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Royalty Pharma Announces Sale of MorphoSys Development Funding Bonds
RPRXRoyalty Pharma(RPRX) Newsfilter·2025-01-29 14:00

Transaction Overview - Royalty Pharma closed a transaction to monetize the remaining fixed payments on the MorphoSys Development Funding Bonds for 511millioninupfrontcash,resultingintotalcashproceedsof511 million in upfront cash, resulting in total cash proceeds of 530 million on the original 300millioninvestmentmadeinSeptember2022[1]−Thecompanyachievedanattractivereturnbymonetizingfuturefixedpaymentsatalowdiscountrateof5.35300 million investment made in September 2022 [1] - The company achieved an attractive return by monetizing future fixed payments at a low discount rate of 5.35% and plans to redeploy the proceeds into higher-returning investment opportunities, including share repurchases and acquiring new royalties [1][8] Strategic Context - The monetization was driven by Novartis' acquisition of MorphoSys, which created a unique opportunity to convert fixed long-term payments into a large cash inflow at an attractive return for shareholders [2] - Royalty Pharma updated its capital allocation framework earlier in the year, aiming to generate attractive returns through a blend of royalty investments and share repurchases, enhancing flexibility for disciplined capital allocation [2] Transaction Details - Royalty Pharma entered a long-term strategic funding partnership with MorphoSys in 2021, providing up to 2.025 billion for MorphoSys' acquisition of Constellation Pharmaceuticals, acquiring royalties on Tremfya and other development-stage assets [3] - Prior to the monetization, Royalty Pharma received two quarterly repayments on the Development Funding Bonds, totaling 19.4million(19.4 million (9.7 million in Q4 2024 and 9.7millioninJanuary2025),whichwillberecordedinPortfolioReceipts[4]−The9.7 million in January 2025), which will be recorded in Portfolio Receipts [4] - The 511 million monetization proceeds will be treated as an asset sale and not recorded as Portfolio Receipts, and Royalty Pharma will no longer receive Development Funding Bond payments after this transaction [4] Company Background - Royalty Pharma, founded in 1996, is the largest buyer of biopharmaceutical royalties and a leading funder of innovation in the biopharmaceutical industry, collaborating with academic institutions, research hospitals, and companies of all sizes [6] - The company's portfolio includes royalties on over 35 commercial products, such as Vertex's Trikafta, GSK's Trelegy, Roche's Evrysdi, and Johnson & Johnson's Tremfya, as well as 14 development-stage product candidates [6] Financial Impact - The total proceeds of 530millionontheoriginal530 million on the original 300 million investment strengthen the company's balance sheet and provide added flexibility to pursue its disciplined capital allocation strategy, including significant share repurchases and royalty acquisitions [8]