint: Operating and professional costs equated to 12, 1% of portfolio ever seen this.
Terry Quaint: This included $33 million of one time payments related to the sale of the morphosis development funding box.
Terry Quaint: Notably the $511 million of proceeds we received were accounted for as an asset sale and were not included in portfolio receipts.
Terry Quaint: This item.
Terry Quaint: Ratio would've been just over 8% of portfolio overseas, which is very typical for our business.
Terry Quaint: Net interest paid of $127 million reflected the semi annual timing of our interest payment schedule with payments in the first and third quarters.
Terry Quaint: For the first time and included interest on the $1 $5 billion of incremental debt that we raised in June of 2024.
Terry Quaint: 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. We look at the portfolio cash flow, which is adjusted EBITDA less net interest paid.
Terry Quaint: This amounted to $611 million in the quarter.
Terry Quaint: I went to a margin of around 73%.
Terry Quaint: He kept keeping in mind. The one time expense item I mentioned this reflects a high level of cash comparison and once again underscores the efficiency of our business model.
Terry Quaint: Lastly on this slide capital deployment in the first quarter was $101 million and share repurchases reduced our weighted average share count by 19 million shares as compared to the prior period prior year period.
Terry Quaint: Slide 15 provides more detail on the evolution of royalty receipts versus milestones and other contractual receipts in the quarter.
As I highlighted earlier portfolio ever seats, our topline so all benefit from milestone payments compared with the same period last year.
Terry Quaint: Meanwhile, royalty receipts, which we consider are recurring cash inflows grew by 12% driven entirely by the underlying strength of our diversified portfolio.
Terry Quaint: Slide 16 shows that we continue to maintain significant financial capacity to execute our strategy through a combination of cash on our balance sheet, our cash our business generates and access to the debt markets.
Terry Quaint: At the end of the first quarter, we had cash and equivalents of close to $1 $1 billion.
Terry Quaint: As a reminder, we received $511 million in upfront cash in January from the sale of an morphosis development funding bonds.
Terry Quaint: This not only delivered an attractive IRR on that investment of approximately 25%, but also help to bolster our balance sheet and increase our financial flexibility.
Terry Quaint: In terms of our borrowing position.
Terry Quaint: That's a great debt outstanding of $7 $8 billion, our leverage now stands at around three times total debt to EBITDA or two five times net of cash and equivalents.
Terry Quaint: We also have undrawn financial capacity from a $1 8 billion revolver.
Terry Quaint: We were also pleased that Moody's upgraded our credit rating to <unk> from B double a three.
George Grofik: George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir. Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's first quarter 2025 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.
One time payments related to the sale of the Morphosis development funding box.
Terry Quaint: Pablo noted under our dynamic capital allocation framework, we took advantage of the fundamental disconnect in our share price and repurchased repurchased $723 million in the quarter.
Notably the $511 million of proceeds we receive were accounted for as an asset sale and were not included in portfolio receipts exclude.
Excluding this item the ratio would have been just over 8% of portfolio receipts, which is very typical for our business.
Terry Quaint: Slide 17 lays out our dynamic capital allocation framework.
George Grofik: Moving to slide three, I'd like to remind you that information presented in this call contains overlooking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from the statements.
Terry Quaint: If this framework balances our view of the share price valuation against the attractiveness of royalty deals.
Net interest paid of $127 million reflected the semi annual timing of our interest payment schedule with payments in the first and third quarters.
Terry Quaint: When our share price is trading at a discount to its intrinsic value share buybacks will be an important part of our capital allocation.
George Grofik: We refer you to our most recent 10K on file with the SEC for description of these risks. 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.
For the first time it included interest on the $1 $5 billion of incremental debt that we raised in June of 2024.
Terry Quaint: Conversely, when our shares approach a premium to intrinsic value, we would plan to dial back our share repurchases and focus on higher returning royalty deals.
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 looked at portfolio cash flow, which is adjusted EBITDA less net interest paid.
Terry Quaint: In an environment, where neither attractive royalty deals nor share repurchases are available we.
George Grofik: Non-GAAP liquidity measures will be used to help you understand our financial results and 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.
Terry Quaint: We have other options available for our cash including growing cash to wait for the right deals paying down debt or increasing dividend distributions.
This amounted to $611 million in the quarter equivalent to a margin of around 73 per cent.
Terry Quaint: Ultimately, we are focused on driving shareholder value through allocating capital as efficiently and effectively as possible.
He kept keeping in mind, the one time expense item I mentioned.
George Grofik: Our speakers on the call today are Pablo Legorreta, Founder and Chief Executive Officer, Marshall Urist, EVP, Head of Research and Investment, and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Marshall will provide a portfolio update, and Terry will review the plan.
That's a high level of cash conversion and once again underscores the efficiency of our business model.
Terry Quaint: So far this year, we've been operating in the upper left quadrant, we see many attractive royalty opportunities and a discount to the intrinsic value of our stock.
Lastly on this slide capital deployment in the first quarter was $101 million and share repurchases reduced our weighted average share count by 19 million shares as compared to the prior period prior year period.
Terry Quaint: For this reason we have accelerated the rate of share repurchases consistent with our target of up to $2 billion in 2025.
George Grofik: Following concluding remarks from Pablo, we will hold a Q&A session in which we will be joined by Krit Tite, EVP Vice Chairman.
Terry Quaint: While also increasing our dividend and continuing to deploy capital on attractive royalty deals.
Slide 15 provides more detail on the evolution of royalty receipts versus milestones and other contractual receipts in the quarter.
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 happy to report a successful start to 2025 as we execute against our vision to be the leading partner funding innovation in life science. Moving to slide six, we delivered excellent financial performance in the first quarter, while continuing to expand our portfolio and returning substantial capital to shareholders. In terms of the financials, we deliver 12% growth in royalty. This represents a recurring cash flow, and the strong performance in the quarter reflects the quality of our diversified portfolio.
Terry Quaint: In total we returned $850 million to shareholders in the first quarter of <unk>.
As I highlighted earlier portfolio receipts, our top line, so all benefit from milestone payments compared with the same period last year.
Terry Quaint: Record from royalty pharma, while we maintain a very active and robust deal pipeline.
Terry Quaint: On slide 18, we are raising our full year 2025 financial guidance, we expect.
Meanwhile, royalty receipts, which we consider are recurring cash inflows grew by 12% driven entirely by the underlying strength of our diversified portfolio.
Terry Quaint: Portfolio overseas to be in the range of $2 97, 5 billion to $3 <unk> 5 billion, which is a $75 million increase versus prior year guidance.
Yeah.
Slide 16 shows that we continue to maintain significant financial capacity to execute our strategy through a combination of cash on our balance sheet, the cash our business generates and access to the debt market.
Terry Quaint: About half the increase was driven by the strength of our diversified portfolio, while the other half was driven by the weakening of the U S dollar.
Terry Quaint: Starting with portfolio receipts were expecting growth of around 6% to 12%, which reflects the momentum of our portfolio.
At the end of the first quarter, we had cash and equivalents of close to $1 $1 billion. As a reminder, we received $511 million in upfront cash in January from the sale of the morphosis development funding bonds.
Pablo Legorreta: Milestones and other contractual receipts, which are more variable and included a larger payment this quarter, lifted growth in portfolio receipts, our top line, to 17%.
Terry Quaint: This takes into account a range of scenarios for the launch of a lift track the new vertex triple as well as for Promacta generics Biosimilar Tysabri.
This not only delivered an attractive IRR on that investment of approximately 25%, but also help to bolster our balance sheet and increase our financial flexibility.
Pablo Legorreta: Turning to Capital Allocation, in January we announced an evolution to a more dynamic capital allocation framework. This flexible framework allows us to scale our efforts to address the discount of our share price to intrinsic value while also pursuing attractive royalty acquisitions. At that time, we also announced our intention to repurchase up to 2 billion of shares in 2025, depending on market conditions.
Terry Quaint: Any impact of Medicare part D redesign.
Terry Quaint: Meiosis and other contractual and receipts are expected to increase from $31 million in 2024 to approximately $60 million in 2025.
In terms of our borrowing position, we have investment grade debt outstanding of $7 $8 billion.
Terry Quaint: 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.
Our leverage now stands at around three times total debt to EBITDA or two five times net of cash and equivalents.
We also have undrawn financial capacity from a $1 8 billion revolver.
Terry Quaint: For modeling purposes, we would remind you that several of our largest royalties such as the CF franchise trilogy.
We were also pleased that Moody's upgraded our credit rating to <unk> from B double a three.
