Royalty Pharma Reports Third Quarter 2020 Results
- Double-digit growth in Net cash provided by operating activities (GAAP) and Adjusted Cash Receipts1
- Increased 2020 guidance: Adjusted Cash Receipts1 expected to be
$1,780 to$1,800 million $2.3 billion of new acquisitions announced in 2020, including$1.1 billion in the third quarter
“Our performance in the third quarter underscored the strong momentum in the business", said
GAAP financial results demonstrate continued strong operating cash flow generation and revenue growth
- Cash provided by operating activities increased to
$509 million in the third quarter of 2020 compared with $436 million on a pro forma basis in the same period of 2019 primarily due to higher royalty receipts. - Cash used in investing activities of
$1,042 million largely reflected two royalty acquisitions. - Cash used in financing activities of
$357 million resulted from repayment of debt and dividends paid. - Total income and other revenues of
$538 million grew 16% driven by the CF franchise and Imbruvica.
Non-GAAP financial results driven by strong, broad-based growth across the portfolio
- Adjusted Cash Receipts(1) increased 12% on a pro forma basis led by the CF franchise and Imbruvica.
- Adjusted Cash Flow(2) grew 27% on a pro forma basis to
$394 million , supported by lower interest payments.
Portfolio continues to expand with new royalty acquisitions and regulatory and clinical milestones achieved
- Expansion of agreement with the
CF Foundation brings announced transactions to$2.3 billion this year. - Regulatory approvals granted for Kaftrio by the
European Commission and Evrysdi by the FDA. - Positive clinical study results presented for Trodelvy in metastatic triple-negative breast and urothelial cancer.
Financial Summary | For the three months ended |
||
(unaudited) | |||
($ and shares in millions) | 2020 | 2019(3) Pro Forma |
Change |
Net cash provided by operating activities (GAAP) | 509 | 436 | 17% |
Net cash used in investing activities (GAAP) | (1,042) | n/a | n/a |
Net cash used in financing activities (GAAP) | (357) | n/a | n/a |
Total income and other revenues (GAAP) | 538 | 464 | 16% |
Adjusted Cash Receipts (1) (non-GAAP) | 472 | 421 | 12% |
Adjusted Cash Flow (2) (non-GAAP) | 394 | 309 | 27% |
Fully diluted Class A shares outstanding as of |
607 | n/a | n/a |
Third quarter 2020 financial results
For the three months ended |
|||||||
(unaudited) | |||||||
($ in millions) | 2020 | 2019 Pro forma(3) |
Change | ||||
Net cash provided by operating activities (GAAP) | 509 | 436 | 17% | ||||
Royalty Receipts: | Marketer: | Therapeutic Area: | |||||
CF franchise | Vertex | Rare diseases | 157 | 116 | 36% | ||
Tysabri | Biogen | Neurology | 77 | 83 | (8)% | ||
Imbruvica | AbbVie/Johnson & Johnson | Cancer | 78 | 67 | 16% | ||
HIV franchise | Gilead, others | Infectious disease | 67 | 63 | 6% | ||
Januvia, Janumet, Other DPP-IVs | Merck & Co., others | Diabetes | 34 | 34 | 2% | ||
Xtandi | Pfizer, Astellas | Cancer | 38 | 32 | 21% | ||
Promacta | Novartis | Hematology | 40 | 31 | 28% | ||
Farxiga/Onglyza | AstraZeneca | Diabetes | 8 | — | n/a | ||
Prevymis | Merck & Co. | Infectious diseases | 7 | — | n/a | ||
Crysvita | Ultragenyx, Kyowa Kirin | Rare diseases | 3 | — | n/a | ||
Erleada | Johnson & Johnson | Cancer | 2 | 2 | 30% | ||
Emgality | Eli Lilly | Neurology | 3 | 1 | 155% | ||
Tazverik | Epizyme | Oncology | 0 | — | n/a | ||
Nurtec ODT | Biohaven | Neurology | 0 | — | n/a | ||
Trodelvy | Gilead | Cancer | 1 | — | n/a | ||
Lyrica | Pfizer | Neurology | 5 | 32 | (85)% | ||
Letairis | Gilead | Cardiology | 9 | 29 | (70)% | ||
Other Products (4) | 59 | 59 | 1% | ||||
Total Royalty Receipts | 588 | 550 | 7% | ||||
Distributions to non-controlling interests | (116) | (128) | (9)% | ||||
Adjusted Cash Receipts (non-GAAP) (1) | 472 | 421 | 12% | ||||
Amounts shown in the table may not add due to rounding The difference between pro forma and reported results for Total Royalty Receipts relate to the treatment of Legacy SLP interest in “Other Products.” |
Net cash provided by operating activities (GAAP) was
Total Royalty Receipts were
Drivers of royalty receipts in the third quarter of 2020 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).
