Royalty Pharma plc
11/05/2025 | Press release | Distributed by Public on 11/05/2025 08:11
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our results of operations, cash flows, other changes in financial condition and business performance. MD&A is provided as a supplement to, and should be read in conjunction with, our 2024 Annual Report on Form 10-K and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Special Note Regarding Forward-Looking Statements included elsewhere in this Quarterly Report on Form 10-Q and in Part II, Item 1A. Risk Factors.
Royalty Pharma plc is a public limited company that is incorporated under the laws of England and Wales and is a holding company. "Royalty Pharma," the "Company," "we," "us" and "our" refer to Royalty Pharma plc and its subsidiaries on a consolidated basis. Our principal asset is a controlling equity interest in Royalty Pharma Holdings Ltd ("RP Holdings"), a private limited company incorporated under the laws of England and Wales. We conduct our business through RP Holdings and its subsidiaries.
Business Overview
We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. Since our founding in 1996, we have been pioneers in the royalty market, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry's leading therapies, which includes royalties on more than 35 commercial products, including Vertex's Trikafta and Alyftrek, Johnson & Johnson's Tremfya, GSK's Trelegy, Roche's Evrysdi, Servier's Voranigo, Biogen's Tysabri and Spinraza, AbbVie and Johnson & Johnson's Imbruvica, Astellas and Pfizer's Xtandi, Pfizer's Nurtec ODT, and Gilead's Trodelvy, among others, and 17 development-stage product candidates. We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators.
Background and Format of Presentation
RP Holdings is owned by Royalty Pharma plc and, indirectly, by various partnerships (the "Continuing Investors Partnerships") and, in addition, post-Internalization (as defined below), by the Holders of RP Holdings Class E Interests (as defined below). RP Holdings is the sole owner of Royalty Pharma Investments 2019 ICAV ("RPI 2019 ICAV"), which is an Irish collective asset management vehicle and is the successor to Royalty Pharma Investments, an Irish unit trust. In 2022, we became an indirect owner of an 82% economic interest in Royalty Pharma Investments ICAV, which was previously owned directly by Royalty Pharma Investments. In connection with the Internalization, Royalty Pharma Investments distributed all of its assets to Royalty Pharma Investments 2011 ICAV (together with Royalty Pharma Investments ICAV, "Old RPI").
We consummated an exchange offer on February 11, 2020 (the "Exchange Offer") to facilitate our initial public offering ("IPO"). Prior to the Exchange Offer, Royalty Pharma Investments was owned by various partnerships (the "Legacy Investors Partnerships"). Through the Exchange Offer, investors which represented 82% of the aggregate limited partnership in the Legacy Investors Partnerships exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP and RPI International Holdings 2019, LP which are part of the Continuing Investors Partnerships. Following the Exchange Offer, we became the indirect owner of an 82% economic interest in Royalty Pharma Investments which entitled us to 82% of the economics of its wholly-owned subsidiary RPI Finance Trust, a Delaware statutory trust ("RPIFT") and 66% of Royalty Pharma Collection Trust, a Delaware statutory trust ("RPCT"). In December 2023, we acquired the remaining 34% interest in RPCT owned by Royalty Pharma Select Finance Trust, a Delaware statutory trust ("RPSFT").
Prior to Internalization (as defined below), we were externally managed by RP Management, LLC, a Delaware limited liability company (the "Legacy Manager" or "RPM"), pursuant to advisory and management agreements (collectively, the "Management Agreement").
On January 10, 2025, we entered into an agreement (as amended, the "Purchase Agreement") with RPM, Royalty Pharma Manager, LLC, a Delaware limited liability company ("RP Manager") and the Sellers (as defined below). Pursuant to the Purchase Agreement, RPM contributed substantially all of its previously held assets and liabilities to RP Manager and we agreed to acquire all of the equity interests of RP Manager from the Sellers (such transaction, the "Internalization"). The Sellers include our founder, chief executive officer and chairman, Pablo Legorreta, RPM I, LLC and RP MIP Holdings, LLC ("RP MIP Holdings"), as the former equity owners of RPM. The equity interest holders of RP MIP Holdings include our named executive officers and certain employees of the Legacy Manager, who became employees of Royalty Pharma, LLC, a wholly-owned subsidiary of RP Holdings, in connection with the Internalization. We completed the acquisition of RP Manager on May 16, 2025.
Understanding Our Financial Reporting
Our portfolio of investments contains royalties and royalty-like terms held through different forms or instruments. Most of the royalties we acquire are treated as investments in cash flow streams and are classified as financial assets measured under the effective interest method in accordance with generally accepted accounting principles in the United States ("GAAP"). Under this accounting methodology, we calculate the effective interest rate on each financial royalty asset using a forecast of the expected cash flows to be received over the life of the financial royalty asset relative to the initial acquisition price. The yield, which is calculated at the end of each reporting period and applied prospectively, is then recognized via accretion into our income at the effective rate of return over the expected life of the financial royalty asset.
The measurement of income from our financial royalty assets requires significant judgments and estimates, including management's judgment in forecasting the expected future cash flows of the underlying royalties and the expected duration of each financial royalty asset. Our cash flow forecasts are updated each reporting period primarily using sell-side equity research analysts' consensus sales estimates. We then calculate our expected royalty receipts by applying our royalty terms to these consensus sales forecasts. As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the condensed consolidated statements of operations as non-cash provision expense. If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a non-cash credit to the provision, or provision income.
As a result of the non-cash charges associated with applying the effective interest method accounting methodology to our financial royalty assets, our condensed consolidated statements of operations activity can be volatile and unpredictable. Small declines in sell-side equity research analysts' consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future. For example, in late 2014 we acquired the cystic fibrosis franchise and shortly after, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expense in our condensed consolidated statements of operations. Over the course of the next 10 quarters, we continued to recognize non-cash provision expense because of these changes in sales forecasts, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017. With the approval of Vertex's Trikafta, in October 2019, sell-side equity research analysts' consensus sales forecasts increased to reflect the larger addressable market and the extension of the expected duration of the Trikafta royalty, resulting in the reversal of the remaining $1.10 billion cumulative allowance. The recognition of the associated non-cash provision income of $1.10 billion in 2019 was not tied to royalty receipts, but rather to the increase in sales forecasts due to the U.S. Food and Drug Administration ("FDA") approval of Trikafta. This example illustrates the volatility caused by our accounting model in our condensed consolidated statements of operations.
We believe there is no direct correlation between income from financial royalty assets and royalty receipts due to the nature of the accounting methodology applied for financial royalty assets. Further, income from financial royalty assets and the provision for changes in expected cash flows related to these financial royalty assets can be volatile and unpredictable.
Our operations have historically been financed primarily with cash flows generated by our royalties. Given the importance of cash flows and their predictability to management's operation of the business, management uses Portfolio Receipts (as defined below) as a primary measure of our operating performance. See "-Portfolio Overview" for additional discussion regarding Portfolio Receipts.
Understanding Our Results of Operations
We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us and which are attributable to:
1. The Legacy Investors Partnerships' ownership of approximately 18% in Old RPI, which is the only remaining historical non-controlling interest that existed prior to our IPO. The value of this non-controlling interest will continue to decline over time as the assets in Old RPI expire. The Legacy Investors Partnerships are referred to as the "legacy non-controlling interests."
2. The Continuing Investors Partnerships' indirect ownership in RP Holdings through their indirect ownership of RP Holdings' Class B ordinary shares (the "RP Holdings Class B Interests"). RP Holdings Class B Interests are exchangeable into our Class A ordinary shares. As the Continuing Investors Partnerships conduct exchanges, the Continuing Investors Partnerships' ownership in RP Holdings decreases and the value of this non-controlling interest decreases.
3. Pablo Legorreta's ultimate ownership of the RP Holdings' Class C ordinary share (the "RP Holdings Class C Special Interest") which entitles him to receive Equity Performance Awards ("Founder's Equity").
Equity Performance Awards ("EPAs") represent 20% of the Net Economic Profit (as defined below) generated from investments made during each two-year investment period (each, a "Portfolio"). Net Economic Profit is defined as the aggregate cash receipts for all new portfolio investments in a Portfolio less Total Expenses, which is defined as interest expense, operating expense, and recovery of acquisition cost related to that Portfolio. Distributions of EPAs occur only upon the satisfaction of specified performance and return thresholds. EPAs are generally settled in RP Holdings' Class B Interests, which are immediately exchanged upon issuance for Class A ordinary shares. A portion of the EPAs may be paid in cash as a tax advance to cover income tax obligations incurred by the beneficial owners of the RP Holdings Class C Special Interest.
Mr. Legorreta granted ownership units in the entities that hold the RP Holdings Class C Special Interest to certain employees of RPM, who became employees of Royalty Pharma, LLC, a wholly-owned subsidiary of RP Holdings, in connection with the Internalization. These grants allow such employees to participate on a pro rata basis in the economic returns of the EPAs for a specific Portfolio (the "Employee EPAs"). Prior to the Internalization, Founder's Equity, which included the Employee EPAs, was accounted for as an equity transaction and recorded as non-controlling interest. Following the Internalization, Founder's Equity continues to be accounted as non-controlling interest.
4. The Sellers' indirect ownership in RP Holdings through their indirect ownership of RP Holdings' Class E ordinary shares (the "RP Holdings Class E Interests"). In connection with the Internalization, we issued 24.5 million RP Holdings Class E Interests, subject to vesting conditions, to the Sellers (the "Holders of RP Holdings Class E Interests") as part of the transaction considerations. Upon vesting, the RP Holdings Class E Interests are exchangeable on a one-for-one basis for Class A ordinary shares. Once exchanged, the value of this non-controlling interest decreases.