Pablo Legorreta: at about an authorized total of $3 billion. Consistent with this, we repurchased $723 million of our shares in the first quarter. At the same time, we deployed capital of just over $100 million on value-creating royalty transactions, and we increased our dividends in line with our commitment to mid-single-digit growth. Looking at our portfolio, we expanded our development stage pipeline through a new phase three R&D funding collaboration with Biogen for the Tefilimab in lupus. As Marshall will discuss, this is a potential blood pressure therapy in a disease space with unmet patient need. And we're excited to add this to our portfolio.
Terry Quaint: F risky and others are tiered royalties, which means they reset to a lower rate in the first quarter.
As Pablo noted under our dynamic capital allocation framework, we took advantage of the fundamental disconnect in our share price and repurchased for repurchased $723 million in the quarter.
Terry Quaint: As a royalty receipts lag reported product sales by the marketers by one quarter. This has the effect of decreasing royalties sequentially in the second quarter.
Slide 17 lays out our dynamic capital allocation framework.
Terry Quaint: Given these dynamics, we are providing guidance for second quarter portfolio receipts, which we expect to be between $700 million and $725 million referenced representing growth of 15% to 19% compared to last year's second quarter.
If this framework balances our view of the share price valuation against the attractiveness of royalty deals.
When our share price is trading at a discount to its intrinsic value share buybacks will be an important part of our capital allocation.
Terry Quaint: Turning to expenses payments for operating and professional costs are expected to be approximately 10% of portfolio receipts in 2025.
Conversely, when our shares approach a premium to intrinsic value, we would plan to dialed back our share repurchases and focus on higher returning royalty deals.
Pablo Legorreta: We also received encouraging regulatory and clinical news on several portfolio therapies, including FDA and E.C. approval of Trinifolia and Crohn's and E.C. approval. and Ulcerative Colitis, positive phase 3 result for acopepam in Tourette's syndrome and confirmation that Roche is advancing to antennumab into phase 3 in Oskarmor's disease.
Terry Quaint: This reflects a combination of our efficient business model and the one time fee I referred to earlier related to morphosis development funding bond sale.
In an environment, where neither attractive royalty deals nor share repurchases are available.
We have other options available for our cash including growing cash to wait for the right deals paying down debt or increasing dividend distributions.
You should also note that our guidance for this line does not take into account the benefits of the internalization transaction.
Ultimately, we are focused on driving shareholder value through allocating capital as efficiently and effectively as possible.
Terry Quaint: We will provide an update after it closes.
Pablo Legorreta: Lastly, I'm pleased to raise our 2025 full-year guidance. We now expect portfolio receipts to be between $2.975 billion and $3.125 billion, based on expected growth in portfolio receipts of around 6 to 12 percent. This guidance increase is driven by the strength of our diversified portfolio and a tailwind from weakening U.S. dollars.
Terry Quaint: Interest paid in 2025 is expected to be around $260 million with de Minimis amounts due in Q2 and Q4.
So far this year, we've been operating in the upper left quadrant, we see many attractive royalty opportunities and a discount to the intrinsic value of our stock.
Terry Quaint: This guidance does not take into account interest received on our cash balance which was $12 million in the first quarter.
For this reason we have accelerated the rate of share repurchases consistent with our target of up to $2 billion in 2025.
Terry Quaint: It also does not reflect the additional interest expense related to the internalization transaction.
While also increasing our dividend and continuing to deploy capital on attractive royalty deals.
Terry Quaint: Before handing the call the problem given investor interest in the current macro environment I would like to briefly comment on tariffs as it relates to our business.
Pablo Legorreta: Consistent with our shared standard practice, our guidance is based on our current portfolio and does not include the benefit of any future transactions.
In total we returned $850 million to shareholders in the first quarter.
In short we do not currently expect any meaningful impact on our royalties from tariffs as we would expect a potential terrorists to be paid paid upstream of our royalty.
Record for royalty pharma.
Maintain a very active and robust deal pipeline.
Pablo Legorreta: Slide seven shows our impressive track record of average double-digit growth since our IPO. As I noted earlier, we delivered 12% growth in royalty receipts in the first quarter. This is at the high end of the run rate. included in our full year guidance and sets us up well to deliver another successful result in 2025. Overall, our track record underscores our ability to execute successfully and consistently against our strategy in the growing market for biopharma royalties.
On slide 18, we are raising our full year 2025 financial guidance, we expect portfolio ever seems to be in the range of $2 97, 5 billion to $3 125 billion, which is a $75 million increase versus prior year guidance.
Terry Quaint: For example, when components of our pharmaceutical products are manufactured outside of the U S.
Terry Quaint: Non U S company typically sell to an affiliated U S company.
Terry Quaint: This sale or import into the U S triggers the tariffs.
About half the increase was driven by the strength of our diversified portfolio, while the other half was driven by the weakening of the U S dollar.
Terry Quaint: The affiliate of the market or then sells the product to a third party.
Terry Quaint: Our royalties are calculated on the sale to the third party.
Starting with portfolio receipts were expecting growth of around 6% to 12%.
As such the turret bearing import of the product occurs upstream of the royalty bearing sale.
Marshall Urist: With that, I will hand it over to Marshall. Thanks, Pablo. I want to focus today on some exciting updates to our development stage portfolio. First, the R&D funding partnership we recently announced with Biogen. And second, the encouraging phase two results with Ecopipam and Terrestrium. As Pablo mentioned, we were also excited to see Roche advance Trontinumab to Phase 3 for Alzheimer's. could receive a royalty averaging in the mid-single digit. Beginning with Lidophilumab, this is a potential first-in-class medicine currently in Phase III development by Biogen for two types of lupus, systemic lupus, or FLE, and cutaneous lupus, or CLE.
Which reflects the momentum of our portfolio.
This takes into account a range of scenarios for the launch of a wind tracks, the new vertex triple as well as for Promacta generics Biosimilar Tysabri.
Terry Quaint: To close we have a we've had a great start to the year and we expect to deliver another full year of strong financial performance in 2025.
And the impact of Medicare part D redesign.
Milestones and other contractual receipts are expected to increase from $31 million in 'twenty 'twenty four to approximately $60 million in 2025.
Pablo: With that I would like to turn the call over to Pablo.
Pablo: Thanks, Terry let me begin my remarks by saying how pleased I am with our performance so far in 2025.
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.
Pablo: We delivered double digit growth, we strengthened our exciting development stage pipeline.
Pablo: Dynamic capital allocation framework allowed us to buy back stock at an attractive price for our shareholders.
For modeling purposes, we would remind you that several of our largest royalties.
Pablo: We also announced the acquisition of our external manager, which we expect to deliver multiple benefits for shareholders.
Marshall Urist: Phase 3 results are expected in 2026 and 2027, so relatively near term. Importantly for our shareholders, this partnership fits clearly within our product selection and capital allocation framework with an attractive risk-reward profile given compelling phase two data that was published in the New England Journal of Medicine, with blockbuster commercial potential in Biogen's capable hands. In terms of financials, we will provide Biogen with R&D funding of up to $250 million over six quarters to support the advancement of lidofilamab in return for a mid-single-digit royalty and milestone. Slide 10 highlights why we are so excited by Lidophilimab's commercial potential.
As the CF franchise trilogy ever.
<unk> and others are tiered royalties, which means they reset to a lower rate in the first quarter.
Pablo: We're on track to close the transaction in the current quarter.
Pablo: On my final slide I want to share my excitement for our upcoming Investor day on September 11th.
As our royalty receipts lag reported product sales by the marketers by one quarter. This has the effect of decreasing royalties sequentially in the second quarter.
Pablo: In New York City.
Pablo: Jim and I are looking forward to providing an update on our plans to drive shareholder value creation through leveraging our unique business model and capabilities in the large and growing market for funding Biopharma innovation, we think it's a compelling story and we hope you will be able to join us with that we would be happy to take your questions.
Given these dynamics, we are providing guidance for second quarter portfolio receipts, which we expect to be between $700 million and $725 million.
Representing growth of 15% to 19% compared to last year's second quarter.
Turning to expenses.
Speaker Change: Thank you Pablo and we'll now open up the call for your questions. Operator, Please take the first question.
