Royalty Pharma Reports Second Quarter 2023 Results
- Net cash provided by operating activities (GAAP) of
$608 million and Adjusted Cash Receipts(1) (non-GAAP) of$545 million - Announced transactions of up to
$1.7 billion year-to-date, including$659 million in upfront payments - Raising 2023 guidance: Adjusted Cash Receipts(1) (non-GAAP) expected to be
$2,900 to$2,975 million
NEW YORK, NY, August 8, 2023 -
“We reported another quarter of strong financial performance as we continued to execute on our strategy,” said
Second quarter 2023 GAAP financial results demonstrate solid operating cash flow growth
- Net cash provided by operating activities grew 6% to
$608 million ; Net cash used in investing activities was$63 million ; Net cash used in financing activities was$347 million . - Total income and other revenues were
$538 million .
Second quarter 2023 non-GAAP financial results show continued business momentum
- Adjusted Cash Receipts(1) increased 4% to
$545 million , driven by strong portfolio performance and new royalties, partially offset by royalty expirations, Imbruvica headwinds and unfavorable foreign exchange movements; Adjusted Cash Receipts(1) grew 7% prior to the Biohaven related fixed payment received in the prior year period. - Adjusted EBITDA(2) grew 4% to
$498 million ; Adjusted Cash Flow(3) increased 6% to$512 million .
Positive business updates during the second quarter 2023
- Johnson & Johnson reported positive Phase 3 results for Tremfya in ulcerative colitis; Gilead announced approval of Trodelvy in pre-treated HR+/HER2- metastatic breast cancer in
Europe . - Purchased incremental royalty on Johnson & Johnson’s Erleada.
Increasing mid-point of financial guidance range for 2023 (excludes contributions from new transactions)
Royalty Pharma now anticipates 2023 Adjusted Cash Receipts(1) (non-GAAP) to be between$2,900 million and$2,975 million (previously$2,850 million to$2,950 million ), excluding future transactions.- This guidance represents underlying growth of 6%(4) to 10%(4) prior to the Zavzpret milestone payment in 2023 and payments related to the Biohaven Preferred Shares in 2022.
Financial Summary | Three Months Ended |
||
(unaudited) | |||
($ and shares in millions) | 2023 | 2022 | Change |
Net cash provided by operating activities (GAAP) | 608 | 575 | 6% |
Net cash used in investing activities (GAAP) | (63) | (30) | 110% |
Net cash used in financing activities (GAAP) | (347) | (228) | 52% |
Total income and other revenues (GAAP) | 538 | 536 | 0% |
Adjusted Cash Receipts(1) (non-GAAP) | 545 | 524 | 4% |
Adjusted EBITDA(2) (non-GAAP) | 498 | 480 | 4% |
Adjusted Cash Flow(3) (non-GAAP) | 512 | 482 | 6% |
Weighted average Class A ordinary shares outstanding - diluted | 606 | 607 | 0% |
Second Quarter 2023 Financial Results
Three Months Ended |
|||||
(unaudited) | |||||
($ in millions) | 2023 | 2022 | Change | ||
Net cash provided by operating activities (GAAP) | 608 | 575 | 6% | ||
Royalties: | Marketers: | Therapeutic Area: | |||
Cystic fibrosis franchise | Vertex | Rare disease | 206 | 182 | 13% |
Tysabri | Biogen | Neurology | 84 | 93 | (9)% |
Imbruvica | AbbVie, J&J | Cancer | 63 | 80 | (22)% |
Xtandi | Pfizer, Astellas | Cancer | 40 | 52 | (22)% |
Promacta | Novartis | Hematology | 39 | 35 | 12% |
Trelegy | GSK | Respiratory | 37 | — | n/a |
Tremfya | Johnson & Johnson | Immunology | 22 | 18 | 21% |
Cabometyx/Cometriq | Exelixis, Ipsen, Takeda | Cancer | 15 | 13 | 18% |
Prevymis | Merck & Co. | Infectious disease | 14 | 10 | 38% |