The Continuing Investors Partnerships, the Founder's Equity and the Holders of RP Holdings Class E Interests, collectively, are referred to as the "continuing non-controlling interests."
Total income and other revenues
Total income and other revenues is primarily comprised of interest income from our financial royalty assets and royalty income generally arising from successful commercialization of products developed through research and development ("R&D") funding arrangements. Most of our royalties are classified as financial assets as our ownership rights are generally protective and passive in nature. In certain instances, we may acquire a royalty that includes more substantial rights or ownership of the underlying intellectual property, we classify such royalties as intangible assets and recognize revenue from these intangible royalty assets.
The royalty payors that accounted for greater than 10% of our total income and other revenues are shown in the table below:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
| Royalty Payor | Royalty | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||
| Vertex | Cystic fibrosis franchise | 35 | % | 36 | % | 35 | % | 37 | % | |||||||||||||||||||||||
| Roche | Evrysdi, Mircera | * | 10 | % | * | 10 | % | |||||||||||||||||||||||||
*Represents less than 10%.
Income from financial royalty assets
Our financial royalty assets represent investments in cash flow streams with yield components that most closely resemble loans measured at amortized cost under the effective interest method. We calculate the effective interest rate using forecasted expected cash flows to be received over the life of the royalty asset relative to the initial acquisition price. Interest income is recognized at the effective rate of return over the expected life of the asset, which is calculated at the end of each reporting period and applied prospectively. As changes in sell-side equity research analysts' consensus sales estimates are updated on a quarterly basis, the effective rate of return changes. For example, if sell-side equity research analysts' consensus sales forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods.
Variables affecting the recognition of interest income from financial royalty assets under the prospective effective interest method include any one of the following: (1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts' consensus sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (e.g., patent expiration date), (5) changes in amounts and timing of projected royalty receipts and milestone payments and (6) changes in the portion of sales that are subject to the royalty, which is referred to as royalty bearing sales. Our financial royalty assets are directly linked to sales of underlying pharmaceutical products whose life cycle typically peaks at a point in time, followed frequently by declining sales trends due to the entry of generic competition, resulting in natural declines in the asset balance and periodic interest income over the life of our royalties. The recognition of interest income from royalties requires management to make estimates and assumptions around many factors, including those impacting the variables noted above.
Other royalty income and revenues
Other royalty income and revenues primarily includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of R&D funding arrangements. Occasionally, a royalty asset may be amortized on an accelerated basis due to collectability concerns, which, if resolved, may result in future cash collections when no financial royalty asset remains. Similarly, we may continue to collect royalties on a fully amortized financial royalty asset beyond the estimated duration. In each scenario where a financial royalty asset has been fully amortized, income from such royalty is recognized as Other royalty income and revenues.
Other royalty income and revenues also includes revenues from intangible royalty assets and income from royalties that are recorded at fair value.
Provision for changes in expected cash flows from financial royalty assets
The Provision for changes in expected cash flows from financial royalty assetsincludes the following:
•non-cash expense or income related to the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows; and
•non-cash expense or income related to the provision for current expected credit losses, which reflects the activity for the period, primarily due to new financial royalty assets with limited protective rights and changes to cash flow estimates for financial royalty assets with limited protective rights.
As discussed above, income is accreted on our financial royalty assets using the effective interest method. As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the condensed consolidated statements of operations through the line item Provision for changes in expected cash flows from financial royalty assets. If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a credit to the provision, or provision income.
The same variables and management's estimates affecting the recognition of interest income on our financial royalty assets noted above also directly impact the provision.
Provision for credit losses on unfunded commitments
The provision for credit losses on unfunded commitments, a non-cash item, represents the current expected credit losses on the unfunded portions of our funding arrangements primarily with Revolution Medicines. Because we have limited protective rights with respect to each unfunded portion once the funding is provided, we are required to recognize an allowance for current expected credit losses based on our estimate of probability of future funding. We estimated the allowance for credit losses using the probability of default and loss given default method. We are required to reassess our estimate of current expected credit losses as of each reporting date and any subsequent change to such allowance, which can be income or expense, is reflected within Provision for credit losses on unfunded commitmentsin the condensed consolidated statements of operations.
R&D funding expense
R&D funding expense consists of development-stage funding payments that we have made to counterparties to acquire royalties or milestones on product candidates. The payments can be made on an upfront basis, upon pre-approval milestone or over time as the related product candidates undergo clinical trials.
General and administrative expenses
Prior to the Internalization, the most significant component of general and administrative ("G&A") expenses was the Operating and Personnel Payments (as defined below). Under the Management Agreement, we paid a quarterly operating and personnel payment to RPM or its affiliates equal to 6.5% of the cash receipts from Royalty Investments (as defined in the Management Agreement) and 0.25% of the value of our security investments under GAAP as of the end of such quarter ("Operating and Personnel Payments").
Following the Internalization, we no longer pay Operating and Personnel Payments and instead, employee compensation expenses represent the most significant components of G&A expenses. Employee compensation includes cash-based and share-based expenses. The share-based compensation expenses arising from the Internalization primarily include the following:
1.Approximately 22.8 million RP Holdings Class E Interests with an aggregate fair value of approximately $755.4 million which are expensed over vesting periods on a straight-line basis of generally five to nine years.
2.The vesting of the Employee EPAs over the remaining service period and the subsequent change in the fair value of the Employee EPAs. The fair value of the Employee EPAs is driven by the performance of the investments within the Portfolio and will fluctuate based on the timing and amount of the investments made during the investment period as well as the return and expected return on the investments.
Additionally, as each new Portfolio commences after the Internalization, any related Employee EPAs will also be recognized as share-based compensation expense over the required service periods of generally four years and included within General and administrative expenseson the condensed consolidated statement of operations. Lastly, G&A expenses include rent, legal fees and other expenses for professional services.
Equity in (earnings)/losses of equity method investees
Equity in (earnings)/losses of equity method investees primarily includes the results of our share of income or loss from the following non-consolidated affiliates:
1. Legacy SLP Interest.In connection with the Exchange Offer, we acquired an equity method investment from the Continuing Investors Partnerships in the form of a special limited partnership interest in the Legacy Investors Partnerships (the "Legacy SLP Interest") in exchange for issuing shares in our subsidiary. The Legacy SLP Interest entitles us to the equivalent of performance distribution payments that would have been paid to the general partner of the Legacy Investors Partnerships and a performance income allocation on a similar basis. As the Legacy Investors Partnerships no longer participate in investment opportunities, the value of the Legacy SLP Interest is expected to decline over time.
2. The Avillion Entities.The Avillion Entities (as defined below) partner with global biopharmaceutical companies to perform R&D in exchange for success-based milestones or royalties if products are commercialized. Our investments in Avillion Financing I, LP ("Avillion I") and BAv Financing II, LP ("Avillion II" and together with Avillion I, the "Avillion Entities") are accounted for using the equity method.
Other (income)/expense, net
Other (income)/expense, net primarily includes the changes in fair value of our equity securities, derivative instruments and available for sale debt securities, including related forwards and funding commitments, and interest income.
Net income attributable to non-controlling interests
The net income attributable to non-controlling interests includes income attributable to the legacy non-controlling interests and the continuing non-controlling interests. Following our acquisition of the remaining non-controlling interest in RPCT held by RPSFT in December 2023, and since the Legacy Investors Partnerships no longer participate in investment opportunities, the related net income attributable to the legacy non-controlling interests is expected to continue to decline over time as the assets held by Old RPI mature.
The net income attributable to the continuing non-controlling interests related to the Continuing Investors Partnerships and the Holders of RP Holdings Class E Interests are expected to decline over time if the investors who indirectly own the RP Holdings Class B and Class E Interests, respectively, conduct exchanges for our Class A ordinary shares.
Net income attributable to non-controlling interests above can fluctuate significantly from period to period, primarily driven by volatility in the income statement activity of the respective underlying entity as a result of the non-cash charges associated with applying the effective interest accounting methodology to our financial royalty assets as described in the section titled "Understanding Our Financial Reporting."
Further, the net income attributable to the continuing non-controlling interests includes EPAs attributable to Founder's Equity that we began recognizing in the first quarter of 2025 as certain conditions were met.