Marshall Urist: There are 600,000 people living with lupus in the U.S. and greater than 3 million patients globally. Yet today, only two biologics are currently approved to treat SLE, and there are no biologics specifically approved for CLE. Together, the two approved biologics reported around $2.4 billion in combined sales last year. So, already a blockbuster model. However, we expect many more lupus patients will benefit from advanced therapies in the years to come. Our internal analyses show only about 10% of U.S. lupus patients currently receive biologics. When we compare this to more mature immunology markets, like inflammatory bowel disease, psoriasis, and RA, biologic penetration reaches 40 to 60%, so the lupus market has significant room for growth.
Payments for operating and professional costs are expected to be approximately 10% of portfolio receipts in 2025.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one.
This reflects a combination of our efficient business model and the one time fee I referred to earlier related to morphosis development funding bond sale.
Speaker Change: If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Speaker Change: Our first question comes from Chris Scott with Jpmorgan. Your line is open.
I should also note that our guidance for this line does not take into account the benefits of the internalization transaction.
Harley Creek: Hey, This is Harley Creek.
Harley Creek: J P Morgan and informed Chris John just wanted to ask about.
We will provide an update after it closes.
Interest paid in 2025 is expected to be around $260 million with de Minimis amounts due in Q2 and Q4.
Harley Creek: In terms of the investment environment and opportunities how has the regulatory and government policy uncertainties of late kind of impacted the deal making environment from your side in terms of the assets you consider or how you evaluate risk and then.
This guidance does not take into account interest received on our cash balance which was $12 million in the first quarter.
It also does not reflect the additional interest expense related to the internalization transaction.
Harley Creek: Second part is.
Marshall Urist: This will be driven by medical guidelines that are shifting to support earlier stage use of biologics in lupus, and the introduction of new options like lidofilamab.
Harley Creek: Just any kind of update in terms of the four.
Before handing the call to Pablo given investor interest in the current macro environment I would like to briefly comment on tariffs as it relates to our business.
Harley Creek: Our tax.
Harley Creek: Cystic fibrosis portfolio on negotiations in terms of the arbitration timelines. Thank you.
Marshall Urist: To summarize, we think lidofilamab has the potential to significantly improve outcomes for people living with lupus, it's an exciting blockbuster opportunity, and a great addition to our development stage pipeline.
In short we do not currently expect any meaningful impact on our royalties from tariffs as we would expect a potential terrorists to be paid paid upstream of our royalty.
Chris: Yes. Thanks for the question, Chris Why don't you take the first one and then Terry Okay.
Speaker Change: Talking about the fuel situation sure. Thanks.
Marshall Urist: On slide 11, I want to highlight the positive phase 3 results that were recently reported for Echocoypam and Tourette's EchoPipeM is a first-in-class potential therapy with a novel mechanism of action which we believe has a high probability of clinical and commercial success. As EchoPipeM is being developed by MLX Biosciences, a private company, many of you might have missed this positive development. As a reminder, we have acquired a royalty interest in EchoPipeM at the start of 2024 for an upfront payment of $49 million and up to $44 million in contingent regulatory milestones. In return, we are entitled to meaningful tiered royalties of 6 to 10 percent.
Speaker Change: Thanks for the question the Ah <unk>.
For example, when components of our pharmaceutical products are manufactured outside of the U S.
Speaker Change: The pipeline remains very robust.
As a reminder.
Non U S company typically sell to an affiliated U S company.
Speaker Change: Investing about.
Speaker Change: 12 billion deployed since our since our IPO and we've announced transactions of over $15 billion.
This sale or import into the U S triggers the tariffs.
The affiliate of the marketer then sells the product to a third party.
Speaker Change: And our in depth reviews have gone up significantly since 2019 of almost a 150%. So we are.
Our royalties are calculated on the sale to the third party.
As such the turret bearing import of the product occurs upstream of the royalty bearing shale.
Speaker Change: You know the environment is very strong for alternative forms of capital and that remains true through the first quarter, obviously theres a lot of policy uncertainty, but that.
To close we have a we've had a great start to the year and we expect to deliver another full year of strong financial performance in 2025.
Marshall Urist: In February of this year, MLX reported positive top-line phase 3 data. The study showed a clinically and statistically significant benefit for echopytham in maintaining reductions of the vocal and motor tics that characterize Tourette's Syndrome as compared to placebo. The results were consistent across pediatric and adult patients, and in terms of safety, Ecopipan was generally well-tolerated, consistent with earlier clinical studies. Based on these results, MLX plans to meet with the FDA and other global regulators to discuss the submission of a new drug application later this year.
Speaker Change: It's not really impacting our or.
Speaker Change: Our opportunity set and we think that's going to.
With that I would like to turn the call over to Pablo.
Speaker Change: Show through.
Thanks Terry.
Speaker Change: For the remainder of the year.
To begin my remarks by saying how pleased I am with our performance so far in 2025.
Speaker Change: And then on on.
Speaker Change: Vertex there is we have no update at this time.
We delivered double digit growth, we strengthened our exciting development stage pipeline and our dynamic capital allocation framework allowed us to buy back stock at an attractive price for our shareholders.
Speaker Change: And we.
Speaker Change: To feel very strongly about our position that generated kalydeco is the same as kalydeco.
Speaker Change: But there's no update at.
Speaker Change: At this point on any potential arbitration.
He also knows the precision of our external manager, which we expect to deliver multiple benefits for shareholders.
Speaker Change: Yeah.
Speaker Change: Thank you operator next question please.
Marshall Urist: Turning to the opportunity for Echopipam, we believe it addresses a clear unmet need. There has not been a new option for Tourette's patients in over a decade, and it could be the first drug ever exclusively developed for Tourette's. Our proprietary analytics support a large Tourette's syndrome population with over 120,000 diagnosed U.S. patients, yet only half currently receive medical therapy, suggesting that new treatments like Ecopipe M could expand the market. All told, we believe Ecopipam can improve the lives of Tourette's patients and represents a meaningful commercial opportunity where we hold a sizable 6-10% royalty.
On track to close the transaction in the current quarter.
Speaker Change: Our next question comes from Mike Novakovich with TD Cowen Your line is open.
On my final slide I want to share my excitement for our upcoming Investor day on September 11th.
Mike Novakovich: Thank you for the questions I had one follow up and then two questions for my first follow up actually relates to tariffs it sounds like Theres no way that the accounting for terrorists could directly affect the royalties owed to royalty pharma, but are you aware of any message that pharma may use to offset tariffs that could impact royalties and maybe that.
New York City, My team and I are looking forward to providing an update on our plans to drive shareholder value creation, leveraging our unique business model and capabilities.
The large and growing market for funding Biopharma innovation, we think it's a compelling story and we hope you will be able to join us with that we would be happy to take your questions.
Speaker Change: Could be either positive or negative.
Mike Novakovich: And then my first.
Speaker Change: Question relates again to the policy environment, you noted policy uncertainty it seems as though that could present, a potential opportunity to royalty pharma, particularly in academia and nonprofits as well.
Thank you Pablo and we'll now open up the call for your questions. Operator, Please take the first question.
Terrance Coyne: With that, I'd like to hand it over to Terrence. Thanks, Marshall. Let's move to slide 14. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 12% in the first quarter, reflecting the strength of our diversified portfolio. The key drivers of growth were the strong performance of the Cystic Fibrosis franchise, Trilogy and Xtandi, and the 2024 acquisition of royalties on Voronigo. Income from milestones and other contractual receipts amounted to $51 million and included a $27 million milestone payment on AirSupra. As a consequence, portfolio receipts, our top line, grew by 17% to $839 million.
Thank you if you'd like to ask a question. Please press star one one.
Your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Speaker Change: The need for alternative sources of funding has quickly become urgent is this an area where royalty pharma could step in in a way it hasn't in the past.
Our first question comes from Chris Scott with Jpmorgan. Your line is open.
Hey, this is Harley.
Speaker Change: And then my last question is a product related one on you can pipe Pam you lay out a very nice rationale and outlook for this agent in tourettes given the opportunity why do you think that this indication and possibly even this product is not being pursued by larger pharma companies at least so far in any visible way.
Morgan from Chris John just wanted to ask about.
In terms of the investment environment and opportunities how has the regulatory and policy uncertainties.
Oh boy, it kind of impacted the steel making environment from your side.
In terms of the assets you consider or how you evaluate risks and then.
Speaker Change: Thank you.
Speaker Change: Sure. Thanks for the question, maybe I'll start by just addressing your question about policy and how that might benefit royalty pharma.
Second part is I'm, just any kind of updates in terms of the port.
