Core Viewpoint - BeiGene has entered into a royalty purchase agreement with Royalty Pharma, receiving $885 million for the rights to royalties from the monoclonal antibody Imdelltra outside of China [1] Group 1 - The agreement involves Royalty Pharma paying $885 million at closing for the majority of the rights to receive royalties on annual net sales of Imdelltra outside of China [1] - BeiGene Switzerland retains the right to sell additional royalty rights for up to $65 million before August 25, 2026 [1] - This transaction is not classified as a related party transaction and does not require shareholder approval [1]

Core Insights - Royalty Pharma has acquired a royalty interest in Amgen's Imdelltra for $885 million upfront, with an option for BeOne Medicines to sell additional royalties for up to $65 million within the next 12 months [1][2][3] - Imdelltra is a first-in-class bispecific T-cell engager targeting DLL3, aimed at treating extensive-stage small cell lung cancer (ES-SCLC), a disease with limited treatment options [2][6] - The transaction aligns with Royalty Pharma's strategy of acquiring royalties on transformative life sciences products, enhancing its long-term growth and portfolio diversification [2][3] Financial Details - Royalty Pharma will pay $885 million upfront for approximately 7% royalty on worldwide net sales of Imdelltra, with potential total payments up to $950 million [3] - BeOne retains the option to sell an additional portion of its royalty for up to $65 million within the next year [3] - Imdelltra sales reached $215 million in the first half of 2025, with projections to exceed $2.8 billion by 2035 based on analyst consensus [2] Market Context - Small cell lung cancer affects approximately 360,000 patients globally each year, with a poor prognosis and a five-year survival rate of only 7% for invasive disease [2] - Imdelltra received accelerated approval from the U.S. FDA in May 2024 for patients who have progressed after platinum-based chemotherapy [2]

Core Insights - Royalty Pharma has acquired a royalty interest in Amgen's Imdelltra for $885 million upfront, with an option for BeOne Medicines to sell additional royalties for up to $65 million within the next 12 months [1][3] - Imdelltra is a first-in-class bispecific T-cell engager targeting DLL3, aimed at treating extensive-stage small cell lung cancer (ES-SCLC), a disease with limited treatment options [2][6] - The acquisition aligns with Royalty Pharma's strategy to invest in transformative life sciences products, enhancing its long-term growth and portfolio diversification [2][3] Transaction Details - The total potential acquisition cost for Royalty Pharma could reach $950 million, which includes a 7% royalty on worldwide net sales of Imdelltra, with royalty sharing on annual net sales exceeding $1.5 billion [3] - The royalty duration for Imdelltra is expected to extend through 2038-2041, while BeOne retains commercial rights in China [3] Market Context - Imdelltra received accelerated FDA approval in May 2024 for treating ES-SCLC in patients who have progressed after platinum-based chemotherapy [2] - Approximately 360,000 patients are affected by small cell lung cancer globally each year, with a poor prognosis and a five-year survival rate of only 7% for invasive disease [2] - Imdelltra sales reached $215 million in the first half of 2025, with projections to exceed $2.8 billion by 2035 based on analyst consensus [2]

Group 1 - Royalty Pharma's Lead Independent Director, Henry Fernandez, has stepped down from the Board of Directors effective August 13, 2025 [1] - Fernandez joined the Board in July 2020 and was appointed Lead Independent Director in March 2021, contributing significantly to the company's growth during its early public years [2] - The company plans to appoint a new Lead Independent Director in the near future [2] Group 2 - Royalty Pharma, founded in 1996, is the largest buyer of biopharmaceutical royalties and a key funder of innovation in the biopharmaceutical industry [3] - The company collaborates with various entities, including academic institutions and leading pharmaceutical companies, and has a portfolio that includes royalties on over 35 commercial products [3] - Current royalties in Royalty Pharma's portfolio include notable therapies such as Vertex's Trikafta, GSK's Trelegy, and Roche's Evrysdi, among others [3]

Group 1 - Royalty Pharma plc (NASDAQ: RPRX) reported results that significantly exceeded expectations, indicating a strong future outlook for the company [1] - The performance of Royalty Pharma reinforces the belief that the company is well-positioned for growth [1] Group 2 - The article does not provide additional relevant content regarding the industry or company beyond the performance of Royalty Pharma [2][3][4]

Core Insights - Royalty Pharma reported a revenue of $727 million for the quarter ended June 2025, reflecting a year-over-year increase of 19.6% and surpassing the Zacks Consensus Estimate of $686.22 million by 5.94% [1] - The company's EPS for the quarter was $1.14, compared to $0.96 in the same quarter last year, resulting in an EPS surprise of 3.64% against the consensus estimate of $1.10 [1] Financial Performance Metrics - The total portfolio receipts from royalty products amounted to $672 million, slightly below the average estimate of $680.22 million [4] - Key product performances included: - Cystic fibrosis franchise: $194 million, -0.4% year-over-year, below the estimate of $206.12 million [4] - Tysabri: $56 million, -12.3% year-over-year, above the estimate of $53.9 million [4] - Imbruvica: $44 million, -10.4% year-over-year, above the estimate of $39.81 million [4] - Xtandi: $42 million, +8.8% year-over-year, below the estimate of $42.75 million [4] - Promacta: $33 million, +8.2% year-over-year, below the estimate of $39.51 million [4] - Evrysdi: $33 million, +32.4% year-over-year, above the estimate of $31.21 million [4] - Trelegy: $57 million, +17.6% year-over-year, slightly below the estimate of $57.04 million [4] - Tremfya: $37 million, +23.7% year-over-year, below the estimate of $38.47 million [4] Stock Performance - Over the past month, Royalty Pharma's shares have returned +6.8%, outperforming the Zacks S&P 500 composite's +0.