Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma First Quarter 2021 Financial Results Conference Call. I would now like to turn the call over to George Grofik, SVP, Head of Investor Relations and Communications. Please go ahead, sir. Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma’s first quarter results. You can find the slides to this call on the Investors page of our website at royaltypharma.com. Moving to Slide 3, I would like to provide you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties and other factors that cause actual results to differ materially. I refer you to our 10-K on file with the SEC for a description of these risks. With that, please advance to Slide 4. Our speakers on the call today are Pablo Legorreta, Founder and Chief Executive Officer; Marshall Urist, EVP, Co-Head of Research and Investments; Jim Reddoch, EVP, Co-Head of Research and Investments & Chief Scientific Officer; and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Marshall and Jim will provide an update on our Royalty acquisitions and portfolio. Terry will then review the financials. And after concluding remarks from Pablo, we will hold a Q&A session. Chris Hite, our Vice Chairman, will also join the Q&A session. And with that, I’d like to turn the call over to Pablo.

Thank you, George, and welcome to everyone on the call. I am delighted to report a great start to the year for Royalty Pharma, building off our strong momentum in 2020. Our financial performance in the first quarter was excellent with strong double-digit top line and bottom line growth. In addition, we continue to execute well against our strategy. We announced up to $787 million in new Royalty transactions as well as an exciting new thematic index collaboration with MSCI. And looking ahead, our pipeline continues to be very active as the demand for Royalty funding of life sciences innovation is exceptionally strong. Lastly, we are also raising our guidance for adjusted cash receipts for 2021. On Slide 7, you can see our financials in a little more detail. In the first quarter, we delivered 37% growth in both adjusted cash receipts and adjusted cash flow, what we consider to be our top and bottom lines respectively. This excellent momentum positions us well to deliver another year of strong performance as Terry will speak to when he discusses our raised guidance for this year. So overall, I am extremely pleased with our start to 2021. And for reasons we will highlight during this presentation, we continue to believe our prospects look very promising. Before I hand it over to Marshall and Jim to update you on our Royalty portfolio, I would like to elaborate a bit more on our recently announced collaboration with MSCI to develop and market thematic indexes in life sciences, biotechnology and the pharmaceutical spaces. Thematic investing is a fast growing category of assets under management globally and we believe we can leverage our unique skill set based around our deep scientific and clinical knowledge and our data analytics capabilities to develop novel indexes in partnership with MSCI, an innovative index provider. We see this collaboration as having a number of benefits to Royalty Pharma. First, it is expected to create a recurring and growing license revenue stream on global life sciences under management linked to these indexes. Second, we believe it expands our commitment and recognition as a leading funder of innovation in the biopharmaceutical industry. And third, we expect that upfront costs required will be minimal as we already have the capabilities in place to contribute to this important new collaboration. In terms of the financial contribution, we expect this collaboration to start small and play out over a longer period of time. That said, thematic index investing is a rapidly growing area, with more than $400 billion of assets under management, of which approximately $100 billion are invested in ETFs and $300 billion in mutual funds. With healthcare representing an important segment of the economy, contributing to around 18% of U.S. GDP, we think this collaboration could be an attractive source of recurring cash flow over time. With that, I will hand it over to you, Marshall.

Thank you, Pablo, and good morning and good afternoon to everyone. We are really excited about the Royalty acquisitions we have announced so far in 2021. And I would like to take a couple of minutes to highlight two of our recent transactions, which expanded our portfolio of innovative high growth therapies. Beginning on Slide 10, in April, we announced the acquisition of GlaxoSmithKline’s Royalty interest in the cabozantinib products, Cabometyx and Cometriq. For an upfront payment of $342 million and potential milestones of $50 million based on approvals in lung and prostate cancer, we will receive a 3% royalty on worldwide net sales. Cabometyx is a leading TKI approved for renal cell carcinoma and hepatocellular carcinoma and is marketed by Exelixis in the U.S. and by Ipsen and Takeda outside the U.S. Most recently, Cabometyx received regulatory approvals in the U.S. and Europe for use in combination with the PD-1 inhibitor Opdivo in first-line renal cell carcinoma. Cabometyx is also in a number of ongoing combination studies in kidney, liver, lung and prostate cancer. Overall, we see a tremendous opportunity for this therapy to improve treatment outcomes for a large and growing number of cancer patients. And as reported by Exelixis last week, the early launch in first line kidney cancer in combination with Opdivo is off to a good start. In terms of the financials, the Street expects Cabometyx and Cometriq sales to grow from just over $1 billion in 2020 to $3 billion by 2025. And we are excited to add this important therapy to our portfolio and expect it to deliver an attractive return for Royalty Pharma as well. Now, moving to Slide 11, we are excited by the opportunity for Oxlumo, a transformative medicine that significantly improves the lives of patients suffering from the ultra-rare genetic disorder, primary hyperoxaluria type 1 or PH1. Oxlumo is an RNA interference therapeutic, which lowers levels of oxalate that are abnormally elevated in PH1, resulting in kidney stones and ultimately kidney failure. Oxlumo was approved in the U.S. and Europe in November 2020 and is marketed by Alnylam, a company that has pioneered RNA interference therapies and successfully launched other rare disease medicines. Last month, we acquired Dicerna’s mid to high single-digit royalty interest in Oxlumo for an upfront payment of $180 million and $60 million of potential sales based milestones. Following its launch at the end of last year, the uptake has been encouraging and we are optimistic that the number of patients that could benefit from Oxlumo should expand with increased awareness and diagnosis. Consensus estimates show sales of $333 million in 2025 and Alnylam has described a potential market opportunity in excess of $500 million. Similar to Cabometyx, we expect Oxlumo to generate an attractive return for Royalty Pharma. And with that, I will hand it over to Jim.