Terrance Coyne: As we move down the column, operating and professional costs equated to 12.1% of portfolio receipts. This included $33 million of one-time payments related to the sale of the Morphosis Development Funding Bond. Notably, the $511 million of proceeds we received were accounted for as an asset sale and were not included in portfolio receipts. Including this item, the ratio would have been just over 8% of portfolio receipts, which is very typical for our business. Net interest paid of $127 million reflected the semi-annual timing of our interest payment schedule with payments in the first and third quarters. For the first time, it included interest on the $1.5 billion of incremental debt that we raised in June of 2024.
For tax.
Speaker Change: And then Terry will take the question on tariffs and Marshall the question as well.
Cystic fibrosis portfolio on negotiations in terms of the arbitration timeline. Thank you.
Speaker Change: With respect to policy.
Speaker Change:
Yes. Thanks for the question, Chris Why don't you take the first one of them very often.
You're right and.
Speaker Change: In indicating that there is a significant concern about the proposed cuts to NIH funding I think the Trump administration.
Talking about the fuel.
Situations sure. Thanks.
Thanks for the question the Ah.
Speaker Change: The budget that was just released I think a week ago.
The pipeline remains very robust.
Speaker Change: Proposing a cut of about 20 billion from 47 billion to 27.
As a reminder.
And about the <unk>.
12 billion deployed since our since our IPO and we've announced transactions of over $15 billion.
Speaker Change: I believe it's a negotiating position with Congress and.
Speaker Change: What IBM the cuts will not be that severe I just came back from there.
And our in depth reviews have gone up significantly since 2019 of almost 150% so.
Speaker Change: The Milken conference. So there was a lot of discussion of the conference.
You know opening and then in private rooms.
We are you know the environment is very strong for alternative forms of capital and that remains true through the first quarter, obviously theres a lot of policy uncertainty, but that's not really impacting our are our.
Speaker Change: With.
Terrance 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 portfolio cash flow, which is adjusted EBITDA, less net interest paid. This amounted to $611 million in the quarter, equivalent to a margin of around 73%. Keeping in mind the one-time expense item I mentioned, this reflects a high level of cash conversion and once again underscores the efficiency of our business. Lastly on this slide, capital deployment in the first quarter was $101 million and share repurchases reduced our weighted average share count by 19 million shares as compared to the prior year period.
Speaker Change: No the former head of NIH, So many university president.
Speaker Change: Trying to see how.
Speaker Change: They're organizing to to actually.
Our opportunity set and we think that's going to.
Speaker Change: Presented a position through the government, but really.
Show through.
Speaker Change: I think the message is you know the U S has been the.
For the remainder of the year.
And then on on.
Speaker Change: As a leader in medical research for many many decades and you know reducing the.
Vertex there is we have no update at this time.
Yeah.
Speaker Change: <unk>.
We continue to feel very strongly about our position that generated kalydeco is the same as kalydeco.
Speaker Change: Investment in an age.
Speaker Change: It is not good because we might end up seating.
But there's no update at.
Speaker Change: The leadership for the U S has two other other regions of the World Europe and.
At this point on any potential arbitration.
Yeah.
Speaker Change: And China.
Speaker Change: And.
Thank you operator next question please.
Speaker Change: In terms of.
Our next question comes from Mike Novakovich with TD Cowen Your line is open.
Speaker Change: The uncertainty and.
Terrance Coyne: Slide 15 provides more detail on the evolution of royalty receipts versus milestones and other contractual receipts in the quarter. As I highlighted earlier, portfolio receipts are top line so will benefit from milestone payments compared with the same period last year. Meanwhile, royalty receipts, which we consider our recurring cash inflows, grew by 12%, driven entirely by the underlying strength of our diversified portfolio.
Speaker Change: The markets and you know there's other.
Thank you for the questions I had one follow up and then two questions for my first follow up actually relates to tariffs it sounds like Theres no way that the accounting for tariffs could directly affect the royalties owed to royalty pharma, but are you aware of any message that pharma may use to offset tariffs that could impact royalties and maybe that.
Speaker Change: Aspects of that that could be beneficial to us because as.
Speaker Change: We have noted in the past.
Speaker Change:
Speaker Change: U S biotech.
Speaker Change: Industry and a big part of the R&D ecosystem.
Speaker Change: Which comprises about 8000 companies worldwide.
Could be either positive or negative.
Speaker Change: What we have.
And then my first.
Speaker Change: Highlighted is that there's about a trillion dollars of capital required by.
Question relates again to the policy environment, you noted policy uncertainty it seems as though that could present, a potential opportunity to royalty pharma, particularly in academia and nonprofits as well.
Terrance Coyne: Slide 16 shows that we continue to maintain significant financial capacity to execute our strategy through a combination of cash on our balance sheet, the cash our business generates, and access to the debt market. At the end of the first quarter, we had cash in equivalence of close to $1.1 billion. As a reminder, we received $511 million in upfront cash in January from the sale of the Morphosis Development Funding Bond. This not only delivered an attractive IRR on that investment of approximately 25%, but also helped to bolster our balance sheet and increase our financial flexibility. In terms of our borrowing position, we have investment grade debt outstanding at $7.8 billion.
Speaker Change: Profitable Biopharma, which are really the biotech.
Speaker Change: Over the next decade.
Speaker Change: And to essentially move their pipeline pipelines along from phase one phase two phase two to phase three and then approval.
The need for alternative sources of funding has quickly become urgent is this an area where royalty pharma could step in in a way it hasn't in the past.
Speaker Change: And of that Parisien border number over the next decade.
And then my last question is a product related one on you can pay Pam you lay out a very nice rationale and outlook for this agent in tourettes given the opportunity why do you think that this indication and possibly even this product is not being pursued by larger pharma companies at least so far in any visible way.
Speaker Change: We oh.
Speaker Change: Around $450 billion to $470 billion of.
Speaker Change: Couple of that is new to this.
Speaker Change: Part of the ecosystem as you know the biotech are much more dependent on capital markets to fund the pipeline.
Speaker Change: And it makes it more difficult in the current environment. So you know that obviously creates an attractive opportunity for Williams from him to step in and provide.
Terrance Coyne: Our leverage now stands at around three times total debt to EBITDA or 2.5 times net of cash and equivalent. We also have undrawed financial capacity from a $1.8 billion revolver.
Thank you.
Sure. Thanks for the question, maybe I'll start by just addressing your question about policy and how that might benefit royalty pharma and then Terry will take the question on tariffs and Marshall the question into work.
Speaker Change: Needed capital to all.
Speaker Change: These companies and we're.
Speaker Change: We're excited about that part of our business.
Terrance Coyne: We were also pleased that Moody's upgraded our credit rating to BAA2 from BAA3. As Pablo noted, under our dynamic capital allocation framework, we took advantage of the fundamental disconnect in our share price and repurchased $723 million in the quarter. Slide 17 lays out our dynamic capital allocation framework. This framework balances our view of the share price valuation against the attractiveness of royalty. When our share price is trading at a discount to its intrinsic value, share buybacks will be an important part of our capital allocation. Conversely, when our shares approach a premium to intrinsic value, we would plan to dial back our share repurchases and focus on higher returning royalties.
With respect to policy.
No.
Speaker Change: Synthetic royalty part of our business synthetics, which we invented over a decade ago.
You're right and.
In indicating that there is a significant concern about the proposed cuts to NIH funding I think the Trump administration.
Speaker Change: It's been a large large and growing part of our capital.
Speaker Change: Capital deployment.
Speaker Change: I'll stop there and then ask.
The budget that was just released I think a week ago.
Speaker Change: Terry to talk about tariffs and Marshall about threats I'm sure so on tariffs.
Proposing a cut of about 20 billion from 47 billion.
Thanks, Kevin.
Speaker Change: As I mentioned in our prepared remarks.
I believe it's a negotiating position with Congress and.
Speaker Change: We're in a fortunate position, where we do not expect.
What IBM the cuts will not be that severe I just came back from the American conference. So there was a lot of discussion of the conference.
Speaker Change: Much of an impact at all on any potential Paris, just as a result of how the supply chain typically works.
Speaker Change: In terms of tools that pharma would use potential tool to offset offset tariffs.
Opening and then in private rooms.
With.
No the former head of NIH, So many university president.
Speaker Change: Tough for us to speculate at this time.
Terrance Coyne: In an environment where neither attractive royalty deals nor shareholder purchases are available, we have other options available for our cash, including growing cash to wait for the right deals, paying down debt, or increasing dividend distribution. Ultimately, we are focused on driving shareholder value through allocating capital as efficiently and effectively as possible. So far this year, we've been operating in the upper left quadrant, where we see many attractive royalty opportunities and a discount to the intrinsic value of our stock. For this reason, we have accelerated the rate of share of our purchases, consistent with our target of up to $2 billion in 2025, while also increasing our dividend and continuing to deploy capital on attractive royalty deals.