- CF franchise – Royalty receipts from Vertex’s CF franchise, which includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio, all approved for patients with certain mutations causing CF, were $157 million in the third quarter of 2020, an increase of 36% compared to the same period of 2019, primarily driven by the highly successful launch of Trikafta in the
U.S.
- Tysabri – Royalty receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, were
$77 million in the third quarter of 2020, a decrease of 8% compared to the same period of 2019. The performance was impacted by inventory dynamics and COVID-19, given delays in dosing at infusion sites.
- Imbruvica – Royalty receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, were $78 million in the third quarter of 2020, an increase of 16% compared to the same period of 2019 driven by the continued penetration in patients with chronic lymphocytic leukemia.
- HIV franchise – Royalty receipts from the HIV franchise, which are based on products marketed by Gilead that contain emtricitabine, including Biktarvy, Genvoya and Truvada, among others, were
$67 million in the third quarter of 2020, an increase of 6% compared to the same period of 2019.
- Januvia, Janumet, Other DPP-IVs – Royalty receipts from the DPP-IVs for type 2 diabetes, which include Januvia and Janumet, both marketed by Merck & Co., were $34 million in the third quarter of 2020, an increase of 2% compared to the same period of 2019.
- Xtandi – Royalty receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, were $38 million in the third quarter of 2020, an increase of 21% compared to the same period of 2019, driven by demand across various prostate cancer indications.
- Promacta – Royalty receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia purpura (ITP) and aplastic anemia, were
$40 million in the third quarter of 2020, an increase of 28% compared to the same period of 2019. Global growth was driven by increased use in ITP and further uptake as first-line treatment for severe aplastic anemia in the US.
Distributions to non-controlling interests, which reduces royalty receipts to arrive at Adjusted Cash Receipts, were $116 million in the third quarter of 2020, a decrease of 9% compared to the same period of 2019 on a pro forma basis.
Adjusted Cash Receipts (non-GAAP) (1) were
Adjusted EBITDA (5) is a non-GAAP measure used by
- The increase was largely attributable to the 12% growth in Adjusted Cash Receipts.
- Payments for operating and professional costs amounted to
$59 million in the third quarter of 2020 (representing 13% of Adjusted Cash Receipts) as compared to$36 million (representing 8% of Adjusted Cash Receipts) in the third quarter of 2019 on a pro forma basis, with the increase relating to expenses for the initial public offering and inaugural bond offering.
Adjusted Cash Flow (2) is a non-GAAP measure which is comprised of Adjusted EBITDA less development-stage funding payments —ongoing, net interest paid and miscellaneous other items relating to swap arrangements, investment in non-consolidated affiliates plus contributions from non-controlling interests—R&D. In the third quarter of 2020, Adjusted Cash Flow was $394 million, a 27% increase compared to Adjusted Cash Flow of $309 million for the same period of 2019 on a pro forma basis. The increase primarily resulted from the growth in Adjusted Cash Receipts as well as lower net interest paid and development-stage funding payments. Items in the period included:
- Development-stage funding payments of $5 million in the third quarter of 2020 was significantly lower than the $23 million in the same period in 2019, as certain ongoing R&D programs (primarily related to the Phase 3 adjuvant studies of Ibrance) reached completion at the end of 2019.
- Net interest paid of $15 million was lower than the $55 million paid in the same period of 2019 on a pro forma basis due to the impact of debt refinancing and a shift to semi-annual interest payments with the issuance of
$6 billion of senior unsecured notes (the "Notes").
- Investment in non-consolidated affiliates was zero compared with $4 million in the third quarter of 2019 as there were no funding requirements in the period.