Results of Operations
The comparison of our historical results of operations is as follows (in thousands):
| For the Three Months Ended September 30, | Change | For the Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Income and other revenues | |||||||||||||||||||||||||||||||||||||||||||||||
| Income from financial royalty assets | $ | 578,812 | $ | 533,166 | 45,646 | 8.6 | $ | 1,668,720 | $ | 1,587,577 | 81,143 | 5.1 | |||||||||||||||||||||||||||||||||||
| Other royalty income and revenues | 30,479 | 31,524 | (1,045) | (3.3) | 87,483 | 82,358 | 5,125 | 6.2 | |||||||||||||||||||||||||||||||||||||||
| Total income and other revenues | 609,291 | 564,690 | 44,601 | 7.9 | 1,756,203 | 1,669,935 | 86,268 | 5.2 | |||||||||||||||||||||||||||||||||||||||
| Operating expense/(income) | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for changes in expected cash flows from financial royalty assets | 12,135 | (227,604) | 239,739 | * | (318,943) | 568,425 | (887,368) | * | |||||||||||||||||||||||||||||||||||||||
| Provision for credit losses on unfunded commitments | 766 | - | 766 | n/a | 93,301 | - | 93,301 | n/a | |||||||||||||||||||||||||||||||||||||||
| Research and development funding expense | 50,500 | 500 | 50,000 | * | 401,500 | 1,500 | 400,000 | * | |||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 118,734 | 56,720 | 62,014 | 109.3 | 409,209 | 169,080 | 240,129 | 142.0 | |||||||||||||||||||||||||||||||||||||||
| Total operating expense/(income), net | 182,135 | (170,384) | 352,519 | * | 585,067 | 739,005 | (153,938) | (20.8) | |||||||||||||||||||||||||||||||||||||||
| Operating income | 427,156 | 735,074 | (307,918) | (41.9) | 1,171,136 | 930,930 | 240,206 | 25.8 | |||||||||||||||||||||||||||||||||||||||
| Other (income)/expense | |||||||||||||||||||||||||||||||||||||||||||||||
| Equity in (earnings)/losses of equity method investees | (15,948) | (10,407) | (5,541) | 53.2 | (25,084) | 2,039 | (27,123) | * | |||||||||||||||||||||||||||||||||||||||
| Interest expense | 79,564 | 66,506 | 13,058 | 19.6 | 213,493 | 159,751 | 53,742 | 33.6 | |||||||||||||||||||||||||||||||||||||||
| Other (income)/expense, net | (80,671) | (127,383) | 46,712 | (36.7) | 14,448 | (227,322) | 241,770 | * | |||||||||||||||||||||||||||||||||||||||
| Total other (income)/expense, net | (17,055) | (71,284) | 54,229 | (76.1) | 202,857 | (65,532) | 268,389 | * | |||||||||||||||||||||||||||||||||||||||
| Consolidated net income | 444,211 | 806,358 | (362,147) | (44.9) | 968,279 | 996,462 | (28,183) | (2.8) | |||||||||||||||||||||||||||||||||||||||
| Net income attributable to non-controlling interests | 155,994 | 262,371 | (106,377) | (40.5) | 411,537 | 345,693 | 65,844 | 19.0 | |||||||||||||||||||||||||||||||||||||||
| Net income attributable to Royalty Pharma plc | $ | 288,217 | $ | 543,987 | (255,770) | (47.0) | $ | 556,742 | $ | 650,769 | (94,027) | (14.4) | |||||||||||||||||||||||||||||||||||
*Percentage change is not meaningful.
Total income and other revenues
Income from financial royalty assets
Income from financial royalty assets by top products is as follows, in order of contribution to income for the first nine months of 2025 (in thousands):
| For the Three Months Ended September 30, | Change | For the Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| Cystic fibrosis franchise | $ | 214,247 | $ | 205,701 | 8,546 | 4.2 | $ | 612,828 | $ | 619,113 | (6,285) | (1.0) | |||||||||||||||||||||||||||||||||||
| Evrysdi | 54,901 | 56,747 | (1,846) | (3.3) | 155,261 | 166,277 | (11,016) | (6.6) | |||||||||||||||||||||||||||||||||||||||
| Trelegy | 39,858 | 37,593 | 2,265 | 6.0 | 113,265 | 110,272 | 2,993 | 2.7 | |||||||||||||||||||||||||||||||||||||||
| Tremfya | 37,422 | 37,293 | 129 | 0.3 | 111,470 | 109,137 | 2,333 | 2.1 | |||||||||||||||||||||||||||||||||||||||
| Voranigo | 40,182 | 15,780 | 24,402 | 154.6 | 109,898 | 15,780 | 94,118 | * | |||||||||||||||||||||||||||||||||||||||
| Tysabri | 28,050 | 30,355 | (2,305) | (7.6) | 89,195 | 93,722 | (4,527) | (4.8) | |||||||||||||||||||||||||||||||||||||||
| Other products | 164,152 | 149,697 | 14,455 | 9.7 | 476,803 | 473,276 | 3,527 | 0.7 | |||||||||||||||||||||||||||||||||||||||
| Total income from financial royalty assets | $ | 578,812 | $ | 533,166 | 45,646 | 8.6 | $ | 1,668,720 | $ | 1,587,577 | 81,143 | 5.1 | |||||||||||||||||||||||||||||||||||
*Percentage change is not meaningful.
Three months ended September 30, 2025 and 2024
Income from financial royalty assets increased by $45.6 million, or 8.6%, in the third quarter of 2025 as compared to the third quarter of 2024, primarily due to the Voranigo royalty that we acquired in August of 2024 upon FDA approval.
Nine months ended September 30, 2025 and 2024
Income from financial royalty assets increased by $81.1 million, or 5.1%, in the first nine months of 2025 as compared to the first nine months of 2024, primarily due to the addition of Voranigo, partially offset by a decline in sell-side equity research analysts' consensus sales forecast for Evrysdi.
Other royalty income and revenues
Three months ended September 30, 2025 and 2024
Other royalty income and revenues were relatively flat in the third quarter of 2025 as compared to the third quarter of 2024.
Nine months ended September 30, 2025 and 2024
Other royalty income and revenues increased by $5.1 million, or 6.2%, in the first nine months of 2025 as compared to the first nine months of 2024, primarily related to the sales growth of Nurtec ODT.
Provision for changes in expected cash flows from financial royalty assets
Provision activity is a combination of income and expense items. The provision breakdown by royalty asset (exclusive of the provision for current expected credit losses) based on the largest contributors to each period's provision income or expense (in thousands) is as follows:
| For the Three Months Ended September 30, 2025 | For the Three Months Ended September 30, 2024 | |||||||||||||||||||
| Royalty | Royalty | |||||||||||||||||||
| Evrysdi | $ | 113,775 | Tysabri | $ | (76,489) | |||||||||||||||
| Tazverik | 34,137 | Xtandi | (52,410) | |||||||||||||||||
| Crysvita | 18,584 | Cystic fibrosis franchise | (44,501) | |||||||||||||||||
| Tysabri | (42,432) | Evrysdi | (36,513) | |||||||||||||||||
| Tremfya | (100,911) | Trelegy | (24,885) | |||||||||||||||||
| Other | (15,003) | Other | (26,529) | |||||||||||||||||
| Total provision, exclusive of provision for credit losses | 8,150 | Total provision, exclusive of provision for credit losses | (261,327) | |||||||||||||||||
| Provision for current expected credit losses | 3,985 | Provision for current expected credit losses | 33,723 | |||||||||||||||||
| Total provision | $ | 12,135 | Total provision | $ | (227,604) | |||||||||||||||
| For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | |||||||||||||||||||
| Royalty | Royalty | |||||||||||||||||||
| Cystic fibrosis franchise | $ | (259,353) | Evrysdi | $ | 208,212 | |||||||||||||||
| Xtandi | (75,057) | Cystic fibrosis franchise | 187,996 | |||||||||||||||||
| Trelegy | (66,647) | Crysvita | 142,089 | |||||||||||||||||
| Tremfya | (64,977) | Promacta | 59,410 | |||||||||||||||||
| Evrysdi | 65,542 | Tysabri | (85,475) | |||||||||||||||||
| Other | 98,981 | Other | (7,761) | |||||||||||||||||
| Total provision, exclusive of provision for credit losses | (301,511) | Total provision, exclusive of provision for credit losses | 504,471 | |||||||||||||||||
| Provision for current expected credit losses | (17,432) | Provision for current expected credit losses | 63,954 | |||||||||||||||||
| Total provision | $ | (318,943) | Total provision | $ | 568,425 | |||||||||||||||
Three months ended September 30, 2025 and 2024
In the third quarter of 2025, we recorded provision expense of $12.1 million, comprised of $8.2 million in provision expense for changes in expected cash flows and $4.0 million in provision expense for current expected credit losses. We recorded provision expense for changes in expected cash flows primarily related to Evrysdi due to declines in sell-side equity research analysts' consensus sales forecasts, partially offset by provision income related to Tremfya due to increase in sell-side equity research analysts' consensus sales forecasts.
In the third quarter of 2024, we recorded provision income of $227.6 million, comprised of $261.3 million in provision income for changes in expected cash flows and $33.7 million in provision expense for current expected credit losses. We recorded provision income for changes in expected cash flows primarily related to Tysabri, Xtandi, the cystic fibrosis franchise, and Evrysdi due to increases in sell-side equity research analysts' consensus sales forecasts. The provision expense for credit losses was primarily driven by the addition of Yorvipath to our portfolio.
Nine months ended September 30, 2025 and 2024
In the first nine months of 2025, we recorded provision income of $318.9 million, comprised of $301.5 million in provision income for changes in expected cash flows and $17.4 million in provision income for current expected credit losses. We recorded provision income for changes in expected cash flows primarily related to the cystic fibrosis franchise, Xtandi and Trelegy due to increases in sell-side equity research analysts' consensus sales forecasts, partially offset by provision expense related to Evrysdi due to declines in sell-side equity research analysts' consensus sales forecasts.
In the first nine months of 2024, we recorded provision expense of $568.4 million, comprised of $504.5 million in provision expense for changes in expected cash flows and $64.0 million in provision expense for current expected credit losses. We recorded provision expense for changes in expected cash flows primarily related to Evrysdi due to declines in sell-side equity research analysts' consensus sales forecasts. We recorded provision expense for changes in expected cash flows related to the cystic fibrosis franchise, primarily due to the inclusion of consensus estimates in 2024 for Vertex's Alyftrek and the conservative assumption that royalties will only be collected on the tezacaftor component of Alyftrek and not on the deuterated ivacaftor component. Although we believe that the deuterated ivacaftor component of Alyftrek is the same as ivacaftor and is therefore royalty-bearing, Vertex has made public statements that it believes the deuterated ivacaftor component is not royalty-bearing. If deuterated ivacaftor is determined to be royalty-bearing, we may recognize provision income in our results of operations at that time. Additionally, we recorded provision expense for Crysvita due to declines in sales forecasts. The provision expense for credit losses was primarily driven by the additions of Yorvipath, Voranigo and ecopipam to our portfolio.
Provision for credit losses on unfunded commitments
Three months ended September 30, 2025 and 2024
Provision for credit losses on unfunded commitments was $0.8 million in the third quarter of 2025, primarily related to our funding arrangement with BeOne entered into in August 2025.