And it's going to CECO.
Speaker Change: And so I you know I think it's just early days there, but overall, we feel very good about our about our.
They're organizing tool to actually.
Preserve the position to the government, but really.
Speaker Change: Our business and our ability to kind of have minimal impact from tariffs.
I think the message is.
The U S has been.
Peter and medical research for many many decades and you know.
Mike Novakovich: And Mike when he just quickly on your question on <unk>.
Reducing the.
<unk>.
Speaker Change: Taking a step back.
Investment in an age.
Speaker Change: This is this investment and the potential opportunity here I think is highlights one of the strengths of our model, which is the ability to identify.
<unk> is not good because we might end up seating.
The leadership for the U S guys to other other regions of the World Europe and.
Speaker Change: Underappreciated or potentially overlooked.
And.
In China.
Speaker Change: And underserved markets like like of Tourette syndrome, and I think it brings together the breadth of our platform our ability to really dig in and do proprietary analytics to gain conviction in the market opportunity because it happened to your point.
And and.
In terms of.
The uncertainty in.
The markets and you know there's other aspects.
Terrance Coyne: In total, we returned $850 million to shareholders in the first quarter, a record for Royalty Pharma, while we maintain a very active and robust deal pipeline.
Aspects of that that could be beneficial to us because as.
We have noted in the past.
Speaker Change: Enjoyed the focus of much of the Biopharma industry. So we think this is we think this is the exciting and you know I'm a proud of the work we did here and look forward to finding more of these in the future.
<unk> U S biotech.
Terrance Coyne: On slide 18, we are raising our full year 2025 financial guidance. We expect portfolio receipts to be in the range of $2.975 billion to $3.125 billion, which is a $75 million increase versus prior year guidance. About half the increase was driven by the strength of our diversified portfolio, while the other half was driven by the weakening of the U.S. dollar. Starting with portfolio receipts, we are expecting grows of around 6% to 12%, which reflects the momentum of our portfolio. This takes into account a range of scenarios for the launch of the lift track, the new Vertex Triple, as well as for Primacta Generics, Biosimilar Tysabric, and the impact of Medicare Part D redeployment.
Industry and a big part of the R&D ecosystem.
Which comprises about 8000 companies worldwide.
Yeah.
What we have.
<unk> highlighted is that there's about a trillion dollars of capital required by the.
Speaker Change: Thank you Michael.
Speaker Change: Operator next question please.
Speaker Change: Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open.
<unk> Biopharma, which are really the biotech.
Terence Flynn: Great. Good morning, Thanks for taking the questions two product ones for me.
Over the next decade.
And to essentially move their pipeline pipelines along from phase one phase two phase two to phase three and then approval.
Speaker Change: Obviously, it's still early days on the lift truck launch, but Terry you mentioned that your guidance contemplates a range of scenarios. So just wondering.
And of that Parisien border number over the next decade. The next five years, we estimate that it's around $450 billion to $470 billion of cash.
Speaker Change: This initial quarter falls relative to your expectations. If you could elaborate at all there and then the second one is Kansas iOS received a less restrictive rems from the FDA as I know Youre aware.
Couple of that is new to this.
Terrance Coyne: Milestones and other contractual receipts are expected to increase from $31 million in 2024 to approximately $60 million in 2025. 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. For modeling purposes, we would remind you that several of our largest royalties, such as the CF franchise, Trilogy, Evrizdi, and others, are tiered royalties, which means they reset to a lower rate in the first quarter. As our royalty received lag reported product sales by the marketers by one quarter, this has the effect of decreasing royalties sequentially in the second quarter.
Part of the ecosystem as you know the biotech are much more dependent on capital markets to fund the pipeline.
Just thoughts on that ahead of a kimpton.
Hum.
The more difficult in the current environment. So you know that obviously creates an attractive opportunity for Williams from him to step in and provide the.
Speaker Change: Hampton FDA decision and launch there and how important it is or maybe less important now in terms of differentiation on the Rems side as you guys thought about the opportunity for avid Camden. Thank you.
Neither capital too.
These companies and we're excited about that part of our business.
Sure so on electric.
Speaker Change: It's still very early days here and.
Hum.
Synthetic royalty part of I've been with synthetics, which we invented over a decade ago.
Speaker Change: We've obviously been following it closely we looked at a number of different scenarios.
It's been a large large and growing part of our you know capital deployment. So I'll stop there and then you know ask.
Speaker Change: The way, we're thinking about this year and also the long term.
Speaker Change: And but I think the big picture.
Speaker Change: Is for US is that we continue to expect.
Just talk about tariffs and Marshall about threats I'm sure so on tariffs.
Speaker Change: Under any outcome.
Terrance Coyne: Given these dynamics, we are providing guidance for second quarter portfolio receipts, which we expect to be between $700 million and $725 million, representing growth of 15% to 19% compared to last year's second quarter. Turning to expenses, payments for operating and professional costs are expected to be approximately 10% of portfolio receipts in 2025. This reflects a combination of our efficient business model and the one-time fee I referred to earlier related to Morphosis Development Funding Bond Sale. You should also note that our guidance for this line does not take into account the benefit of the internalization transaction.
Speaker Change: Related to royalty rates that the vertex CF franchise will continue to be a major contributor.
As I mentioned in our prepared remarks.
We're in a fortunate position, where we do not expect.
They have much of an impact at all on any potential Paris, just as a result of how the supply chain typically works.
Speaker Change: Two our top line over the long term and I think that's a function of the you know the amazing data.
In terms of tools that pharma would use potential tool to offset offset tariffs.
Speaker Change: Amazing experience that patients have had with tri CAFTA and the strength of that of that product and brand.
Really tough for us to speculate at this time.
Speaker Change: And you know I think that.
Speaker Change: No matter what happens we continue to feel really good about about our position on.
And so I you know I think it's just early days there, but overall, we feel very good about our about.
Speaker Change: Does he have franchise.
Speaker Change: Yeah.
Our business and our ability to kind of have minimal impact from tariffs.
Speaker Change: And then Terry good morning, too quickly on the Abbvie Campion opportunity. So I think first of all just a start just start at the top we remain really excited about about the potential for Abbvie campaign and are really happy to have it as a part of the portfolio specifically on the ramp.
And Mike maybe just quickly on your question on <unk>.
Terrance Coyne: We will provide an update after a close. Interest paid in 2025 is expected to be around $260 million, with de minimis amounts due in Q2 and Q4. This guidance does not take into account interest received on our cash balance, which was $12 million in the first quarter. It also does not reflect the additional interest expense related to the internalization transaction.
Taking a step back.
This is this investment and the potential opportunity here I think it highlights one of the strengths of our model, which is the ability to identify.
Speaker Change: Updates when we first looked at this it was always a scenario, we contemplated even if potentially likely scenarios that rems in this space would evolve as you know as the market got and regulators got more experience with the safety profile through our investments over the years, we've seen much.
Underappreciated or potentially overlooked.
And under served markets like like of Tourette syndrome, and I think it it brings together the breadth of our platform our ability to really dig in and do proprietary analytics to gain conviction in the market opportunity because it happened to your point.
Terrance Coyne: Before handing the call to Pablo, given investor interest in the current macro environment, I would like to briefly comment on tariffs as it relates to our business. In short, we do not currently expect any meaningful impact on our royalties from tariffs as we would expect potential tariffs to be paid upstream of our royalties. For example, when components of a pharmaceutical product are manufactured outside of the U.S., the non-U.S. company typically sells to an affiliated U.S. company. This sale or import into the U.S. triggers the tariff. The affiliate of the marketer then sells the product to a third party.
Speaker Change: People precedence of precedence of that happening, sometimes faster sometimes slower. So we always anticipated that was certainly a possibility. So are and so what that meant was our core thesis and view was that.
Enjoyed the focus of.
Much of the Biopharma industry. So we think this is we think this is the exciting and you know I'm a.
I'm proud of the work we did here and look forward to finding more of these in the future.
Speaker Change: We thought the HCM hypertrophic cardiomyopathy market was big and certainly had had.
Yeah.
Yeah.
Thank you Michael.
Operator next question please.
Speaker Change: And more than enough room for two products and we still really like happy campaigns profile and thank the state of Connecticut team is going to do a great job with it.
Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open.
Great. Good morning, Thanks for taking the questions two product ones for me.
