Royalty Pharma plc Q2 FY2025 earnings call

• Pablo highlighted strong business momentum, with 20% growth in Portfolio Receipts and 11% growth in Royalty Receipts. They purchased 8 million shares, totaling $1 billion in share repurchases, and deployed ~$600 million in royalty transactions. Completed acquisition of external manager, announced collaboration with Revolution Medicines for up to $2 billion funding on daraxonrasib, received positive clinical news on portfolio therapies, and raised full-year 2025 Portfolio Receipts guidance.
• Marshall discussed the Revolution Medicines deal, noting up to $2B funding for daraxonrasib with synthetic royalty and senior secured debt, potential IRR in teens, and daraxonrasib's potential in pancreatic and lung cancers.
• Terry reviewed financials: Royalty Receipts grew 11% due to diversified portfolio, Portfolio Receipts at $727M (20% growth). Operating professional costs were 12.9% of Portfolio Receipts, excluding one-time items it was ~8%. Portfolio cash flow (adjusted EBITDA less net interest) was $641M (88% margin). Mentioned Vertex royalty dispute on Alyftrek, expecting resolution by end-2026.

In the second quarter, Royalty Pharma delivered 20% growth in Portfolio Receipts to $727 million and 11% growth in Royalty Receipts to $672 million. Key drivers for Royalty Receipts included Voranigo, Trelegy, Evrysdi, and Tremfya. Portfolio Receipts were ahead of prior guidance due to the strength of the diversified portfolio. Royalty Receipts represent recurring cash inflows, and Portfolio Receipts grew by 20% in the quarter, with the top line at $727 million.

Royalty Pharma raised full-year 2025 Portfolio Receipts guidance to between $3.05 billion and $3.15 billion, representing growth of around 9% to 12%. Operating and professional costs are now expected to be approximately 9% to 9.5% of Portfolio Receipts in 2025, down from 10% previously. Second half of 2025 operating costs are seen at 5% to 6% of Portfolio Receipts. Interest paid in 2025 is expected to be around $275 million.

There is a royalty dispute with Vertex on Alyftrek, where Vertex paid 4% royalty instead of 8%, initiating dispute resolution process with confidentiality obligations, and expecting resolution by around the end of 2026.

Q: Thoughts on Revolution Medicines deal scalability and China innovation?

A: Pablo and Marshall discussed Revolution Medicines deal as scalable with potential for more, and interest in China innovation with active relationships.

Q: Adstiladrin royalty tracking and operating expenses guidance?

A: Terry discussed operating expenses trend towards 5%-6% in second half 2025, Marshall on Adstiladrin market view.

Q: Vertex dispute timing and Spinraza durability?

A: Pablo mentioned Vertex dispute resolution could be earlier than end-2026, Marshall on Spinraza next-gen inclusion.

Q: Vertex dispute timing, aficamten trends, ABI conference insights?

A: Pablo on Vertex dispute timing conservatively, Marshall on aficamten positive trends, Pablo on ABI conference learnings.

Q: Competition in biopharma royalties?

A: Pablo discussed Royalty Pharma's unique position with low cost of capital, scale, and team, differentiating from competitors.

Q: Policy impact and synthetic deals?

A: Marshall on policy monitoring, Pablo on large-scale deals continuing including synthetic ones.