Q2 2025 Royalty Pharma PLC Earnings Call

Ladies and gentlemen, thank you for standing by welcome to royalty Pharmacy, second quarter 2025 earnings conference call. I would like now to turn the conference over to George graphic. 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. Farmer's. Second 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-free.

Moving to slide 3. I would like to remind you that information presented in, this call contains 4 looking statements. That involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially from these statements.

We refer you to our most recent 10K on file, with the SEC for description of these risks.

All 4 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.

And with that, please Advance the slide for

Our speakers on the call today are Pablo Legorreta, Founder and Chief Executive Officer; Marshall Urist, EVP, Head of Research and Investments; 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 financials.

Following concluding remarks on Pablo, we will hold a Q&A session in which we will also be joined by Chris Hite, EVP and Vice Chairman. And with that, I'd like to turn the call over to Pablo.

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

Slide 6 summarizes our strong business momentum in the second quarter.

In terms of the financials, we delivered 20% growth in portfolio receipts. Our Top Line to 727 million and 11% growth in royalty, receipts to 672 million. This was ahead of the guidance. We provided last quarter for the for portfolio. Receipts of 700 to 725 million due to the strength of our Diversified portfolio.

Turning to Capital allocation we purchase. Another 8 million shares in the second quarter. Taking our total share repurchase this year to 1 billion at the same time. In the second quarter, we deployed capital of just under 600 million on value, creating royalty transactions.

Looking at our portfolio, we completed the acquisition of our external manager which combined our leading role to portfolio with our valuable investment platform to become an integrated company. An important milestone in our evolution,

In addition we announced a grind break groundbreaking collaboration with Revolution medicines which we believe represents a new funding Paradigm for Innovative biotech companies. Under this agreement we will provide up to 2 billion of flexible funding anchored by a synthetic royalty. On the exciting phase 3, oncology therapy that I saw direct sun res.

We also received encouraging clinical news. On several portfolio therapies, including positive phase 3 results for Giles for delve and first-line metastatic triple negative breast cancer.

Lastly, we are pleased to raise a full year 2025 Topline guidance. We now expect expect portfolio receipts to be between 3.05 and 3.15 billion which represents growth of around 9.

To 12%.

We're also improving our guidance for full year, operating and professional costs to range to a range of 9 to 9 and a half percent of, for further receipts, compared with around 10% previously, this reflects immediate cost savings

of our internalization transaction.

Sir will provide further guidance on the significant savings in operating and professional costs for the remainder of the year and beyond. Consistent with our standard practice, our guidance is based on our current portfolio and does not include the benefit of any future transactions.

Systems track record of averaged double-digit growth since our IPO. As I noted earlier, we delivered 11% growth in royalty, receipts in the second quarter, this takes us to 11% growth in the first half of 2025, which supports our confidence in, delivering our updated full year guidance.

I would also highlight.

That we have delivered.

This impressive track record of consistent growth, irrespective of the economic and financial markets background.

This really demonstrates our ability to execute successfully and consistently against our strategy in the growing market for bio. For royalties, with that, I will hand it over to Marshall.

Thanks Pablo.

I want to focus today on our Innovative partnership with Revolution medicines.

Slide 9 gives a high-level view of the ordeal.

We will provide up to 2 billion dollars in long-term funding that will help the company aggressively pursue clinical development and commercialization of its practice changing therapy directs on raseed and Ras mutant pancreatic and lung cancers.

Of this amount 1.25 billion dollars is comprised of synthetic. Royalty funding including 250 million dollars. We've already paid upfront

The remaining $750 million is senior secured debt that becomes available. Over time, beginning with FDA approval,

royalty Pharma expects to generate an internal rate of return in the teams with Peak potential annual royalties in excess of 170 million. We in the street, see duracon raseed as a multi-block buster based on Stellar Phase 1 advocacy and we anticipate the first phase 3 readout in second line. Metastatic pancreatic cancer in 2026

at a broader level. We think this will serve as a blueprint for a new funding approach that allows the most Innovative biofarma companies to access large scale Capital while keeping full control of pipeline development and Global commercialization and retaining full strategic optionality.

Thus, capturing more value for shareholders.

Pablo use the term groundbreaking to describe this partnership and it's indeed getting lots of attention across the industry.

Now, let's turn to slide. 10 to take a, take a closer look at the detail.

What's really powerful about this agreement? Is both the scale and the flexibility. It is a true win-win for both Revolution medicines and royalty Pharma.