Terrance Coyne: Our royalties are calculated on the sale to the third party. As such, the tariff-bearing import of the product occurs upstream of the royalty-bearing sale.
Obviously, it's still early days on the lift truck launch, but Terry you mentioned that your guidance contemplates a range of scenarios. So just wondering.
Speaker Change: Thank you operator next question please.
Next question comes from Geoff Meacham with Citi. Your line is open.
Great Hey, guys. Good morning, Thanks for the question just.
Terrance Coyne: To close, we have had a great start to the year and we expect to deliver another full year of strong financial performance in 2025.
Where this initial quarter falls relative to your expectations. If you could elaborate at all there and then the second one is Kansas iOS received a less restrictive rems from the FDA as I know Youre aware.
Speaker Change: Just had a couple.
Speaker Change: Terry or Pablo and when you look at Slide 16, you know share repurchases were pretty impactful for the stock and it wasn't a big use of cash I guess the question is can you talk about where you are in the cycle on capital deployment. I know you can do both new deals and buybacks, but what informs the decision to go big on <unk>.
Pablo Legorreta: With that, I would like to turn the call over to Pablo. Thanks, Terry. Let me begin my concluding remarks by saying how pleased I am with our performance so far in 2025. We delivered double-digit growth, we strengthened our exciting development stage pipeline, and our dynamic capital allocation framework allowed us to buy back stock at an attractive price for our shareholders. We also announced the acquisition of our external manager, which we expect to deliver multiple benefits for shareholders, and we're on track to close the transaction in the current quarter.
Just thoughts on that.
Head of a and after Kimpton FDA decision and launch there and how important it is or maybe less important now in terms of differentiation on the Rems side as you guys thought about the opportunity for avid Camden. Thank you.
Speaker Change: Versus the other.
Speaker Change: And then a second question for Marshall and I know, we always ask about how your process your diligence process.
Okay.
Sure so on electric.
Speaker Change: Evolves for royalty deals it does seem like you've gone after.
It's still very early days here and.
Speaker Change: Late more first in class unmet need more novel mechanisms.
We've obviously been following it closely we looked at.
A number of different scenarios.
Speaker Change: Especially with the tube hot in today, but it is that an intention I think to the to the portfolio going forward. Thank you.
We were thinking about this year and also the long term.
Pablo Legorreta: On my final slide, I want to share my excitement for our upcoming Investor Day on September 11th in New York City. My team and I are looking forward to providing an update on our plans to drive shareholder value creation through leveraging our unique business model and capabilities in the large and growing market for funding biopharma innovation. We think it's a compelling story, and we hope you will be able to join us.
But I think the big picture.
Is for US is that we continue to expect.
Speaker Change: Yes, so thanks for the question I'll actually.
Speaker Change: So you can take the question on capital allocation and then Marshall.
Under any outcome.
Related to royalty rates that the vertex CF franchise will continue to be a major contributor.
Speaker Change: Yes, Jeff so on capital allocation and share repurchases.
Speaker Change: As we've mentioned it.
Speaker Change: It's dynamic and so we were really happy to buyback are you know as much of our stock as we did in the first quarter.
Two our top line over the long term and I think that's a function of that.
Pablo Legorreta: With that, we will be happy to take your questions. Thank you, Pablo, and we'll now open up the call to questions.
The amazing data.
Speaker Change: At what we think are really attractive prices and I think overtime.
Amazing experience that patients have had with trade CAFTA and the strength of that of that product and brand.
Unknown Executive: Operator, please take the first... Thank you.
Speaker Change: We'll continue to look at the relative.
And you know I think that.
Unknown Executive: If you'd like to ask a question, please press star 1. If your question hasn't been answered and you'd like to remove yourself from the queue, please press star one one again.
Speaker Change: <unk> share price relative to intrinsic value and also also relative to the.
No matter what happens we continue to feel really good about about our position on.
The CF franchise.
Speaker Change: The royalty opportunities.
Yeah.
Hardik Parikh: Our first question comes from Chris Scott with J.P. Morgan. Your line is open. Hey, this is Hardik Parikh at J.P. Morgan for Chris Schott.
Speaker Change: And it will continue to be dynamic I think.
And then tourists good morning, too quickly on the App you can see an opportunity. So I think first of all just a start just start at the top we remain really excited about about the potential for Appy campaign and are really happy to have it as a part of the portfolio specifically on the ramp.
Over time.
Speaker Change: If we continue to operate in the upper left quadrant.
Speaker Change: On slide 17, I think it will be a balanced approach and where we have luckily a lot of financial capacity to do both share repurchases and royalty acquisition.
Pablo Legorreta: I just wanted to ask about, in terms of the investment environment and opportunities, how has the regulatory and the kind of policy uncertainties of late kind of impacted the dealmaking environment from your side, in terms of the assets you consider or how you evaluate risk? And then just a second part is just any kind of updates in terms of the Foretex cystic fibrosis portfolio negotiations in terms of the arbitration timeline. Thank you. Yes, thanks for your question.
Speaker Change: To update you when we first looked at this it was always a scenario, we contemplated even if potentially likely scenarios that ramp in this space would evolve as you know as.
Speaker Change: And if we think that that is going to be driving the most value for shareholders.
Speaker Change: Well that will pursue there.
Speaker Change: And Jeff on on your on the second part of your question. So overall no no change in our approach and I think you've heard us talk before that our core process is looking for products to add to the portfolio does that bring benefits to two patients.
Speaker Change: The market got and regulators got more experience with the safety profile through our investments over the years, we've seen multiple precedence of presence of that happening sometimes faster sometimes slower. So we always anticipated that was certainly a possibility. So are and so what that meant was our core thesis and view was.
Pablo Legorreta: Chris, why don't you take the first one and then Terry can talk about the CF situation. Sure. Thanks for the question. The pipeline remains very robust. You know, we, as a reminder, you know, we've invested about $12 billion in deployed since our IPO, and we've announced transactions of over $15 billion. And our in-depth reviews have gone up significantly since 2019, almost 150%. So we, you know, the environment's very strong for alternative forms of capital. And that remains true through the first quarter. Obviously, there's a lot of policy uncertainty, but that's not really impacting our opportunity set.
Speaker Change: To physicians to the system in some way and I think we tried to be flexible in our thinking about how how products. How how we can meet that how we can meet that definition. So certainly first in class.
Speaker Change: That.
Speaker Change: We thought the HCM hypertrophic cardiomyopathy market with Big insurance, we had had more than enough room for two products and we still really like happy campaigns profile and speak the same kinetics team is going to do a great job with it.
Speaker Change: It is something that is important and we and we certainly.
Speaker Change: <unk> to invest in first in class product, but you know what that core discipline of things that bring together both.
Speaker Change: Thank you operator next question please.
Speaker Change: But both great science, great benefit for patients and being with a team that can maximize the value will continue to drive our investments and so you know I think we've talked about a few with the profile that you mentioned lately, but I think overall our core approach remains the same.
Speaker Change: Next question comes from Geoff Meacham with Citi. Your line is open.
Geoff Meacham: Great Hey, guys. Good morning, Thanks for the question.
Speaker Change: Just had a couple of carrier Pablo and when you look at Slide 16, you know share repurchases were pretty impactful for the stock and it was a big use of cash I guess the questions can you talk about where you are in the cycle on capital deployment. I know you can do both new deals and buybacks, but what informs the decision.
Pablo Legorreta: And we think that's going to show through for the remainder of the year.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thanks, Josh Operator next question. Please. Thank you. Our next question is Jason <unk> with Bank of America Securities. Your line is open.
Terrance Coyne: And then on Vertex, there is, we have no update at this time. And we continue to feel very strongly about our position that deuterated Kalydeco is the same as Kalydeco, but there is no update at this point on any potential arbitration.
Geoff Meacham: To go big on one versus the other.
Speaker Change: Hey, guys.
Jason: Thanks for taking my questions. Two from me just on Echo pipe Pam I'm wondering if you can contextualize a little bit the clinical benefit in this group of patients and do you see parallels at all to this market opportunity and say tardive dyskinesia and other movement disorder I know that.
Geoff Meacham: And then a second question for Marshall and I know, we always ask about how your process your diligence process.
Geoff Meacham: <unk> for royalty deals it does seem like you've gone after.
Speaker Change: Late more first in class unmet need more novel mechanisms.
Unknown Executive: Thank you.
Mike Nedelcovych: Operator, next question, please. Our next question comes from Mike Nedelcovych with TD Cowan, your line is open. Thank you for the questions.
