Q2 2026 Dri Healthcare Trust Earnings Call

August 10, 2026

Speaker #1: Good morning, everyone. Welcome to DRI Healthcare's Q2 2026 earnings call. Listeners are reminded that certain statements made in this earnings call presentation, including responses to questions, may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws.

Operator: Good morning, everyone. Welcome to DRI Healthcare's 2026 Q2 earnings call. Listeners are reminded that certain statements made in this earnings call presentation, including responses to questions, may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward statements, please consult the MD&A for this Q, the Risk Factors section of the annual information form, and DRI Healthcare's other filings with Canadian securities regulators. DRI Healthcare does not undertake to update any forward-looking statements.

Speaker #1: Forward-looking statements involve risks and uncertainties, and as such, reliance should not be placed on these statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements.

Speaker #1: For additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward statements, please consult the MD&A for this quarter.

Speaker #1: The risk factors section of the Annual Information Form and DRI Healthcare's other filings with Canadian securities regulators. DRI Healthcare does not undertake to update any forward-looking statements.

Speaker #1: Such statements speak only as of the date made. Today's presentation also references non-GAAP measures. The definitions of these measures, and reconciliations to measures recognized under IFRS, are included in our earnings news release as well as in our MD&A for this quarter.

Operator: Today's presentation also references non-GAAP measures. The definitions of these measures and reconciliations to measures recognized under IFRS are included in our earnings news release, as well as in our MD&A for this quarter, both of which are available on our website and our SEDAR+. Unless otherwise specified, all dollar amounts discussed today are in US dollars. I want to remind everyone that this conference call is being recorded today, Monday, 10 August 2026. DRI quarterly results news release and the slides from today's call will be available in the investor page of the company's website at drihealthcare.com. I would now like to introduce Mr. Ali Hedayat, CEO of DRI Healthcare. Please go ahead, Mr. Hedayat.

Speaker #1: Both of which are available on our website and on Cedar Plus. Unless otherwise specified, all dollar amounts discussed today are in U.S. dollars. I want to remind everyone that this conference call is being recorded today.

Speaker #1: Monday, August 10th, 2026. DRI quarterly results news release and the slides from today’s call will be available on the investor page of the company’s website at drihealthcare.com.

Speaker #1: I would now like to introduce Mr. Ali Hidayat, CEO of DRI Healthcare. Please go ahead, Mr. Hidayat.

Speaker #2: Thank you, operator, and good morning, everyone. Thank you for taking the time to join us today. With me on the call are Naveen Jacob, our Chief Investment Officer, and Zahid Mawani, our Chief Financial Officer.

Ali Hedayat: Thank you, operator. Good morning, everyone, and thank you for taking the time to join us today. With me on the call are Navin Jacob, our chief investment officer, and Zahid Mawani, our chief financial officer. On the call today, I will provide a recap of our Q2 highlights. Navin will then discuss our portfolio assets and share insights into our market outlook. Zahid will cover off our key financial highlights for Q2 before moving on to Q&A. We are pleased to have delivered another solid quarter, posting record financial performance with double-digit growth across total income, cash receipts, and adjusted EBITDA. We continue to see a validation of DRI's approach to pre-approval assets over the past months with the monetization of our EKTERLY investment and the approval of veligrotug, demonstrating the payoff of our thought leadership in structuring attractive risk-return outcomes in that segment.

Speaker #2: On the call today, I will provide a recap of our second quarter highlights. Naveen will then discuss our portfolio assets and share insights into our market outlook, and Zahid will cover our key financial highlights for the second quarter, before we move on to Q&A.

Speaker #2: We are pleased to have delivered another solid quarter, posting record financial performance with double-digit growth across total income, cash receipts, and adjusted EBITDA. We continue to see validation of DRI's approach to pre-approval assets over the past months, with the monetization of our Hector Lee investment and the approval of the Ligra Tug, demonstrating the payoff of our thought leadership in structuring attractive risk-return outcomes in that segment.

Speaker #2: From a top-line perspective, we delivered royalty income growth of 8%, contributing to our total income of $50.1 million, which was up 13% year over year.

Ali Hedayat: From a top-line perspective, we delivered royalty income growth of 8%, contributing to our total income of $50.1 million, which was up 13% year-over-year. Royalty income growth was led by the inclusion of EKTERLY as well as strong performances from VONJO, OMIDRIA, and XOLAIR, partially offset by slightly softer results from ORSERDU and Rydapt. Notably, our royalty income also included a $450,000 milestone payment from Xenpozyme this quarter. Ex milestones, our royalty income growth was 7% year-over-year. Total income was up 12%. I also think it's worth stepping back to look at the 2-year stack. Our focus over the past 8 quarters has been on optimizing our operating model for durable compounding growth. Over this time horizon, royalty income has grown from $41 million in Q2 of 2024 to $48.2 million this quarter, up nearly 18% cumulatively.

Speaker #2: Royalty income growth was led by the inclusion of Hector Lee, as well as strong performances from Vonjo, Omidria, and Zolair, partially offset by slightly softer results from our Surdu and Rydapt.

Speaker #2: Notably, our royalty income also included a $450,000 milestone payment from Zempazime this quarter. X milestones, as royalty income growth was 7% year over year, and total income was up 12%.

Speaker #2: I also think it's worth stepping back to look at the two-year stack. Our focus over the past eight quarters has been on optimizing our operating model for durable, compounding growth.

Speaker #2: Over this time horizon, royalty income has grown from $41 million in Q2 of 2024 to $48.2 million this quarter, up nearly 18% cumulatively.

Speaker #2: Total income has grown even faster, up more than 20% over the same comparative period. Our expense structure generated strong operating leverage in the quarter as we continue to execute and realize our expected internalization synergies while operating with cost management discipline.

Ali Hedayat: Total income has grown even faster, up more than 20% over the same comparative period. Our expense structure generated strong operating leverage in the quarter as we continue to execute and realize our expected internalization synergies while operating with cost management discipline. Our adjusted EBITDA margin is tracking slightly above our internal expectations due to the high incremental margin from the adjusted cash receipt outperformance we are showing versus our internal expectations this quarter. I would like to touch on interest expense for a moment, as it's higher year-over-year on a reported basis. I don't want that to be misread against the refinancing work we completed in Q1 of this year. In Q2, our reported total interest expense of $9.3 million reflects a 2.5% increase year-over-year. However, this increase includes transaction costs related to our recent financing initiatives.

Speaker #2: Our adjusted EBITDA margin is tracking slightly above our internal expectations due to the high incremental margin from the adjusted cash receipt outperformance we are showing versus our internal expectations this quarter.

Speaker #2: I would like to touch on interest expense for a moment, as it's higher year over year on a reported basis, and I don't want that to be misread in light of the refinancing work we completed in the first quarter of this year.

Speaker #2: In Q2, our reported total interest expense of $9.3 million reflects a 2.5% increase year over year. However, this increase includes transaction costs related to our recent financing initiatives.

Speaker #2: Excluding these costs, our interest expense would have been $7.9 million in the quarter, representing an approximately 6% reduction year over year. Interest on our credit facility borrowings came down meaningfully quarter over quarter, reflecting the benefit of the lower-cost, more diversified capital structure that we put in place with the senior notes private placement and the debenture issuance.

Ali Hedayat: Excluding these costs, our interest expense would have been $7.9 million in the quarter, representing an approximately 6% reduction year over year. Interest on our credit facility borrowings came down meaningfully quarter over quarter, reflecting the benefit of the lower cost, more diversified capital structure that we put in place with the senior notes private placement and the debenture issuance. That's the underlying trend I want to point you to. Closing out our operating performance, all in, our adjusted EBITDA margin for the quarter was 92%, up meaningfully from the 82% that we posted in Q2 of last year on a normalized basis. Looking ahead, we maintain our view that adjusted EBITDA margins in H2 of the year are expected to be in the high 80% to 90% range. Operationally, I'd like to share the latest developments surrounding our EKTERLY investment.

Speaker #2: That's the underlying trend I want to point you to. Closing out our operating performance, all in, our adjusted EBITDA margin for the quarter was 92%, up meaningfully from the 82% that we posted in the second quarter of last year, on a normalized basis.

Speaker #2: Looking ahead, we maintain our view that adjusted EBITDA margins in the second half of the year are expected to be in the high 80s to 90% range.

Speaker #2: Operationally, I'd like to share the latest developments surrounding our Hector Lee investment. In June, Kiezi Group completed the acquisition of Calvista Pharmaceuticals, which constitutes a change in control under our royalty agreement with Calvista.

Ali Hedayat: In June, Chiesi Group completed the acquisition of KalVista Pharmaceuticals, which constitutes a change in control under our royalty agreement with KalVista. Subsequent to the quarter, we exercised our put option on EKTERLY for a total net repurchase price of approximately $178 million, creating a significant and immediate realized return of 1.5x and a high 20s IRR for unitholders. Subject to the terms of the royalty agreement, we expect to receive payment by approximately mid-August. While the EKTERLY disposition may reduce our portfolio receipts in the near term, on a portfolio level, we expect to benefit from the compounding effects of bringing forward that capital for redeployment, meaningfully creating additional value for unitholders. Also in June, we were pleased to see the approval of Viridian's veligrotug, now named Lumvoa, by the FDA.

Speaker #2: Subsequent to the quarter, we exercised our put option on Hector Lee for a total net repurchase price of approximately $178 million, creating a significant and immediate realized return of 1.5x and a high 20s IRR for unitholders.

Speaker #2: Subject to the terms of the royalty agreement, we expect to receive payment by approximately mid-August. While the Hector Lee disposition may reduce our portfolio receipts in the near term, on a portfolio level we expect to benefit from the compounding effects of bringing forward that capital for redeployment, meaningfully creating additional value for unitholders.

Speaker #2: Also in June, we were pleased to see the approval of Veridian's Valigra tug, now named Lumvoa, by the FDA. With Lumvoa's approval, we made a milestone payment of $75 million to Veridian, which was partially funded via our acquisition credit facility.

Ali Hedayat: With Lumvoa's approval, we made a milestone payment of $75 million to Viridian, which was partially funded via our acquisition credit facility. This marks an exciting milestone for us, and we will begin earning royalties in Q3 with receipts collected on a one-quarter lag. Together, the EKTERLY and Lumvoa outcomes demonstrate our underwriting team's discipline and specialized expertise across the full cycle of an asset, from regulatory approval to realized returns for unitholders. Let me take a moment now to share some thoughts on where we stand strategically, because I think it speaks directly to the work this team has done over the past several quarters. As we've discussed on prior calls, we've been deliberate about optimizing our balance sheet and diversifying our sources of capital. That work has put us in a position of considerable strength today.