The royalty structure on duracon. Raseed provides an attractive risk reward for both of us with additional funding becoming available upon clinical and Regulatory progress as well as sales thresholds. Importantly, for our partner, most of this additional funding is optional and comes at a successively lower cost of capital.

On top of that, we'll receive royalties on a second pipeline therapy, sold on rasp once it once it is approved in an overlapping indication.

Duraxe and raseed consensus model show over. 7 billion dollars in worldwide sales by 2035 which translates to as much as 170 million in Peak annual royalties to royalty Pharma the full details of this transaction are shown in the appendix of this presentation.

the credit facility further scales, the capital available to Revolution medicines

It's tranche-based on achievement of product approvals and sales thresholds. So, it grows as the company grows. We have the flexibility to syndicate some or all of this 6-year loan with other investors.

Glide 11 gets to the core of why there is so much excitement surrounding duraxe and raseed. The unmet need in pancreatic cancer is profound according to the American Cancer Society. The 5-year survival,

It's just 13% and it's now the third leading cause of cancer related deaths in the US.

The opportunity is substantial with around 56,000, new pancreatic cancer, patients diagnosed each year. And for most chemotherapy is the only option.

Assuming success in Phase 3 Revolution medicines would have a significant first to Market advantage.

We see a similar dynamic in non small cell lung cancer where chemotherapy is the only option for second line treatment for most patients.

Here. Revolution medicine is currently enrolling a phase 3 study in the second and third line setting with primary completion expected by the end of 2027.

as I also noted, if development in other rats driven tumors succeeds, we also benefit

To summarize we think direct and Rapid can transform care for raspbian and Cancers especially in metastatic pancreatic cancer where patients desperately need new options. It's a high impact program with significant commercial potential and we are proud to be a part of it. With that, I'll hand it over to Terry.

Thanks, Marshall. Let's move to slide 13.

This slide shows how our efficient business model generates substantial cash flow to be reinvested.

A lot of Diversified portfolio.

The key drivers, were the strong performances of Boren ego, Trilogy of Rizzi, and troomi.

In addition, we benefited from a one-time payment of approximately $1 million in milestones and other contractual receipts, which was anticipated within our prior guidance.

This resulted in portfolio receipts, our top line of 727 million, which was growth of 20%.

As we move down the column.

Operating professional cost, equated to 12.9% of portfolio receipts.

This included approximately 35 million of 1 expense related to the internalization transaction.

Excluding this item, the ratio would have been just over 8% of portfolio receipts within our historical range.

Net interest was a small positive of 8 million in the quarter, reflecting the semiannual timing of our interest payment schedule with payments primarily in the first and third quarters, and the interest, and the interest we received for the cash on our balance sheet.

Moving further down the column. We have consistently stated that when we think of the cash generated by the business to then be redeployed and devalue enhancing royalties.

We look to portfolio cash flow, which is adjusted IBA. Less net interest paid.

This amount of the 641 million in the quarter equivalent to a margin of around 88%.

This reflects a high underlying level of cash conversion. And once again, underscores the efficiency of our business model.

Capital deployment in the quarter was 595 million.

This primarily included the 250 million Upfront for revolution medicines.

A 200 million manufacturing, Milestone payment related to add stin.

And R&D funding for lit of filament.

Lastly, our weighted average share count declined by 35 million shares, largely as a result of our share buyback program.

Slide 14 provides more detail on the evolution of our top line in the second quarter.

Royalty receipts which we consider our recurring. Cash inflows grew by 11% helped by the strength of our Diversified portfolio which I highlighted earlier.

I would also note that 1 of the drivers. This quarter was born in ego which was 26 million in royalty receipts after being launched by servier only last August

We are excited to see the profound impact. It is having for Goma patients as a quick quickly, becomes 1 of our top royalties, and is on track to rapidly become a Blockbuster.

Portfolio, receipts, which grew by 20% in the quarter benefited from the 1-time 1-time payment that I described earlier and is slightly ahead of the range. We guided to, for the quarter.

This takes our Topline growth through the first 6 months to 18% and supports our confidence in delivering another strong year of growth.

Slide 15 shows that we continue to maintain significant financial capacity to execute our strategy in total. We have access to approximately $3.4 billion through a combination of cash on our balance sheet, the cash our business generates, and access to the debt markets.

at the end of the second quarter, we had cash and equivalents of 632 million.