Nine months ended September 30, 2025 and 2024
Provision for credit losses on unfunded commitments was $93.3 million in the first nine months of 2025, primarily related to our funding arrangement with Revolution Medicines entered into in June 2025.
R&D funding expense
Three months ended September 30, 2025 and 2024
R&D funding expense increased by $50.0 million in the third quarter of 2025 as compared to third quarter of 2024, primarily driven by the R&D funding arrangement with Biogen for litifilimab of $50.0 million.
Nine months ended September 30, 2025 and 2024
R&D funding expense increased by $400.0 million in the first nine months of 2025 as compared to the first nine months of 2024 due to R&D funding arrangements entered into in 2025 related to daraxonrasib and litifilimab of $250.0 million and $150.0 million, respectively.
G&A expenses
Three months ended September 30, 2025 and 2024
G&A expenses increased by $62.0 million, or 109.3%, in the third quarter of 2025 as compared to the third quarter of 2024, primarily driven by higher share-based compensation expense of $72.2 million that we began to recognize following the Internalization. The increase in G&A expenses was partially offset by the discontinuation of Operating and Personnel Payments, which we no longer pay subsequent to the Internalization.
Nine months ended September 30, 2025 and 2024
G&A expenses increased by $240.1 million, or 142.0%, in the first nine months of 2025 as compared to the first nine months of 2024, primarily driven by higher employee compensation expenses recognized following the Internalization and acquisition-related costs of $29.6 million incurred for the Internalization. The increase in G&A expenses was also partially attributable to higher Operating and Personnel Payments of $33.0 million pre-Internalization as a result of the January 2025 sale of the MorphoSys Development Funding Bonds.
Equity in (earnings)/losses of equity method investees
Three months ended September 30, 2025 and 2024
Equity in earnings of equity method investees increased by $5.5 million, or 53.2%, in the third quarter of 2025 as compared to the third quarter of 2024. Equity in earnings of equity method investees was $15.9 million in the third quarter of 2025 primarily driven by an $11.1 million gain related to the FDA approval of Airsupra's supplemental new drug application which triggered a milestone payable from AstraZeneca to the Avillion Entities. Equity in earnings of equity method investees was $10.4 million in the third quarter of 2024 primarily driven by an income allocation from the Legacy SLP Interest of $10.2 million.
Nine months ended September 30, 2025 and 2024
Equity in earnings of equity method investees was $25.1 million in the first nine months of 2025 as compared to equity in losses of equity method investees of $2.0 million in the first nine months of 2024. Equity in earnings of equity method investees in the first nine months of 2025 was primarily driven by the $11.1 million gain related to the milestone payable from AstraZeneca to the Avillion Entities noted above and an income allocation from the Legacy SLP Interest of $13.8 million. Equity in losses of equity method investees in the first nine months of 2024 was primarily driven by a loss allocation from the Avillion Entities of $7.6 million.
Interest expense
Three months ended September 30, 2025 and 2024
Interest expense increased by $13.1 million, or 19.6%, in the third quarter of 2025 as compared to third quarter of 2024, primarily driven by the $380 million term loan that we assumed as part of the Internalization, interest on the Revolving Credit Facility that was drawn down and repaid during the period, and the issuance of $2.0 billion of senior unsecured notes in September 2025.
Nine months ended September 30, 2025 and 2024
Interest expense increased by $53.7 million, or 33.6%, in the first nine months of 2025 as compared to the first nine months of 2024, primarily driven by the issuance of the $1.5 billion of senior unsecured notes in June 2024 and the $380 million term loan that we assumed as part of the Internalization. The weighted average coupon rate on our senior unsecured notes outstanding as of September 30, 2025 and 2024 was 3.75% and 3.06%, respectively.
Refer to the "Liquidity and Capital Resources" section for additional discussion of our debt financing arrangements.
Other (income)/expense, net
Three months ended September 30, 2025 and 2024
Other income, net of $80.7 million in the third quarter of 2025 was primarily comprised of $52.5 million of gains on available for sale debt securities, $18.9 million of gains on equity securities and $6.9 million of interest income earned on cash and cash equivalents. The gains on available for sale debt securities were primarily driven by the changes in fair value of the Cytokinetics Funding Arrangements.
Other income, net of $127.4 million in the third quarter of 2024 was primarily comprised of $57.7 million of gains on available for sale debt securities, $50.8 million of gains on equity securities and $17.5 million of interest income earned on cash and cash equivalents. The gains on available for sale debt securities were primarily driven by the changes in fair value of the Cytokinetics Funding Arrangements.
Nine months ended September 30, 2025 and 2024
Other expense, net of $14.4 million in the first nine months of 2025 was primarily comprised of $57.6 million of losses on equity securities, partially offset by $26.5 million of interest income earned on cash and cash equivalents and $21.8 million of gains on available for sale debt securities primarily driven by the changes in fair value of the Cytokinetics Funding Arrangements.
Other income, net of $227.3 million in the first nine months of 2024 was primarily comprised of $103.9 million of gains on available for sale debt securities, $81.5 million of gains on equity securities and $38.3 million of interest income on cash and cash equivalents. The gains on available for sale debt securities were primarily driven by the changes in fair value of the MorphoSys Development Funding Bonds.
Net income attributable to non-controlling interests
Three months ended September 30, 2025 and 2024
Net income attributable to Legacy Investors Partnerships decreased by $33.1 million in the third quarter of 2025 as compared to the third quarter of 2024, primarily driven by lower net income attributable to Old RPI as a result of lower provision income recognized in 2025 as compared to 2024.
Net income attributable to Continuing Investors Partnerships decreased by $92.4 million in the third quarter of 2025 as compared to the third quarter of 2024, primarily driven by lower net income attributable to RP Holdings as a result of provision expense and higher share-based compensation expense recognized in 2025. In 2024, RP Holdings recognized provision income and immaterial share-based compensation expense.
Net income attributable to Founder's Equity was $2.9 million in the third quarter of 2025. We began recognizing EPAs in the first quarter of 2025 as certain conditions were met during the period.
Net income attributable to RP Holdings Class E Interests was $16.2 million in the third quarter of 2025. We issued 24.5 million RP Holdings Class E Interests in connection with the Internalization in the second quarter of 2025.
Nine months ended September 30, 2025 and 2024
Net income attributable to Legacy Investors Partnerships increased by $43.9 million in the first nine months of 2025 as compared to first nine months of 2024, primarily driven by higher net income attributable to Old RPI as a result of provision income recognized in 2025 as compared to provision expense recognized in 2024.
Net income attributable to Continuing Investors Partnerships decreased by $40.4 million in the first nine months of 2025 as compared to first nine months of 2024, primarily driven by lower net income attributable to RP Holdings as a result of higher R&D expense and share-based compensation expense recognized in 2025, partially offset by provision income recognized during the same period as compared to provision expense recognized in 2024.
Net income attributable to Founder's Equity was $45.3 million in the first nine months of 2025. We began recognizing EPAs in the first quarter of 2025 as certain conditions were met during the period.
Net income attributable to RP Holdings Class E Interests was $17.1 million in the first nine months of 2025. The RP Holdings Class E Interests were issued in connection with the Internalization.
Portfolio Overview
Our business model is different from that of traditional operating companies in the biopharmaceutical industry. Our operating performance is a function of our liquidity as our operations have historically been financed primarily with cash flows generated by our royalties. We use the cash generated by our existing royalties to fund investments in new royalties. We consider a variety of metrics in assessing the performance of our business. Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments. Portfolio Receipts also enables management to better analyze our liquidity and long-term growth prospects by providing a more granular product-by-product presentation of the underlying cash generation of our royalty investments.
Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts. Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to us ("Royalty Receipts"). Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that are attributed to us. Portfolio Receipts does not include royalty receipts and milestones and other contractual receipts that were received on an accelerated basis under the terms of the agreement governing the receipt or payment. Portfolio Receipts also does not include proceeds from equity securities or proceeds from purchases and sales of marketable securities, both of which are not central to our fundamental business strategy.
Portfolio Receipts is calculated as the sum of the following line items from our GAAP condensed consolidated statements of cash flows: Cash collections from financial royalty assets, Cash collections from intangible royalty assets, Other royalty cash collections, Proceeds from available for sale debt securitiesand Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts, which represent contractual distributions of Royalty Receipts, milestones and other contractual receipts to the Legacy Investors Partnerships.