Speaker #2: This marks an exciting milestone for us, and we will begin earning royalties in Q3 with receipts collected on our one-quarter lag. Together, the Hector Lee and Lumvoa outcomes demonstrate our underwriting team's discipline and specialized expertise across the full cycle of an asset, from regulatory approval to realized returns for unit holders.

Speaker #2: Let me take a moment now to share some thoughts on where we stand strategically, because I think it speaks directly to the work this team has done over the past several quarters.

Speaker #2: As we've discussed on prior calls, we've been deliberate about optimizing our balance sheet and diversifying our sources of capital. That work has put us in a position of considerable strength. Today, we have a robust balance sheet and a strong liquidity position, and I want to be direct about what that means operationally.

Ali Hedayat: We have a robust balance sheet and a strong liquidity position. I want to be direct about what that means operationally. We are not constrained by cash at this time. That gives us real flexibility in how and when we deploy capital without being limited by our funding position. It also allows us to participate in meaningfully larger acquisitions than we have done historically. The second point I'd highlight is the composition of the portfolio itself. We currently have no phase III approval risk anywhere in the book. Every pre-approval asset we have held has cleared that hurdle, which meaningfully de-risks our forward return profile and is a good reminder of the discipline and unique expertise behind how we structured these transactions from the outset. Taken together, a strong balance sheet, ample liquidity, and capacity to add pre-approval risk puts DRI in an advantageous position for new deployment.

Speaker #2: We are not constrained by cash at this time. That gives us real flexibility in how and when we deploy capital, without being limited by our funding position.

Speaker #2: It also allows us to participate in meaningfully larger acquisitions than we have done historically. The second point I'd highlight is the composition of the portfolio itself.

Speaker #2: We currently have no phase three approval risk anywhere in the book. Every pre-approval asset we have held has cleared that hurdle, which meaningfully de-risks our forward return profile and is a good reminder of the discipline and unique expertise behind how we structured these transactions from the outset.

Speaker #2: Taken together, a strong balance sheet, ample liquidity, and capacity to add pre-approval risk puts DRI in an advantageous position for new deployment. We're actively evaluating a range of assets across the market today, and based on what we're seeing in our pipeline, we expect to complete a transaction in the second half of this year.

Ali Hedayat: We are actively evaluating a range of assets across the market today, and based on what we are seeing in our pipeline, we expect to complete a transaction in the H2 of this year. We will continue to apply the same underwriting discipline that has served us well, as we go into this next chapter of deployment, we are doing so from a position of real strength. To conclude my remarks, given we are at the midpoint of the fiscal year, we believe that we are on track to deliver towards the high end of our 2026 adjusted EBITDA guidance. Our financial performance year to date, together with the balance sheet work and portfolio de-risking, only reinforces our confidence in achieving our targets, as well as further buoying our confidence in the longer-term 2026 through 2030 financial aspirations.

Speaker #2: We'll continue to apply the same underwriting discipline that has served us well, but as we go into this next chapter of deployment, we're doing so from a position of real strength.

Speaker #2: To conclude my remarks, given we're at the midpoint of the fiscal year, we believe that we are on track to deliver towards the high end of our 2026 adjusted EBITDA guidance.

Speaker #2: Our financial performance year to date, together with the balance sheet work and portfolio de-risking, only reinforces our confidence in achieving our targets, as well as further buoying our confidence in the longer-term 2026 through 2030 financial aspirations.

Speaker #2: Before I hand the call over, I'd like to take a moment to thank our entire DRI team for delivering another outstanding quarter. Now, let me pass the call over to our Chief Investment Officer, Naveen Jacob.

Ali Hedayat: Before I hand the call over, I would like to take a moment to thank our entire DRI team for delivering another outstanding quarter. Now let me pass the call over to our Chief Investment Officer, Navin Jacob.

Speaker #3: Thank you, Ali. Touching first on our portfolio performance, slide seven shows the individual royalty receipts for the second quarter of 2026, compared to the same period in the previous year and the previous quarter.

Navin Jacob: Thank you, Ali. Touching first on our portfolio performance, slide seven shows the individual royalty receipts for the Q2 of 2026 compared to the same period in the previous year and the previous quarter. Our portfolio generated total cash receipts of over CAD 46 million, an increase of CAD 6.3 million, or 16%, versus Q2 2025. The increase was driven by several factors. First, a CAD 3.7 million increase in ORSERDU from growing sales in the European market. Second, over CAD 2 million of receipts earned from EKTERLY, which, as a reminder, has no receipts in Q2 of last year. Third, the ZEPOSIA milestone payment received in Q2 2026, triggered by the achievement of a certain performance threshold.

Speaker #3: Our portfolio generated total cash receipts of over $46 million, an increase of 16% versus Q2 '25. The increase was driven by several factors. First, a $3.7 million increase in assets from growing sales in the European market.

Speaker #3: Second, over $2 million of receipts earned from Hector Lee, which, as a reminder, had no receipts in Q2 of last year. Third, the Zempazime milestone payment received in Q2 '26 was triggered by the achievement of a certain performance threshold.

Speaker #3: These increases were partially offset by a $0.6 million decline in Amgen receipts due to declining sales volume, as well as a $0.5 million decline in Zytiga receipts due to the generic entry in the European market.

Navin Jacob: These increases were partially offset by a CAD 0.6 million decline in AMPYRA receipts due to declining sales volume, as well as a CAD 0.5 million decline in ZYTIGA receipts due to the generic entry in the European market. Turning to specific individual product performance, let me start with CASGEVY. As a reminder, we already received our entitled annual license fee of CAD 5 million in the Q1. Our entitled sales-based fee is earned when sales are over CAD 1 billion, and as such, we do not anticipate any more receipts for CASGEVY in 2026. Performance for the product is strong, and we see two sources of upside relative to our acquisition estimates. First, on the regulatory front, CASGEVY received US FDA approval on 1 July for pediatric patients two and older with severe sickle cell disease or transfusion-dependent beta thalassemia.

Speaker #3: Turning to specific individual product performance, let me start with Keshavi. As a reminder, we already received our entitled annual license fee of $5 million in the first quarter.

Speaker #3: Our entitled sales base fee is earned when sales are over $1 billion, and as such, we do not anticipate any more receipts for Keshavi in 2026.

Speaker #3: Performance for the product is strong, and we see two sources of upside relative to our acquisition estimates. First, on the regulatory front, Keshavi received US FDA approval on July 1st for pediatric patients aged 2 and older with severe sickle cell disease or transfusion-dependent beta thalassemia.

Speaker #3: This label expansion adds roughly 5,500 patients in the U.S. who are now eligible for Keshavi, with the first pediatric patient already having initiated therapy.

Navin Jacob: This label expansion adds roughly 5,500 patients in the US who are now eligible for CASGEVY, with the first pediatric patient already having initiated therapy. Second, general performance of CASGEVY has been better than our initial expectations. To date, there have been more CASGEVY infusions in H1 2026 than in all of 2025, with Q2 representing the third sequential quarter with over 100 patient initiations. Vertex reported Q2 2026 sales of $76 million for CASGEVY. Overall, the product is launching between one to two years ahead of our expectations, and as such, we are now confident there is a decent probability of receiving at least one more sales-based payment versus our original underwriting. Looking now at EctRly, we recorded cash receipts of $2.2 million in Q2 2026, which is ahead of our acquisition forecast.

Speaker #3: Second, general performance of Keshavi has been better than our initial expectations. To date, there have been more Keshavi infusions in the first half of 2026 than in all of 2025, with the second quarter representing the third sequential quarter with over 100 patient initiations.

Speaker #3: Vertex reported Q2 '26 sales of $76 million for Keshavi. Overall, the product is launching between one to two years ahead of our expectations, and as such, we are now confident there is a decent probability of receiving at least one more sales-based payment versus our original underwriting.

Speaker #3: Looking now at Hector Lee, we recorded cash receipts of $2.2 million in Q2 26, which is ahead of our acquisition forecast. To build on Ali's earlier comments, Hector Lee represented precisely the kind of asset that showcases the type of discipline and high-conviction investing DRI can deliver.

Navin Jacob: To build on Ali's earlier comments, EctRly represented precisely the kind of asset that showcases the type of disciplined, high-conviction investing DRI can deliver. From the outset, our research identified EctRly as a compelling opportunity, which at the time of our investment was a differentiated non-consensus conclusion. The strong realized outcome is a direct testament to the rigorous diligence process our investment team applies in every decision we make on behalf of our unitholders. The recent initiation of a put option allows DRI to crystallize an exceptional return on this investment while providing us with significant flexibility and dry powder to pursue future opportunities with the same conviction. We're extremely proud to have partnered with KalVista and its outstanding management team throughout this journey, and we want to recognize the tremendous work they have done in bringing this novel drug to patients.

Speaker #3: From the outset, our research identified Hector Lee as a compelling opportunity, which at the time of our investment was a differentiated, non-consensus conclusion. The strong realized outcome is a direct testament to the rigorous diligence process our investment team applies to every decision we make on behalf of our unitholders.

Speaker #3: The recent initiation of a put option allows DRI to crystallize an exceptional return on this investment, while providing us with significant flexibility and dry powder to pursue future opportunities with the same conviction.

Speaker #3: We're extremely proud to have partnered with Calvista, and its outstanding management team throughout this journey, and we want to recognize the tremendous work they have done in bringing this novel drug to patients.

Speaker #3: As Hector Lee continues its next chapter under the Kiezi Group, we wish the entire Kiezi team unlimited success in the years ahead. Amidria Q2 '26 royalty receipts declined by 7% from the previous year.

Navin Jacob: As EctRly continues its next chapter under the Chiesi Group, we wish the entire Chiesi team unlimited success in the years ahead. OMIDRIA Q2 2026 royalty receipts declined by 7% from the previous year. As a reminder, OMIDRIA is on a 60-day lag, and as such, our Q2 royalty receipts reflect a mix of Q1 and Q2 sales. Q2 receipts were in line with our previously discussed updated estimates. Q2 2026 OMIDRIA sales, which exhibited year-over-year growth of +9% versus Q2 2025, was slightly ahead of our updated expectations. Even though we have now seen two quarters of sales growth in the mid to high single-digit range, we maintain our previously discussed expectation of flat or no growth for annual sales of OMIDRIA over the next few years. Moving to ORSERDU.

Speaker #3: As a reminder, Amidria is on a 60-day lag, and as such, our Q2 royalty receipts reflect a mix of Q1 and Q2 sales. Q2 receipts were in line with our previously discussed, updated estimates.