In terms of our borrowing position, we have investment grade debt outstanding of 8.2 billion.

Our leverage now stands at around 3 times total debt to evda.

Or 2.7 times on a net basis, we also have undrawn Financial capacity from our 1.8 billion dollar revolver.

Lastly, had you heard earlier?

Under our Dynamic Capital allocation framework. We continue to take advantage of the fundamental disconnect in our share price and repurchase shares in the quarter. Taking our total repurchase activity to 1 billion dollars for the first 6 months.

We also grew our dividend and continued to deploy capital on attractive, royalty deals.

In total, we returned 1.26 billion dollars to shareholders in the first 6 months, a record for royalty Farms.

On slide 16. We are raising our full year 2025 Financial guidance.

We now expect portfolio receipts to be in the range of $3.05 billion to $3.15 billion.

Let me walk you through our assumptions.

Starting with portfolio receipts. We are expecting growth of around 9% to 12% up from 6% to 12%, previously, based on the strong momentum of our Diversified portfolio.

this takes into account the recent launch of pnac promacta generics, as well as a range of scenarios for the launch of the lift Trek and the impact of Medicare Part D redesign

Royalty acquisitions.

Turning to operating costs.

Payment for operate payments for operating a professional costs are now expected to be 9% to 9.5% a portfolio receipts in 2025 down from 10% in our previous guidance.

Keep in mind that in the first half of this year, operating in professional costs were greater than 12% of portfolio. Receipts driven by the 1-time expenses related to the internalization and the sale of the morphosis development funding bonds.

Collectively, these items are expected to impact full year cost by approximately 70 million dollars, or a little more than 2% of portfolio receipts.

we expect operating a professional cost to be between 5% to 6% and the second half of the year as we begin to realize the full benefits of the internalization

interest paid in 2025 is now expected to be around 275 million.

With around 126 million to be paid in the third quarter and 8 million in the fourth quarter.

This guidance includes the additional quarterly interest expense for the debt assumed as part of the internalization, but does not take into account interest received on our cash balance, which was $21 million in the first half.

In summary we have delivered a strong second quarter and first half, which puts us on track to deliver another full year of excellent financial performance in 2025 as reflected in our raised guidance. Now before I hand it over to Pablo, I should also note that we did not receive from vertex the full royalty to which we are entitled on a lift Trek specifically the royalty related to duter ivacaftor.

As we have previously stated, We believe We entitled, we are entitled to a royalty of 8% on sales of the lift Trek. However, vertex only paid us a royalty of 4%, as a result. We commenced the dispute, resolution process, contemplated by the agreements relating to our royalties on vertex, statistic fibrosis products.

That Pro that process is subject to confidential confidentiality obligations and we. And so, we do not expect to provide any updates until the matter matter is resolved, which we anticipate by around the end of 2026.

We continue to receive our full royalties, on tricapa kaleido, Sim Deco and or campy.

And with that, I would like to hand the call back to Pablo.

Thanks Terry to conclude. I am delighted with our strong performance so far. In 2025, we have again, delivered double digit growth. And we've entered into a groundbreaking partnership and acquired our royalty and 1 of the most exciting oncology Assets in clinical development. On top of that this, we significantly increased the return of capital to our shareholders. And we're now an integrated company with all the benefits that it brings to our shareholders and our people,

On, slide 18. I want to highlight an important event in partnership with MIT that took place in the second quarter and reflects a role in advancing. The healthcare ecosystem. In June, we sponsored our fifth annual accelerating Bio Innovation conference. The aim of this 3-day conference is to facilitate discussions on translational, science and Drug development, and to connect diverse parties in the biofarma. Ecosystem. This year, we had a tremendous turnout of nearly 350. Life Sciences Executives, including 127 CEOs 79 scientists and 4 Nobel laureates, the audience was balanced between industry Academia and investment professionals. As with our previous conferences, the feedback we received was hugely positive and sensitive up. Well for future dialogue with many of the leading innovators in biofarma. This is another example of our win-win approach and keeps us front of mind for those seeking a partner to fund their innovation.

On my final slide. I want to remind you of our coming. Investor day on September 11th. We have an exciting agenda which will provide you with a comprehensive Deep dive into our plans to drive shareholder value Creation in the large and growing market for funding biofarma Innovation. We think it's a truly unique and compelling story and we hope you can join us with that. We will be happy to take your questions.