Our portfolio consists of royalties on more than 35 marketed therapies and 17 development-stage product candidates. The therapies in our portfolio address therapeutic areas such as rare disease, cancer, neuroscience, infectious disease, hematology and diabetes, and are delivered to patients across both primary and specialty care settings. The table below shows Portfolio Receipts, including Royalty Receipts by product and milestones and other contractual receipts, in order of contribution to total Royalty Receipts for the first nine months of 2025 (in thousands):
|
Products
|
Marketer(s) | Therapeutic Area | For the Three Months Ended September 30, | Change | For the Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Cystic fibrosis franchise(1)
|
Vertex | Rare disease | $ | 222,260 | $ | 206,988 | 15,272 | 7.4 | $ | 665,808 | $ | 620,218 | 45,590 | 7.4 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Trelegy | GSK | Respiratory | 95,668 | 90,541 | 5,127 | 5.7 | 237,521 | 209,615 | 27,906 | 13.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tysabri | Biogen | Neuroscience | 68,011 | 68,262 | (251) | (0.4) | 184,921 | 201,171 | (16,250) | (8.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Xtandi | Pfizer, Astellas | Cancer | 49,686 | 43,311 | 6,375 | 14.7 | 144,024 | 122,939 | 21,085 | 17.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Evrysdi | Roche | Rare disease | 51,816 | 47,953 | 3,863 | 8.1 | 137,366 | 117,832 | 19,534 | 16.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Imbruvica | AbbVie, Johnson & Johnson | Cancer | 41,326 | 46,198 | (4,872) | (10.5) | 130,761 | 145,389 | (14,628) | (10.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tremfya | Johnson & Johnson | Immunology | 49,407 | 34,264 | 15,143 | 44.2 | 122,012 | 100,336 | 21,676 | 21.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Promacta | Novartis | Hematology | 37,949 | 41,810 | (3,861) | (9.2) | 114,777 | 114,856 | (79) | (0.1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Voranigo | Servier | Cancer | 33,454 | - | 33,454 | n/a | 79,490 | - | 79,490 | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cabometyx/Cometriq | Exelixis, Ipsen, Takeda | Cancer | 21,363 | 18,527 | 2,836 | 15.3 | 62,396 | 53,092 | 9,304 | 17.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Spinraza | Biogen | Rare disease | 13,584 | 14,186 | (602) | (4.2) | 38,478 | 30,422 | 8,056 | 26.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trodelvy | Gilead | Cancer | 12,205 | 11,473 | 732 | 6.4 | 34,762 | 32,129 | 2,633 | 8.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Erleada | Johnson & Johnson | Cancer | 12,370 | 10,025 | 2,345 | 23.4 | 33,401 | 28,230 | 5,171 | 18.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Other products(2)
|
101,628 | 98,206 | 3,422 | 3.5 | 284,994 | 265,132 | 19,862 | 7.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Royalty Receipts
|
$ | 810,727 | $ | 731,744 | 78,983 | 10.8 | $ | 2,270,711 | $ | 2,041,361 | 229,350 | 11.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||
|
Milestones and other contractual receipts
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2,880 | 2,880 | - | n/a | 109,652 | 18,241 | 91,411 | n/a | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Portfolio Receipts
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$ | 813,607 | $ | 734,624 | 78,983 | 10.8 | $ | 2,380,363 | $ | 2,059,602 | 320,761 | 15.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1)The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek, which was approved by the FDA in December 2024.
(2)Other products primarily include Royalty Receipts on the following products: Crysvita, Emgality, Entyvio, Farxiga/Onglyza, IDHIFA, Nesina, Nurtec ODT, Orladeyo, Prevymis, Rytelo, Skytrofa, Soliqua and distributions from the Legacy SLP Interest, which are presented as Distributions from equity method investees in the condensed consolidated statements of cash flows.
Analysis of Portfolio Receipts
The key drivers of Portfolio Receipts are discussed below:
•Cystic fibrosis franchise- Royalty Receipts from the cystic fibrosis franchise, including Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek, which is marketed by Vertex for the treatment of cystic fibrosis, increased by $45.6 million in the first nine months of 2025 as compared to the first nine months of 2024. The increase was primarily due to strong Trikafta/Kaftrio demand globally and higher net realized pricing in the United States, while outside the United States saw strong performance in many established markets, offset by a revenue decline in Russia.
•Trelegy- Royalty Receipts from Trelegy, which is marketed by GSK for the maintenance treatment of chronic obstructive pulmonary disease and asthma, increased by $27.9 million in the first nine months of 2025 as compared to the first nine months of 2024, primarily driven by continued volume growth across all regions, reflecting patient demand, single inhaler triple therapy class growth, and increased market share.
•Tysabri- Royalty Receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, decreased by $16.3 million in the first nine months of 2025 as compared to the first nine months of 2024, due to increased competition and decreased pricing in rest of world, partially offset by favorable net pricing in the United States.
•Xtandi- Royalty Receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, increased by $21.1 million in the first nine months of 2025 as compared to the first nine months of 2024, attributable to sales growth across all regions, particularly in the United States.
•Evrysdi- Royalty Receipts from Evrysdi, which is marketed by Roche for the treatment of spinal muscular atrophy, increased by $19.5 million in the first nine months of 2025 as compared to the first nine months of 2024, attributable to the incremental royalties acquired in the second quarter of 2024 and strong growth globally.
•Imbruvica- Royalty Receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, decreased by $14.6 million in the first nine months of 2025 as compared to the first nine months of 2024, reflecting competitive pressures and the impact of Medicare Part D redesign.
•Tremfya - Royalty Receipts from Tremfya, which is marketed by Johnson & Johnson for the treatment of plaque psoriasis, active psoriatic arthritis and inflammatory bowel disease, increased by $21.7 million in the first nine months of 2025 as compared to the first nine months of 2024 driven by market share gains and market growth, including strong uptake across recently launched inflammatory bowel disease indications, partially offset by the impact of Medicare Part D redesign.
•Promacta- Royalty Receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia purpura (ITP) and aplastic anemia, was relatively flat in the first nine months of 2025 as compared to the first nine months of 2024, due to discontinued promotion in most markets. In May 2025, Camber Pharmaceuticals announced the U.S. launch of eltrombopag (the first AB-rated generic for Promacta).
•Voranigo -Royalty Receipts from Voranigo, which is marketed by Servier for the treatment of low-grade glioma, were $79.5 million in the first nine months of 2025, primarily driven by its strong launch in the United States. We acquired the Voranigo royalty in the third quarter of 2024 which began contributing to Royalty Receipts in the fourth quarter of 2024.
•Cabometyx/Cometriq- Royalty Receipts from Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and Takeda, primarily for the treatment of advanced renal cell carcinoma and hepatocellular carcinoma, increased by $9.3 million in the first nine months of 2025 as compared to the first nine months of 2024, primarily driven by continued demand growth from uptake in combination with Opdivo in first-line renal cell carcinoma.
•Spinraza - Royalty Receipts from Spinraza, which is marketed by Biogen for the treatment of spinal muscular atrophy, increased by $8.1 million in the first nine months of 2025 as compared to the first nine months of 2024. Royalties in the first quarter of 2024 were lower due to the $1.5 billion cap, benefiting year-over-year royalty receipts growth.
•Trodelvy- Royalty Receipts from Trodelvy, which is marketed by Gilead for the treatment of metastatic triple-negative breast cancer and pre-treated hormone receptor (HR)-positive, human epidermal growth factor receptor 2 (HER2)-negative metastatic breast cancer, increased by $2.6 million in the first nine months of 2025 as compared to the first nine months of 2024, primarily driven by strong demand across all regions.
•Erleada - Royalty Receipts from Erleada, which is marketed by Johnson & Johnson for the treatment of prostate cancer, increased by $5.2 million in the first nine months of 2025 as compared to the first nine months of 2024, driven by continued share gains and market growth, partially offset by the impact of Medicare Part D redesign.
•Other products - Royalty Receipts from other products increased by $19.9 million in the first nine months of 2025 as compared to the first nine months of 2024, driven by the performance of Orladeyo and recent acquisitions of Rytelo, Skytrofa and Niktimvo, partially offset by the expiration of the Entyvio royalty.
•Milestones and other contractual receipts increased by $91.4 million in the first nine months of 2025 as compared to the first nine months of 2024, primarily attributable to a one-time distribution related to the Legacy SLP Interest and a milestone payment in the amount of $27.4 million related to Airsupra.
Key Developments Relating to Our Portfolio
Recent key developments related to products in our portfolio are discussed below:
Commercial Products
•Airsupra.In September 2025, AstraZeneca announced that the FDA approved a supplemental New Drug Application for Airsupra to reflect the statistically significant severe exacerbation risk reduction in patients with mild asthma compared to albuterol.
•Skytrofa. In July 2025, Ascendis announced the FDA approved Skytrofa for the once-weekly treatment of adults with growth hormone deficiency.
•Cabometyx. In July 2025, Ipsen announced that the European Commission ("EC") approved Cabometyx for previously treated advanced neuroendocrine tumors.
•Cystic fibrosis franchise.In July 2025, Vertex announced that the EC approved Alyftrek for people with cystic fibrosis ages 6 years and older who have at least one non-class I mutation in the cystic fibrosis transmembrane conductance regulator gene.
Development-Stage Product Candidates
•Litifilimab.In October 2025, Biogen announced that both litifilimab Phase 3 studies for systemic lupus erythematosus are fully enrolled with expected data readout for both studies now accelerated to the second half of 2026.
•Obexelimab.In October 2025, Zenas BioPharma announced positive results from the Phase 2 trial of obexelimab in relapsing multiple sclerosis, which demonstrated a highly statistically significant 95% relative reduction in new gadolinium (Gd)-enhancing T1 lesions over week 8 and week 12 compared with placebo. Zenas anticipates reporting 24-week data in relapsing multiple sclerosis in the first quarter of 2026.
•Trontinemab.In September 2025, Roche announced that it initiated the Phase 3 program for trontinemab in early symptomatic Alzheimer's disease. Additionally, Roche announced plans to initiate a Phase 3 study in preclinical Alzheimer's disease, in people at high risk of cognitive decline.
•Daraxonrasib.In September 2025, Revolution Medicines announced positive Phase 1 results from its clinical trials evaluating daraxonrasib as a monotherapy and daraxonrasib in combination with chemotherapy in first-line ("1L") metastatic pancreatic ductal adenocarcinoma ("PDAC"). These data support Revolution Medicines' plan to initiate a Phase 3 trial for daraxonrasib in 1L metastatic PDAC in the fourth quarter of 2025. In October 2025, the FDA granted a non-transferrable voucher for daraxonrasib under the Commissioner's National Priority Voucher (CNPV) pilot program, which accelerates review times to 1-2 months.
•Deucrictibant.In July 2025, Pharvaris announced that it anticipates topline data for the Phase 3 study (RAPIDe-3) evaluating deucrictibant for the on-demand treatment of hereditary angioedema attacks in the fourth quarter of 2025 and, pending positive data, expects to submit a New Drug Application with the FDA in the first half of 2026.