Speaker #3: Q2 2026 Amidria sales, which exhibited year-over-year growth of 9% versus Q2 2025, were slightly ahead of our updated expectations. Even though we have now seen two quarters of sales growth in the mid- to high-single-digit range, we maintain our previously discussed expectation of flat or no growth for annual sales of Amidria over the next few years.

Speaker #3: Moving to Assertive, DRI recorded royalty receipts of $16.6 million in Q2 2026, a robust 29% year-over-year increase versus Q2 2025, due to accelerating sales momentum in the European market.

Navin Jacob: DRI recorded royalty receipts of $16.6 million in Q2 2026, a robust 29% year-over-year increase versus Q2 2025 due to accelerating sales momentum in the European market. As we have stated before, our acquisition forecast assumes 2025 would represent peak sales given anticipated competitive pressures from other oral SERDs and novel PI3K inhibitors. Performance to date in 2026 has held up better than expected, with Q2 2026 sales implying $17.6 million of royalties, which will be paid in Q3 2026. Q3 will be a pivotal marker for the investment, as this is when we will fully recoup our initial capital outlay for ORSERDU-2, well ahead of our original expectations. Recall we already recouped our initial outlay on ORSERDU-1 a couple of quarters ago.

Speaker #3: As we have stated before, our acquisition forecast assumes 2025 would represent peak sales, given anticipated competitive pressures from other oral CERTs and novel PI3K inhibitors.

Speaker #3: Performance to date in 2026 has held up better than expected, with Q2 '26 sales implying $17.6 million of royalties, which will be paid in Q3 '26.

Speaker #3: Q3 will be a pivotal marker for the investment, as this is when we will fully recoup our initial capital outlay for Asset 2, well ahead of our original expectations.

Speaker #3: Recall, we already recouped our initial outlay on assertive 1 a couple quarters ago. As we've discussed before, we are closely monitoring several ongoing assertive lifecycle management studies, that if successful, could unlock substantial upside beyond our original acquisition thesis, extending the growth run rate for this asset even further into the future.

Navin Jacob: As we've discussed before, we are closely monitoring several ongoing ASERTI lifecycle management studies that, if successful, could unlock substantial upside beyond our original acquisition thesis, extending the growth run rate for this asset even further into the future. SPINRAZA Q2 2026 cash receipts were down 2% year-over-year, mainly due to shipping issues impacting inventory to certain international markets. Biogen reported worldwide SPINRAZA Q2 2026 sales of $402 million, a modest increase of 2% year-over-year versus Q2 2025, and was in line with our expectations. Q2 2026 sales should translate to approximately $3.7 million of royalty receipts in Q3 2026. VONJO Q2 2026 cash receipts, which reflect Q1 2026 sales, rose 11% year-over-year, driven by stocking in the US, partly offset by order phasing in the international region.

Speaker #3: Spinraza Q2 2026 cash receipts were down 2% year over year, mainly due to shipping issues impacting inventory to certain international markets. Biogen reported worldwide Spinraza Q2 2026 sales of $402 million, a modest increase of 2% year over year versus Q2 2025, and was in line with our expectations.

Speaker #3: Q2 2026 sales should translate to approximately $3.7 million of royalty receipts in Q3 2026. Vonjo Q2 2026 cash receipts, which reflect Q1 2026 sales, rose 11% year over year, driven by stocking in the US, partly offset by order phasing in the international region.

Speaker #3: So we recently reported Q2 2026 sales of approximately $34 million, which should translate into royalty receipts of approximately $3.9 million in Q3 2026.

Navin Jacob: Sobi recently reported Q2 2026 sales of approximately $34 million, which should translate into royalty receipts of approximately $3.9 million in Q3 2026. As a reminder, we revised our expectation downward on VONJO in Q3 2025, and this quarter's results track in line with the updated forecast, reinforcing our confidence in the reforecasted trajectory for the asset. Sobi has several lifecycle management opportunities for VONJO, including the PACIFICA phase III confirmatory study in myelofibrosis with severe thrombocytopenia. Sobi has confirmed that PACIFICA completed enrollment in April, which, if successful, could be used for regulatory submissions of pacritinib VONJO in the EU and Japan. Sobi has also indicated that the PAXIS phase II trial evaluating VONJO in VEXAS syndrome is also progressing. This indication was not contemplated in our original acquisition forecast.

Speaker #3: As a reminder, we revised our expectation downward on Vonjo in Q3 '25, and this quarter's results track in line with the updated forecast, reinforcing our confidence in the reforecasted trajectory for the asset.

Speaker #3: So we have several lifecycle management opportunities for Vonjo, including the PACIFICA Phase 3 confirmatory study in myelofibrosis with severe thrombocytopenia. So, we have confirmed that PACIFICA completed enrollment in April, which, if successful, could be used for regulatory submissions of pacritinib (Vonjo) in the EU and Japan.

Speaker #3: So, we have also indicated that the Paxis Phase 2 trial evaluating Vonjo in Vexus syndrome is also progressing. This indication was not contemplated in our original acquisition forecast.

Speaker #3: On Zempizyme, we recorded $3.3 million of royalty receipts for Q2 '26, which is a marked increase versus the prior year, driven largely by strong overall growth and milestone income, as previously discussed.

Navin Jacob: On ZEPOSIA, we recorded $3.3 million of royalty receipts for Q2 2026, which is a marked increase versus the prior year, driven largely by strong overall growth and milestone income as previously discussed. Sanofi reported worldwide ZEPOSIA sales of $74 million in Q2 2026, which is ahead of our expectations. Turning to slide eight. As we announced, Lumvoa, formerly known as veligrotug, received FDA approval on 26 June 2026. This milestone triggered a $75 million payment, which we paid to Viridian in Q3 2026. Lumvoa pricing is set at parity with the current market leader, TEPEZZA, on a per-course basis. Thus, the pitch to physicians and patients rests on clinical strength and convenience. Based on key opinion leader feedback, we are confident Lumvoa's launch will be built on real clinical differentiation. It is the first approved therapy with both active and chronic thyroid eye disease data in its label.

Speaker #3: Sanofi reported worldwide Zempizyme sales of $74 million in Q2 26, which is ahead of our expectations. Turning to slide 8, as we announced, Lymphoa, formerly known as Velagritub, received FDA approval on June 26. The million dollar payment, which we paid to Veridian, was made in Q3 26.

Speaker #3: Lymphoa pricing is set at parity with the current market leader, Tepezza, on a per-course basis. Thus, the pitch to physicians and patients rests on clinical strength and convenience.

Speaker #3: Based on key opinion leader feedback, we are confident Lymphoa's launch will be built on real clinical differentiation. It is the first approved therapy with both active and chronic thyroid eye disease data in its label.

Speaker #3: Furthermore, it has shown rapid proptosis and diplopia responses in both settings. Lymphoa’s treatment is also shorter and more convenient—five infusions over 12 weeks, versus a longer, more burdensome regimen for Tepezza.

Navin Jacob: Furthermore, it has shown rapid proptosis and diplopia responses in both settings. Lumvoa's treatment is also shorter and more convenient, five infusions over 12 weeks versus a longer, more burdensome regimen for TEPEZZA. Viridian expects it'll take six to nine months for Lumvoa to reach broad access for US patients, with revenue becoming more meaningful as they enter 2027 once a permanent J-code is in place, which is expected to be available by Q1 2027. On elegrobart, recall Viridian released top-line data from REVEAL-1, a study in patients with active thyroid eye disease, also known as TED. During Q2, Viridian released positive top-line results on REVEAL-2 in patients with chronic TED. The chronic TED data were slightly better than our expectations and perhaps a more relevant data set when considering the potential for elegrobart.

Speaker #3: Veridian expects it will take six to nine months for Lymphoa to reach broad access for U.S. patients, with revenue becoming more meaningful as they enter 2027 once a permanent J code is in place, which is expected to be available by Q1 2027.

Speaker #3: On Eligrabar, recall Veridian released top-line data from Reveal 1, a study in patients with active thyroid eye disease, also known as TED. During Q2, Veridian released positive top-line results on Reveal 2, in patients with chronic TED.

Speaker #3: The chronic TET data were slightly better than our expectations, and perhaps a more relevant dataset when considering the potential for Eligrabar. Chronic TET is a highly underpenetrated market; thus, Reveal 2 provides Veridian the opportunity to fully maximize Eligrabar's potential as the first true subcutaneous auto-injector in the market.

Navin Jacob: Chronic TED is a highly under-penetrated market, thus REVEAL-2 provides Viridian the opportunity to fully maximize elegrobart's potential as the first true subcutaneous auto-injector in the market. In summary, our outlook for elegrobart, and of course Lumvoa, remains very positive. In closing, I'd like to touch on thoughts regarding the market and our positioning for 2026. It has been DRI's strong belief that royalty financing would become a more common or mainstay method of raising capital. Our thesis appears to be materializing. During Q2 2026, despite more than 60 equity deals across the US and Europe for a total of $16 billion raised by biopharma companies, we tracked at least eight royalty deals for a total of approximately $1.7 billion in announced value.

Speaker #3: In summary, our outlook for Eligrabar, and of course Lymphoa, remains very positive. In closing, I'd like to touch on thoughts regarding the market and our positioning for 2026.

Speaker #3: It has been DRI's strong belief that royalty financing would become a more common, or even a mainstay, method of raising capital. Our thesis appears to be materializing.

Speaker #3: During the second quarter of 2026, despite more than 60 equity deals across the United States and Europe for a total of $16 billion raised by biopharma companies, we tracked at least 8 royalty deals for a total of approximately $1.7 billion in announced value.

Speaker #3: On a trailing 12-month basis, the size of royalty deals is at least $5.3 billion, roughly flat versus the same period ending in Q2 2025, despite a robust rebound in the biotech equity capital markets.

Navin Jacob: On a trailing 12-month basis, the size of royalty deals is at least $5.3 billion, roughly flat versus the same period ending in Q2 2025, despite a robust rebound in the biotech equity capital markets. Biopharma boards and management teams are recognizing the value creation that royalty financing can provide to the ecosystem. I will now turn the call over to Zaheed Mawani to review our Q2 financial performance.

Speaker #3: BioPharma boards and management teams are recognizing the value creation that royalty financing can provide to the ecosystem. I will now turn the call over to Zaheed Mawani to review our second quarter financial performance.

Speaker #1: Thank you, Naveen. Turning to the second quarter results, our total income was $50.1 million, an increase of $5.9 million, or 13%, year over year.