Evrysdi | Roche | Rare disease | 13 | 8 | 60% |
Spinraza | Biogen | Neurology | 13 | — | n/a |
Farxiga/Onglyza | AstraZeneca | Diabetes | 10 | 11 | (10)% |
Trodelvy | Gilead | Cancer | 9 | 6 | 52% |
Erleada | Johnson & Johnson | Cancer | 7 | 5 | 37% |
Orladeyo | BioCryst | Rare disease | 7 | 5 | 38% |
Crysvita | Ultragenyx, Kyowa Kirin | Rare disease | 5 | 5 | 5% |
Emgality | Lilly | Neurology | 4 | 4 | 0% |
Nurtec ODT/Biohaven payment* | Pfizer | Neurology | 4 | 19 | (78)% |
Other products(5) | 45 | 86 | (48)% | ||
Total royalty receipts | 637 | 633 | 1% | ||
Distributions to legacy non-controlling interests - royalty receipts | (92) | (109) | (15)% | ||
Adjusted Cash Receipts(1) (non-GAAP) | 545 | 524 | 4% |
Amounts shown in the table may not add due to rounding.
* In 2022, royalty receipts include the
Net cash provided by operating activities (GAAP) was
Total royalty receipts were
Drivers of total royalty receipts in the second quarter of 2023 are discussed below, based on commentary from the marketers of the products underlying the royalties in the preceding quarter (as royalty receipts generally lag product performance by one calendar quarter). The section below excludes comments from marketers on the impact of foreign exchange rates, which was generally a modest headwind across the portfolio. Refer to Table 6 for a description of approved indications.
Cystic fibrosis franchise* | ( |
Tysabri | ( |
Imbruvica | ( |
Xtandi | ( |
Promacta | ( |
Trelegy | ( |
Tremfya | ( |
Cabometyx / Cometriq | ( |
Evrysdi | ( |
Spinraza | ( |
Trodelvy | ( in the |
Orladeyo | ( |
Nurtec ODT/Biohaven payment | ( |
Percentages shown represent year-over-year changes.
*Includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio.
Distributions to legacy non-controlling interests - royalty receipts, which reduce royalty receipts to arrive at Adjusted Cash Receipts(1), were
Adjusted Cash Receipts(1) (non-GAAP) were
Adjusted EBITDA(2) (non-GAAP) is comprised of Adjusted Cash Receipts(1) less payments for operating and professional costs. Adjusted EBITDA(2) was
Adjusted Cash Flow(3) (non-GAAP) is comprised of Adjusted EBITDA(2) less Development-stage funding payments - ongoing, Development-stage funding payments - upfront and milestone, net interest received and miscellaneous other items. In the second quarter of 2023, Adjusted Cash Flow(3) was
A more comprehensive discussion of the non-GAAP measures utilized by
Key Developments Relating to the Portfolio
The key developments related to Royalty Pharma’s royalty interests are discussed below based on disclosures from the marketers of the products.
Trodelvy | In |
Cystic fibrosis franchise | In In In |
Xtandi | In In |
Tremfya | In |
Summary of Recent Royalty Acquisition Activity
- In
June 2023 ,Royalty Pharma acquired an incremental royalty interest in Erleada from the Regents of theUniversity of California .
Liquidity and Capital Resources
- As of
June 30, 2023 ,Royalty Pharma had cash and cash equivalents of$2.2 billion and total debt with principal value of$7.3 billion . - During the second quarter of 2023,
Royalty Pharma began repurchasing its Class A ordinary shares and repurchased approximately four million shares for$134 million . ThroughAugust 7, 2023 ,Royalty Pharma has repurchased approximately six million shares for$185 million . The weighted-average diluted Class A ordinary shares outstanding for the second quarter of 2023 was 606 million as compared to 607 million for the first quarter of 2023.