Speaker Change: Especially with the tube hot today, but is that an intention I think to the to the portfolio going forward. Thank you.
Jason: At one point the <unk> inhibitors are being developed for Tourettes and just wondering generally speaking how to think about adoption rates and.
Speaker Change: Yes, so thanks for the question I'll actually.
Mike Nedelcovych: I have one follow up and then two questions. So my first follow up actually relates to tariffs. It sounds like there's no way that the accounting for tariffs could directly affect the royalties owed to Royalty Pharma. But are you aware of any methods that pharma may use to offset tariffs that could impact royalties? And maybe that would be either positive or negative.
Speaker Change: Taking the question a couple of location and when Marshall.
Jason: Pricing at a high level, if you think that T D might be a good market comp.
Speaker Change: Yeah, Jeff so on capital allocation and share repurchases.
Jason: And then.
Jason: On the vertex issue. My question is really is there any amount of time.
Speaker Change: As we've mentioned it.
Speaker Change: It's dynamic and so we were really happy to buy back as much of our stock as we did in the first quarter.
Jason: Inspired that if you did not take action when you forego ability to bring a claim to dispute resolution I'm just wondering if there's any timeline on that thanks.
Mike Nedelcovych: And then my first question relates again to the policy environment. You noted policy uncertainty. It seems as though that could present a potential opportunity to Royalty Pharma, you know, particularly in academia and nonprofits as well. The need for alternative sources of funding has quickly become urgent. Is this an area where Royalty Pharma could step in in a way it hasn't in the past?
Speaker Change: At what we think are really attractive prices.
Speaker Change: I think overtime, we will.
Speaker Change: Continue to look at the relative.
Jason: Yeah.
Speaker Change: Sure Marshall why don't you pick the threads question for the CFO question.
Speaker Change: Share price relative to intrinsic value and also also relative to the.
Speaker Change: Sure So Jason Thanks for the question.
Speaker Change: The royalty opportunities.
Speaker Change: Overall, the way I would the way I would think about it is.
Speaker Change: And it will continue to be dynamic I think.
Speaker Change: Is that you know that this is a market that as we mentioned in the prepared remarks, you hadn't seen new new innovation in a very long time and the options that are available to both adults and parents of.
Speaker Change: Over time.
Speaker Change: If we continue to operate in the upper left quadrant, AR, which was on slide 17, I think it will be a balanced approach and where we have luckily a lot of financial capacity to do both share repurchases and royalty acquisitions.
Mike Nedelcovych: And then my last question is a product related one on Ecopipam. You lay out a very nice rationale and outlook for this agent in Tourette's. Given the opportunity, why do you think that this indication and possibly even this product is not being pursued by larger pharma companies, at least so far in any visible way?
Speaker Change: Children with Tourettes are either very old drugs or anti psychotics that were that were repurposed for for treating tourette's as well. So I think the I think there is a lot of interest in this space and amongst physicians and patients and parents for.
Speaker Change: And if we think that that is going to be driving the most value for shareholders. That's the strategy that will that will pursue there.
Unknown Executive: Thank you.
Unknown Executive: Sure, thanks for the question.
Pablo Legorreta: Maybe I'll start by just addressing your question about policy and how that might benefit Royalty Pharma. And then Terry will take the question on tariffs and Marshall the question on duress. So with respect to policy, You're right in indicating that there is a significant concern about the proposed cuts to NIH funding. I think the Trump administration, in the budget that was just released I think a week ago, is proposing a cut of about $20 billion from $47 billion to $27. I believe it's a negotiating position with Congress and that at the end the cuts will not be that severe.
Speaker Change: And Jeff on on your on the second part of your question. So.
Speaker Change: Overall, no no change in our approach and I think you've heard us talk before that our core process is looking for products to add to the portfolio does that bring benefits to two patients to physicians to the system in some way and I think we try to be flexible in our thinking about.
Speaker Change: For new for new options here.
Speaker Change: The TD market is.
Speaker Change: It is certainly an interesting one and I think maybe an example of one where eight where a new treatment option can lead to the growth and.
Speaker Change: How how products how how we can meet that how we can meet that definition. So certainly first in class.
Speaker Change: And focus on it and investment and it can lead to the growth of what ultimately ended up being a significant commercial opportunity. So we're we're certainly what we're certainly you know we think that that's an interesting one to think about won't comment on pricing, that's certainly something for for the MLS team.
Speaker Change: It is something that is important and we and we certainly like to invest in first in class products, but that core discipline of things that bring together both.
Pablo Legorreta: I just came back from the Milken conference and there was a lot of discussion at the conference, you know, openly and then in private rooms with, you know, the former head of NIH and many university presidents and, you know, really trying to see how they're organizing to actually, you know, present the position to the government that really, I think the message is, you know, the U.S. has been the leader in medical research for many, many decades and, you know, reducing the investment in NIH is not good because we might end up ceding the leadership that the U.S.
Speaker Change: 222 to ultimately make a decision on but we're certainly excited about this.
Speaker Change: But both great science, great benefit for patients and being with a team that can maximize the value will continue to drive our investments and so you know I think we've talked about a few with the profile that you mentioned lately, but I think overall our core approach remains the same.
Speaker Change: And then Jason on your other question, we can't comment on the timing of any potential dispute with fair tax.
Speaker Change: Yeah.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you I'm showing no further questions I'd like to turn the call back over to Pablo for closing remarks.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thanks, Geoff Operator next question. Please. Thank you. Our next question is Jason <unk> with Bank of America Securities. Your line is open.
Speaker Change: Thank you operator, and thank you to everyone on the call for your continued interest and royalty pharma do you have any follow up questions. Please feel free to reach out to George.
Jason: Hey, guys. Thanks.
Speaker Change: Thanks for taking my questions.
Speaker Change: Two for me just on Echo pipe am I'm wondering if you can contextualize a little bit the clinical benefit in this group of patients and do you see parallels at all to this market opportunity in tardive dyskinesia and other movement disorder I know that.
Speaker Change: Thanks, everyone.
Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.
Pablo Legorreta: has to other regions of the world, Europe, and and China. And in terms of the uncertainty in The markets and, you know, there's other aspects of that, that could be beneficial to us because we have, as we have noted in the past, the U.S. biotech industry, you know, a big part of the R&D ecosystem. which comprises about 8,000 companies worldwide. What we have highlighted is that there's about a trillion dollars of capital required by the unprofitable biopharmace, which are really the biotech over the next decade. to essentially move their pipelines along from phase 1 to phase 2, phase 2 to phase 3, and then approval.
Speaker Change: At one point the <unk> two inhibitors are being developed for Tourettes and just wondering generally speaking.
Speaker Change: How to think about adoption rates and.
Speaker Change: Pricing at a high level, if you think that TD might be a good market comp and then you know on the vertex issue. My question is really is there any amount of time that transpired that if you did.
Speaker Change: <unk> did not take action when you forego ability to bring a claim through dispute resolution I'm just wondering if there's any timeline on that.
Speaker Change: Yeah.
Marshall: Sure Marshall why don't you pick the threads question for the CFO question sure.
Jason: Sure So Jason Thanks for the question.
Speaker Change: Overall, the way I would the way I would think about it is.
Speaker Change: Is that you know that this is a market that as we mentioned in the prepared remarks, you hadn't seen new new innovation in a very long time and the options that are available to both adults and pair.
Pablo Legorreta: And of that $1 trillion number over the next decade, in five years, we estimate that it's around $450 to $470 billion of capital that is needed. This part of the ecosystem, as you know, the biotech, are much more dependent on capital markets to fund the pipeline. And it makes it more difficult in the current environment. So, you know, that obviously creates an attractive opportunity for Royalty Pharma to step in and provide the, you know, needed capital to these companies. And we're excited about that part of our business, as you know, the synthetic Royalty part of our business, synthetics, which we invented over a decade ago.
Speaker Change: Parents of.
Speaker Change: Children with Tourettes are either very old drugs or anti psychotics that were that were repurposed for for treating tourette's as well. So I think the I think there is a lot of interest in this space and amongst physicians and patients and parents for.
Speaker Change: For new for new options here.
Speaker Change: The TD market is.
Speaker Change: It is certainly an interesting one and I think maybe an example of one where eight where a new treatment option can lead to the growth and.
Pablo Legorreta: And it's been a large, large and growing part of our capital deployment.
Terrance Coyne: So I'll stop there and then, you know, ask Terry to talk about tariffs and Marshall about Tourette's.