Zaheed Mawani: Thank you, Navin. Turning to the Q2 results, our total income was $50.1 million, an increase of $5.9 million or 13% year over year, primarily driven by higher royalty income led by EKTERLY, improved performance from VONJO, OMIDRIA, XOLAIR, and the receipt of the milestone income from Xenpozyme. These were partially offset by ORSERDU, as well as Rydapt due to an expected step-down in sales. Turning to expenses, our total expenses were $40.9 million, approximately $2 million lower versus last year. This was primarily driven by internalization synergies, including the elimination of performance fees, lower compensation, as well as lower deal investigation and research expenses, lower unit-based compensation, and lower other operating expenses. These were partially offset by higher amortization of intangible royalty assets, higher interest expense, as outlined earlier in Ellie's comments, and higher G&A. We also recorded $3 million of income tax expense in the quarter.

Speaker #1: Primarily driven by higher royalty income led by Hector Lee, improved performance from Vonjo, Omidria, Xolair, and the receipt of the milestone income from Zempizyme.

Speaker #1: These were partially offset by our surcharges, as well as a write-up due to an expected step-down in sales. Turning to expenses, our total expenses were $40.9 million, approximately $2 million lower versus last year.

Speaker #1: This was primarily driven by internalization synergies, including the elimination of performance fees, lower compensation, as well as lower deal investigation and research expenses, lower unit-based compensation, and lower other operating expenses.

Speaker #1: These were partially offset by higher amortization of intangible royalty assets, higher interest expense as outlined earlier in Ali's comments, and higher G&A. We also recorded $3 million of income tax expense in the quarter.

Speaker #1: When we internalized our management function last July, some of our subsidiaries became subject to income tax for the first time. So, 2026 is our first full year carrying tax through the P&L.

Zaheed Mawani: When we internalized our management function last July, some of our subsidiaries became subject to income tax for the first time. 2026 is our first full year carrying tax through the P&L. Quarterly amounts will move as we settle our full-year position. Notably, there is no impact to adjusted EBITDA, cash receipts or our distribution. All in, our adjusted EBITDA for the quarter was $42.6 million, which increased $12.2 million or 40% over Q2 last year. On a rate basis, our adjusted EBITDA margin was 92% versus 76% in Q2 2025. Cash receipts for the quarter were $46.5 million, an increase of 16% year over year. The increase was driven primarily by the higher cash receipts from ORSERDU due to growing sales in the European market, the inclusion of royalties from EKTERLY, and the Xenpozyme milestone.

Speaker #1: Quarterly amounts will move as we settle our full-year position. Notably, there's no impact to adjusted EBITDA, cash receipts, or our distribution. All in, our adjusted EBITDA for the quarter was $42.6 million, which increased $12.2 million, or 40%, over the second quarter last year.

Speaker #1: On a rate basis, our adjusted EBITDA margin was 92% versus 76% in the second quarter of 2025. Cash receipts for the quarter were $46.5 million, an increase of 16% year over year.

Speaker #1: The increase was driven primarily by higher cash receipts from our surgeon, due to growing sales in the European market, the inclusion of royalties from Hector Lee, and the Zempizyme milestone.

Speaker #1: The increase in cash receipts was partially offset by a decline in Omidria cash receipts due to lower sales volume, and lower Zytiga receipts due to generic entrants deteriorating market share in the European market.

Zaheed Mawani: The increase in cash receipts was partially offset by a decline in AMPYRA cash receipts due to lower sales volume and lower ZYTIGA receipts due to generic entrants deteriorating market share in the European market. We generated adjusted cash earnings per unit of $0.56, and we announced last Friday our quarterly distribution of $0.11 per unit, which will be paid on 20 October 2026, to unit holders of record on 30 September 2026. Turning to slide 12. We continue to generate strong cash flows from our assets. Over the last 12 months ending 30 June 2026, we reported total income of $209.2 million. After adjusting for receivables, net unrealized and realized gains, the net change in financial royalty asset and other non-cash items, we achieved normalized total cash receipts of $199.1 million.

Speaker #1: We generated adjusted cash earnings per unit of $0.56, and we announced last Friday our quarterly distribution of $0.11 per unit, which will be paid on October 20, 2026, to unitholders of record on September 30, 2026.

Speaker #1: Turning to slide 12, we continue to generate strong cash flows from our assets. Over the last 12 months ending June 30, 2026, we recorded total income of $209.2 million.

Speaker #1: After adjusting for receivables, net unrealized and realized gains, the net change in financial royalty asset, and other non-cash items, we achieved normalized total cash receipts of $199.1 million.

Speaker #1: After adjusting for all other operating expenses, adjusted EBITDA was 178.3 million dollars with a trailing 12-month adjusted EBITDA margin of 90%. We also generated adjusted cash earnings per unit of 2 dollars and 56 cents.

Zaheed Mawani: After adjusting for all other operating expenses, adjusted EBITDA was $178.3 million, with a trailing 12-month adjusted EBITDA margin of 90%. We also generated adjusted cash earnings per unit of $2.56. Moving to slide 13. As of 30 June, we had $55.2 million of cash and cash equivalents. We also had $54.7 million of royalties receivables and $520 million of credit availability from our bank facilities. We continue to be well-capitalized and well-positioned to fulfill any prospective milestone commitments, as well as continue to invest in new assets. We continue to allocate a portion of our capital towards unit buybacks. We will retain discretion whether to make any purchases under the new NCIB and to determine the timing, amount, and acceptable price of any such purchases, subject at all times to applicable TSX and other regulatory requirements. All units purchased by the trust under the new NCIB will be canceled.

Speaker #1: Moving to slide 13, as of June 30th, we had $55.2 million of cash and cash equivalents. We also had $54.7 million of royalty receivables and $520 million of credit availability from our bank facilities.

Speaker #1: We continue to be well capitalized and well positioned to fulfill any prospective milestone commitments, as well as continue to invest in new assets. We also continue to allocate a portion of our capital towards unit buybacks.

Speaker #1: We will retain discretion whether to make any purchases under the new NCIB and to determine the timing, amount, and acceptable price of any such purchases, subject at all times to applicable TSX and other regulatory requirements.

Speaker #1: All units purchased by the trust under the new NCIB will be canceled. During the three months ended June 30th, 2026, the trust acquired and canceled approximately 90,000 units at an average price of 11 dollars and 65 cents totaling 1 million dollars.

Zaheed Mawani: During the three months ended 30 June 2026, the trust acquired and canceled approximately 19,000 units at an average price of $11.65, totaling $1 million. As of 30 June 2026, in aggregate, we have acquired and canceled 4.8 million units at an average price per unit of $7.23, totaling $34.6 million under all current and previous NCIB plans. From 1 July 2026 to 7 August 2026, there were no units acquired under the May 2026 NCIB plan under the ASPP. That concludes our prepared remarks. With that, let's open the call to questions.

Speaker #1: As of June 30th, 2026, in aggregate, we have acquired and canceled 4.8 million units at an average price per unit of 7 dollars and 23 cents totaling 34.6 million dollars under all current and previous NCIB plans.

Speaker #1: From July 1, 2026, to August 7, 2026, there were no units acquired under the May 2026 NCIB plan under the AUPP. That concludes our prepared remarks, and with that, let's open the call to questions.

Speaker #2: Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session. If you have a question, please press the star key followed by one on your touch-tone phone.

Operator: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press the star key followed by one on your touchtone phone. You will hear a one-time prompt acknowledging your request. Your question will be polled in the order they are received. If you would like to decline from the polling process, please press the pound key. Please ensure you leave the handset if you are using a speakerphone before pressing any keys. One moment please for your first question. Your first question comes from Douglas Miehm with RBC Capital Markets. Please go ahead.

Speaker #2: You will hear a one-time prompt acknowledging your request. Your question will be taken in the order it is received. If you would like to withdraw from the polling process, please press the pound key.

Speaker #2: Please ensure you lift the handset if you are using a speakerphone before pressing any keys. One moment, please, for your first question. Your first question comes from Douglas Smeal with RBC Capital Markets.

Speaker #2: Please go ahead.

Speaker #3: Okay. Good morning, everyone. First question just obviously has to do with deal pipeline and capital deployment. Maybe you could walk us through, given the amount of capital that you have available to deploy now, could we see a larger deal than we've seen in the past?

Douglas Miehm: Yeah. Good morning, everyone. First question just obviously has to do with deal pipeline capital deployment. Maybe you could walk us through, given the amount of capital that you have available to deploy now, could we see a larger deal than we've seen in the past, let's say plus $200 million upfront and then added milestones? The second thing is with respect to that, just as it relates to seller expectations, competitive landscape, are you noticing any changes in that market today? Thank you.

Speaker #3: Let's say plus $200 million upfront, and then added milestones. And the second thing is, with respect to that—just as it relates to seller expectations and the competitive landscape—are you noticing any changes in that market today?

Speaker #3: Thank you.

Speaker #4: Hey Doug, it's Ali. Hope you're well. Look, I'll take it at a very high level, and then I think nobody will probably have some comments as well.

Ali Hedayat: Hey, Doug. It's Ali. Hope you're well. Look, I'll take it at a very high level. I think Navin will probably have some comments as well. We don't think it's super productive to discuss specific deals in the pipeline. I think what I would say at a high level is we still expect a transaction in the second half of the year. I think as it pertains to your question on the liquidity, it obviously does open up a range of options for us that were not available before. I think some of those options could be larger transactions. I think it could be sort of multiple transactions of the size that we had done in the past. I think if you sort of think of the sliding scale on that, on the larger end, we would be somewhat constrained on the financing side by cash flow generation.

Speaker #4: You know, we don't think it's super productive to discuss specific deals in the pipeline. I think what I would say at a high level is, we still expect a transaction in the second half of the year.

Speaker #4: I think, as it pertains to your question on the liquidity, it obviously does open up a range of options for us that were not available before.

Speaker #4: I think some of those options could be larger transactions. I think it could be multiple transactions of the size that we have done in the past.

Speaker #4: I think if you sort of think of the sliding scale on that, on the larger end, you know, we would be somewhat constrained on the financing side by cash flow generation. So, you know, the larger the transaction gets, you know, probably the more cash flowing it needs to be immediately.

Ali Hedayat: The larger the transaction gets, probably the more cash flowing it needs to be immediately. I think on the regular way side, the types of deals that you have seen us do over the past little bit with Viridian as the most recent example, we could certainly do more than one of those in the next 12 months and easily be able to fund it with the liquidity that we have right now. I think directionally, we're looking at everything available to us. I would certainly expect the cadence of deployment over the next, let's say, 12 to 18 months to be higher than usual, just given our liquidity position.

Speaker #4: But I think, on the regular way side, the types of deals that you have seen us do over the past little bit—with Verdian as the most recent example—you know, we could certainly do more than one of those in the next 12 months and easily be able to fund it with the liquidity that we have right now.

Speaker #4: So I think directionally we're looking at, you know, everything available to us, but I would certainly expect, you know, the cadence of deployment over the next, let's say, 12 to 18 months to be higher than usual, just given our liquidity position.