2023 Financial Outlook
Provided |
Previous | |
Adjusted Cash Receipts(1) (non-GAAP) | ||
Payments for operating and professional costs | 8.0% to 8.5% of Adjusted Cash Receipts(1) | 8% to 9% of Adjusted Cash Receipts(1) |
Interest paid | ||
Development-stage funding payments - upfront and milestone |
This Adjusted Cash Receipts(1) guidance represents underlying growth of 6%(4) to 10%(4) prior to the Zavzpret milestone payment in the first quarter of 2023 and the payments related to the Biohaven Preferred Shares received in 2022.
Additionally, this guidance reflects an estimated foreign exchange impact of approximately -1%(10) to -2%(10) for full year 2023 Adjusted Cash Receipts(1) growth, assuming current foreign exchange rates prevail for 2023.
Total interest paid is based on the semi-annual interest payment schedule of Royalty Pharma’s existing notes and is anticipated to be approximately
Financial Results Call
About
Founded in 1996,
Forward-Looking Statements
The information set forth herein does not purport to be complete or to contain all of the information you may desire. Statements contained herein are made as of the date of this document unless stated otherwise, and neither the delivery of this document at any time, nor any sale of securities, shall under any circumstances create an implication that the information contained herein is correct as of any time after such date or that information will be updated or revised to reflect information that subsequently becomes available or changes occurring after the date hereof.
This document contains statements that constitute “forward-looking statements” as that term is defined in
Certain information contained in this document relates to or is based on studies, publications, surveys and other data obtained from third-party sources and the company’s own internal estimates and research. While the company believes these third-party sources to be reliable as of the date of this document, it has not independently verified, and makes no representation as to the adequacy, fairness, accuracy or completeness of, any information obtained from third-party sources. In addition, all of the market data included in this document involves a number of assumptions and limitations, and there can be no guarantee as to the accuracy or reliability of such assumptions. Finally, while the company believes its own internal research is reliable, such research has not been verified by any independent source.
For further information, please reference Royalty Pharma’s reports and documents filed with the
Use of Non-GAAP Measures
Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow are non-GAAP measures presented as supplemental measures to Royalty Pharma’s GAAP financial performance. These non-GAAP financial measures exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. In each case, because operating performance is a function of liquidity, the non-GAAP measures used by management are presented and defined as supplemental liquidity measures.
In addition,
Management believes that Adjusted EBITDA is an important non-GAAP measure in analyzing liquidity and is a key component of certain material covenants contained within the company’s amended and restated credit agreement that Royalty Pharma’s subsidiary entered to provide for a five-year unsecured revolving credit facility with borrowing capacity of up to
Management believes Adjusted Cash Flow provides meaningful information about Royalty Pharma’s operating performance because one of its core business strategies is to generate consistent cash flows that can be redeployed into new royalty investments. Tracking Adjusted Cash Flow over time helps to identify underlying trends in the business and permits management and investors to better understand Royalty Pharma’s performance. Management uses Adjusted Cash Flow for decision-making purposes related to the funding of investments in royalty-generating assets, debt repayments, dividends and other discretionary investments. Management also uses Adjusted Cash Flow to compare its performance against non-GAAP measures used by many companies in the biopharmaceutical industry, even though each company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s.
The non-GAAP financial measures used in this press release have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of Royalty Pharma’s results as reported under GAAP. The company has provided a reconciliation of each non-GAAP financial measure, except for its non-GAAP outlook to the most directly comparable GAAP financial measure, in each case being net cash provided by operating activities at Table 4.