We will now open up the call to see questions. Operator, please take the first question. Okay, thank you. And to ask a question. Please press star, 1, 1 1 on your telephone, and wait for your name to be announced. If your question has been answered and you'd like to withdraw, please press star, 1 1 1 again, the first question comes from Chris shot with JP Morgan. Your line is open.

But could be a sizable amount of capital with obviously very attractive returns if it all works out. So should we think about this is kind of more like, 1-off type of transactions? Or can we think about royalty doing kind of a wider range of these kind of end-to-end type of of structures like this. Uh, my second question was on China, Innovation and how royalty is thinking about this seems like we're seeing a larger and larger percent of the industries, at least early stage pipeline coming from China. How do you think about this from a royalty perspective? So, specifically to these companies have the same royalty opportunities you've seen with, maybe more traditional us or european biotechs. And as a company, do you have the resources to diligence and develop relationships with some of these emerging uh companies? Thank you?

Chris, thank you for your excellent questions. And I'm going to take the first 1 and the last Marshall to take the second 1. So, uh, with respect to the revolution medicine, uh, transaction. It's incredibly exciting for us. And, um, as we, uh, shared with investors, uh, when we closed the deal in our press release, uh, we believe this is groundbreaking. It's a new paradigm. Uh for us for the industry for you know biotech exciting biotech company seeking funding because it really puts royalty Pharma as a very viable alternative to a big Pharma partnership where companies typically give up a very significant portion of the economics, it could be 50/50 shared economics with a big Pharma partner often big farmers. Also take a much larger

The share of the xus economics because they have worldwide distribution. And, you know, they they um, when their discussion discussing transactions with biotechs, uh, they present that as a as a, you know, Advantage they have also what happens in this big Pharma Partnerships is that, um, you now have a partner that will have opinions and maybe in how in terms of how to develop the drug. Um and maybe their opinions do not coincide with the opinions of the biotechs management.

And it becomes complicated. So, uh, what's so interesting about this is that, um, we provided uh, funding at scale up to 2 billion dollars. Um, for this very exciting product and this great company with a fantastic management team, um, that, you know, uh, puts us it creates this win-win, uh, partnership with, with this company, but to more precisely. Um, you know, just a touch on on 1 of your, uh, questions is, uh, can we do more of this? And absolutely, we can, we're actually having active discussions with many other potential, um, you know, Partners, uh obviously, when something like this happens, um, people notice and they realize that, you know, they could be another Revolution medicines. Um, and you know, we do have the capacity to do many more. We have the capacity to, you know, analyze these deals and and um, you know negotiate

Later. And we're, we're very excited about this. And I don't see this as a 1-off, um, obviously transactions, you know, take time and, and for us to agree on terms with Partners, uh, it requires a lot of things that have to fall in place. Um, but I do expect that we will see more of this, um, in the coming years and that something that railed from us extremely well, positioned to do based on our scale cost of capital and also also knowledge 1. Very last thing that I will mention is that we've invested a lot of money over the last, you know. Um, 5 6, 7 years in data, um, and 1 of the things that we're doing is, uh, data that we acquire and then

Use it to analyze our investments but also on a data analytics team, uh, that is expensive. Um, and you know, it's it's great people that we've gathered, um, and we're using that uh, for our own benefit but also um, sharing that with our partners and again something that differentiates royalty Pharma from other Capital providers. Um, so I'll turn it. Uh, now over to Marshall, uh, to answer your second question.

Hey Chris, good morning. Thanks for the question on China. So no, it's a great question and it probably won't surprise you to hear that something. We've been focused on with that, we've been focused on for a while now. You know, I think we are really excited to see the new product development and the kind of globalization of biofarma.

Uh, Innovation, and what's happening in China is exciting and we are definitely focused on. Um,

Couple of points to make I think 1 is, um, definitely, we're excited to see this as a whole new source of, you know, both royalty creation, and new royalties for us to, uh, potentially invest in in the future. But then also, you know, there's definitely going to be opportunities over time to work directly with companies. Um, with companies there, like you've seen us do, like, like you're seeing us do here in, in, in, in the US and Europe. Um, so we're we're definitely excited about that and, you know, like I said, we've been focused on it for a while and we're already actively engaged in developing relationships there and potential Investments there. So I think it's a place you'll continue to see Focus From Us in terms of um

In terms of, uh, you know, new opportunities and, you know, something that we're excited to see as a part of our business in the future.

and the next question will come from Terence Flynn with Morgan Stanley, your line is open

Hi. Uh, thanks for taking the questions. Congrats on all the progress. Uh, I had 2. Um the first is you know there's been a growing focus on the bladder cancer Market. Given a number of innovative drugs that have been launched in our launching. I know you guys have some exposure there um with Ed still, it still a dren royalties. Um just wondering if you can disclose what that you know royalty is tracking that on a dollar.