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and accompanying notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024%20(unaudited)) This section details the company's assets, liabilities, and shareholders' equity at the end of the reporting periods Key Balance Sheet Metrics | Metric (in thousands) | As of June 30, 2025 | As of December 31, 2024 | Change | | :-------------------- | :------------------ | :---------------------- | :----- | | Total Assets | $18,323,000 | $18,222,715 | +$100,285 | | Total Liabilities | $8,820,060 | $7,880,349 | +$939,711 | | Total Shareholders' Equity | $9,502,940 | $10,342,366 | -$839,426 | | Cash and cash equivalents | $631,908 | $929,026 | -$297,118 | | Financial royalty assets, net | $15,134,291 | $15,127,158 | +$7,133 | | Goodwill | $924,634 | $— | +$924,634 | | Long-term debt | $7,003,063 | $6,614,653 | +$388,410 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section outlines revenues, expenses, and net income for the reported three and six-month periods Key Operational Metrics | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total income and other revenues | $578,665 | $537,267 | $1,146,912 | $1,105,245 | | Operating income | $209,799 | $269,630 | $743,980 | $195,856 | | Consolidated net income | $90,635 | $194,377 | $524,068 | $190,104 | | Net income attributable to Royalty Pharma plc | $30,176 | $102,004 | $268,525 | $106,782 | | Basic EPS | $0.07 | $0.23 | $0.63 | $0.24 | | Diluted EPS | $0.07 | $0.23 | $0.62 | $0.24 | - Provision for changes in expected cash flows from financial royalty assets shifted from an expense of **$796.0 million in H1 2024 to an income of $331.1 million in H1 2025**[17](index=17&type=chunk) - Research and development funding expense **significantly increased from $1.0 million in H1 2024 to $351.0 million in H1 2025**[17](index=17&type=chunk) - General and administrative expenses **rose from $112.4 million in H1 2024 to $290.5 million in H1 2025**[17](index=17&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section presents changes in the company's equity accounts during the reporting periods Key Shareholders' Equity Metrics | Metric (in thousands) | As of June 30, 2025 | As of December 31, 2024 | Change | | :-------------------- | :------------------ | :---------------------- | :----- | | Total Shareholders' Equity | $9,502,940 | $10,342,366 | -$839,426 | | Class A ordinary shares outstanding | 432,288 | 445,985 | -13,697 | | Class B ordinary shares outstanding | 150,881 | 143,128 | +7,753 | | Additional paid-in capital | $4,127,665 | $4,103,482 | +$24,183 | | Retained earnings | $2,222,750 | $2,845,653 | -$622,903 | | Non-controlling interests | $3,155,030 | $3,395,785 | -$240,755 | - Repurchases of Class A ordinary shares amounted to **$1.0 billion in H1 2025**, significantly higher than $84.4 million in H1 2024[24](index=24&type=chunk) - Dividends paid to shareholders were **$188.7 million in H1 2025**, consistent with H1 2024[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024%20(unaudited)) This section details the sources and uses of cash from operating, investing, and financing activities Key Cash Flow Metrics | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :----- | | Net cash provided by operating activities | $960,060 | $1,322,847 | -$362,787 | | Net cash provided by/(used in) investing activities | $191,935 | $(979,826) | +$1,171,761 | | Net cash (used in)/provided by financing activities | $(1,449,113) | $944,613 | -$2,393,726 | | Net change in cash and cash equivalents | $(297,118) | $1,287,634 | -$1,584,752 | | Cash and cash equivalents, end of period | $631,908 | $1,764,644 | -$1,132,736 | - Development-stage funding payments **increased significantly from $1.0 million in H1 2024 to $351.0 million in H1 2025**[26](index=26&type=chunk) - Repurchases of Class A ordinary shares **increased from $79.9 million in H1 2024 to $1.0 billion in H1 2025**[26](index=26&type=chunk) - Proceeds from issuance of long-term debt, net of discount, was **$1.47 billion in H1 2024, with no proceeds in H1 2025**[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations of the company's accounting policies and financial statement items [Note 1. Organization and Purpose](index=9&type=section&id=1.%20Organization%20and%20Purpose) This note describes the company's business model and recent organizational changes - Royalty Pharma is the **largest buyer of biopharmaceutical royalties** and a leading funder of innovation[28](index=28&type=chunk) - The company **completed its internalization on May 16, 2025**, integrating its former external manager's employees[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and estimates used in preparing the financial statements - Financial statements are prepared under **GAAP**, requiring management estimates and assumptions[30](index=30&type=chunk)[32](index=32&type=chunk) - The company consolidates majority-owned and controlled subsidiaries, including variable interest entities[33](index=33&type=chunk) - **Goodwill** was recorded as a result of the Internalization and is not amortized, but assessed for impairment annually[43](index=43&type=chunk) - **Vertex accounted for 31% of current financial royalty assets** as of June 30, 2025, down from 34% at December 31, 2024[38](index=38&type=chunk) [Note 3. Internalization](index=11&type=section&id=3.