A more comprehensive discussion of the non-GAAP measures utilized by
Key Developments Relating to the Portfolio
The key developments impacting cash receipts and income and revenue from royalty interests are discussed below:
- Evrysdi (risdiplam): In
August 2020 , Evrysdi was approved by the FDA, representing the first oral treatment approved for infants, children and adults with all spinal muscular atrophy ("SMA") types. Subsequently, the commercial launch for Evrysdi, marketed by Roche, began inAugust 2020 .
- CF franchise: In
August 2020 , Vertex announced that theEuropean Commission had granted marketing authorization for Kaftrio in a combination regimen with ivacaftor to treat people with CF ages 12 years and older with one F508del mutation and one minimal function mutation, or two F508del mutations in the cystic fibrosis transmembrane conductance regulator gene.
- Trodelvy (sacituzumab govitecan-hziy): In
September 2020 , Immunomedics presented results from the confirmatory Phase 3 ASCENT study that showed that Trodelvy significantly extended overall survival (OS) and improved overall response rate and clinical benefit rate, compared to treatment of choice standard single-agent chemotherapy in brain metastases-negative patients with metastatic triple-negative breast cancer who had previously received at least two prior therapies for metastatic disease. Immunomedics also announced positive results from cohort 1 of cisplatin-eligible patients in the pivotal Phase 2 TROPHY U-01 study of Trodelvy in metastatic urothelial cancer. Results confirm the interim findings and prior Phase 1/2 study results showing Trodelvy has significant activity and is safe in patients with heavily-pretreated metastatic urothelial cancer who progressed on both platinum-based chemotherapy and checkpoint inhibitors.
InSeptember 2020 , Gilead and Immunomedics announced that Gilead would acquire Immunomedics for$88.00 per share in cash, which valued Immunomedics at approximately$21 billion . In 2018,Royalty Pharma entered into a partnership with Immunomedics whereby it acquired a tiered, sales-based royalty on Trodelvy for$175 million and acquired 4,373,178 shares of Immunomedics common stock for$75 million . The acquisition closed inOctober 2020 , resulting in gross cash proceeds of$385 million related to Royalty Pharma’s equity position in Immunomedics.
- Ibrance (palbociclib): In
October 2020 , Pfizer announced that the Phase 3 PENELOPE-B trial did not meet the primary endpoint of improved invasive disease-free survival (iDFS) in women with hormone receptor-positive (HR+), human epidermal growth factor-negative (HER2-) early breast cancer (eBC) who have residual invasive disease after completing neoadjuvant chemotherapy.
- Nurtec ODT (rimegepant) and zavegepant: In
October 2020 , Biohaven announced that the FDA had accepted for review its recently submitted supplemental New Drug Application ("sNDA") for Nurtec ODT for the preventive treatment of migraine. In September, Biohaven’s oral zavegepant, a third generation CGRP receptor antagonist, received authorization to proceed into clinical trials from the FDA and achieved first-in-human dosing.
- Omecamtiv mecarbil: In
October 2020 , Amgen, Cytokinetics andServier announced topline results from GALACTIC-HF, a Phase 3 trial of omecamtiv mecarbil in patients with heart failure. The trial met the primary composite endpoint of reduction in cardiovascular death or heart failure events, but did not meet the secondary endpoint of reduction in cardiovascular death. Detailed results including sub-group analysis are expected to be presented at the AHA Scientific Sessions 2020.
Summary of Recent Royalty Acquisition Activity
- Evrysdi (risdiplam): In
July 2020 ,Royalty Pharma acquired a royalty on Evrysdi, a development-stage product candidate for the treatment of Types 1, 2 and 3 SMA, from PTC Therapeutics in exchange for an upfront payment of$650 million .
- Nurtec ODT (rimegepant) and zavegepant: In
August 2020 ,Royalty Pharma announced an expanded agreement withBiohaven Pharmaceuticals for up to$450 million to fund the development of zavegepant and the commercialization of Nurtec ODT. To support the zavegepant Phase 3 program, Biohaven received a$150 million upfront payment and will receive an additional$100 million payment upon the start of the oral zavegepant Phase 3 program.Royalty Pharma will receive a royalty of 0.4% on Nurtec ODT, a royalty of up to 3% on zavegepant and success-based milestone payments based on zavegepant regulatory approvals.Royalty Pharma will also provide further support for the ongoing launch of Nurtec ODT through the purchase of committed, non-contingent commercial launch preferred equity for a total of$200 million payable between 2021 and 2024 in exchange for a series of fixed quarterly payments between 2025 and 2030.