Investments Overview
Ongoing investment in new royalties is fundamental to the long-term prospects of our business. New investments provide a source of growth for our Royalty Receipts, supplementing growth within our existing portfolio and offsetting declines for royalties on products that have lost market exclusivity. We evaluate an array of royalty acquisition opportunities on a continuous basis and expect to continue to make acquisitions in the ordinary course of our business. We have established a strong track record of identifying, evaluating and investing in royalties tied to leading products across therapeutic areas and treatment modalities. We invest in approved products and development-stage product candidates that have generated robust proof of concept data. We invest in these therapies through the purchase of royalties, milestones and other contractual receipts by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets.
During the first nine months of 2025, we invested $1.7 billion in royalties, milestones and other contractual receipts. While volatility exists in the funding of new acquisitions on a year-to-year basis due to the unpredictable timing of new investment opportunities, we have consistently deployed significant amounts of cash when measured over multi-year periods. Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold.
Summary of Acquisition Activities
•In November 2025, we acquired a royalty interest in Alnylam's Amvuttra from Blackstone for $310 million. Amvuttra is an approved ribonucleic acid interference ("RNAi") therapeutic for the treatment of transthyretin ("TTR") amyloidosis with cardiomyopathy and for hereditary TTR amyloidosis with polyneuropathy.
•In September 2025, we acquired a synthetic royalty on obexelimab from Zenas BioPharma for an upfront payment of $75 million and up to $225 million in milestone payments contingent on the achievements of certain clinical and regulatory events. Obexelimab is in Phase 3 development for the treatment of immunoglobulin G4-related disease and Phase 2 development for relapsing multiple sclerosis and systemic lupus erythematosus.
•In August 2025, we acquired a royalty interest in Amgen's Imdelltra from BeOne for an upfront payment of $885 million. BeOne has the option to sell to us additional royalties on Imdelltra for up to $65 million within twelve months from the acquisition date. Imdelltra is approved for the treatment of extensive-stage small cell lung cancer.
•In June 2025, we entered into a two part $2 billion funding arrangement with Revolution Medicines. The funding arrangement includes up to $1.25 billion, including $250 million upfront, to purchase a synthetic royalty on daraxonrasib and a senior secured term loan of up to $750 million. The first tranche of the senior secured term loan must be drawn following FDA approval of daraxonrasib. Daraxonrasib is in Phase 3 development for the treatment of RAS mutant pancreatic cancer and non-small cell lung cancer.
•In February 2025, we entered into an R&D funding arrangement with Biogen to provide up to $250 million over six quarters including $50 million upfront for the development of litifilimab. Litifilimab is in Phase 3 development for the treatment of lupus.
•In November 2024, we acquired a synthetic royalty on Rytelo from Geron Corporation for an upfront payment of $125 million. Rytelo is approved for the treatment of certain adult patients with low- to intermediate-1 risk myelodysplastic syndromes with transfusion-dependent anemia. Following the acquisition, we are entitled to receive tiered royalties on the U.S. net sales on Rytelo.
•In November 2024, we acquired a synthetic royalty on Niktimvo from Syndax Pharmaceuticals, Inc. for an upfront payment of $350 million. Niktimvo is approved for the treatment of chronic graft-versus-host disease and will be co-commercialized by Incyte. Following the acquisition, we are entitled to receive royalties on the U.S. net sales on Niktimvo.
•In September 2024, we acquired a royalty interest in deucrictibant from BRAIN Biotech AG for an upfront payment of approximately $21 million and up to EUR 110.5 million in milestone payments contingent on the achievements of certain regulatory and commercial milestones. Deucrictibant is in Phase 3 development by Pharvaris N.V. for the treatment of hereditary angioedema attacks.
•In September 2024, we acquired a synthetic royalty on Yorvipath from Ascendis Pharma A/S for an upfront payment of $150 million. Yorvipath is approved for the treatment of hypoparathyroidism in adults.
•In June 2024, PTC Therapeutics, Inc. ("PTC") exercised its option to sell half of its retained royalties on Roche's Evrysdi, an approved product for the treatment of spinal muscular atrophy for approximately $242 million. This option arose from the Evrysdi royalty transaction with PTC that was announced in October 2023, in which we acquired additional royalty on Evrysdi for $1 billion. PTC has an option to sell its remaining 9.5% of the Evrysdi royalty for $250 million less royalties received until December 31, 2025.
•In May 2024, we announced a transaction to acquire a royalty interest in Voranigo from Agios Pharmaceuticals for an upfront payment of $905 million contingent on FDA approval. In August 2024, we made the upfront payment following the FDA approval of Voranigo.
•In May 2024, we expanded our strategic funding collaboration with Cytokinetics, Incorporated ("Cytokinetics") to provide up to $575 million, including $250 million in upfront payments, in exchange for royalties and fixed payments. This collaboration includes the following key components: a royalty restructuring on aficamten for hypertrophic cardiomyopathy; amended commercial launch funding with two additional tranches for aficamten of $50 million upfront with the option to draw an additional $175 million following approval of aficamten in oHCM; development funding of $100 million upfront for the confirmatory Phase 3 clinical trial of omecamtiv mecarbil for heart failure with reduced ejection fraction and $50 million upfront for the Phase 2 clinical trial of CK-586 for heart failure with preserved ejection fraction, which includes an option to invest an additional $150 million to fund Phase 3 development of CK-586; and the purchase of $50 million of Cytokinetics' common stock.
•In May 2024, we acquired royalties and milestones on frexalimab, which was owned by ImmuNext, Inc., for approximately $525 million, including estimated transaction costs. We are entitled to receive royalties on annual worldwide net sales of frexalimab and milestones related to the achievement of certain commercial and regulatory events. Frexalimab, which is in development by Sanofi, is a second generation anti-CD40 ligand monoclonal antibody. Frexalimab is being evaluated in Phase 3 clinical studies for the treatment of multiple sclerosis and is in Phase 2 clinical studies for systemic lupus erythematosus and Type 1 Diabetes.
•In January 2024, we acquired a royalty interest in ecopipam for an upfront payment of $49 million and up to $44 million in milestone payments contingent on the achievement of certain regulatory milestones. Ecopipam is in Phase 3 development by Emalex Biosciences for the treatment of Tourette Syndrome.
Liquidity and Capital Resources
Overview
Our primary source of liquidity is cash provided by operations. For the first nine months of 2025 and 2024, we generated $1.7 billion and $2.0 billion, respectively, in Net cash provided by operating activities. We believe that our existing capital resources, cash provided by operating activities and access to our Revolving Credit Facility (as defined below) will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions and R&D funding arrangements, and to meet our debt service obligations for the foreseeable future. We have historically operated at a low level of fixed operating costs. We no longer pay Operating and Personnel Payments following the Internalization, which comprised the majority of our cash G&A expenses historically. Our primary cash operating expenses, other than R&D funding commitments, include interest expense, employee personnel costs, rent expense and legal and professional fees.
We have access to substantial sources of funds in the capital markets and we may, from time to time, seek additional capital through a combination of additional debt or equity financings. As of September 30, 2025 and December 31, 2024, the par value of all of our outstanding borrowings was $9.2 billion and $7.8 billion, respectively. Additionally, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility (as defined below) and up to $350.0 million of an uncommitted line of credit under our Uncommitted Credit Facility (as defined below). A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 12-Borrowings of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
We have historically funded our investments through operating cash flows, equity contributions and debt. Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high cash flow conversion. We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and investments through cash flow and issuances of equity and debt. We have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.
Our ability to satisfy our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control.
Cash Flows
The following table and analysis of cash flow changes presents a summary of our cash flow activities (in thousands):
| For the Nine Months Ended September 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
|
Cash provided by/(used in):
|
|||||||||||||||||
| Operating activities | $ | 1,662,675 | $ | 2,026,461 | $ | (363,786) | |||||||||||
| Investing activities | (766,379) | (2,172,527) | 1,406,148 | ||||||||||||||
| Financing activities | (886,378) | 619,108 | (1,505,486) | ||||||||||||||
Analysis of Cash Flow Changes
Operating Activities
Cash provided by operating activities decreased by $363.8 million in the first nine months of 2025 as compared to the first nine months of 2024, primarily due to higher payments for development-stage funding agreements and interest, which were partially offset by an increase in cash collections from financial royalty assets.
Investing Activities
Cash used in investing activities decreased by $1.4 billion in first nine months of 2025 as compared to the first nine months of 2024, primarily driven by lower cash used for acquisitions of financial royalty assets.
Financing Activities
Cash used in financing activities in the first nine months of 2025 was $886.4 million as compared to cash provided by financing activities of $619.1 million in the first nine months of 2024. In the first nine months of 2025, cash used in financing activities was primarily driven by the repurchases of our Class A ordinary shares and the repayment of $1.0 billion debt, which was partially offset by the net proceeds from the issuance of $2.0 billion of senior unsecured notes. In the first nine months of 2024, cash provided by financing activities was primarily driven by the issuance of $1.5 billion of senior unsecured notes in June 2024.
Sources of Capital
As of September 30, 2025 and December 31, 2024, our cash and cash equivalents totaled $938.9 million and $929.0 million, respectively. We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, future cash flows from operations or the issuance of additional debt. Our ability to generate cash flows from operations, issue debt or enter into financing arrangements on acceptable terms could be adversely affected if there is a material decline in the sales of the underlying pharmaceutical products in which we hold royalties, deterioration in our key financial ratios or credit ratings, or other material unfavorable changes in business conditions. Currently, we believe that we have sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support our growth objectives.