%20Internalization) This note details the acquisition of the company's external manager and its financial impact - **Internalization of RP Manager completed on May 16, 2025**[44](index=44&type=chunk) Component of Purchase Price | Component of Purchase Price (in thousands) | Amount | | :--------------------------------------- | :----- | | Cash | $81,950 | | Fair value of equity attributable to pre-Internalization service period: | | | RP Holdings Class E Interests | $57,000 | | Employee RSUs | $3,778 | | Employee EPAs | $422,479 | | Total purchase price | $565,207 | - **Goodwill of $924.6 million** was recorded as part of the Internalization[53](index=53&type=chunk) - **Acquisition-related costs of $28.7 million** were incurred in H1 2025, primarily for legal, advisory, and professional services[54](index=54&type=chunk) [Note 4. Share-Based Compensation](index=14&type=section&id=4.%20Share-Based%20Compensation) This note provides details on the company's various share-based compensation plans and related expenses Share-Based Compensation Expense | Share-Based Compensation (in thousands) | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :------------------------------------ | :--------------------------- | :--------------------------- | | RP Holdings Class E Interests | $44,050 | $44,050 | | Employee EPAs | $45,732 | $45,732 | | Employee and Director RSUs | $1,262 | $1,965 | | Total Share-Based Compensation | $91,044 | $91,747 | - Unrecognized compensation expense for RP Holdings Class E Interests is **$711.4 million**, vesting over 6.0 years[59](index=59&type=chunk) - Unrecognized expense for Employee EPAs is **$103.5 million**, vesting over 2.1 years[63](index=63&type=chunk) [Note 5. Shareholders' Equity](index=15&type=section&id=5.%20Shareholders%27%20Equity) This note describes changes in share capital, share repurchases, dividends, and non-controlling interests - New share repurchase program authorized for up to **$3.0 billion of Class A ordinary shares**, expiring June 23, 2027[69](index=69&type=chunk) Class A Ordinary Share Repurchases | Class A Ordinary Share Repurchases (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | | Shares repurchased | 31,154 | 3,117 | | Cost of repurchases | $1,000,044 | $84,426 | - As of June 30, 2025, **$2.0 billion remained available** under the share repurchase program[69](index=69&type=chunk) - RP Holdings ownership as of June 30, 2025: **74% by Royalty Pharma plc**, 22% by Continuing Investors Partnerships, and 4% by Holders of RP Holdings Class E Interests[81](index=81&type=chunk) - Quarterly cash dividend of **$0.22 per Class A ordinary share** paid in H1 2025, totaling $188.7 million[82](index=82&type=chunk) [Note 6. Available for Sale Debt Securities](index=18&type=section&id=6.%20Available%20for%20Sale%20Debt%20Securities) This note details the company's investments in debt securities, including funding collaborations - Expanded funding collaboration with Cytokinetics in May 2024, totaling up to **$525 million for commercial launch and $100 million for development**[83](index=83&type=chunk) - **MorphoSys Development Funding Bonds were sold in January 2025** for approximately $511 million[89](index=89&type=chunk) Cytokinetics Funding Arrangements | Cytokinetics Funding Arrangements (in thousands) | Funded (as of June 30, 2025) | Potential Future Draw | Total | | :--------------------------------------------- | :--------------------------- | :-------------------- | :---- | | Commercial Launch Funding | $175,000 | $275,000 | $450,000 | | Development Funding | $100,000 | $— | $100,000 | | R&D Funding Derivative (CK-586) | $50,000 | $150,000 | $200,000 | | Common Stock | $50,000 | $— | $50,000 | | Total | $375,000 | $425,000 | $800,000 | [Note 7. Fair Value Measurements and Financial Instruments](index=20&type=section&id=7.%20Fair%20Value%20Measurements%20and%20Financial%20Instruments) This note explains the methodologies used to measure the fair value of financial assets and liabilities - Fair value measurements primarily use **Level 3 inputs**, indicating unobservable inputs requiring significant judgment[111](index=111&type=chunk) Level 3 Financial Instruments | Level 3 Financial Instruments (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :----------------------------------------- | :------------------ | :---------------------- | | Available for sale debt securities | $285,100 | $751,700 | | Equity securities | $2,241 | $2,241 | | Cytokinetics R&D Funding Derivative | $9,000 | $12,000 | | Royalty at fair value | $5,323 | $5,323 | | Employee EPAs (liability) | $(467,143) | $— | | Cytokinetics Funding Commitments (liability) | $(27,200) | $(12,080) | - Employee EPAs liability of **$467.1 million** was recognized in connection with the Internalization[95](index=95&type=chunk)[117](index=117&type=chunk) - Cytokinetics R&D Funding Derivative fair value is estimated using probability-adjusted discounted cash flow calculations with Level 3 inputs, including a **risk-adjusted discount rate of 13.7%** as of June 30, 2025[113](index=113&type=chunk) [Note 8. Financial Royalty Assets](index=24&type=section&id=8.%20Financial%20Royalty%20Assets) This note provides a breakdown of the company's portfolio of financial royalty assets - Financial royalty assets are measured at amortized cost using the **effective interest method**[118](index=118&type=chunk) Top Financial Royalty Assets | Top Financial Royalty Assets (in thousands) | Net Carrying Value (as of June 30, 2025) | | :---------------------------------------- | :--------------------------------------- | | Cystic fibrosis franchise | $5,017,659 | | Evrysdi | $1,770,330 | | Trelegy | $1,053,534 | | Voranigo | $970,268 | | Tysabri | $913,435 | | Tremfya | $822,682 | | Other | $5,646,026 | | Total (before credit losses) | $16,193,934 | - Estimated fair value of financial royalty assets was **$22.2 billion** ($0.8 billion current, $21.4 billion non-current) as of June 30, 2025[120](index=120&type=chunk) [Note 9. Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets](index=26&type=section&id=9.%20Cumulative%20Allowance%20and%20the%20Provision%20for%20Changes%20in%20Expected%20Cash%20Flows%20from%20Financial%20Royalty%20Assets) This note details the activity in the allowance for credit losses related to financial royalty assets Cumulative Allowance Activity | Cumulative Allowance Activity (in thousands) | Amount | | :----------------------------------------- | :----- | | Balance at December 31, 2024 | $(3,789,281) | | Increases to allowance | $(358,493) | | Decreases to allowance | $668,154 | | Current period provision for credit losses, net | $21,417 | | Balance at June 30, 2025 | $(3,458,203) | [Note 10. Non-Consolidated Affiliates](index=26&type=section&id=10.%20Non-Consolidated%20Affiliates) This note discusses the company's investments in and income from non-consolidated entities - Income allocation from Legacy SLP Interest was **$10.6 million in H1 2025**, compared to a loss allocation of $4.7 million in H1 2024[136](index=136&type=chunk) - Distributions from Avillion I were **$13.4 million in H1 2025** and H1 2024[138](index=138&type=chunk) - Received **$27.4 million milestone payment from Avillion II** related to Airsupra in Q1 2025[139](index=139&type=chunk) - Unfunded commitments related to Avillion Entities totaled **$10.3 million** as of June 30, 2025[140](index=140&type=chunk) [Note 11. Research and Development Funding Expense](index=27&type=section&id=11.%20Research%20and%20Development%20Funding%20Expense) This note details the expenses incurred for funding development-stage biopharmaceutical assets R&D Funding Expense | R&D Funding Expense (in thousands) | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :------------------------------- | :--------------------------- | :--------------------------- | | Total R&D funding expense | $300,500 | $351,000 | - H1 2025 R&D funding primarily includes **$250.0 million for daraxonrasib** and **$100.0 million for litifilimab**[142](index=142&type=chunk) - Unfunded commitment of **$150 million for litifilimab** as of June 30, 2025[143](index=143&type=chunk) [Note 12. Borrowings](index=28&type=section&id=12.%20Borrowings) This note provides a summary of the company's outstanding debt and credit facilities Debt Summary | Borrowing Type (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :---------------------------- | :------------------ | :---------------------- | | Senior Unsecured Notes | $7,800,000 | $7,800,000 | | Term Loan | $380,000 | $— | | Unamortized debt discount and issuance costs | $(177,501) | $(187,574) | | Total debt carrying value | $8,002,499 | $7,612,426 | - Assumed a **$380 million Term Loan** as part of the Internalization, maturing July 2027[144](index=144&type=chunk)[152](index=152&type=chunk) - **$1.8 billion Revolving Credit Facility** available, with no outstanding borrowings as of June 30, 2025[153](index=153&type=chunk) - Future principal payments total **$8.18 billion**, with $1.0 billion due in the remainder of 2025 and $1.38 billion in 2027[156](index=156&type=chunk) [Note 13. Earnings per Share](index=30&type=section&id=13.%20Earnings%20per%20Share) This note presents the calculation of basic and diluted earnings per share for Class A ordinary shares Earnings Per Share | EPS (per share) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.07 | $0.23 | $0.63 | $0.24 | | Diluted EPS | $0.07 | $0.23 | $0.62 | $0.24 | - Dilutive effects include assumed exchanges of Class B ordinary shares (**138.3 million for Q2 2025**) and RP Holdings Class E Interests (**0.4 million for Q2 2025**)[159](index=159&type=chunk) [Note 14. Indirect Cash Flow](index=32&type=section&id=14.%20Indirect%20Cash%20Flow) This note provides a reconciliation of net income to net cash provided by operating activities Reconciliation of Net Income to Operating Cash Flow | Adjustment (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | | Consolidated net income | $524,068 | $190,104 | | Income from financial royalty assets | $(1,089,908) | $(1,054,411) | | Provision for changes in expected cash flows from financial royalty assets | $(331,078) | $796,029 | | Cash collected on financial royalty assets | $1,556,262 | $1,414,324 | | Net cash provided by operating activities | $960,060 | $1,322,847 | [Note 15. Commitments and Contingencies](index=32&type=section&id=15.%20Commitments%20and%20Contingencies) This note discloses the company's contractual commitments, contingencies, and legal proceedings - **$275 million remains available** under Cytokinetics Funding Commitments[162](index=162&type=chunk) - Entered a **$2 billion funding arrangement with Revolution Medicines**, including a $1.25 billion royalty purchase and a $750 million term loan[163](index=163&type=chunk)[165](index=165&type=chunk) - Recorded a **$92.5 million provision for credit losses** on unfunded commitments related to Revolution Medicines[166](index=166&type=chunk) - Operating lease liabilities for office spaces total **$20.8 million** (present value)[168](index=168&type=chunk) - Commenced dispute resolution procedures with **Vertex regarding Alyftrek royalty receipts**[171](index=171&type=chunk) [Note 16. Related Party Transactions](index=34&type=section&id=16.