Royalty Pharma Investor Relations and Communications
+1 (212) 883-6772
ir@royaltypharma.com
Condensed Consolidated Statements of Operations (unaudited) | ||
Table 1 | ||
Three Months Ended |
||
($ in millions) | 2023 | 2022 |
Income and other revenues | ||
Income from financial royalty assets | 501 | 515 |
Revenue from intangible royalty assets | 0 | 3 |
Other royalty income | 37 | 18 |
Total income and other revenues | 538 | 536 |
Operating expenses | ||
Provision for changes in expected cash flows from financial royalty assets | 241 | 106 |
Research and development funding expense | 1 | 1 |
General and administrative expenses | 48 | 52 |
Total operating expenses, net | 289 | 158 |
Operating income | 249 | 378 |
Other expense/(income) | ||
Equity in losses/(earnings) of equity method investees | 1 | (1) |
Interest expense | 47 | 47 |
Other income, net | (150) | (160) |
Total other income, net | (102) | (114) |
Consolidated net income before tax | 351 | 492 |
Income tax expense | — | — |
Consolidated net income | 351 | 492 |
Net income attributable to non-controlling interests | 124 | 187 |
Net income attributable to |
228 | 305 |
Amounts may not add due to rounding.
Selected Balance Sheet Data (unaudited) | ||
Table 2 | ||
($ in millions) | As of |
As of |
Cash and cash equivalents | 2,173 | 1,711 |
Marketable securities | — | 24 |
Total current and non-current financial royalty assets, net | 13,998 | 14,184 |
Total assets | 17,121 | 16,813 |
Current portion of long-term debt | 999 | 998 |
Long-term debt, net of current portion | 6,127 | 6,119 |
Total liabilities | 7,308 | 7,288 |
Total shareholders’ equity | 9,814 | 9,525 |
Condensed Consolidated Statements of Cash Flows (unaudited) | ||||
Table 3 | ||||
Three Months Ended |
Six Months Ended |
|||
($ in millions) | 2023 | 2022 | 2023 | 2022 |
Cash flows from operating activities: | ||||
Cash collections from financial royalty assets | 595 | 560 | 1,746 | 1,181 |
Cash collections from intangible royalty assets | 0 | 36 | 1 | 71 |
Other royalty cash collections | 40 | 15 | 60 | 33 |
Distributions from equity method investees | 2 | 7 | 19 | 28 |
Interest received | 19 | 3 | 35 | 3 |
Development-stage funding payments - ongoing | (1) | (1) | (1) | (1) |
Development-stage funding payments - upfront and milestone | — | — | — | (100) |
Payments for operating and professional costs | (47) | (44) | (134) | (93) |
Interest paid | (1) | (1) | (83) | (87) |
Net cash provided by operating activities | 608 | 575 | 1,642 | 1,035 |
Cash flows from investing activities: | ||||
Distributions from equity method investees | — | — | 35 | — |
Investments in equity method investees | (3) | — | (7) | (3) |
Purchases of equity securities | — | (29) | — | (63) |
Purchases of available for sale debt securities | — | (15) | — | (79) |
Proceeds from available for sale debt securities | — | 16 | — | 31 |
Purchases of marketable securities | — | (58) | — | (235) |
Proceeds from sales and maturities of marketable securities | — | 251 | 24 | 526 |
Acquisitions of financial royalty assets | (60) | (175) | (662) | (175) |
Acquisitions of other financial assets | — | (21) | — | (21) |
Milestone payments | — | — | (12) | — |
Net cash used in investing activities | (63) | (30) | (622) | (19) |
Cash flows from financing activities: | ||||
Distributions to legacy non-controlling interests - royalty receipts | (92) | (109) | (184) | (216) |
Distributions to continuing non-controlling interests | (31) | (38) | (64) | (72) |
Dividends to shareholders | (91) | (83) | (179) | (165) |
Repurchases of Class A ordinary shares | (134) | — | (134) | — |
Contributions from legacy non-controlling interests - R&D | 0 | 0 | 0 | 1 |
Contributions from non-controlling interests - other | 1 | 2 | 4 | 3 |
Net cash used in financing activities | (347) | (228) | (557) | (449) |
Net change in cash and cash equivalents | 197 | 317 | 462 | 567 |
Cash and cash equivalents, beginning of period | 1,976 | 1,792 | 1,711 | 1,541 |
Cash and cash equivalents, end of period | 2,173 | 2,108 | 2,173 | 2,108 |
Amounts may not add due to rounding.