- CF franchise: In
November 2020 ,Royalty Pharma announced that it acquired the residual royalty interest in Vertex’s CF treatments owned by theCF Foundation for an upfront payment of$575 million and a potential milestone of$75 million payable under certain circumstances. As part of previous agreements with theCF Foundation ,Royalty Pharma purchased all of the CF Foundation’s royalty interests on Vertex’s CF franchise. Under the terms of those agreements,Royalty Pharma was obligated to pay theCF Foundation 50% of royalties attributable to revenue over$5.8 billion in any calendar year. This obligation is eliminated with this transaction and entitlesRoyalty Pharma to all royalties above the previous revenue threshold.
Liquidity and Capital Resources
- As of
September 30, 2020 ,Royalty Pharma had cash, cash equivalents and marketable securities in the amount of$2.1 billion and long-term debt with principal value of$6.0 billion .
- In
September 2020 ,Royalty Pharma completed a$6.0 billion issuance of Notes across six tranches with a weighted-average coupon of 2.125% that will pay interest semi-annually, with the initial interest payment occurring inMarch 2021 .Royalty Pharma used the net proceeds from the Notes, together with available cash on hand, to repay in full its senior secured credit facilities entered into inFebruary 2020 . This transaction more than doubledRoyalty Pharma's weighted average maturity to 12.5 years as ofSeptember 2020 .
- In
October 2020 ,Royalty Pharma announced the closing of a secondary offering of 17,343,037 shares of its Class A ordinary shares by selling shareholders in an underwritten public offering at a price to the public of$42.00 per share.Royalty Pharma did not receive any of the proceeds and did not pay any underwriting costs from the sale of its Class A ordinary shares by the selling shareholders.
2020 Financial Outlook
Provided |
|
Adjusted Cash Receipts (non-GAAP) excluding new transactions announced after the date of this release |
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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
Use of Non-GAAP Measures
Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow are non-GAAP measures presented as supplemental measures to
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 Credit Agreement. Noncompliance with the interest coverage ratio and leverage ratio covenants under the credit agreement could result in lenders requiring the company to immediately repay all amounts borrowed. If
Management uses Adjusted Cash Flow to evaluate its ability to generate cash and performance of the business and to evaluate the company’s performance as compared to its peer group. Management also uses Adjusted Cash Flow to compare its performance against non-GAAP adjusted net income 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 earnings release have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of
Condensed Consolidated Income Statement (unaudited)
Table 1
For the three months ended |
||
($ in millions) | 2020 | 2019 |
Total income and revenues | ||
Income from financial royalty assets | 499 | 430 |
Revenue from intangible royalty assets | 35 | 32 |
Other royalty income | 5 | 2 |
Total income and other revenues | 538 | 464 |
Operating expenses | ||
Research and development funding expense | 5 | 23 |
Provision for changes in expected cash flows from financial royalty assets | (34) | (122) |
Amortization of intangible assets | 6 | 6 |
General and administrative expenses | 51 | 26 |
Total operating expenses, net | 28 | (68) |
Operating income | 511 | 532 |
Other (income)/expense | ||
Equity in (earnings)/loss of non-consolidated affiliates | (14) | 8 |
Interest expense | 31 | 69 |
Other (income)/expense | (131) | 16 |
Total other (income)/expense, net | (114) | 92 |
Consolidated net income before tax | 624 | 440 |
Income tax expense | — | — |
Consolidated net income | 624 | 440 |
Less: Net income attributable to non-controlling interest | (334) | (31) |
Net income attributable to controlling interest | 291 | 409 |
Amounts may not add due to rounding.