Basis right now and then maybe how you see the non-muscle invasive segment of evolving, just given some um, upcoming, uh, competitors that might be entering. And then the second 1 is just on the, um, operating expenses is the 5 to 6% range that you talked about Terry for second, half of 25. Is that the the Run rate we should think about for 26. Um, and then, how are you thinking about additional share repos, uh, from here. Thank you.

Thanks for the question. So Terry, why don't you take this? Uh, question about operating expenses and then Marshall can talk about bladder cancer? Sure. So uh,

We yeah, we're we're we're now you know, starting to really see the benefits of the internalization on that on that sort of operating margin, um, with 5 to 6% of it. Uh, you know,

Portfolio overseas going to expenses in the second half of this year. Um, you know, I think that we haven't given guidance yet for next year, but we do feel like this is, you know, it's a strong Trend and and, uh, and you know, heading in a heading in a direction that will, you know, reach when we did the transaction. We said that we could ultimately get to 4 to 5%, uh, of of portfolio, receipts. And, you know, I think we're we're heading there. Um, so we feel really good about that. And then the question on, uh, on

Uh, Sheriff purchases.

Um, as we've discussed a number of times in the past, it's going to be very dynamic.

I think what we're really excited about right now and then and you you see it with the the revolution medicines deal is, is, you know, the opportunity to ahead of us. And so we're really excited about the pipeline and I think that we're going to try to strike the right balance. Um and look at our Capital allocation framework as sort of a a guidepost there. And look at the attractiveness of royalty deals and the attractiveness of of our share price relative to intrinsic value. And I, you know, we do feel really good about where the pipeline is

Right now. And so, I think that that's

We're very excited about.

And then Terence your question.

Oh, the second part of the question on at slagger and Karen. So, um, we have not disclosed the, the nominal royalties for that but I can certainly provide some thoughts on how how we thought about that market and how we see it developing. So, you know, we are excited to be a part of adalind and, you know, fairing has done great work. Um building this Market, this is a market that hasn't seen innovation in this area for some time. And I'm fairing is doing a good job. Um,

Live in the sense that, you know, as more companies are focused on this Market, um, we see it growing with patients, seeing multiple lines of therapy and certainly not a zero sum game in any way. And so we are excited about ads, still Adrian and excited to see how the, um, non-muscle invasive breast cancer Market. Develops from here.

Thank you. And the next question will come from Jason gurvi with Bank of America. Your line is open.

Hey guys. Um thanks for taking my question. Um maybe 1 more on the Rev Med deal. Um, curious

How important to The Upfront deal consideration? Was Frontline pedak. Um, you know, how you viewed de-risking of, uh, Dara, uh, combos with chemo, specifically in the Frontline feedback setting, uh, or is that kind of more, um, factored into the sort of the downstream optionality, uh, when you consider that and then, maybe just when we think about 2025,

Portfolio. Receipt guidance. Can you identify what is the single biggest variable on that 3%? Delta. Thanks.

Sure. Um so Marshall why don't you take the revolution medicine's question. Um and then Terry you can uh take the second question.

Sure hey Jason, good morning. So on the revolution medicine's deal and you know just want to reiterate you know, how excited we are both about this product, what it means for patients and you know, how Innovative and Innovative this deal is and you know, like 1 of the earlier questions, asked about we really see this as a new approach for for companies to develop and assess large scale for exciting drugs specifically on the first line question. So we are really excited about um,

About the first line opportunity. And I think certainly, um, you know, the the patient need there is just as great. And so we are excited to see, um, the revolution medicines develop at their, um, won't go into a, a lot of detail on that except to say, yes, that's something we are excited. We, we are certainly excited about, um, Beyond

beyond second line. And then finally, just as a, reminder 1 of the tranches of the synthetic royalty deal is based on positive phase 3 data in pancreatic cancer. So certainly, um, in first line pancreatic cancer. So certainly, that's something that was contemplated as as part of our deal.

Thanks.

