Royalty Pharma(RPRX) - 2024 Q3 - Quarterly Results

Royalty Pharma Q3 2024 Earnings Release Financial & Operational Highlights Royalty Pharma reported strong Q3 2024 results with a 15% year-over-year growth in Portfolio Receipts to $735 million, deploying approximately $1.2 billion in capital and raising full-year 2024 guidance to $2,750 million to $2,800 million Q3 2024 Financial & Liquidity Summary | ($ and shares in millions) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Portfolio Receipts | $735 | $637 | 15% | | Net cash provided by operating activities | $704 | $574 | 23% | | Adjusted EBITDA (non-GAAP) | $679 | $582 | 17% | | Portfolio Cash Flow (non-GAAP) | $617 | $528 | 17% | | Weighted average Class A ordinary shares outstanding - diluted | 593 | 601 | (1)% | - Raised full-year 2024 guidance for Portfolio Receipts to a new range of $2,750 million to $2,800 million[1][3] - Capital Deployment reached approximately $1.2 billion in Q3 and $2.6 billion year-to-date[1] - Strengthened the portfolio by acquiring royalties on three innovative therapies: Niktimvo, Yorvipath, and deucrictibant[2] - Recent FDA approvals for portfolio assets include Cobenfy (schizophrenia), Tremfya (ulcerative colitis), and Voranigo (glioma)[3] Financial Performance Analysis The company's financial performance in Q3 2024 was robust, highlighted by a 15% increase in Portfolio Receipts, strong liquidity with $950 million in cash, and significant growth in non-GAAP measures like Adjusted EBITDA and Portfolio Cash Flow Portfolio Receipts Portfolio Receipts grew 15% YoY to $735 million in Q3 2024, with Royalty Receipts also up 15% to $732 million, primarily driven by strong performance from Trelegy, Evrysdi, the cystic fibrosis franchise, and Tremfya Q3 2024 Portfolio Receipts by Product ($ in millions) | Product | Marketer | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Cystic fibrosis franchise | Vertex | $207 | $196 | 6% | | Trelegy | GSK | $91 | $58 | 55% | | Tysabri | Biogen | $68 | $71 | (4)% | | Evrysdi | Roche | $48 | $16 | 204% | | Imbruvica | AbbVie, J&J | $46 | $51 | (10)% | | Xtandi | Pfizer, Astellas | $43 | $39 | 12% | | Promacta | Novartis | $42 | $45 | (6)% | | Tremfya | Johnson & Johnson | $34 | $27 | 26% | | Total Royalty Receipts | | $732 | $637 | 15% | | Total Portfolio Receipts | | $735 | $637 | 15% | - The significant increase in Royalty Receipts was primarily driven by strong growth from Trelegy, Evrysdi, the cystic fibrosis franchise, and Tremfya[2][5] Liquidity and Capital Resources As of September 30, 2024, Royalty Pharma maintained a solid liquidity position with $950 million in cash and cash equivalents against total debt of $7.8 billion, continuing its share repurchase program with $95 million in buybacks during the quarter - As of September 30, 2024, the company held $950 million in cash and cash equivalents and had total debt with a principal value of $7.8 billion[7] - In Q3 2024, the company repurchased approximately 3 million Class A ordinary shares for $95 million, with year-to-date repurchases totaling 7 million shares for $180 million[8] Non-GAAP Liquidity Measures In Q3 2024, Adjusted EBITDA (non-GAAP) was $679 million, and Portfolio Cash Flow (non-GAAP) was $617 million, both increasing by 17% compared to the same period last year, reflecting strong cash generation for reinvestment and shareholder returns Q3 Non-GAAP Liquidity Summary ($ in millions) | Measure | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Portfolio Receipts | $735 | $637 | 15% | | Adjusted EBITDA (non-GAAP) | $679 | $582 | 17% | | Portfolio Cash Flow (non-GAAP) | $617 | $528 | 17% | - Portfolio Cash Flow reflects cash generated that can be redeployed into royalty acquisitions, debt repayment, dividends, or share repurchases[9] Capital Deployment & Recent Transactions Royalty Pharma actively deployed capital, with $1.2 billion in Q3 and $2.2 billion year-to-date for the first nine months of 2024, primarily on acquiring financial royalty assets, and announced new transactions totaling up to approximately $2.7 billion in 2024 Capital Deployment by Category ($ in millions) | Category | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Acquisitions of financial royalty assets | $(1,195) | $(2,009) | | Total Capital Deployment | $(1,195) | $(2,239) | - Announced new transactions of up to approximately $2.7 billion in 2024, including $294 million in Q3 and $350 million in November[13] - Key recent transactions include a $350 million synthetic royalty on Niktimvo, a $150 million synthetic royalty on Yorvipath, and a royalty interest in deucrictibant for ~$21 million upfront plus milestones[13] Key Portfolio Developments The company's portfolio saw significant positive regulatory and clinical developments, including FDA approvals for Cobenfy, Tremfya, and Voranigo, alongside pipeline discontinuations for MK-8189 and BCX10013 - FDA Approvals: - Cobenfy (KarXT): Approved in September 2024 for schizophrenia in adults (Bristol Myers Squibb) - Tremfya: Approved in September 2024 for adults with moderately to severely active ulcerative colitis (Johnson & Johnson) - Voranigo (vorasidenib): Approved in August 2024 as a first-in-class therapy for IDH-mutant diffuse glioma (Servier)[17] - Regulatory Submissions: - aficamten: Cytokinetics submitted an NDA to the FDA in Q3 2024 - Skytrofa: Ascendis