Speaker #3: And as a follow-up, we noticed in your disclosures and with Hector Lee leaving the portfolio that the expected royalty expiry for the Verdian asset has changed quite significantly from Q4 2042 to Q2 2036.

Douglas Miehm: As a follow-up, we noticed in your disclosures, and with EKTERLY leaving the portfolio, that the expected royalty expiry for the Viridian asset has changed quite significantly from Q4 2042 to Q2 2036. Can you perhaps walk us through why that change was made? Also what that means for the overall duration of the portfolio, having lost EKTERLY and then making this change with respect to that asset. Thank you.

Speaker #3: Can you perhaps walk us through why that change was made, and then also what that means for the overall duration of the portfolio? Having lost Hector Lee, and then making this change with respect to that asset.

Speaker #3: Thank you.

Ali Hedayat: I'll break it up in two parts. I think EKTERLY in isolation is obviously a duration reducing effect, right? It's one of our longer duration assets. Just stating the obvious, losing one of your longer duration assets, albeit at a very attractive outcome for unitholders, mechanically does reduce duration. I think really the story with EKTERLY is the fact that we're bringing forward this large amount of proceeds, and we're able to compound it through redeployment, right? I think when you think of the range of outcomes on that redeployment, they're all super accretive to us. We certainly are approaching it with a balance of an eye to duration as well as other characteristics.

Speaker #4: I'll break it up in two parts. I think Hector Lee in isolation is obviously a duration reducing effect, right? It's one of our longer duration assets so just stating the obvious losing one of your longer duration assets albeit at a very attractive outcome for unit holders mechanically does reduce duration.

Speaker #4: I think, really, the story with Hector Lee is the fact that we're bringing forward this large amount of proceeds, and we're able to compound it through redeployment, right?

Speaker #4: So, I think when you think of the range of outcomes on that redeployment, they're all super accretive to us. We certainly are approaching it with a balance—an eye to duration as well as other characteristics—but at the same time, we don't feel sort of a need to target a certain duration like we did, let's say, 36 or 48 months ago, when I think the portfolio duration was meaningfully lower and we were sort of chasing that endpoint a little bit harder.

Ali Hedayat: At the same time, we don't feel a need to target a certain duration like we did, let's say, 36 or 48 months ago when I think the portfolio duration was meaningfully lower, and we were sort of chasing that endpoint a little bit harder. I think we'll take a balanced approach to it. What I would focus on with regards to the EKTERLY deal is really that compounding effect of bringing that money forward and redeploying it. With regards to Viridian and Navin, I think you may want to jump in here. I think what you're seeing there is the veligrotug duration and not the VRDN-003 duration, which, obviously, we are not approved on yet. I think probably that's the accounting twist, but I might be wrong there.

Speaker #4: So, I think we'll take a balanced approach to it, but I—you know, what I would focus on with regards to the Hector Lee deal is really that compounding effect of bringing that money forward and redeploying it.

Speaker #4: With regards to Verdian and Naveen, I think you may want to jump in here. I think what you're seeing there is the ligure tug duration and not the VRDN003 duration, which obviously we are not approved on yet.

Speaker #4: So, I think probably that's the accounting twist, but I might be wrong there.

Speaker #5: That, plus the potential for achieving the cap associated with the deal. With regards to—I'll just go back to—and this touches on both your first question and your second question, Doug, but it speaks to the pipeline and our ability to redeploy the cash coming in.

Navin Jacob: That, and plus potential for achieving the cap associated with the deal. I'll just go back to this touches on both your first question and your second question, Doug, but it speaks to the pipeline, our ability to redeploy the cash coming in. You're right. Obviously, we're losing a revenue stream with EKTERLY, but it was done in a value-accretive way, obviously, to unitholders, given, one, the 100% realized return that we got on EKTERLY at an annualized IRR of high 20s. The cash coming in as we redeploy that compounding effect can be quite a dramatic impact for unitholders. One very clear example of that DRI has conducted already was with Tzield. Obviously, that was a great outcome for unitholders.

Speaker #5: You're right, obviously we're losing a revenue stream with Hector Lee but it is it was done in a value accretive way obviously to unit holders given the one, the 100% realized return that we got on Hector Lee at an annualized IRR of high 20s.

Speaker #5: And the cash coming in as we redeploy that, that compounding effect can be quite a dramatic impact for unit holders one very clear example of that that DRI has conducted already was with TZIELD, obviously that was a great outcome for unit holders.

Speaker #5: We took those proceeds and invested it into Ursodiol twice, with a Ursodiol 1 and 2, and both of those have now recouped their initial investments in record time.

Navin Jacob: We took those proceeds and invested it into ORSERDU twice with ORSERDU one and two, and both those have now recouped their initial investments in record time. Obviously, that product is doing extremely well. That compounded effect that unitholders are enjoying as a result of us taking in the capital and redeploying it into a high-quality asset is very powerful and we hope to do the same again here with the sale of EKTERLY and value accretion there.

Speaker #5: And so, obviously, that product is doing extremely well. So that compounded effect for Astero that unit holders are enjoying, as a result of us taking in the capital and redeploying it into a high-quality asset, is very powerful, and we hope to do the same again here with the sale of Hector Lee and value accretion there.

Speaker #3: Great. Thank you.

Ali Hedayat: Great. Thank you.

Douglas Miehm: Great. Thank you.

Operator: Thank you. The next question comes from Louise Chen with Scotiabank. Please go ahead.

Speaker #1: Thank you. The next question comes from Felice Chen with Scotiabank. Please go ahead.

Speaker #6: Hi. Congratulations on all the progress, and thanks for taking my questions here. So, I wanted to ask you: when it comes to deals, are there any therapeutic areas that really interest you the most?

Louise Chen: Hi. Congratulations on all the progress, and thanks for taking my questions here. I wanted to ask you, when it comes to deals, are there any therapeutic areas that really interest you the most? Secondly, we always get asked this question, so I thought I would pose it to you, which is, what are the competitive advantages that you have when it comes to deal sourcing and diligence? Thank you.

Speaker #6: And then secondly, we always get asked this question, so I thought I would pose it to you, which is: what are the competitive advantages that you have when it comes to deal sourcing and diligence?

Speaker #6: Thank you.

Ali Hedayat: Louise. Hi. I think on the buildup of what therapeutic areas we look at, it's really a function of our overall criteria rather than, let's say, selecting a therapeutic area per se. We're really focused on therapies that have a meaningful impact on patient well-being, on extension of life, on quality of life. We really try to avoid areas that might have a cyclical component to them or a discretionary component to them. We're very conscious of certain aspects of regulatory risk, and competitive risk and when you start to Venn diagram the types of things that we're looking at or try to avoid and build out the overlaps there, it naturally leads you to certain therapeutic areas. It naturally leads you towards areas like oncology or autoimmune or some of the other areas that we've been involved in in the past.

Speaker #4: Really sorry. You know, I think the build-up of what therapeutic areas we look at is really a function of our overall criteria, rather than, let's say, selecting a therapeutic area per se.

Speaker #4: So, you know, we're really focused on therapies that have a meaningful impact on patient well-being, on extension of life, on quality of life. We really try to avoid areas that might have a cyclical component to them or a discretionary component to them.

Speaker #4: You know we're very conscious of certain aspects of regulatory risk and competitive risk and sort of when you start to then diagram the types of things that we're looking at or try to avoid and sort of build up the overlaps there, it naturally leads you to certain therapeutic areas.

Speaker #4: It naturally leads you you know towards areas like oncology or autoimmune or some of the other areas that we've been involved in in the past.

Speaker #4: But it's not that we're necessarily selecting for those. It's that, you know, those areas are sort of an outcome of the overall guidelines that we put on the investment process.

Ali Hedayat: It's not that we're necessarily selecting for those. It's that those areas are sort of an outcome of the overall guidelines that we put on the investment process. I think on your second question, I don't know, Navin, if you have a strong view there, I'll probably turn that one over to you.

Speaker #6: I think on your second question I don't know Naveen if you have a strong view there. I'll probably turn that one over to you.

Speaker #5: With regards to research and sourcing, Louise, at the we are a research-driven organization that is how we've always acted and sourcing is a function of that.

Navin Jacob: With regards to research and sourcing, Louise, we are a research-driven organization. That is how we've always acted, sourcing is a function of that. It touches a little bit on your first question, actually, which is that the research drives the assets that we're interested in, then that turns into sourcing. As part of the sourcing effort that we then make, there's almost a feedback loop into, there's absolutely a feedback into our research, which then feeds into sourcing. What do I mean by that? As we're conducting our research, we do a broad landscape, which is a combination of sourcing and research. We find therapeutic areas, assets that we're interested in. We dig a little deeper, and sometimes we cast out assets we're interested in.

Speaker #5: It touches a little bit on your first question actually, which is that the research drives the assets that we are interested in and then that turns into sourcing and when we when as part of the sourcing effort that we then make, there's almost a feedback loop into not sort of a there is absolutely a feedback into our research which then feeds into sourcing.

Speaker #5: And what do I mean by that? So, as we're conducting our research, we do a broad landscape, which is a combination of sourcing and research.

Speaker #5: We find therapeutic areas, assets that we're interested in. We dig a little deeper and sometimes we cast out assets we're interested in more often than not we are casting out assets we're interested in.

Navin Jacob: More often than not, we're casting out assets we're interested in, we may stay in the area that we found interesting. Then that will feed more research, which will then feed the sourcing, and we make outreaches to the various parties that we're interested in working with. It's always research driven. What that leads to then from a therapeutic area standpoint and what areas we go into versus not is then what often happens is we are somewhat allergic to sort of a consensus view and what the hottest trend is. We're consistently asked about GLP-1s and GLP/GIP agonists, that's an area that is obviously white hot, and we tend to stay away from those areas. One, because they're super competitive. Two, because valuation expectations are probably outsized, and particularly amongst the type of players we would be working with.

Speaker #5: But we may stay in the area that we found interesting and then that'll feed more research which will then feed the sourcing and we make outreaches to the various parties that we're interested in working with.

Speaker #5: And that then—and so it's always research-driven. What that leads to, then, from a therapeutic area standpoint and what areas we go into versus not, is then what often happens is we are somewhat allergic to sort of a consensus view and what the hottest trend is.

Speaker #5: So we're constantly consistently asked about GLP-1s and GLP, GIP, agonists and that's an area that is obviously white hot and we tend to stay away from those areas.

Speaker #5: One, because they're super competitive. Two, because valuations and expectations are probably outsized, particularly among the types of players we would be working with. And so, we tend to focus on areas that are a little bit less under the microscope of the general public.