%20Related%20Party%20Transactions) This note details transactions with related parties, including those associated with the Internalization - **Internalization completed on May 16, 2025**, involving acquisition of RP Manager from related parties[172](index=172&type=chunk) - Operating and Personnel Payments to Legacy Manager **ceased post-Internalization**[173](index=173&type=chunk) Distributions Payable to Non-Controlling Interests | Distributions Payable to Non-Controlling Interests (in thousands) | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------------------------------------------- | :------------------ | :---------------------- | | Payable to Founder | $808 | $— | | Payable to Legacy Investors Partnerships | $97,389 | $75,811 | | Total | $98,197 | $75,811 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, operational results, and liquidity [Business Overview](index=37&type=section&id=Business%20Overview) This section describes the company's core business of acquiring biopharmaceutical royalties and funding innovation - Royalty Pharma is the **largest buyer of biopharmaceutical royalties** and a leading funder of innovation[186](index=186&type=chunk) - Portfolio includes royalties on over **35 commercial products** and 16 development-stage product candidates[186](index=186&type=chunk) [Background and Format of Presentation](index=37&type=section&id=Background%20and%20Format%20of%20Presentation) This section explains the company's organizational structure and the impact of its recent Internalization - Royalty Pharma plc holds a **controlling equity interest** in Royalty Pharma Holdings Ltd (RP Holdings)[185](index=185&type=chunk) - The company **completed the Internalization of RP Manager on May 16, 2025**, integrating former external manager employees[190](index=190&type=chunk) [Understanding Our Financial Reporting](index=38&type=section&id=Understanding%20Our%20Financial%20Reporting) This section clarifies key aspects of the company's financial reporting, including non-GAAP measures - Financial royalty assets are classified as financial assets measured under the **effective interest method**[191](index=191&type=chunk) - Income statement activity can be **volatile** due to non-cash provisions for changes in expected cash flows from financial royalty assets[193](index=193&type=chunk)[194](index=194&type=chunk) - Management uses **"Portfolio Receipts"** as a primary measure of operating performance, focusing on cash generation[195](index=195&type=chunk) [Understanding Our Results of Operations](index=39&type=section&id=Understanding%20Our%20Results%20of%20Operations) This section breaks down the key components of the company's income statement - **Non-controlling interests** include Legacy Investors Partnerships, Continuing Investors Partnerships, Founder's Equity, and Holders of RP Holdings Class E Interests[196](index=196&type=chunk)[197](index=197&type=chunk)[200](index=200&type=chunk) - **Equity Performance Awards (EPAs)** represent 20% of Net Economic Profit from investments, generally settled in RP Holdings' Class B Interests[198](index=198&type=chunk) - Total income and other revenues primarily consist of **interest income from financial royalty assets** and royalty income from R&D funding arrangements[201](index=201&type=chunk) - Provision for changes in expected cash flows includes **non-cash adjustments** for forecasted royalty payments and credit losses[207](index=207&type=chunk) - **R&D funding expense** covers development-stage funding payments for royalties or milestones on product candidates[211](index=211&type=chunk) - General and administrative expenses now primarily consist of **employee compensation (cash and share-based) post-Internalization**, replacing Operating and Personnel Payments[212](index=212&type=chunk)[213](index=213&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's operating results for the reported periods Key Operational Metrics | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total income and other revenues | $578,665 | $537,267 | $1,146,912 | $1,105,245 | | Operating income | $209,799 | $269,630 | $743,980 | $195,856 | | Consolidated net income | $90,635 | $194,377 | $524,068 | $190,104 | | Net income attributable to Royalty Pharma plc | $30,176 | $102,004 | $268,525 | $106,782 | - Income from financial royalty assets **increased by 7.3% in Q2 2025 and 3.4% in H1 2025**, primarily due to the Voranigo royalty acquisition[222](index=222&type=chunk)[223](index=223&type=chunk) - Provision for changes in expected cash flows from financial royalty assets shifted from an expense of $212.4 million in Q2 2024 to an **income of $203.9 million in Q2 2025**, driven by increases in sales forecasts for Evrysdi and Xtandi[228](index=228&type=chunk) - R&D funding expense **increased by $300.0 million in Q2 2025 and $350.0 million in H1 2025**, mainly for daraxonrasib and litifilimab[234](index=234&type=chunk)[235](index=235&type=chunk) - G&A expenses **increased by 228.6% in Q2 2025 and 158.5% in H1 2025**, primarily due to higher share-based compensation and Internalization-related costs[236](index=236&type=chunk)[237](index=237&type=chunk) - Interest expense **increased by 40.1% in Q2 2025 and 43.6% in H1 2025**, due to new senior unsecured notes and the assumed term loan[240](index=240&type=chunk)[241](index=241&type=chunk) [Portfolio Overview](index=49&type=section&id=Portfolio%20Overview) This section reviews the performance of the company's royalty portfolio, a key non-GAAP measure - **Portfolio Receipts increased by 19.7% in Q2 2025 and 18.2% in H1 2025**[257](index=257&type=chunk) Portfolio Receipts by Product | Product (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Cystic fibrosis franchise | $443,548 | $413,230 | $30,318 | 7.3% | | Trelegy | $141,853 | $119,074 | $22,779 | 19.1% | | Tysabri | $116,910 | $132,909 | $(15,999) | (12.0)% | | Xtandi | $94,339 | $79,628 | $14,711 | 18.5% | | Imbruvica | $89,435 | $99,191 | $(9,756) | (9.8)% | | Evrysdi | $85,550 | $69,879 | $15,671 | 22.4% | | Promacta | $76,828 | $73,045 | $3,783 | 5.2% | | Tremfya | $72,606 | $66,072 | $6,534 | 9.9% | | Voranigo | $46,036 | $— | $46,036 | n/a | | Cabometyx/Cometriq | $41,033 | $34,565 | $6,468 | 18.7% | | Spinraza | $24,894 | $16,236 | $8,658 | 53.3% | | Trodelvy | $22,557 | $20,656 | $1,901 | 9.2% | | Erleada | $21,031 | $18,205 | $2,826 | 15.5% | | Other products | $183,364 | $166,927 | $16,437 | 9.8% | | Royalty Receipts | $1,459,984 | $1,309,617 | $150,367 | 11.5% | | Milestones and other contractual receipts | $106,772 | $15,361 | $91,411 | n/a | | **Portfolio Receipts** | **$1,566,756** | **$1,324,978** | **$241,778** | **18.2%** | - Milestones and other contractual receipts **increased by $91.4 million in H1 2025**, driven by a one-time distribution from Legacy SLP Interest and a $27.4 million Airsupra milestone payment[265](index=265&type=chunk) [Key Developments Relating to Our Portfolio](index=52&type=section&id=Key%20Developments%20Relating%20to%20Our%20Portfolio) This section highlights recent clinical and regulatory updates for key products in the portfolio - Vertex received **EC approval for Kaftrio label expansion** for CF patients aged 2 years and older[262](index=262&type=chunk) - Gilead announced **positive Phase 3 results for Trodelvy** in previously untreated PD-L1+ mTNBC[263](index=263&type=chunk) - Johnson & Johnson received **EC approval for Tremfya** in ulcerative colitis and Crohn's disease[264](index=264&type=chunk)[265](index=265&type=chunk) - Cytokinetics announced **positive topline results from MAPLE-HCM Phase 3 trial** for aficamten[270](index=270&type=chunk) - Roche expects to initiate a **Phase 3 program for trontinemab** at the end of 2025[270](index=270&type=chunk) [Investments Overview](index=54&type=section&id=Investments%20Overview) This section summarizes the company's recent investment activities and funding arrangements - **Invested $696.3 million** in royalties, milestones, and other contractual receipts in H1 2025[271](index=271&type=chunk) - Entered a **$2 billion funding arrangement with Revolution Medicines** for daraxonrasib, including a $250 million upfront payment for a synthetic royalty[272](index=272&type=chunk) - Entered an R&D funding arrangement with Biogen for litifilimab, providing **$50 million upfront out of $250 million**[272](index=272&type=chunk) - Acquired synthetic royalties on **Rytelo for $125 million** and **Niktimvo for $350 million** in November 2024[272](index=272&type=chunk) - Acquired a royalty interest in **Voranigo for $905 million upfront** in May 2024, following FDA approval in August 2024[272](index=272&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the company's cash flows, debt, and overall financial position - Net cash provided by operating activities was **$960.1 million in H1 2025**, down from $1.3 billion in H1 2024[273](index=273&type=chunk)[278](index=278&type=chunk) - Total debt carrying value was **$8.0 billion as of June 30, 2025**, including $380 million Term Loan assumed from Internalization[283](index=283&type=chunk)[285](index=285&type=chunk) - **$1.8 billion Revolving Credit Facility** available, with no outstanding borrowings as of June 30, 2025[286](index=286&type=chunk) - Cash used in financing activities was **$1.4 billion in H1 2025**, primarily due to **$1.0 billion in Class A ordinary share repurchases**[281](index=281&type=chunk) - The company was **in compliance with all financial covenants** under its debt agreements as of June 30, 2025[287](index=287&type=chunk) Non-GAAP Liquidity Measures | Non-GAAP Liquidity Measures (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | | Portfolio Receipts | $1,566,756 | $1,324,978 | | Adjusted EBITDA | $1,371,035 | $1,216,406 | | Portfolio Cash Flow | $1,252,104 | $1,157,552 | [Critical Accounting Policies and Use of Estimates](index=63&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) This section discusses the accounting policies that require the most significant management judgment - Most critical accounting policies relate to **financial royalty assets**, measured at amortized cost using the prospective effective interest method[311](index=311&type=chunk) - **Significant judgment** is required for forecasting expected future cash flows and royalty durations[311](index=311&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states there have been no material changes in market risk since the last annual report - **No material changes** in market risk exposures reported[312](index=312&type=chunk) [Item 4. Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) This section provides management's conclusion on the effectiveness of the company's disclosure controls - Disclosure controls and procedures were **effective as of June 30, 2025**[313](index=313&type=chunk) - **No material changes** in internal control over financial reporting in Q2 2025[314](index=314&type=chunk) - Cash employee compensation for RP Manager (acquired in Q2 2025) will be **excluded from the 2025 internal control assessment**[315](index=315&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses ongoing legal actions, including a dispute with Vertex regarding Alyftrek royalties - The company is a party to **legal actions in the ordinary course of business**[171](index=171&type=chunk) - A dispute with **Vertex regarding Alyftrek royalty receipts** commenced in Q2 2025[171](index=171&type=chunk) - **No accruals for legal proceedings** have been established as of June 30, 2025, due to indeterminable probability of loss or damages[171](index=171&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) This section outlines risks related to product sales, competition, leverage, accounting