Pharma submitted a supplemental BLA to the FDA for adults with growth hormone deficiency[16] - Pipeline Discontinuations: - MK-8189: Merck removed the drug from its pipeline chart - BCX10013: BioCryst discontinued development due to insufficient clinical activity[16][17] 2024 Financial Outlook The company raised its full-year 2024 guidance for Portfolio Receipts to a range of $2,750 million to $2,800 million, reflecting an expected Royalty Receipts growth of 11% to 13% for the year Full Year 2024 Financial Outlook | Metric | Updated Guidance (Nov 6, 2024) | Previous Guidance | | :--- | :--- | :--- | | Portfolio Receipts | $2,750M to $2,800M | $2,700M to $2,775M | | Payments for operating and professional costs | ~8.5% of Portfolio Receipts | 8% to 9% of Portfolio Receipts | | Interest paid | $160 million | $160 million | - The updated guidance includes expected Royalty Receipts growth of 11% to 13% in 2024, an increase from the previous guidance of 9% to 12%[3][18] - Anticipated interest paid is approximately $160 million for 2024, projected to increase to approximately $260 million in 2025 following a recent debt issuance[19] Financial Statements (Unaudited) The unaudited financial statements for the third quarter ended September 30, 2024, detail the company's financial position and performance, including total income of $565 million, consolidated net income of $806 million, total assets of $18.0 billion, and net cash provided by operating activities of $704 million Condensed Consolidated Statements of Operations For Q3 2024, Royalty Pharma reported total income and other revenues of $565 million, with a net operating income of $735 million and consolidated net income of $806 million, of which $544 million was attributable to Royalty Pharma plc Q3 2024 Statement of Operations Highlights ($ in millions) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Total income and other revenues | $565 | $536 | | Total operating (income)/expense, net | $(170) | $385 | | Operating income | $735 | $151 | | Consolidated net income | $806 | $122 | | Net income attributable to Royalty Pharma plc | $544 | $72 | Selected Balance Sheet Data As of September 30, 2024, the company's balance sheet showed total assets of $18.0 billion, an increase from $16.4 billion at year-end 2023, with total liabilities at $7.8 billion and total shareholders' equity at $10.3 billion Balance Sheet Highlights ($ in millions) | Metric | As of Sep 30, 2024 | As of Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $950 | $477 | | Total assets | $18,042 | $16,382 | | Total liabilities | $7,784 | $6,298 | | Total shareholders' equity | $10,258 | $10,084 | Condensed Consolidated Statements of Cash Flows For the three months ended September 30, 2024, net cash provided by operating activities was $704 million, while net cash used in investing activities was $1.19 billion, primarily due to acquisitions of financial royalty assets, and net cash used in financing activities was $326 million Q3 2024 Cash Flow Summary ($ in millions) | Cash Flow Category | Three Months Ended Sep 30, 2024 | | :--- | :--- | | Net cash provided by operating activities | $704 | | Net cash used in investing activities | $(1,193) | | Net cash (used in)/provided by financing activities | $(326) | | Net change in cash and cash equivalents | $(815) | Reconciliation of GAAP to Non-GAAP Measures This section provides a reconciliation of the non-GAAP liquidity measures, Adjusted EBITDA and Portfolio Cash Flow, to the most directly comparable GAAP measure, Net cash provided by operating activities, showing adjustments from $704 million to $679 million and $617 million respectively for Q3 2024 Q3 2024 GAAP to Non-GAAP Reconciliation ($ in millions) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities (GAAP) | $704 | $574 | | Adjustments | ... | ... | | Adjusted EBITDA (non-GAAP) | $679 | $582 | | Interest paid, net | $(62) | $(54) | | Portfolio Cash Flow (non-GAAP) | $617 | $528 | Appendix & Notes The appendix contains supplementary information, including a corporate overview, forward-looking statements, definitions of key performance and non-GAAP metrics, and a table detailing approved indications for select therapies in the company's portfolio About Royalty Pharma & Forward-Looking Statements Royalty Pharma, founded in 1996, is the largest buyer of biopharmaceutical royalties with a portfolio of over 35 commercial products, and the report includes standard forward-looking statement disclaimers regarding future performance and risks - Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation, with a portfolio of royalties on more than 35 commercial products and 15 development-stage candidates[21] Definition of Key Metrics This section defines key performance metrics, including Portfolio Receipts as cash generation from portfolio investments, and non-GAAP measures like Adjusted EBITDA and Portfolio Cash Flow, used to evaluate the company's ability to generate cash for deployment - Portfolio Receipts is a key metric representing cash generation, defined as the sum of Royalty Receipts, milestones, and other contractual receipts[26][39] - Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures used by management to evaluate the company's ability to generate cash from operations for deployment into acquisitions, debt repayment, and shareholder returns[29][30]