Selected Balance Sheet Data
Table 2
(unaudited) | ||||
($ in millions) | As of |
As of |
||
Cash and cash equivalents | 1,553 | 284 | ||
Marketable securities | 580 | 57 | ||
Total assets | 15,991 | 12,450 | ||
Current portion of long-term debt | — | 282 | ||
Long-term debt, excluding current portion | 5,812 | 5,956 | ||
Total liabilities | 6,192 | 6,308 | ||
Total shareholders’ equity | 9,799 | 6,141 | ||
Condensed Consolidated Statements of Cash Flows (unaudited)
Table 3
($ in millions) | For the three months ended |
For the nine months ended |
||
2020 | 2019 | 2020 | 2019 | |
Cash flows from operating activities: | ||||
Cash collections from financial royalty assets | 546 | 507 | 1,549 | 1,402 |
Cash collections from intangible royalty assets | 34 | 34 | 104 | 108 |
Other royalty cash collections | 4 | 4 | 13 | 25 |
Interest received | 4 | 4 | 7 | 18 |
Swap collateral received | — | — | 45 | — |
Swap collateral posted | — | (19) | — | (46) |
Swap termination payments | — | — | (35) | — |
Distributions from non-consolidated affiliates | 4 | — | 36 | 14 |
Development-stage funding payments—ongoing | (5) | (23) | (19) | (67) |
Payments for operating and professional costs | (59) | (23) | (129) | (70) |
Interest paid | (19) | (65) | (102) | (195) |
Net cash provided by operating activities | 509 | 419 | 1,469 | 1,189 |
Cash flows from investing activities: | ||||
Distributions from non-consolidated affiliates | — | — | 15 | — |
Purchases of available for sale debt securities | — | — | — | (125) |
Purchase of equity securities | — | — | (50) | — |
Purchase of marketable securities | (496) | (750) | (1,133) | (750) |
Proceeds from available for sale debt securities | — | — | — | 150 |
Proceeds from sales and maturities of marketable securities | 256 | 162 | 610 | 162 |
Investments in non-consolidated affiliates | — | (4) | (29) | (23) |
Acquisitions of financial royalty assets | (802) | (23) | (1,377) | (1,255) |
Milestone payments | — | — | — | (250) |
Net cash used in investing activities | (1,042) | (615) | (1,964) | (2,091) |
Cash flows from financing activities: | ||||
Distributions to shareholders/unitholders | — | (168) | (285) | (564) |
Distributions to non-controlling interest | (116) | (39) | (401) | (117) |
Distributions to non-controlling interest – other | (46) | — | (74) | — |
Dividends to shareholders | (55) | — | (55) | — |
Contributions from non-controlling interest- R&D | 1 | — | 6 | — |
Contributions from non-controlling interest- other | — | — | 30 | — |
Scheduled repayments of long-term debt | — | (74) | (94) | (221) |
Repayments of long-term debt | (5,946) | — | (11,116) | — |
Proceeds from issuance of long-term debt | 5,851 | — | 11,891 | — |
Debt issuance costs and other | (38) | — | (47) | — |
Purchase of treasury interests | — | — | — | (4) |
Proceeds from issuance of Class A ordinary shares upon IPO, net of offering costs | (9) | — | 1,910 | — |
Net cash (used in)/provided by financing activities | (357) | (281) | 1,765 | (906) |
Net change in cash and cash equivalents | (891) | (477) | 1,269 | (1,808) |
Cash and cash equivalents, beginning of period | 2,443 | 593 | 284 | 1,924 |
Cash and cash equivalents, end of period | 1,553 | 116 | 1,553 | 116 |
Amounts may not add due to rounding.
Non-GAAP Financial Measures (unaudited)
Table 4
($ in millions) | For the three months ended |
||||
2020 | 2019 Pro Forma(3) |
Change | |||
Net cash provided by operating activities (GAAP) | 509 | 436 | 17 | ||
Royalty Receipts: | |||||
CF franchise | 157 | 116 | 36% | ||
Tysabri | 77 | 83 | (8)% | ||
Imbruvica | 78 | 67 | 16% | ||
HIV franchise | 67 | 63 | 6% | ||
Januvia, Janumet, Other DPP-IVs | 34 | 34 | 2% | ||
Xtandi | 38 | 32 | 21% | ||
Promacta | 40 | 31 | 28% | ||
Farxiga/Onglyza | 8 | — | n/a | ||
Prevymis | 7 | — | n/a | ||
Crysvita | 3 | — | n/a | ||
Erleada | 2 | 2 | 30% | ||
Emgality | 3 | 1 | 155% | ||
Tazverik | 0 | — | n/a | ||
Nurtec ODT | 0 | — | n/a | ||
Trodelvy | 1 | — | n/a | ||
Lyrica | 5 | 32 | (85)% | ||
Letairis | 9 | 29 | (70)% | ||
Other Products (4) | 59 | 59 | 1% | ||
Total Royalty Receipts | 588 | 550 | 7% | ||
Distributions to non-controlling interest | (116) | (128) | (9)% | ||
Adjusted Cash Receipts (non-GAAP) (1) | 472 | 421 | 12% | ||
Payments for operating and professional costs | (59) | (36) | 66% | ||
Adjusted EBITDA (non-GAAP) (5) | 413 | 386 | 7% | ||
Development-stage funding payments – ongoing | (5) | (23) | (78)% | ||
Interest paid, net | (15) | (55) | (72)% | ||
Investment in non-consolidated affiliates | — | (4) | (100)% | ||
Contributions from non-controlling interest- R&D | 1 | 5 | (76)% | ||
Adjusted Cash Flow (non-GAAP) (2) | 394 | 309 | 27% | ||
Amounts may not add due to rounding.