And then Jason on your guidance. Question, we always try to look at a range of scenarios, um, when we're providing our guidance. And so some of the, some of the factors that I mentioned before are certainly the the you know promacta generic is 1 Part D, redesign FX, um, uh, you know, we we we really try to just kind of stress test. All of the, you know, potential sales scenarios for a lot of our products when we're doing that. So that's how we, that's how we came up with that range. Um,

yeah, that's that's that's basically it.

All right. Thanks guys.

Thank you. And the next question will come from Boomer rafit with that core. Your line is open.

Thanks for taking my questions, guys. I have several today, if that's okay. Um, maybe just step by step first, um, Terry, the you mentioned, um, obviously the change in how vertex is putting out the royalties now, um, I also see consensus tracking at about 900 million dollars in royalty payments to uh royalty Farmer for the foreseeable future set next. Several years, I guess how would you recommend? We think through that while you guys are in the arbitration process, um, secondly, maybe this is for Pablo and Marshall. Um, obviously congrats on the revmed deal and very intriguing, uh, structure of the deal around pancreatic data, pancreatic approval, Etc. But there's 1 thing, I can't seem to figure out which is why we're no tranches pegged to

The phase 3, lung cancer readout and who decided that was it rev met that decided that or was it royalty Pharma?

And then finally, on spinraza um durability. Um I'm biogen's obviously really emphasizing and so zionis the salon nurse in program which is the 1 to annual version of spinraza and it prompted me to sort of go back and see how you guys structured the transaction and at least based on what was put out there. It looks like it was specifically focused on which is spinraza. Um so would you guys have to buy into that? Just trying to think about how to think about the spinraza franchise durability? If I may

Sure, uh, good morning. So, on the first part of your question on the, um, tranches and why they were tied to pancreatic cancer. Um, I I wouldn't read anything into that about our views on lung cancer. We're certainly excited about that. Um, it was, you know, the the tranches and the triggers and the timing was really part of an extensive and collaborative discussion that we had with um that we had with uh with revmed about, you know, fitting the capital, and the Cadence of the capital coming in to fit their needs as they're thinking about their broader development program. So that was really the trigger and I think it's a good insight and a good question into how we develop these deals and these structures with our partners, um, so that so that that's the right way to think about that. And on, um,

It's been Raza. Um, on that 1. Yes, we have certainly been following the, um, we have certainly been been following the developments on the Next Generation, Um, and just a reminder that, you know, that on the spinraza. Um, remember that is a that royalty, depending on the pellek Carson outcome will will end at a certain point when we have, um,

When we have received when when essentially gotten our gotten our Capital back. So there is a limit, there is a limit on that royalty and then specifically on your next gen, let on the next gen. Let us come back to you on the offline on on the details on that 1. Um and and we can give you some more detail on the extent to which we have exposure to the next gen.

And then umer on on CF um just to sort of clarify when we look at our consensus we see 850 million dollars in 2026.

declining to 750 million dollars by 2030 uh as far as what investors should assume during the arbitration or during the dispute resolution process,

What we know right now is that we're getting a 4% royalty.

Um,

you know, I think that that that's what we know today. Um,

I think, you know, as this plays out, uh, you know, I think we, we'll, we'll just have to wait and see, but right now, it's a 4% royalty. We believe strongly that we are entitled to an 8% royalty, but we need to let this process play out Terry. Maybe you need to point out the guidance you gave of uh 850 going to 750 or 700. Um is based on what assumption in terms of the royalty rates um that's based on consensus estimates and based on what royalty Pharma consensus estimates. I

You know, I I don't know. It's a low royalty. Yeah I assume I assume that the royalty rate is that that that reflects the lower royalty the lower royalty rate. Yeah.

Obviously the outcome of of this dispute will determine what the actual royalt rate will be and you know, that will change this estimate.

Thank you very much, guys.

And the next question will come from Mike nettle, covich with TV Co and your line is open.

Hi, thank you for that question. I have 3, 1 is actually a follow-up on the vertex. Dispute in terms of timing, is end of 2026. The worst case scenario is it within the realm of possibility, for example, that this dispute is settled much earlier than that. There are other structural reasons why the arbitration absolutely must extend into 2026. That's my first question. My second question is on AIC Campton. Uh, Bristol is Kim Zios has been performing much better of late and I wonder how you interpret those Trends. Do you view them as positive for the market opportunity as a whole and likely to accrue to affic camptons benefit as well? Or do you think it might make the competitor more difficult to dislodge either way, in what ways do you think FAQ Campton might differentiate in the marketplace? And then my last question is actually on the ABI conference. Uh, it's very interesting. I'm curious if you might share with us 1 new thing that you learned at the conference about the industry that perhaps you have not heard in other videos.