Borrowings
Our borrowings consisted of the following (in thousands):
|
Type of Borrowing
|
Date of Issuance | Maturity | As of September 30, 2025 | As of December 31, 2024 | |||||||||||||||||||
| Senior Unsecured Notes: | |||||||||||||||||||||||
| $1,000,000, 1.20% (issued at 98.875% of par) | 9/2020 | 9/2025 | $ | - | $ | 1,000,000 | |||||||||||||||||
| $1,000,000, 1.75% (issued at 98.284% of par) | 9/2020 | 9/2027 | 1,000,000 | 1,000,000 | |||||||||||||||||||
| $500,000, 5.15% (issued at 98.758% of par) | 6/2024 | 9/2029 | 500,000 | 500,000 | |||||||||||||||||||
| $1,000,000, 2.20% (issued at 97.760% of par) | 9/2020 | 9/2030 | 1,000,000 | 1,000,000 | |||||||||||||||||||
| $600,000, 4.45% (issued at 98.909% of par) | 9/2025 | 3/2031 | 600,000 | - | |||||||||||||||||||
| $600,000, 2.15% (issued at 98.263% of par) | 7/2021 | 9/2031 | 600,000 | 600,000 | |||||||||||||||||||
| $500,000, 5.40% (issued at 97.872% of par) | 6/2024 | 9/2034 | 500,000 | 500,000 | |||||||||||||||||||
| $900,000, 5.2% (issued at 97.989% of par) | 9/2025 | 9/2035 | 900,000 | - | |||||||||||||||||||
| $1,000,000, 3.30% (issued at 95.556% of par) | 9/2020 | 9/2040 | 1,000,000 | 1,000,000 | |||||||||||||||||||
| $1,000,000, 3.55% (issued at 95.306% of par) | 9/2020 | 9/2050 | 1,000,000 | 1,000,000 | |||||||||||||||||||
| $700,000, 3.35% (issued at 97.565% of par) | 7/2021 | 9/2051 | 700,000 | 700,000 | |||||||||||||||||||
| $500,000, 5.90% (issued at 97.617% of par) | 6/2024 | 9/2054 | 500,000 | 500,000 | |||||||||||||||||||
| $500,000, 5.95% (issued at 95.824% of par) | 9/2025 | 9/2055 | 500,000 | - | |||||||||||||||||||
| Term Loan | See below | 7/2026 | 380,000 | - | |||||||||||||||||||
| Total senior unsecured debt | 9,180,000 | 7,800,000 | |||||||||||||||||||||
| Unamortized debt discount and issuance costs | (234,265) | (187,574) | |||||||||||||||||||||
| Total debt carrying value | 8,945,735 | 7,612,426 | |||||||||||||||||||||
| Less: Current portion of long-term debt | (380,000) | (997,773) | |||||||||||||||||||||
| Total long-term debt | $ | 8,565,735 | $ | 6,614,653 | |||||||||||||||||||
Senior Unsecured Notes
We have issued an aggregate of $10.8 billion of senior unsecured notes (the "Notes"), consisting of $6.0 billion issued in September 2020 with a weighted average coupon rate of 2.13%, $1.3 billion in July 2021 with a weighted average coupon rate of 2.80%, $1.5 billion in June 2024 with a weighted average coupon rate of 5.48% and $2.0 billion in September 2025 with a weighted average coupon rate of 5.16%. We have repaid $2.0 billion of the Notes upon maturity. The Notes require semi-annual interest payments. Indentures governing the Notes contain certain covenants with which we were in compliance as of September 30, 2025.
Term Loan assumed from Internalization
In connection with the Internalization, RP Holdings and RP Manager were each joined as a borrower under RPM's then existing $380 million term loan (the "Term Loan") with Bank of America, N.A (as amended, the "Loan Agreement"). Pablo Legorreta, Legorreta Investments, LLC and Legorreta Investments II LLC are guarantors under the Term Loan. Upon the closing of the Internalization, RPM was released as a borrower under the Term Loan. In the third quarter of 2025, the Loan Agreement was amended to accelerate the maturity of the Term Loan to July 31, 2026 and decrease the applicable interest rate. Following the amendment, the Term Loan is subject to an interest rate, at our option, of either (i) the Daily SOFR plus 1.25% or (ii) Term SOFR plus 1.25%, each as defined in the Loan Agreement. Interest is payable in arrears quarterly. We made the first interest payment in the third quarter of 2025. The Term Loan is subject to certain customary covenants, that among other things, require us to maintain (i) a Consolidated Leverage Ratio, (ii) a Consolidated Coverage Ratio, and (iii) a Consolidated Portfolio Cash Flow Ratio, each as described further below under the description of the Credit Agreement that governs the Revolving Credit Facility.
Uncommitted Credit Facility
In August 2025, we entered into an uncommitted line of credit agreement with Société Générale (the "Uncommitted Credit Facility") which provides for an aggregate borrowing capacity of up to $350.0 million for general corporate purposes within a quarter. As of September 30, 2025, there were no outstanding borrowings under the Uncommitted Credit Facility.
Senior Unsecured Revolving Credit Facility
Our subsidiary, RP Holdings, as borrower, initially entered into the Amended and Restated Revolving Credit Agreement (the "Credit Agreement") on September 15, 2021, which provides for an unsecured revolving credit facility (the "Revolving Credit Facility"). Amendment No. 3 to the Credit Agreement, which was entered into on December 22, 2023, increased the borrowing capacity to $1.8 billion for general corporate purposes with $1.69 billion of the revolving commitments maturing on December 22, 2028 and the remaining $110.0 million of revolving commitments maturing on October 31, 2027. On January 24, 2024 and April 8, 2025, we entered into Amendments No. 4 and 5, respectively, to the Credit Agreement to make certain technical modifications. As of September 30, 2025, we have a borrowing capacity of $1.8 billion under the Revolving Credit Facility.
The Credit Agreement that governs the Revolving Credit Facility and the amended loan agreement that governs the Term Loan contain certain customary covenants, that among other things, require us to maintain (i) a Consolidated Leverage Ratio at or below 4.00 to 1.00 (or at or below 4.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Adjusted EBITDA, each as defined and calculated as set forth in the Credit Agreement, (ii) a Consolidated Coverage Ratio at or above 2.50 to 1.00 of Adjusted EBITDA to consolidated interest expense, each as defined and calculated as set forth in the Credit Agreement and (iii) a Consolidated Portfolio Cash Flow Ratio at or below 5.00 to 1.00 (or at or below 5.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Portfolio Cash Flow, each as defined and calculated as set forth in the Credit Agreement. We were in compliance with the financial covenants as of September 30, 2025.
Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that are key components of certain material covenants contained within the Credit Agreement. Noncompliance with the financial covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed. If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.
The table below presents Adjusted EBITDA and Portfolio Cash Flow, each as calculated according to its respective definition in our Credit Agreement (in thousands):
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Portfolio Receipts | $ | 813,607 | $ | 734,624 | $ | 2,380,363 | $ | 2,059,602 | ||||||||||||||||||
|
Payments for operating and professional costs(1)
|
(34,175) | (55,232) | (229,896) | (163,804) | ||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 779,432 | $ | 679,392 | $ | 2,150,467 | $ | 1,895,798 | ||||||||||||||||||
|
Interest paid, net
|
(122,743) | (62,464) | (241,675) | (121,318) | ||||||||||||||||||||||
| Portfolio Cash Flow (non-GAAP) | $ | 656,689 | $ | 616,928 | $ | 1,908,792 | $ | 1,774,480 | ||||||||||||||||||
(1)In the first nine months of 2025, amount included a $33 million payment related to the management fee on the sale of the MorphoSys Development Funding Bonds and payments of $27.6 million for the acquisition-related costs for the Internalization. Both payments are non-recurring.
Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. We caution readers that amounts presented in accordance with our definitions of Adjusted EBITDA and Portfolio Cash Flow may not be the same as similar measures used by other companies or analysts. A reconciliation of Adjusted EBITDA and Portfolio Cash Flow to Net cash provided by operating activities, the closest GAAP measure, is presented below (in thousands):
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 702,616 | $ | 703,614 | $ | 1,662,675 | $ | 2,026,461 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
|
Proceeds from available for sale debt securities(1), (2)
|
2,880 | 2,880 | 18,346 | 7,200 | ||||||||||||||||||||||
|
Distributions from equity method investees(2)
|
905 | 11,489 | 100,155 | 20,397 | ||||||||||||||||||||||
|
Interest paid, net(2)
|
122,743 | 62,464 | 241,675 | 121,318 | ||||||||||||||||||||||
|
Development-stage funding payments
|
50,500 | 500 | 401,500 | 1,500 | ||||||||||||||||||||||
|
Distributions to legacy non-controlling interests - Portfolio Receipts(2)
|
(101,907) | (101,555) | (275,752) | (281,078) | ||||||||||||||||||||||
| Payments for Employee EPAs | 1,695 | - | 1,868 | - | ||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 779,432 | $ | 679,392 | $ | 2,150,467 | $ | 1,895,798 | ||||||||||||||||||
|
Interest paid, net(2)
|
(122,743) | (62,464) | (241,675) | (121,318) | ||||||||||||||||||||||
|
Portfolio Cash Flow (non-GAAP)
|
$ | 656,689 | $ | 616,928 | $ | 1,908,792 | $ | 1,774,480 | ||||||||||||||||||
(1)Amounts include quarterly repayments on the Cytokinetics Commercial Launch Funding. In the first nine months of 2025, amount also includes a quarterly repayment on MorphoSys Development Funding Bonds before they were sold in January 2025.