Navin Jacob: We tend to focus on areas that are a little bit less under the microscope of the general public. One key example is Tzield, another is EKTERLY. At the time, if you go back and read the analyst reports on KalVista and EKTERLY, there was a lot of, let's call it, non-belief in the peak sales of EKTERLY and that launch and that team, we had a very counter-consensus view there. We were very excited about it. We went all in there. Same exact thing for Tzield. Very limited expectations around type 1 diabetes. Everyone was focused on type 2. Both those outcomes ended up well. We've historically done well when we're focusing on areas that are outside of the consensus view.

Speaker #5: One key example is TZIELD and another is Hector Lee at the time. If you go back and read the analyst reports on CalVist and Hector Lee, there was a lot of let's call it non-belief in the peak sales of Hector Lee and that launch and that team and we had a very counter-consensus view there and we were very excited about it and we went all in there.

Speaker #5: And same exact thing for TZIELD. Very limited expectations around type 1 diabetes. Everyone was focused on type 2. Both those outcomes ended up well.

Speaker #5: So we've historically done well when we're focusing on areas that are outside of consensus view.

Speaker #4: Louise, I just throw in one last thing there which is you know I think one of the things that is you know as important as you know what we source in terms of the individual opportunities is how we structure it.

Ali Hedayat: Louise, I'd just throw in one last thing there, which is, I think one of the things that is as important as what we source in terms of the individual opportunities is how we structure it, and I think that's another area where the team really has extraordinary edge. You saw that play out in EKTERLY. I think the Viridian structure is a similar example to that. When you think about sourcing edge, really that intersection between the research capacity of the team and the ability to structure solutions that are really super well-suited both to our needs and to the counterparty needs is something that we think is relatively unique about our platform.

Speaker #4: And I think that's another area where the team really has extraordinary edge. You saw that play out in Hector Lee. I think, you know, the Verdian structure is a similar example to that.

Speaker #4: So, when you think about sourcing edge, really that intersection between the research capacity of the team and the ability to structure solutions that are really super well suited both to our needs and to the counterparty needs, is something that we think is relatively unique about our platform.

Speaker #1: Hello, Louise.

Operator: Hello, Louise.

Speaker #6: Oh, thank you.

Navin Jacob: Oh, thank you.

Louise Chen: Oh, thank you.

Speaker #1: Thank you. The next question comes from Michael Freeman with Raymond James. Please go ahead.

Operator: Thank you. The next question comes from Michael Freeman with Raymond James. Please go ahead.

Speaker #6: Hey, good morning Ali, Naveen, Zahid. Congrats on all the important catalysts you stepped through in the last several months. I wanted to ask about.

Michael Freeman: Good morning, Ali, Navin, Zahid. Congrats on all the important catalysts you stepped through in the last several months. I wanted to ask about ORSERDU. This is such a key part of the portfolio, at least right now. I wonder if you could help us set the landscape for key inflections that we might be looking out for, either from Menarini Group or from competitors, all market competitors, for ORSERDU. Looking for a key trial readouts that we should be monitoring.

Speaker #6: Or Sturdu. And you know this is such a key part of the portfolio at least right now. I wonder if you could help us set the landscape for key inflections that we might be looking out for.

Speaker #6: Either from Menarini Group or from competitors on market competitors for Sturdu looking for key trial readouts that we should be monitoring.

Speaker #4: That's all I wanted to say.

Ali Hedayat: We'll throw that one over to you, I think.

Speaker #6: I was on—yeah, sorry, I was on mute there. Apologies. It's a good question, Michael. So, there are several trials that are in the space from other oral surgeons.

Navin Jacob: Yeah, sorry, I was on mute there. Apologies. It is a good question, Michael. There are several trials that are in the space from other oral SERDs. Obviously, lidERA from Roche with giredestrant has played out. That was positive. There are three other competitor trials, the CAMBRIA-1 study of camizestrant from AstraZeneca, the CAMBRIA-2 study of camizestrant, also from AstraZeneca, the EMBER-4 study of imlunestrant from Eli Lilly, and ELEGANT, which is Menarini's trial of elacestrant or ORSERDU. The ORSERDU study reads out in 2028, 2029, right around that timeframe. Before then, you will see data from CAMBRIA-2 likely next year. CAMBRIA-2, in our opinion, is probably the most similar to Sorry, excuse me, CAMBRIA-1, which is most similar to ELEGANT.

Speaker #6: Obviously Lidera from Roche with Geodestron has played out. That was positive. There are three other competitor trials, the Cambrio one study of Camizestron from AstraZeneca, the Cambria two study of Camizestron also from AstraZeneca, and then the MB4 study of Imulestron from Eli Lilly.

Speaker #6: And then, obviously, Elegant, which has Menarini's trial of elacestrant, or the STUDIO study. The STUDIO study reads out in 2028, 2029—right around that time frame.

Speaker #6: But before then, you will see data from Cambria Two, likely next year. And Cambria Two, in our opinion, is probably the most similar to—sorry, excuse me—Cambria One, which is most similar to Elegant.

Speaker #6: So again, just to be clear, the Cambria one study of Camizestron run by AstraZeneca the Cambria one study of Camizestron run by AstraZeneca which reads out in 2027 is most likely and most similar rather to the study being run by Menarini called Elegant of Sturdu.

Navin Jacob: Again, just to be clear, the CAMBRIA-1 study of camizestrant run by AstraZeneca, which reads out in 2027, is most likely and most similar, rather, to the study being run by Menarini called ELEGANT of ORSERDU. What is CAMBRIA-1? CAMBRIA-1 is a study in the extended adjuvant therapy for ER positive, HER2 negative early breast cancer with intermediate or high recurrence risk in patients who have received roughly two to five years of standard adjuvant therapy, endocrine therapy. In that, with ELEGANT and elacestrant, they are focused on the same exact population as CAMBRIA-1 with a slight twist. It is only focused on the high recurrence and not the intermediate recurrence patients. What that means is they are, it is a smaller population.

Speaker #6: So what is Cambria one? Cambria one is the study of in the extended adjuvant therapy for positive HER2 negative early breast cancer with intermediate or high risk or high recurrence risk in patients who have received roughly two to five years of standard adjuvant therapy.

Speaker #6: Endocrine therapy. In that with Elegant and Elicestron they are focused on the same exact population as Cambria one with a slight twist. It is only focused on the high recurrence and not the intermediate recurrence patients.

Speaker #6: Now what that means is they are basically it's a smaller population however there are more events in that population and so it allows for a better chance of an efficacy signal being seen from in terms of the statistical plan.

Navin Jacob: However, there are more events in that population, so it allows for a better chance of an efficacy signal being seen in terms of the statistical plan. Based on the outcome of CAMBRIA-1, if you look within a subportion of CAMBRIA-1, probably roughly half of the CAMBRIA-1 patients, you should look at the forest plots and look at the efficacy signal in the high recurrence patients. You will have a very good view of what ELEGANT might look like for ORSERDU. That CAMBRIA-1 study, again, reads out in 2027, so that gives you an early peek into how the ELEGANT study may read out. There's almost a semi-catalyst next year for ORSERDU through the CAMBRIA-1 study.

Speaker #6: And so based on the outcome of Cambria one if you look within a subportion of Cambria one probably roughly half of the Cambria one patients you should look at the forest plots and look at the efficacy signal in the high recurrence patients you will have a very good view of what Elegant might look like for Sturdu.

Speaker #6: And that Cambria One study, again, reads out in 2027. So that gives you an early peek into how the Elegant study may read out.

Speaker #6: And so there's almost a semi-catalyst next year for STIRDU through the Cambria-1 study. And obviously, we, at the time of our acquisition, had built in zero for adjuvant because it was an untested hypothesis of oral surgeons in that adjuvant setting.

Navin Jacob: Obviously, we, at the time of our acquisition, had built in zero for adjuvant because it was an untested hypothesis of oral SERDs in that adjuvant setting. It's different biology. We have some signal in the adjuvant setting through the lidERA study. Let's see CAMBRIA-1 in 2027. That'll give us an idea of what ELEGANT might look like.

Speaker #6: It's different biology. And so, but we have some signal in the adjuvant setting through the Lidera study. But let's see Cambria-1 in 2027—that'll give us an idea of what Elegant might look like.

Speaker #6: Thank you, Naveen. That is exactly what I was looking for. Okay. Next, I wonder you know you on Acturly and the return of that royalty you know the payments is looking to come I guess by the end of this month.

Michael Freeman: Thank you, Navin. That is exactly what I was looking for. Okay, next. I wonder, on EKTERLY and the return of that royalty, the payment is looking to come, I guess, by the end of this month. I wonder at what point would you.

Speaker #6: I wonder at what point would you at what point would you undertake what you just received this morning? Well, congratulations. At what point would you undertake to adjust your fiscal 26 guidance on especially on EBITDA just given the removal of the receipt of these royalties?

Ali Hedayat: We just.

Michael Freeman: At what point would you undertake?

Ali Hedayat: We just received it.

Michael Freeman: Oh, you just received it.

Ali Hedayat: We received it this morning. Yeah.

Michael Freeman: Well, congratulations. At what point would you undertake to adjust your fiscal 2026 guidance, especially on EBITDA, just given the removal of the receipt of these royalties?

Speaker #4: Look, I think we're tracking—as I said in my earlier remarks in the call—we're tracking really well against our 2026 guidance. So we think, even inclusive of the removal of these royalties, we're going to be at or above the higher end of what we guided to at this point.

Ali Hedayat: Look, I think we are tracking, as I said on my earlier remarks on the call, we are tracking really well against our 2026 guidance. We think even inclusive of the removal of these royalties, we are going to be at or above the higher end of what we guided to at this point.

Speaker #6: Okay, excellent. If I could just sneak one more in—on the deal sourcing workflow, I wonder if you could give us a sense of what proportion of deals in your pipeline resulted from inbound requests to DRI versus outbound requests to counterparties.

Michael Freeman: Okay. Excellent. If we could just sneak one more in. On the deal sourcing workflow, I wonder if you could give us a sense of what proportion of deals in your pipeline resulted from inbound requests to DRI versus outbound requests to counterparties.

Speaker #6: I think we're just going to—it's just not particularly, that particular metric is not necessarily helpful. We get a lot of inbounds, particularly for some reason in the summer.

Navin Jacob: I think that particular metric is not necessarily helpful. We get a lot of inbounds, particularly for some reason in the summer. We do have a lot of inbounds. We have a lot of outbounds. I am not sure it is particularly productive to go into that breakdown at this moment.

Speaker #6: And so, we do have a lot of inbounds. We have a lot of outbounds. I'm not sure it's particularly productive to go into that breakdown at this moment.

Speaker #6: All right. Okay, thank you very much. I'll pass it on.