Thank you.

Sure. So um, regarding the the timing estimate we gave you for the resolution of the vertex, uh, dispute. It's a conservative uh, time based on on a lot of data of how much time it takes for this disputes to get resolved and obviously, there's scenarios where this could get resolved, much quicker. Um, but we wanted to give you, you know, what is sort of

Um, and and that's why we, we guided conservatively and then Marshall can touch on the African. Um, uh, question.

Okay, great. Hey, Mike, good morning. So first of all, just to, um, confirm on umar's last question. So Umar to answer your question, is, yes, the next generation spinraza is included, um, as, as part of our deal. So, um, so you know, no, no concerns there on spinraza sustainability because it is, it is included and then Mike on Cameo. So yeah, we have been happy to see, um, you know, the the uptake of Cameo and I think, confirms our view of the, you know, of the market and the unmet need there, and the size of that market. And so, I think sets the stage for, um,

Sets the stage for the AI camp and launch nicely. So um, that's our view overall. And, you know, I think there's lots of parts to it. I think certainly, you know, having options in a market for Physicians and for patients is always a powerful thing. I think some of the ease of use factors um with AI camp in are certainly are are are certainly going to be viewed positively by physicians and then the, you know, the the set of data that set of kinetics is developing, um, is developing around the product will certainly be helpful. Like you saw the um, the beta, blocker comparison study that read out positively earlier, or earlier this year. So we remain really excited about application.

Camp in and you know the success of the success of camps is only confirms that for us. Thanks.

Thank you. And the next question is going to come from Ash Verma with UBS. Your line is open.

Hi. Uh, thanks for taking our questions. So, um, I wanted to ask about, uh, just broadly on the biofarma royalty Universe, uh, south of transaction between Healthcare royalty partners and KKR. I just curious to get your thoughts on how comp competition scaling up. Uh, impacts your ability to compete for new new royalties, uh, especially for large transactions.

Thanks.

Um, thank you for the question so it's not a surprise to us. We've actually known Healthcare royalty for probably 2 decades and, you know, know the team. Well know the people. Um, and it's not a surprise to us that um, they have now uh, been acquired by KKR. Uh, we expected that. Um, and you know what I would just say is that um it the competition has been out in the market for decades, um, and um, we are we know really well how to operate uh with uh, uh competitors. Um, the and you know, there's been other things that have happened recently. There was another fund that was raised billion dollars. Um, but I think, uh, a few things to just remind you of 1 is that Royal drama has

An incredible. Very, very different structure than the rest of the um, competitors. We have. We're a full integrated company.

With a very low cost of capital. Um,

You know, a whack of, you know, 7%, you know, made around 7% maybe a little bit higher. Um, and uh, uh, ah ah, ah, cost of debt, that is extremely extremely low. Um, you know, our, our overall cost of that is a little bit north of 3% and uh, obviously right need that will be slightly higher uh given the interest rates today but we also when you look at our debt, it's it's whether average duration of 13 years. So, you know, Royal trauma with our current structure gives us access to the biggest Capital markets in the world. The US Equity markets and also the biggest debt markets in the world where we can fund our business. Um, you know incredibly competitively, um it's really a cost of capital equivalent to to Big Pharma. Um, so that puts us in a very unique position, scale is another really important factor. Um, we're doing deals that are, you know, multi-billion dollars, sometimes as an upfront. Um, you know, we we've invested 2 billion dollars,

Um, in the British the uh, with PTC. Uh, in the past we bought our royalty anti, sorry for 2 billion a royalty in cystic fibrosis for you know close to 4 billion when you look at the 2 combined transactions, we did. Um,

They're not going to put, you know, their entire funds in 1 transaction, they will probably put 10, 15% of the size of the fund, in 1, transaction. And the other things that I think make us very unique is the, the team that we have at royalty Pharma, which is, you know, probably 1 of the biggest, uh, investment teams in life sciences. Um, that has been working, you know, in a very cohesive way with a great culture over, you know, decades. Um, and so we feel really, really good about um, how royalty Pharma is evolving and continues to evolve to stay ahead of the competition. Um, and again, you know, we, we welcome competition, it's good, you know, for, um, companies that are trying to, uh, do transactions and fund themselves to have multiple Alternatives and, you know, we we tend to to, you know, win, uh, when we like the assets because of the advantages, we have the low cost of capital, the scale and our relationship.