GAAP to Non-GAAP Reconciliation (unaudited)
Table 5
For the three months ended |
||
($ in millions) | 2020 | 2019 Pro Forma(3) |
Net cash provided by operating activities (GAAP) | 509 | 436 |
Adjustments: | ||
Interest paid, net (6) | 15 | 55 |
Development-stage funding payments – ongoing (7) | 5 | 23 |
Payments for operating and professional costs | 59 | 36 |
Distributions to non-controlling interests (6) | (116) | (128) |
Adjusted Cash Receipts (non-GAAP) (1) | 472 | 421 |
Net cash provided by operating activities (GAAP) | 509 | 436 |
Adjustments: | ||
Interest paid, net (6) | 15 | 55 |
Development-stage funding payments – ongoing (7) | 5 | 23 |
Distributions to non-controlling interests (6) | (116) | (128) |
Adjusted EBITDA (non-GAAP) (5) | 413 | 386 |
Net cash provided by operating activities (GAAP) | 509 | 436 |
Adjustments: | ||
Contribution from non-controlling interest- R&D (6) | 1 | 5 |
Distributions to non-controlling interests (6) | (116) | (128) |
Investment in non-consolidated affiliates (6) (8) | — | (4) |
Adjusted Cash Flow (non-GAAP) (2) | 394 | 309 |
Amounts may not add due to rounding.
Notes
(1) Adjusted Cash Receipts is a measure calculated with inputs directly from the Statement of Cash Flows and includes royalty receipts: (i) cash collections from royalty assets (financial assets and intangible assets), (ii) other royalty cash collections, (iii) distributions from non-consolidated affiliates, plus proceeds from available for sale debt securities (Tecfidera milestone payments), and less distributions to non-controlling interest, which represents distributions to historical non-controlling interest attributable to a de minimis interest in RPCT held by certain legacy investors and to a new non-controlling interest that was created as a result of the Exchange Offer Transactions in
(2) Adjusted Cash Flow is defined as Adjusted EBITDA less development-stage funding payments – ongoing, interest paid, net, swap collateral (posted) or received, net, swap termination payments and investment in non-consolidated affiliates, and plus contributions from non-controlling interest- R&D, all directly reconcilable to the Statement of Cash Flows. See GAAP to Non-GAAP reconciliation at Table 5.
(3) To aid in comparability, three months ended
(4) Other Products include royalties on the following products: Bosulif (a product co-developed by
(5) Adjusted EBITDA is important to lenders and is defined under the credit agreement as Adjusted Cash Receipts less payments for operating and professional costs. Operating and professional costs are comprised of payments for operating costs and professional services and payments for rebates from the Statement of Cash Flows. See GAAP to Non-GAAP reconciliation at Table 5.
(6) The table below shows the line item for each adjustment and the direct location for such line item on the Statement of Cash Flows.
Reconciling adjustment | Statement of Cash Flows classification |
Investments in non-consolidated affiliates | Investing activities |
Distributions to non-controlling interests | Financing activities |
Interest paid, net | Operating activities (Interest paid less interest received) |
Contributions from non-controlling interest- R&D | Financing activities |
(7) Lenders consider all payments made to support R&D activities for products undergoing late-stage development similar to asset acquisitions as these funds are expected to generate operational returns in the future. All development-stage funding payments - ongoing and upfront - run through 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. As a result, Adjusted EBITDA captures the full add-back for R&D funding payments, while Adjusted Cash Flow only reflects the add-back for the upfront portion of development-stage funding payments due to the fact that development-stage funding payments – ongoing are considered an ongoing business expense.
(8)
Source: RP Management, LLC