Speaker Change: And focus on it and investment and it can lead to the growth of what ultimately ended up being a significant commercial opportunity. So we're we're certainly what we're certainly you know we think that that's an interesting one to think about won't comment on pricing, that's certainly something for for the MLS team.
Terrance Coyne: Sure. So on tariffs. As I mentioned in our prepared remarks, we're in the fortunate position where we do not expect much of an impact at all on any potential tariffs, just as a result of how the supply chain typically works.
Speaker Change: 222 to ultimately make a decision on but we're certainly excited about this.
Terrance Coyne: In terms of tools that pharma would use, potential tools to offset tariffs, it's really tough for us to speculate at this time. And so I think it's just early days there. But overall, we feel very good about our business and our ability to have minimal impact from tariffs.
Speaker Change: And then Jason on your other question.
Speaker Change: Can't comment on the timing of any potential dispute with fair tax.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you I'm showing no further questions I'd like to turn the call back over to Pablo for closing remarks.
Speaker Change: Thank you operator, and thank you to everyone on the go for your continued interest and royalty pharma do you have any follow up questions. Please feel free to reach out to George.
Marshall Urist: And Mike, I want to just quickly on your question on Tourette's, you know, I think taking a step back, this is this investment, a potential opportunity here, I think is highlights one of the strengths of our model, which is the ability to identify underappreciated or potentially overlooked and underserved markets like like a Tourette's syndrome. And I think it, it brings together the breadth of our platform, our ability to really dig in and do proprietary analytics to gain conviction in the market opportunity, because it hasn't, to your point, you know, enjoyed the focus of much of the biopharma industry.
Speaker Change: Thanks, everyone.
Speaker Change: Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hmm mm.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: [music].
Marshall Urist: So, you know, we think this is, we think this is exciting.
Speaker Change: Hum.
Marshall Urist: And, you know, I'm proud of the work we did here and look forward to finding more of these in the future. Thank you, Michael.
Terence Flynn: Operator next question please. Thank you. Our next question comes from Terence Flynn with Morgan Stanley. Your line is open. Great. Good morning. Thanks for taking the questions. Two product ones for me. You know, obviously, it's still early days on the LiftTrick launch. But, Terry, you mentioned that your guidance contemplates a range of scenarios.
Terrance Coyne: So, just wondering, you know, where this initial quarter falls relative to your expectations, if you could elaborate at all there. And then, the second one is Camzaios received less restrictive REMS from the FDA, as I know you're aware. Just thoughts on that ahead of an Aficamptin FDA decision and launch there, and how important it is, or maybe less important now, in terms of differentiation on the REMS side, as you guys thought about the opportunity for Aficamptin. Thank you. Sure, so on a lift track, it's still very early days here and we've obviously been following it closely.
Terrance Coyne: We looked at a number of different scenarios when we were thinking about this year and also the long term. But I think the big picture for us is that we continue to expect, under any outcome related to royalty rates, that the Vertex CF franchise will continue to be a major contributor to our top line over the long term. And I think that's a function of the amazing data and the amazing experience the patients have had with Trikafta and the strength of that product and brand. And I think that no matter what happens, we continue to feel really good about our position on the CF franchise.
Marshall Urist: And good morning. So quickly on the AFI Campton opportunity. So, you know, I think, first of all, just to, you know, start, start at the top, we remain really excited about about the potential for AFI Campton, and, you know, are really happy to have it as a part of the space would evolve as, you know, as sort of the market got and regulators got more experience with the safety profile, you know, through our investments over the years, we've seen multiple precedents of precedents of that happening, sometimes faster, sometimes slower. So, you know, we always anticipated that was certainly a possibility.
Marshall Urist: So our, and so what that meant was our core thesis and view was that, you know, we thought the HCM, hypertrophic cardiomyopathy market, was big, and certainly had, you know, had more than enough room for two products. And, you know, we still really like AFI Campton's profile, and think the cytokinetics team is going to do a great job with it.
Geoff Meacham: Our next question comes from Geoff Meacham with Citi. Your line is open. Great. Hey, guys. Good morning. Thanks for the question. Just had a couple.
Geoff Meacham: Terry or Pablo, when you look at slide 16, you know, share repurchases were pretty impactful to the stock and it was a big use of cash. So I guess the question is, can you talk about where you are in the cycle on capital deployment? I know you can do both new deals and buybacks. But what informs the decision to go big, you know, on one versus the other?
Marshall Urist: And then a second question for Marshall. I know we always ask about how your process, your diligence process evolves for royalty deals. It does seem like you've gone after, of late, more first in class, unmet need, more novel mechanisms, especially with the two you've highlighted today. But is that an intention, I think, to the portfolio going forward?
Terrance Coyne: Thanks. Yeah, so thanks for the question.
Terrance Coyne: I'll actually ask Terry to take the question on capital allocation and then Marshall. Yeah, Geoff, so on capital allocation and share of our purchases, as we've mentioned, you know, it's dynamic. And so we were really happy to buy back our, you know, as much of our stock as we did in the first quarter at what we think are really attractive prices. And I think, you know, over time, you know, we'll continue to look at the relative, you know, share price relative to intrinsic value and also relative to, you know, the royalty opportunity. and it will continue to be dynamic.
Terrance Coyne: I think, you know, share, over time, if we continue to operate in the upper left quadrant, which was on slide 17, I think it will be a balanced approach. And we're, we have, luckily, a lot of financial capacity to do both share purchases and royalty acquisitions. And if we think that that, you know, is going to be driving less value for shareholders, that's the strategy that we'll pursue there.
Marshall Urist: And Geoff, on the second part of your question, so overall, no change in our approach. And I think you've heard us talk before that our core process is looking for products to add to the portfolio that bring benefits to patients, to physicians, to the system in some way. And I think we try to be flexible in our thinking about how products, how we can meet that, how we can meet that definition. So certainly, first-in-class is something that is important, and we certainly like to invest in first-in-class products, but that core discipline of things that bring together You know, both great science, great benefit for patients and being with a team that can maximize the value, you know, will continue to drive our investments.
Marshall Urist: And so, you know, I think we've talked about a few with the profile that you mentioned lately, but I think overall, you know, our core approach remains the same.
Unknown Executive: Okay, thanks guys.
Jason Gerberry: Thank you. Our next question is Jason Gerberry with Bank of America Securities. Your line is open. Hey guys, thanks for taking my questions. Two for me, just on Ecopipam, I'm wondering if you can contextualize a little bit the clinical benefit in this group of patients. And do you see parallels at all to this market opportunity and say Tardive Dyskinesia, another movement disorder? I know that at one point the VMAT2 inhibitors are being developed for Tourette's and just wondering, generally speaking, how to think about adoption rates and pricing at a high level if you think that TD might be a good market comp.
Jason Gerberry: And then, you know, on the Vertex issue, my question is really, is there any amount of time that transpires that if you did not take action, then you forgo ability to bring a claim through dispute resolution? I'm just wondering if there's any timeline on that. Thanks.
Marshall Urist: Sure. Marshall, why don't you take the Tourette's question and Terry, the CFS question. Sure. So Jason, thanks for the question. I think overall, the way I would think about it is is that, you know, this is a market that, as we mentioned in the prepared remarks, you know, hasn't seen new innovation in a very long time. And the options that are available to both adults and, you know, parents of children with Tourette's are, you know, either very old drugs or antipsychotics that were, you know, that were repurposed for treating Tourette's as well. So I think the, you know, I think there is a lot of interest in this space and amongst, you know, physicians and patients and parents for new options here.
Marshall Urist: The TD market is certainly an interesting one, and I think maybe an example of, you know, one where, you know, a new treatment option can lead to the growth and, you know, of and focus on it and investment in it can lead to the growth of what ultimately ends up being a significant commercial opportunity. So we're certainly, you know, think that's an interesting one to think about.
Marshall Urist: Won't comment on pricing. That's certainly something for the MLX team to ultimately make a decision on, but we're certainly excited about this.
Terrance Coyne: And then, Jason, on your other question, we can't comment on the timing of any potential dispute with Virtex. Okay, thanks guys.
Unknown Executive: Thank you. I'm sure no further questions.
Pablo Legorreta: I'd like to turn the call back over to Pablo for closing remarks. Thank you, operator, and thank you to everyone on the call for your continued interest in Royalty Pharma. If you have any follow-up questions, please feel free to reach out to George. Thanks, everyone. Thank you for your participation.
Unknown Executive: This does conclude the program and you may now disconnect.
Unknown Executive: Everyone have a great day.