GAAP to Non-GAAP Reconciliation (unaudited) | ||
Table 4 | ||
Three Months Ended |
||
($ in millions) | 2023 | 2022 |
Net cash provided by operating activities (GAAP) | 608 | 575 |
Adjustments: | ||
Proceeds from available for sale debt securities(6)(7) | — | 16 |
Interest received, net(7) | (18) | (2) |
Development-stage funding payments - ongoing(8) | 1 | 1 |
Payments for operating and professional costs | 47 | 44 |
Distributions to legacy non-controlling interests - royalty receipts(7) | (92) | (109) |
Adjusted Cash Receipts(1) (non-GAAP) | 545 | 524 |
Net cash provided by operating activities (GAAP) | 608 | 575 |
Adjustments: | ||
Proceeds from available for sale debt securities(6)(7) | — | 16 |
Interest received, net(7) | (18) | (2) |
Development-stage funding payments - ongoing(8) | 1 | 1 |
Distributions to legacy non-controlling interests - royalty receipts(7) | (92) | (109) |
Adjusted EBITDA(2) (non-GAAP) | 498 | 480 |
Net cash provided by operating activities (GAAP) | 608 | 575 |
Adjustments: | ||
Proceeds from available for sale debt securities(6)(7) | — | 16 |
Contributions from legacy non-controlling interests - R&D(7) | 0 | 0 |
Distributions to legacy non-controlling interests - royalty receipts(7) | (92) | (109) |
Investments in equity method investees(7)(9) | (3) | — |
Adjusted Cash Flow(3) (non-GAAP) | 512 | 482 |
Amounts may not add due to rounding.
Non-GAAP Financial Measures (unaudited) | |||
Table 5 | |||
Three Months Ended |
|||
($ in millions) | 2023 | 2022 | Change |
Net cash provided by operating activities (GAAP) | 608 | 575 | 6% |
Royalties: | |||
Cystic fibrosis franchise | 206 | 182 | 13% |
Tysabri | 84 | 93 | (9)% |
Imbruvica | 63 | 80 | (22)% |
Xtandi | 40 | 52 | (22)% |
Promacta | 39 | 35 | 12% |
Trelegy | 37 | — | n/a |
Tremfya | 22 | 18 | 21% |
Cabometyx/Cometriq | 15 | 13 | 18% |
Prevymis | 14 | 10 | 38% |
Evrysdi | 13 | 8 | 60% |
Spinraza | 13 | — | n/a |
Farxiga/Onglyza | 10 | 11 | (10)% |
Trodelvy | 9 | 6 | 52% |
Erleada | 7 | 5 | 37% |
Orladeyo | 7 | 5 | 38% |
Crysvita | 5 | 5 | 5% |
Emgality | 4 | 4 | 0% |
Nurtec ODT/Biohaven payment* | 4 | 19 | (78)% |
Other products(5) | 45 | 86 | (48)% |
Total royalty receipts | 637 | 633 | 1% |
Distributions to legacy non-controlling interests - royalty receipts | (92) | (109) | (15)% |
Adjusted Cash Receipts(1) (non-GAAP) | 545 | 524 | 4% |
Payments for operating and professional costs | (47) | (44) | 7% |
Adjusted EBITDA(2) (non-GAAP) | 498 | 480 | 4% |
Development-stage funding payments - ongoing | (1) | (1) | (17)% |
Interest received, net | 18 | 2 | nm |
Investments in equity method investees | (3) | — | n/a |
Contributions from legacy non-controlling interests - R&D | 0 | 0 | (18)% |
Adjusted Cash Flow(3) (non-GAAP) | 512 | 482 | 6% |
Amounts may not add due to rounding.