That's another really important thing that we build relationships with management teams over decades, but I'll stop there. Thank you for that question.

Thanks.

And the next question will come from Jeff Meacham with City, your line is open.

Hey guys. Uh thanks for the question. Uh, just have a couple want to get an updated view on on kind of policy and impact. I think when you look at you know what ultimately could impact net pricing and and then also consensus assumptions, its mfn and and perhaps PBM reform and we may get that by year end. So to what degree have you guys been? You know proactive here to to maybe assess the range of the impact.

And the second question, also, another 1 on competition in the space.

You know, does royalty still see high interest in in larger scale deals? I like more than a billion Pablo. This is where you guys are the most differentiated in. How would you rank synthetic deals?

As a strategic priority in this context, I think it used to be in the other top 1 to kind of get an update there. Thank you.

Yes, of course. So maybe just, uh, quickly on on competition. Um, you know, we we do, uh, believe that there will continue to be very large transactions in our space, um, you know, billion plus. Um, you know, they they are there's obviously fewer of those larger ones, um, than, you know, transactions in the 2550, 500 million dollar range where we have many of those per year. But what's interesting for me to see, uh, Jeff is that

You know, 10 years ago, um, you know, 15 years ago, it was actually rare to have a transaction that was multi-billion dollars. You know, it would happen once every couple of years, every 2 or 3 years, um

And now, it seems like every year we have a transaction of that size, um, you know, for an ego was around that, um, you know, 900 million plus. Um, so it's large. Um, and um, and you know, as, as I mentioned, um, you know, we had, you know, 25A, uh, which was over a billion dollars Trilogy a billion 3. Um, and um, and then you know the transactions with uh PTC that added up to about. Uh I think 2.1 billion so far. Um, so you know I I think it's becoming more common uh, that we have this you know, large billion dollar transactions every year. And I think I'm confident that that's going to continue because when I see, um, the royalties that are being created, um, you know when uh,

Licenses, uh, are put in place, there are large royalties, you know, High single digits low, double digit royalties. That, um, when you look at a product, that can be a multi-billion dollar product, those royalties will be worth, you know, a billion plus. And in some cases multiple billions, um, and I think what's also interesting again, going back to the China question and China strategy and

And we are royal trauma have been working on a Chinese strategy now for for some time and we think that's going to start to pay off. But when you look at at all of the licensing deals that are happening between

You know, Chinese companies that are generating great assets and Western companies.

This royalties are large and and some of them will be royalties in in in Blockbuster drugs, multi-billion dollar drugs, and they will be worth, um, you know, many, uh, billions of dollars. Um, so I think that's another new source of of potential investment for us and, uh, and we're excited about that. Um, and then there was the question on policy and mfn that Marshall will take

Hey Jeff. Yeah, thanks for the question on mfn and policy impact in general. So we've come at it in a couple different ways. I think, certainly, we're trying to stay as close to developments as we can with our advisors and Consultants on the policy side in DC to think about various scenarios and and what might happen. So, you know, I think staying informed um, is, is certain part of it and we've, we've, we've certainly been focused on that. And then second, you know, we we have been, you know, taking an approach that we had described before, which is a, you know, really a scenario based approach and thinking about, um, you know, a, a wide range of scenarios as we consider new Investments. But, you know, I I, I think the thing that we continue to stay focused on is first, you know, being uh, focused on the most high impact important medicines out there. Like, you saw us just do with Revolution medicines because regardless of what ultimately may happen. Um you know, we think those

Are are the medicines that are going to be most successful if they're helping patients. Um if they're helping patients in important ways, you know they they're going to be commercially successful as well. And then second just to remind everyone you know is this this kind of environment, you know it does highlight you know the advantages of just our flexible model and how we can focus our focus, our time and Investments and Innovation and on where the Innovation is most attractive.

But also respond to policy changes in real time and incorporate them certainly in real time in in, in, in to new Investments. So, something we continue to watch something. We certainly are focused on and continue to watch carefully.

Okay, thanks.

I show no further questions at this time, I would like to turn the call back over to Pablo for closing remarks.

Thank you, operator and thank. Thank you to everyone on the call for your continued interest in Royals Pharmacy. If any if you have any follow-up questions, please feel free to reach out to George gick and his team. Thank you very much.

This concludes today's conference calling, thank you for participating. You may now. Disconnect