volatility, and the recent Internalization - Sales of biopharmaceutical products on which royalties are received are subject to various risks, including **pricing pressures, competition, and regulatory changes**[322](index=322&type=chunk) - Acquisitions of development-stage product candidates carry **uncertainties regarding regulatory approval, market acceptance, and funding**[324](index=324&type=chunk)[330](index=330&type=chunk) - The company uses **leverage**, which magnifies potential losses if royalties do not generate sufficient income[333](index=333&type=chunk) - **GAAP results of operations can be volatile** and unpredictable due to the effective interest method for financial royalty assets[351](index=351&type=chunk) - The **Internalization exposes the company to new and additional costs and risks**, including increased direct overhead for employee compensation[413](index=413&type=chunk) - The company expects to be classified as a **PFIC** for U.S. federal income tax purposes, which could subject U.S. holders to adverse tax consequences[451](index=451&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=95&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity during the second quarter of 2025 - **No unregistered sales** of equity securities[461](index=461&type=chunk) Class A Ordinary Share Repurchases | Class A Ordinary Share Repurchases (in thousands, except per share amounts) | Q2 2025 (Total) | | :---------------------------------------------------------------------- | :-------------- | | Total Number of Shares Purchased | 8,499 | | Average Price Paid Per Share | $32.58 | | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program | $2,010,004 | - The share repurchase program, authorized in January 2025 for up to **$3.0 billion**, expires on June 23, 2027[463](index=463&type=chunk) [Item 3. Defaults Upon Senior Securities](index=96&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reported period - **Not applicable**[464](index=464&type=chunk) [Item 4. Mine Safety Disclosures](index=96&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reported period - **Not applicable**[465](index=465&type=chunk) [Item 5. Other Information](index=96&type=section&id=Item%205.%20Other%20Information) This section confirms no changes to director or officer trading plans during the quarter - **No Rule 10b5-1 trading arrangements** were adopted, modified, or terminated by directors or Section 16 officers in Q2 2025[466](index=466&type=chunk) [Item 6. Exhibits](index=97&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The report includes various exhibits such as **amended articles of association, loan agreements, and equity incentive plans**[467](index=467&type=chunk)

Financial Data and Key Metrics Changes - The company reported a 20% growth in portfolio receipts, reaching $727 million, and an 11% growth in royalty receipts to $672 million, exceeding previous guidance [6][19][24] - Operating and professional costs were 12.9% of portfolio receipts, but excluding one-time expenses, this would have been just over 8% [19][25] - The company raised its full-year 2025 top-line guidance, now expecting portfolio receipts between $3.05 billion and $3.15 billion, reflecting a growth of around 9% to 12% [9][24] Business Line Data and Key Metrics Changes - The strong performance in royalty receipts was driven by Voronego, Trelegy, Evrysdi, and Tremfya [18] - A one-time payment of approximately $50 million contributed to the growth in portfolio receipts [19] - The company completed the acquisition of its external manager, integrating its royalty portfolio with its investment platform [7] Market Data and Key Metrics Changes - The company is focusing on innovative partnerships, such as the collaboration with Revolution Medicines, which involves providing up to $2 billion in funding for a Phase III oncology therapy [8][11] - The unmet need in pancreatic cancer is significant, with around 56,000 new cases diagnosed annually in the U.S., highlighting the market potential for new therapies [15] Company Strategy and Development Direction - The company aims to be a leading partner in funding innovation in life sciences, emphasizing its ability to provide flexible funding solutions [6][8] - The recent partnership with Revolution Medicines is seen as a new funding paradigm for biotech companies, allowing them to retain control over their development while accessing large-scale capital [11][38] - The company is actively exploring opportunities in the Chinese market, recognizing the growing percentage of early-stage pipelines coming from there [34][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong financial performance for 2025, supported by a diversified portfolio and strategic partnerships [9][28] - The company is aware of potential policy impacts, such as MFN and PBM reforms, and is proactively assessing their implications [96][102] - Management highlighted the importance of maintaining a flexible business model to adapt to changing market conditions and policy environments [104] Other Important Information - The company returned $1.26 billion to shareholders in the first half of the year, a record amount [23] - The company is engaged in a dispute resolution process with Vertex regarding royalty payments, which may impact future revenue [27][70] Q&A Session Summary Question: Interest in Revolution Medicines deal and capacity for similar transactions - Management confirmed the excitement around the Revolution Medicines deal and indicated that it is not a one-off transaction, with capacity for more similar deals in the future [38][39] Question: Royalty opportunities in China - Management acknowledged the growing innovation in China and confirmed active engagement in developing relationships with emerging