(2)The table below shows the line item for each adjustment and the direct location for such line item in the condensed consolidated statements of cash flows.
| Reconciling Adjustment | Statements of Cash Flows Classification | ||||
|
Interest paid, net
|
Operating activities (Interest paidless Interest received)
|
||||
| Distributions from equity method investees | Investing activities | ||||
| Proceeds from available for sale debt securities | Investing activities | ||||
|
Distributions to legacy non-controlling interests - Portfolio Receipts
|
Financing activities | ||||
Uses of Capital
Acquisitions of Royalties
We acquire product royalties in ways that can be tailored to the needs of our partners through a variety of structures:
•Third-party Royalties- Existing royalties on approved or late-stage development therapies with high commercial potential. A royalty is the contractual right to a percentage of top-line sales from a licensee's use of a product, technology or intellectual property. The majority of our current portfolio consists of third-party royalties.
•Synthetic Royalties- Newly-created royalties on approved or late-stage development therapies with strong proof of concept and high commercial potential. A synthetic royalty is the contractual right to a percentage of top-line sales by the developer or marketer of a therapy in exchange for funding. A synthetic royalty may also include contingent milestone payments. We also fund ongoing R&D for biopharmaceutical companies in exchange for future royalties and milestones if the product or indication we are funding is approved.
•Launch and Development Capital - Tailored supplemental funding solutions, generally included as a component within a transaction, increase the scale of our capital. Launch and development capital is generally provided in exchange for a long-term stream of fixed payments with a predetermined schedule around the launch of a drug. Launch and development capital may also include a direct investment in the public equity of a company.
•Mergers and Acquisitions ("M&A") Related- We acquire royalties in connection with M&A transactions, often from the buyers of biopharmaceutical companies when they dispose of the non-strategic assets of the target company following the closing of the acquisition. We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties. We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions.
Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.
Distributions to Shareholders
We paid dividends to holders of our Class A ordinary shares of $284.0 million and $282.8 million in the first nine months of 2025 and 2024, respectively.We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.
Class A Ordinary Share Repurchases
In January 2025, our board of directors authorized a new share repurchase program, which replaced the share repurchase program approved in March 2023, under which we may repurchase up to $3.0 billion of our Class A ordinary shares. The repurchases may be made in the open market or in privately negotiated transactions. The authorization for the new share repurchase program expires June 23, 2027. In the first nine months of 2025, we repurchased 35.4 million shares at a cost of approximately $1.2 billion. In the first nine months of 2024, we repurchased 6.6 million shares at a cost of approximately $179.7 million. As of September 30, 2025, approximately $1.9 billion remained available under the new share repurchase program.
Other Funding Arrangements
In August 2025, we entered into a funding arrangement with BeOne for up to $950 million, including an upfront payment of $885 million for the purchase of a royalty on Imdelltra. BeOne has the option to sell to us additional royalties on Imdelltra for up to $65 million within twelve months from the acquisition date. As of September 30, 2025, BeOne has not exercised the option.
In June 2025, we entered into a two-part $2 billion funding arrangement with Revolution Medicines. The funding arrangement includes up to $1.25 billion, including $250 million paid upfront, to purchase a synthetic royalty on daraxonrasib and a senior secured term loan of up to $750 million. The first tranche of the senior secured term loan must be drawn following FDA approval of daraxonrasib. As of September 30, 2025, $1 billion of the funding commitment remained unfunded.
As part of the expanded funding collaboration that we entered into with Cytokinetics in May 2024, we agreed to fund the clinical trial for CK-586. We funded $50 million upfront in May 2024. We have an option to fund up to an additional $150 million for the Phase 3 development of CK-586, which we have not exercised as of September 30, 2025.
We have a long-term funding arrangement with Cytokinetics which is comprised of seven tranches of up to $525 million in total funding ("Cytokinetics Commercial Launch Funding"). In September 2025, Cytokinetics requested to draw $100 million under tranche five, which we completed in October 2025. As of September 30, 2025, $275 million remained available under the Cytokinetics Commercial Launch Funding.
We may have other funding arrangements where we are contractually obligated to fund R&D activities performed by our development partners. We also have funding arrangements related to our equity method investments in the Avillion Entities. As our committed capital requirements are based on phases of development, the completion of which is highly uncertain, only the capital required to fund the current stage of development under such funding arrangements is considered committed capital, which was approximately $114.3 million as of September 30, 2025.
We also have certain milestones payable to our counterparties that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones. These contingent milestone payments are not considered contractual obligations. In the first nine months of 2025, we paid a $200 million regulatory milestone following the FDA approval of a new manufacturing hub for Adstiladrin and sales-based milestones of $18.6 million and $50 million related to Erleada and Trelegy, respectively. In the first nine months of 2024, we paid a $50 million regulatory milestone related to olpasiran.
Debt Service
The future principal and interest payments under our Notes over the next five years and thereafter are as follows (in thousands):
| Year | Principal Payments | Interest Payments | |||||||||
| Remainder of 2025 | $ | - | $ | - | |||||||
| 2026 | - | 332,431 | |||||||||
| 2027 | 1,000,000 | 329,850 | |||||||||
| 2028 | - | 312,350 | |||||||||
| 2029 | 500,000 | 312,350 | |||||||||
| Thereafter | 7,300,000 | 3,639,050 | |||||||||
|
Total(1)
|
$ | 8,800,000 | $ | 4,926,031 | |||||||
(1)Excludes unamortized debt discount and issuance costs of $234.3 million as of September 30, 2025, which are amortized through interest expense over the remaining life of the underlying debt obligations.
In addition to our Notes, we have a $380 million Term Loan due in July 2026. The interest rate on the Term Loan is variable based on SOFR. Using the SOFR interest rate as of September 30, 2025, the estimated interest payments for the remainder of 2025 and 2026 are $5.9 million and $18.4 million, respectively.
Leases
In connection with the Internalization, we entered into an operating lease agreement for office spaces. The lease agreement has a non-cancelable term through October 31, 2031 and a five-year extension option. As of September 30, 2025, the future minimum lease payments under non-cancelable operating leases over the next five years and thereafter are as follows (in thousands):
| Year | Payments | |||||||
| Remainder of 2025 | $ | 1,011 | ||||||
| 2026 | 4,053 | |||||||
| 2027 | 3,776 | |||||||
| 2028 | 3,721 | |||||||
| 2029 | 3,726 | |||||||
| Thereafter | 6,884 | |||||||
| Total lease payments | 23,171 | |||||||
| Less: imputed interest | (3,152) | |||||||
| Present value of lease liabilities | $ | 20,019 | ||||||
Operating and Personnel Payments
Prior to the Internalization, we paid quarterly Operating and Personnel Payments pursuant to the Management Agreement equal to 6.5% of the cash receipts from Royalty Investments (as defined in the Management Agreement) for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter. The payment for our Operating and Personnel Payments was the most significant component of Payments for operating and professional costspresented in the condensed consolidated statements of cash flows. Following the Internalization, we no longer pay Operating and Personnel Payments and instead, we compensate employees directly.
Guarantor Financial Information
Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings and RP Manager, our non-wholly owned subsidiaries (together, the "Guarantor Subsidiaries"). Our remaining subsidiaries (the "Non-Guarantor Subsidiaries") do not guarantee the Notes.
Under the terms of the indenture governing the Notes, Royalty Pharma plc and the Guarantor Subsidiaries each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on the Notes. As of September 30, 2025, the total outstanding and guaranteed Notes had a par value and carrying value was $8.8 billion and $8.6 billion, respectively.
The following financial information presents summarized combined balance sheet information as of September 30, 2025 and December 31, 2024 and summarized combined statement of operations information for the first nine months of 2025 for Royalty Pharma plc, RP Holdings and RP Manager. All intercompany balances and transactions between these entities are eliminated in the presentation of the combined financial statements. RP Holdings' most significant asset is its investment in operating subsidiaries, which has been eliminated in the table below to exclude investments in Non-Guarantor Subsidiaries. Our operating subsidiaries hold the majority of our cash and cash equivalents, marketable securities and financial royalty assets. As a result, our ability to make required payments on the Notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us. There are no material restrictions on distributions from the operating subsidiaries. Amounts presented below do not represent our total consolidated amounts (in thousands):
| Summarized Combined Balance Sheets | |||||||||||
| As of September 30, 2025 | As of December 31, 2024 | ||||||||||
| Current assets | $ | 652,195 | $ | 53,380 | |||||||
| Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries | 63,432 | 23,908 | |||||||||
| Current intercompany notes receivable due from Non-Guarantor Subsidiaries | - | 242,476 | |||||||||
| Non-current assets | 948,804 | 3,074 | |||||||||
| Non-current intercompany notes receivable due from Non-Guarantor Subsidiaries | 2,860,003 | 2,430,894 | |||||||||
| Current liabilities | 441,816 | 1,100,681 | |||||||||
| Current interest payable on intercompany notes due to Non-Guarantor Subsidiaries | 5,730 | 23,905 | |||||||||
| Current intercompany notes payable due to Non-Guarantor Subsidiaries | - | 242,476 | |||||||||
| Non-current liabilities | 9,067,768 | 6,613,747 | |||||||||
| Non-current intercompany notes payable due to Non-Guarantor Subsidiaries | 2,208,444 | 1,609,898 | |||||||||
| Summarized Combined Statement of Operations | For the Nine Months Ended September 30, 2025 | ||||
|
Interest income on intercompany notes receivable due from Non-Guarantor Subsidiaries
|
$ | 107,220 | |||
| Other income | 45,978 | ||||
| Operating expenses | 477,236 | ||||
|
Interest expense on intercompany notes due to Non-Guarantor Subsidiaries
|
49,518 | ||||
| Net loss | 373,556 | ||||
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Certain of these policies are considered critical as they have the most significant impact on our financial condition and results of operations and require the most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of income and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our most critical accounting policies relate to our financial royalty assets. Similarly, the most significant judgments and estimates applied by management are associated with the measurement of our financial royalty assets at amortized cost using the prospective effective interest method. The application of the prospective approach to calculate interest income from our financial royalty assets requires management's judgment in forecasting the expected future cash flows of the underlying royalties. There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K.
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