*In 2022, royalty receipts includes the
Description of Approved Indications for Select Portfolio Therapies | |
Table 6 | |
Cystic fibrosis franchise | Cystic fibrosis |
Tysabri | Relapsing forms of multiple sclerosis |
Imbruvica | Hematological malignancies and chronic graft versus host disease |
Xtandi | Prostate cancer |
Promacta | Chronic immune thrombocytopenia purpura and aplastic anemia |
Trelegy | Chronic obstructive pulmonary disease and asthma |
Tremfya | Plaque psoriasis and active psoriatic arthritis |
Cabometyx / Cometriq | Kidney, liver and thyroid cancer |
Evrysdi | Spinal muscular atrophy |
Spinraza | Spinal muscular atrophy |
Trodelvy | Breast and bladder cancer |
Orladeyo | Hereditary angioedema prophylaxis |
Nurtec ODT | Acute and preventative treatment of migraine |
Notes
(1) Adjusted Cash Receipts is a measure calculated with inputs directly from the statements of cash flows and includes total royalty receipts: (i) cash collections from royalty assets (financial assets and intangible assets), (ii) Other royalty cash collections, (iii) Distributions from equity method investees, and (iv) Proceeds from available for sale debt securities; less Distributions to legacy non-controlling interests - royalty receipts, which represent contractual distributions of royalty receipts and proceeds from available for sale debt securities to the
(2) Adjusted EBITDA is important to lenders and is defined under the Credit Agreement as Adjusted Cash Receipts(1) less payments for operating and professional costs. Operating and professional costs reflect Payments for operating and professional costs from the statements of cash flows. See GAAP to Non-GAAP reconciliation at Table 4.
(3) Adjusted Cash Flow is defined as Adjusted EBITDA(2) less (1) Development-stage funding payments - ongoing, (2) Development-stage funding payments - upfront and milestone, (3) Interest paid, net of Interest received, (4) Investments in equity method investees and (5) Other (including Derivative collateral posted, net of Derivative collateral received and Termination payments on derivative instruments) plus (1) Contributions from legacy non-controlling interests - R&D, all directly reconcilable to the statements of cash flows. See GAAP to Non-GAAP reconciliation at Table 4.
(4) Underlying growth in 2023 Adjusted Cash Receipts(1) is calculated based on Royalty Pharma’s 2023 guidance net of the
(5) Other products primarily include royalty receipts on the following products: Cimzia, IDHIFA, Januvia, Janumet, Other DPP-IVs, Letairis, Lexiscan, Mircera, Myozyme, Nesina, Oxlumo, Soliqua, Tazverik and distributions from the Legacy SLP Interest.
(6) Receipts from the quarterly redemption of the Series A Biohaven Preferred Shares in 2022 are presented as Proceeds from available for sale debt securities on the statements of cash flows.
(7) The table below shows the line item for each adjustment and the direct location for such line item on the statements of cash flows.
Reconciling Adjustment | Statements of Cash Flows Classification |
Proceeds from available for sale debt securities | Investing activities |
Investments in equity method investees | Investing activities |
Distributions to legacy non-controlling interests - royalty receipts | Financing activities |
Interest received, net | Operating activities (Interest paid less Interest received) |
Contributions from legacy non-controlling interest - R&D | Financing activities |
(8) Royalty Pharma’s lenders consider all payments made to support R&D activities for development-stage product candidates similar to asset acquisitions as these funds are expected to generate operational returns in the future. All ongoing development-stage funding payments and upfront and milestone development-stage funding payments are reported in R&D funding expense in net income and are added back in aggregate to Net cash provided by operating activities to arrive at Adjusted EBITDA(2). As a result, Adjusted EBITDA(2) captures the full add-back for development-stage funding payments.
(9)
(10) Foreign exchange impact represents an estimate of the difference in results that are attributable to fluctuations in currency exchange rates based on certain assumptions of prevailing exchange rates, contractual terms, geographies from which royalties are derived, timing of payments and other factors. The marketers paying royalties may not provide or may not be required to provide the breakdown of product sales by geography. Actual foreign exchange impact may be different than estimates.