Michael Freeman: All right. Okay. Thank you very much. I'll pass it on.

Speaker #2: Thank you. The next question comes from Justin Keywood with Stifel. Please go ahead.

Operator: Thank you. The next question comes from Justin Keywood with Stifel. Please go ahead.

Speaker #7: Good morning. Thanks for taking my call. On the exceptional margins in the quarter—92% EBITDA—there was a view of reinvesting some of the internalization benefits expressed last quarter.

Justin Keywood: Good morning. Thanks for taking my call. On the exceptional margins in the quarter, 92% EBITDA. That we should not expect EBITDA margins at this level. Is there any other particular structural changes, as far as the cost levels going forward, that we should consider?

Speaker #7: And that we should not expect EBITDA margins at this level. Does that view still hold for the back half of this year, or are there any particular structural changes regarding cost levels going forward that we should consider?

Speaker #8: Yeah. The margins outperformed our own expectations a little bit. And I think that was really a function of two things. A little bit the timing of some of the additional reinvestment that we've spoken about earlier in the year.

Ali Hedayat: Yeah. I think that was really a function of two things. A little bit the timing of some of the additional reinvestment that we've spoken about earlier in the year, and also, and I think this is an important point, the outperformance on revenues. I think the outperformance on revenues goes to what we've been saying about the difference between our pre and post-internalization financial model, because the incremental margin on that outperformance is extremely high. It's pretty close to 100%, right? As we outperform on the revenue side, those outperformance dollars drop down to the bottom line pretty much dollar for dollar, and I think that's a portion of the margin beat as well.

Speaker #8: And also and I think this is an important point the outperformance on revenues. And I think the outperformance on revenues you know goes to what we've been saying about the difference between our pre and post-internalization financial model because the incremental margin on that outperformance is extremely high.

Speaker #8: It's pretty close to 100%, right? So as we outperform on the revenue side, those outperformance dollars drop down to the bottom line pretty much dollar for dollar.

Speaker #8: And I think that's a portion of the margin beat as well. So, as we roll through the year, you know, we intend to keep reinvesting into the team and, you know, into tech and other areas that have been, I think, a source of productivity and will ultimately feed into our top-line growth.

Ali Hedayat: As we roll through the year, we intend to keep reinvesting into the team and into tech and other areas that have been, I think, a source of productivity and will ultimately feed into our top-line growth. That said, if we keep outperforming on the revenue line, the benefit of that outperformance will keep margins above what we thought they were going to be earlier in the year. That's just the math of it.

Speaker #8: That said, if we keep outperforming on the revenue line, the benefit of that outperformance will keep margins, you know, above what we thought they were going to be earlier in the year.

Speaker #8: That's just the math of it.

Speaker #7: Okay. That's very helpful. And then my second question is on the share buyback. The buyback was active at a much lower share price level.

David Brown: Okay. That's very helpful. My second question is on the share buyback. The buyback was active at a much lower share price level, although there continues to remain a wide discount with DRI's valuation versus certain peers. With the cash proceeds expected to come in, is the share buyback a capital allocation tool that we should expect being utilized going forward, in addition to what is described as a very active M&A pipeline?

Justin Keywood: Okay. That's very helpful. My second question is on the share buyback. The buyback was active at a much lower share price level, although there continues to remain a wide discount with DRI's valuation versus certain peers. With the cash proceeds expected to come in, is the share buyback a capital allocation tool that we should expect being utilized going forward, in addition to what is described as a very active M&A pipeline?

Speaker #7: Although there continues to remain a wide discount with DRI's valuation versus certain peers, and with the cash proceeds expected to come in, is the share buyback capital allocation tool something that we should expect to be utilized going forward, in addition to what is described as a very active M&A pipeline?

Speaker #8: It is. You know we intend to remain active on the buyback. It's not something you know we think of on a daily sort of day trading basis.

Ali Hedayat: It is. We intend to remain active on the buyback. It's not something we think of on a daily sort of day trading basis. We have a look at

Speaker #8: We have a look at, you know, the ranges that we think it's appropriate to buy back stock at about once a quarter. And we, you know, we look at the distribution about once a year.

Ali Hedayat: the ranges that we think it's appropriate to buy back stock at about once a quarter. We look at the distribution about once a year and we recalibrate those accordingly when we think it's appropriate. You should continue to see us return capital to investors in line with the growth in the business on an underlying basis with regards to value via the buyback and on a sort of cash flow and earnings basis via distribution growth. Both of those are levers we continue to believe are appropriate to pull, and we're certainly not in a position where we have to choose between shareholder returns and capacity for investment at this point. We have a lot of liquidity, so it's not something that even crosses our mind as a trade-off.

Speaker #8: And, you know, we recalibrate those accordingly when we think it's appropriate. So you should continue to see us return capital to investors in line with the growth in the business on an underlying basis, with regards to value via the buyback, and on a sort of cash flow and earnings basis.

Speaker #8: Via distribution growth. So both of those are levers we continue to believe are appropriate to pull. And we're certainly not in a position where we have to choose between shareholder returns and capacity for investment at this point.

Speaker #8: We have a lot of liquidity, so it's not something that even crosses our mind as a trade-off.

Speaker #7: Understood. Thank you.

David Brown: Understood. Thank you.

Justin Keywood: Understood. Thank you.

Speaker #2: Thank you. The next question comes from Tanya Gonzalvez with Concord January. Please go ahead.

Operator: Thank you. The next question comes from Tania Gonsalves with Canaccord Genuity. Please go ahead.

Speaker #9: Hi. Good morning, guys. I think most of my questions have been asked here. So just one for me. With respect to the actually outcome does it change how you think about the economics of pre-approval royalties specifically when underwriting these assets?

Tania Gonsalves: Hi, good morning, guys. I think most of my questions have been asked here, so just one for me. With respect to the EKTERLY outcome, does it change how you think about the economics of pre-approval royalties? Specifically, when underwriting these assets, do you assign any value to the probability of a post-approval strategic acquisition and potential early royalty repurchase? Do all of your deals include these change of control or repurchase provisions in them, or it's mostly just the pre-approval assets?

Speaker #9: Do you assign any value to the probability of a post-approval strategic acquisition and potential early royalty repurchase? And do all of your deals include these change of control or repurchase provisions in them, or is it mostly just the pre-approval assets?

Speaker #8: So two things there. Sorry. Go ahead. Go ahead. No. I mean you go ahead. So two things, Tanya. Just on risk. Every single asset, every single deal that we work on has a different risk profile.

Navin Jacob: Two things there.

Navin Jacob: No.

Ali Hedayat: No.

Navin Jacob: Sorry. Go ahead, Ali.

Ali Hedayat: No, Navin, you go ahead.

Navin Jacob: Two things, Tania. Just on risk, every single asset, every single deal that we work on has a different risk profile. We don't go into these things saying, X looks just like the other one. We have risk parameters and investment criteria that are fixed, but that is a minimum. Minimum, not maximum or a mean, right? That's a minimum. Or when I say minimum, I mean that there is a high bar for every single asset. I kind of actually meant it the other way, which is that you have to cross a hurdle with every single one of our investment criteria and every single one of our risk parameters.

Speaker #8: We don't go into these things saying, "X looks just like the other one." And so, the probabilities—we have risk parameters and investment criteria that are fixed.

Speaker #8: But that is a minimum—minimum, not a maximum or a mean, right? That's a minimum amount. When I say minimum, I mean that there is a high bar for every single asset.

Speaker #8: I actually meant it the other way, which is that you have to cross a hurdle with every single one of our investment criteria.

Speaker #8: And every single one of our risk parameters. And one of the things that Ali has brought to the table in a very robust manner is institutionalizing that and being able to look at all of those risk parameters, all of the investment criteria on a portfolio level basis and not just at the individual asset basis.

Navin Jacob: One of the things that Ali has brought to the table in a very robust manner is institutionalizing that and being able to look at all of those risk parameters, all of the investment criteria on a portfolio-level basis, and not just at the individual asset basis. Those are high bars across all the different various criteria we have. We've always had it institutionalized at the asset level. What Ali has brought to the table in an extremely powerful way is tying it all together so we can look at the entire portfolio. With regards to, and just to dig into that a little bit more, the idea that the outcome of EKTERLY would affect how we look at returns on a pre-approval asset, absolutely not, because that's effectively what you're saying can lead to thesis creep.

Speaker #8: Those are high bars across all the various criteria we have. And we've always had the institutionalize at the asset level. What Ali has provided—has brought to the table—in an extremely powerful way, is tying it all together so we can look at the entire portfolio.

Speaker #8: And then, with regards to—and just to dig into that a little bit more—whether it’s, so, the idea that the outcome actually would affect how we look at returns and pre-approval assets: absolutely not, because that would, that’s, effectively what you’re saying leads to—it can lead to thesis creep.

Speaker #8: We would never view the hypothetical potential takeout of a product as a reason to change our investment criteria or our risk parameters. That is not the way we run our organization.

Navin Jacob: We would never view the hypothetical potential takeout of a product as a reason to change our investment criteria or our risk parameters. That is not the way we run our organization. It would deteriorate our risk parameters. Does that answer your question? I'm sorry if I missed the second part of your question.

Speaker #8: It would deteriorate our risk parameters. Does that answer your question? I'm sorry if I missed the second part of your question.

Speaker #9: No, no. That adequately answers it. Thank you.

Tania Gonsalves: No, that adequately answers it. Thank you.

Speaker #8: I guess you know, one thing I'd just throw in there—you know, obviously, and this is a relatively obvious statement—if we are sort of in the business of pre-approval transactions, which we are, many of those companies do not want a royalty agreement to act as a poison pill.

Ali Hedayat: I guess, one thing I'd just throw in there, obviously, this is a relatively obvious statement, if we are sort of in the business of pre-approval transactions, which we are, many of those companies do not want a royalty agreement to act as a poison pill. On that segment of our transactions, you might see some of this written in on an idiosyncratic basis. It's not something that is a mold-and-plate structure for us. It's very customized to whatever the company's needs are or where they are in terms of their corporate objectives. It is something that as we do more and more pre-approval, the likelihood of some frequency of those type of clauses in the contract goes up, right?

Speaker #8: And so you know on that segment of our transactions you might see you know some of this written in on an idiosyncratic basis. It's not you know something that is a boilerplate structure for us.

Speaker #8: It's very customized to whatever the company's needs are, or where they are in terms of, you know, their corporate objectives. But it is, you know, it is something that as we do more and more pre-approval, you know, the likelihood or frequency of those types of clauses in the contract goes up, right?

Speaker #8: Which is not to say that they will get triggered, and it’s not to say that the companies will get bought or anything like that.

