Royalty Pharma(RPRX) - 2025 Q4 - Annual Report

Financial Performance - In 2025, the company generated $3.3 billion in Portfolio Receipts, excluding $511 million from the sale of MorphoSys Development Funding Bonds[21] - The company announced transactions with a total potential value of $4.7 billion and deployed $2.6 billion in cash for acquiring royalties and contractual receipts[21] - The biopharmaceutical royalty market reached $10.0 billion in transaction value in 2025, a 40% increase from the average of $7.1 billion over the previous five years[32] - The company executed transactions with an aggregate announced value of $19.4 billion from 2020 to 2025, capturing approximately 48% market share of all royalty transactions during this period[35] - As of December 31, 2025, the portfolio included royalties on 16 therapies generating over $1 billion in sales, with 7 therapies exceeding $3 billion[39] - The estimated weighted average duration of the portfolio's royalties is approximately 13 years, with significant products protected by long patent lives[41] - In 2025, the company paid dividends and distributions of $511.9 million and repurchased $1.2 billion of shares[42] Investment Strategy - The company has a success rate of 90% for development-stage acquisitions, with $6.5 billion of these products already approved[45] - The company’s investment approach is agnostic to therapeutic area and treatment modality, allowing for broad acquisition opportunities across the biopharmaceutical industry[47] - The company focuses on acquiring royalties on approved products and development-stage candidates with strong proof of concept data, mitigating development risk[47] Revenue Projections - The company expects 2025 portfolio receipts to reach $3.254 billion, with end market sales projected at $36.5 billion across its approved products[51] - The cystic fibrosis franchise is projected to generate $917 million in royalty receipts, with end market sales of $11.725 billion in 2025[51] - Trelegy is anticipated to contribute $332 million in royalties, with end market sales of $3.912 billion[51] - Tysabri is expected to yield $250 million in royalties, with end market sales of $1.665 billion[51] Royalty Structures - The company has a blended royalty rate of slightly over 9% for the cystic fibrosis franchise, with ownership percentages of 86.8%[55] - The royalty rate for Evrysdi is tiered, starting at 8% on the first $500 million and going up to 16% on sales exceeding $2 billion[55] - The company acquired a royalty interest in Alnylam's Amvuttra for $310 million, which is an approved RNAi therapeutic[64] - The portfolio includes development-stage product candidates, with Ampreloxetine expected to have Phase 3 data available in Q1 2026[62] - The company has a perpetual royalty interest in Tysabri, with tiered payments of 18% on the first $2 billion and 25% on sales exceeding $2 billion[55] - Spinraza royalties will revert to Ionis after reaching aggregate royalties of $475 million or $550 million, depending on specific events[60] Funding and Financial Commitments - As of December 31, 2025, the company has funded a total of $275 million under the Cytokinetics Commercial Launch Funding, with total repayments expected to reach $450 million[65] - The company anticipates receiving $100 million if the Phase 3 trial of omecamtiv mecarbil is positive and FDA approval is granted, along with potential tiered royalties[66] - If TEV-'749 is approved by the FDA, the company will receive $100 million plus tiered royalty payments based on worldwide sales[67] - The company plans to provide $250 million in funding over six quarters for Biogen's R&D, contingent on meeting certain regulatory milestones[67] Market Competition and Risks - The company faces significant competition in acquiring biopharmaceutical royalties, with potential acquirers including larger biopharmaceutical companies and institutional investors[68] - The biopharmaceutical industry is highly competitive, and products may become obsolete due to new alternatives or improvements, impacting revenue streams[69] Workforce and Governance - As of December 31, 2025, the company had 100 employees, with no union representation, and completed the acquisition of its former external manager[76] - The workforce is composed of 48% women and approximately 36% ethnically diverse individuals, reflecting the company's commitment to diversity[77] - The company maintains robust governance policies to ensure compliance with regulatory standards and ethical practices[72] Sustainability and Financial Position - The company is focused on sustainability practices to minimize environmental impact and track its carbon footprint[75] - The company held cash and cash equivalents of $618.7 million as of December 31, 2025, with $235.1 million in cash and $383.6 million in interest-bearing money market funds[388] - The company has a $1.8 billion Revolving Credit Facility, a $350 million Uncommitted Credit Facility, and a $380 million Term Loan, with no outstanding borrowings on the Revolving and Uncommitted Credit Facilities as of December 31, 2025[390] Financial Asset Management - As of December 31, 2025, Vertex accounted for 32% of the current portion of financial royalty assets, making it the largest individual marketer and payor of royalties[391] - The company is subject to interest rate sensitivity due to its investments in marketable securities, which primarily bear variable interest rates[386] - The company has not experienced significant losses in the collection of income or revenue from its royalty assets or available for sale debt securities to date[392] - The company’s investment policy focuses on capital preservation and liquidity needs, maintaining excess cash in money market funds and investment-grade securities[389] - The company is exposed to foreign currency exchange risk, particularly with royalties paid in currencies other than U.S. dollars, such as Euro and British pound[387] - The company follows established risk management policies, including the use of derivative financial instruments to manage interest rate and foreign currency risks[386] Regulatory and Legal Considerations - The company’s ability to continue its business may be adversely affected if the SEC changes its interpretation regarding royalty receivables[84] - The company was incorporated under the laws of England and Wales on February 6, 2020, and is a holding company with a controlling equity interest in Royalty Pharma Holdings Ltd[85]