companies there [42][44] Question: Bladder cancer market exposure and royalty tracking - Management did not disclose specific royalty figures for adstilodrine but expressed optimism about the market's growth due to increased competition [46][51] Question: Operating expenses and share repurchase strategy - Management indicated a trend towards lower operating expenses and a dynamic approach to share repurchases based on capital allocation opportunities [48][49] Question: Vertex dispute resolution timing - Management provided a conservative estimate for the resolution of the Vertex dispute, suggesting it could extend into 2026 but may resolve sooner [81] Question: Impact of Kymzios on aficamtan market opportunity - Management expressed confidence that the success of Kymzios validates the market opportunity for aficamtan, emphasizing its unique advantages [82] Question: Competition in the biopharma royalty space - Management acknowledged increased competition but emphasized Royalty Pharma's unique structure, low cost of capital, and strong relationships as competitive advantages [88][90]

Financial Data and Key Metrics Changes - Royalty Pharma reported a 20% growth in portfolio receipts, reaching $727 million, and an 11% growth in royalty receipts to $672 million, exceeding previous guidance [5][18] - The company raised its full-year 2025 top-line guidance for portfolio receipts to a range of $3.05 billion to $3.15 billion, reflecting a growth of approximately 9% to 12% [7][23] Business Line Data and Key Metrics Changes - The strong performance in royalty receipts was driven by key products such as Voronego, Trelegy, Evrysdi, and Tremfya [17] - A one-time payment of approximately $50 million contributed to the growth in portfolio receipts [18] Market Data and Key Metrics Changes - The company highlighted the significant unmet need in pancreatic cancer, with around 56,000 new diagnoses annually, emphasizing the potential market for the oncology therapy Daraxonrezib [14] - The partnership with Revolution Medicines is expected to provide up to $2 billion in funding, indicating a strong market opportunity for innovative therapies [10][12] Company Strategy and Development Direction - Royalty Pharma aims to be a leading partner in funding innovation in life sciences, as evidenced by the groundbreaking collaboration with Revolution Medicines [6][10] - The company is focused on maintaining a diversified portfolio and capitalizing on new funding paradigms to support innovative biotech companies [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering strong financial performance for 2025, supported by the updated guidance and the successful execution of their strategy [25][27] - The company is actively exploring additional partnerships and investments, particularly in emerging markets like China [42][44] Other Important Information - Royalty Pharma has access to approximately $3.4 billion in cash and equivalents, providing significant financial capacity to execute its strategy [21] - The company has initiated a dispute resolution process with Vertex regarding royalty payments, which may impact future revenue [26][72] Q&A Session Summary Question: Interest in Revolution Medicines deal and future capacity for similar deals - Management confirmed the excitement around the Revolution Medicines transaction and indicated the capacity to engage in more similar deals in the future [38][39] Question: Royalty opportunities in China - Management acknowledged the growing innovation in China and expressed interest in developing relationships with emerging companies in the region [42][44] Question: Bladder cancer market exposure and royalty tracking - Management did not disclose specific royalty figures for adstilodrine but expressed optimism about the market's growth despite upcoming competitors [48][52] Question: Operating expenses and share repurchase strategy - Management indicated a trend towards lower operating expenses and a dynamic approach to share repurchases based on capital allocation opportunities [49][50] Question: Vertex dispute resolution timing - Management provided a conservative estimate for the resolution of the Vertex dispute, indicating it could extend into 2026 but may resolve sooner [81][83] Question: Impact of competition and large-scale deals - Management emphasized the company's unique position and ability to compete for large transactions, highlighting the increasing frequency of multibillion-dollar deals in the industry [88][90]

Financial Performance - Royalty Pharma's Portfolio Receipts increased by 20% year-over-year to $727 million in Q2 2025[8, 28] - Royalty Receipts grew by 11% year-over-year to $672 million in Q2 2025[8, 28] - The company repurchased 8 million shares for $277 million in Q2 2025, bringing the total for H1 2025 to $1 billion (31 million shares)[8] - Adjusted EBITDA was $633 million, representing 87.1% of Portfolio Receipts in Q2 2025[28] - Portfolio Cash Flow was $641 million, representing 88.2% of Portfolio Receipts in Q2 2025[28] Capital Allocation and Guidance - Capital Deployment totaled $595 million in Q2 2025[8, 28] - Full year 2025 Portfolio Receipts guidance is $3,050 million to $3,150 million, excluding future transactions, representing approximately 9% to 12% growth[8, 35] - Operating and professional costs are expected to be approximately 9% to 9.5% of Portfolio Receipts for FY 2025[8, 35] Revolution Medicines Partnership - Royalty Pharma entered into a funding partnership with Revolution Medicines for up to $2 billion[15, 16] - This includes up to $1.25 billion for a royalty on daraxonrasib and up to $750 million in senior secured debt[18] - The company projects multi-blockbuster sales potential and an IRR in the teens for daraxonrasib[18]