Ali Hedayat: Which is not to say that they will get triggered, and it's not to say that the companies will get bought or anything like that, but certainly it is a feature of pre-approval transactions directionally.

Speaker #8: But you know certainly it is a feature of pre-approval transactions directionally.

Speaker #9: Perfect.

Tania Gonsalves: Perfect. That's helpful. Thank you.

Speaker #8: I just want to add to that. You know what Ali noted is super important because that is part of what distinguishes DRI. Every single one of our deals is highly bespoke.

Navin Jacob: I just want to add to that. What Ali noted is super important because that is part of what distinguishes DRI. Every single one of our deals is highly bespoke. We don't go into these with a template-like approach. There is a template-like approach to our risk structure and our investment criteria, but those are minimums, or rather that is a hurdle that is high that has to be achieved. Beyond that, each deal is completely different from the other one, and so it's entirely dependent on what our partners are trying to achieve. We have needs that we have of ourselves to ensure that we're creating value for unitholders, and that's the difficult part is trying to bridge the needs.

Speaker #8: We don't go into these with a template-like approach. There is a template-like approach to our risk structure and our investment criteria. But those are minimums or rather it's a that is a hurdle that is high that has to be achieved.

Speaker #8: But beyond that, each deal is completely different from the other one. And so it's entirely dependent on what our partners are trying to achieve. We have needs that we have of ourselves to ensure that we're creating value for unitholders.

Speaker #8: And that's the difficult part is trying to bridge the highly customized using a highly customized solution to bridge the needs of our counterparties and us in order to create a win-win solution.

Navin Jacob: Using a highly customized solution to bridge the needs of our counterparties and us in order to create a win-win solution.

Speaker #9: Thank you. That's all from me.

Tania Gonsalves: Thank you. That's all for me.

Speaker #2: Thank you. The next question comes from Ash Verma with UBS. Please go ahead.

Operator: Thank you. The next question comes from Ash Verma with UBS. Please go ahead.

Speaker #10: Hi, good morning. This is on behalf of Ash. Thanks for taking our question. I have two. So, the first one is on the Meridian asset.

[Analyst] (UBS): Hey, good morning. This is Dee, on behalf of Ash. Thanks for taking our question. I have two. The first one on the Viridian asset, Lumvoa. I think Viridian did not provide the specific patient enrollment forms, which seems to be raising some questions. We understand this is still very early in the launch right now, but I guess, what's your sense of patients uptake for 2026 and 2027, I guess based on prior analogs that you have looked at? My second question, can you talk about what percentage of your investment currently on assets that are in the clinical stage as opposed to approved product? What type of IRR are you looking for in those two segments? I guess gradually, is your goal to increase mix towards clinical stage assets? Thanks.

Speaker #10: Lumboa. I think the Meridian did not provide the specific patient enrollment forms which seems to be raising some questions. We understand this is still a very early in the launch right now.

Speaker #10: But I guess, what's your sense of patient uptake for 2026 and 2027? I guess based on prior analogues you have looked at. And my second question: can you talk about what percentage of your investment is currently on assets that are in the clinical stage, as opposed to approved products?

Speaker #10: And then what type of like IRR are you looking for in those two segments? I guess gradually is your goal to increase mix towards a clinical stage assets?

Speaker #10: Thanks.

Speaker #8: I can take both of those. On Lumboa and Meridian, you have to remember it got approved literally at the end of Q2, right? So, you know, for them to be speaking about patient uptake at this stage is entirely too early.

Navin Jacob: I can take both of those. On Lumvoa and Viridian, you have to remember it got approved literally at the end of Q2, right. For them to be speaking about patient uptake at this stage is entirely too early. With regards to analogs, we've said this in the past, I'll say it again. This is not going to be an extremely quick uptake. On the other hand, it's not going to be a super slow uptake. I think we said with Tzield that it's going to be a very slow uptake, which has played out, by the way, if you've been following that asset. It's going to be somewhere in between. Part of what has to happen, remember that a lot of Medicare patients in this population.

Speaker #8: With regards to analogs we've said this in the past. I'll say it again. This is not going to be an extremely quick uptake. On the other hand it's not going to be a super slow uptake.

Speaker #8: I think we said with TZL there's going to be a very slow uptake, which has played out, by the way, if you've been following that asset.

Speaker #8: But it's going to be somewhere in between. Part of what has to happen—remember that there are a lot of Medicare patients in this population—so part of what has to happen is, there has to be some time, call it three quarters or so, of reimbursement that has to be put in place in order for uptake to really start to move.

Navin Jacob: Part of what has to happen is there has to be some time, call it Q3 or so, of reimbursement that has to be put in place in order for uptake to really start to move Lumvoa. After that you'll start to see the product move quite a bit. There is no doubt that this is a differentiated asset, and hopefully you've done some channel checks on that yourself. We feel very strongly that this is a differentiated asset, both from an efficacy standpoint and a convenience standpoint. I made some comments as much in the prepared remarks. With regards to the pipeline and the breakout of pre or post-approval, we've already discussed numerous times our move into the pre-approval setting, and potentially phase III financing. That should not come as a surprise. We are looking to do that.

Speaker #8: Lumboa, but after that, you know, you'll start to see the product move quite a bit. And so, there is no doubt that this is a differentiated asset.

Speaker #8: And hopefully you've done some challenge X on that yourself. We feel very strongly that this is a differentiated asset. Both from an efficacy standpoint and a convenience standpoint.

Speaker #8: I made some comments, as much, in the prepared remarks. And then, with regards to the pipeline and the breakout of pre- or post-approval, we've already discussed numerous times our move into the pre-approval setting.

Speaker #8: And potentially phase three financing. So that should not come as a surprise. We are looking to do that. Obviously pre-approval and then phase three requires a higher return for us to be involved.

Navin Jacob: Obviously pre-approval and then phase III requires a higher return for us to be involved. That's obvious, but if it's not, I'll be very clear, our return metrics are going to be higher the earlier we get in the development cycle. The mix of pre-approval or post-approval, we're not discussing that at this stage. It's just not productive as we have several things in the pipeline that we're working on.

Speaker #8: So that's not that's obvious. But if it's not I'll be very clear. Our return metrics are going to be higher. The earlier we get in the development cycle.

Speaker #8: And the mix of pre-approval or post-approval — we're not discussing that at this stage. It's just not productive, as we have several things in the pipeline that we're working on.

Speaker #9: Thank you very much. Thank you.

[Analyst] (UBS): Thank you very much.

Speaker #2: Thank you. We have time for one more question. The next question comes from Nathan Powell with National Bank of Canada Capital Markets. Please go ahead.

Operator: Thank you. We have time for one more question, the next question comes from Nathan Pey with National Bank of Canada Capital Markets. Please go ahead.

Operator: Thank you. We have time for one more question, the next question comes from Nathan Po with National Bank of Canada Capital Markets. Please go ahead.

Speaker #11: Hi, good morning. Thanks for taking my question. On the point of the mix of pre-approval and post-approval assets, we did see that you introduced two new board members.

Nathan Pey: Hi, good morning. Thanks for taking my question. On the point of mix of pre-approval and post-approval assets, we did see that you introduced two new board members bringing in a wealth of science and healthcare experience. Does this foreshadow any future intent further down the line to eventually broaden the pipeline to include assets that are earlier in their developmental stages, potentially even phase II?

Nathan Po: Hi, good morning. Thanks for taking my question. On the point of mix of pre-approval and post-approval assets, we did see that you introduced two new board members bringing in a wealth of science and healthcare experience. Does this foreshadow any future intent further down the line to eventually broaden the pipeline to include assets that are earlier in their developmental stages, potentially even phase II?

Speaker #11: Bringing in a wealth of science and healthcare experience—does this foreshadow any future intent, further down the line, to eventually broaden the pipeline to include assets that are earlier in their developmental stages, potentially even Phase 2?

Speaker #8: Look we're really we're really excited about those new board members. I think they bring a lot of perspective you know across the range of expertise that they have.

Ali Hedayat: Look, we're really excited about those new board members. I think they bring a lot of perspective across the range of expertise that they have and a lot of relationships as well. I think, look, our goal as a business is to continue to expand our impact and footprint in a profitable and risk managed way across the ecosystem of drug development. I think over time, as we get a broader and broader footprint, you may see us expand to earlier stages. I think that is still something that we're thinking about internally in terms of how to measure out the risk return and sizing considerations and all of that. We're pretty happy with the existing strategy that we have in phase III assets.

Speaker #8: And a lot of relationships as well. I think look our goal as a business is to continue to expand our impact and footprint in a profitable and risk-managed way across the ecosystem of drug development and I think over time as we get a broader and broader footprint you may see us expand to earlier stages.

Speaker #8: I think that is you know still something that you know we're thinking about internally in terms of you know how to measure out the risk return.

Speaker #8: And sizing considerations and all of that. And we're pretty happy with the existing you know strategy that we have in phase three assets. But I think you know if you were to think about DRI in 10 years I think the intention is certainly to be a much more full-service investor across the spectrum of drug development and you know able to provide solutions in many different ways for our counterparties.

Ali Hedayat: I think if you were to think about DRI in 10 years, I think the intention is certainly to be a much more full service investor across the spectrum of drug development and able to provide solutions in many different ways for our counterparties. I think as long as that is done in a risk managed and correctly metered way with regards to required returns, we should definitely have a look at it. As I said, not on the agenda for tomorrow, but also not something that we would turn our back on in terms of saying on a binary basis it's out of consideration.

Speaker #8: And I think as long as that is done in a risk-managed and correctly metered way with regard to required returns, we should definitely have a look at it.

Speaker #8: As I said not on the agenda for tomorrow but also not something that we would turn our back on in terms of you know saying on a binary basis.

Speaker #8: It's out of consideration.

Speaker #11: Thank you very much.

Nathan Pey: Thank you very much.

Nathan Po: Thank you very much.

Speaker #2: Thank you. There are no questions at this time. I will now transfer the conference over to Ali Hidayat CEO for closing remarks. Please go ahead sir.

Operator: Thank you. There are no questions at this time. I will now transfer the conference over to Ali Hedayat, CEO, for closing remarks. Please go ahead, sir.

Speaker #8: Thank you. Operator DRI team. Great job. Keep doing what you're doing. And we'll keep moving forward because of it. And everybody else thank you very much for joining us today.

Ali Hedayat: Thank you, operator. DRI team, great job. Keep doing what you're doing, we'll keep moving forward because of it. Everybody else, thank you very much for joining us today. We look forward to speaking to you on our next quarterly results.

Speaker #8: We look forward to speaking to you on our next quarterly results.

Operator: Thank you. Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.

Q2 2026 Dri Healthcare Trust Earnings Call

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