Thanks, Marshall, and good morning everyone. As shown on Slide 13, we have seen strong progress from our portfolio in the first quarter and there are multiple upcoming clinical and regulatory events that could impact our portfolio throughout 2021. So far in 2021, we have seen an important development for our migraine portfolio with the start of the Phase 2/3 study on Biohaven’s intranasal zavegepant. As a reminder, we agreed in August 2020 to fund the development of this therapy by providing up to $250 million to Biohaven. Should this therapy be approved in migraine, we will receive 1.9x the funded amount or $475 million, which would be paid over a 10-year period and also a royalty on sales. Additionally, in the first quarter, Biohaven filed for European approval of its oral migraine therapy Nurtec ODT. And lastly, the European regulators approved Roche’s Evrysdi for SMA, as well as BioCryst Orladeyo for hereditary angioedema. In April, the FDA granted full approval for Trodelvy in triple-negative breast cancer and accelerated approval in urothelial cancer. In addition, we saw the European approval of a subcutaneous formulation of Tysabri. For the rest of the year, I would call out the upcoming clinical data on Cabometyx in first line hepatocellular carcinoma and in prostate cancer, the readouts for Trodelvy and hormone receptor positive breast cancer, as well as the Phase 3 results of PT027, the combination asthma therapy that we have funded through Avillion that would be marketed by AstraZeneca. So in short, you can see the multiple milestones over the coming quarters showing the continued development of our portfolio. And with that, I will turn it to Terry.

Thanks, Jim. Let’s move to Slide 15. We delivered a very strong first quarter with total royalty receipts up 19% year-over-year. As you can see, the royalties from our largest franchise, cystic fibrosis, grew 68% this quarter. This substantial growth was driven by two factors: first, the continued strong performance of the franchise led by growth of Trikafta, Tricastin in the U.S. and Kaftrio in the EU, the impact of which was enhanced by our acquisition of the residual royalty interest from the Cystic Fibrosis Foundation in November of last year and second, a one-time adjustment related to Vertex’s agreement with the French authorities around reimbursement for Orkambi that reduced royalty receipts in the first quarter of 2020. Imbruvica, Xtandi and Promacta also contributed double-digit growth in the quarter. We are also pleased with the contribution from several recently approved therapies, including Trodelvy, Evrysdi and Nurtec ODT. Nurtec is becoming an increasingly important contributor to our business after we received a $16 million payment from Biohaven on the Series A preferred equity this quarter. This payment was triggered by the approval of the product last year and is the first of 16 consecutive quarterly payments we will receive. We also experienced a couple of headwinds this quarter. Specifically, the HIV franchise was down significantly, primarily as a result of the LOEs for Truvada and Atripla, as well as a lower percentage of combination sales attributable to emtricitabine in the United States. We expect similar dynamics to impact the HIV franchise in the second quarter, leading to year-over-year declines. Taken together, the portfolio drivers mentioned previously, as well as contributions from several recently approved products, more than offset the impact of declines in royalties for the HIV franchise, delivering strong growth in total royalty receipts. Slide 16 shows how our royalty receipts translated to strong adjusted cash flow in the quarter. As you are aware, adjusted cash receipts is a key non-GAAP metric for us, which we arrive at after deducting non-controlling interest. This amounted to $524 million in the quarter, growth of 37% compared to last year’s first quarter, as Pablo noted earlier. We did recognize a high base of comparison in the first quarter of 2020 that increased our growth rate in the first quarter of 2021. Excluding this item, year-over-year adjusted cash receipt growth would have still been 22%. When we move left to right, operating and professional costs of $42 million equated to 8% of adjusted cash receipts. This percentage is lower than in the past couple of quarters, which included certain IPO expenses as well as expenses related to our bond offering. Net interest of $63 million reflected the first semiannual interest payment following our $6 billion unsecured note offering in 2020. As a reminder, the next semiannual interest payment is due in September, meaning our net interest expense will be de minimis in the second and fourth quarters. After other items of $7 million, we reported adjusted cash flow, our bottom line earnings of $409 million or $0.67 per share. This translates to an adjusted cash flow margin of 78.1%, again highlighting the strong cash conversion in our business model. Turning to our balance sheet on Slide 17, we ended the quarter with cash and marketable securities of $1.8 billion. The decrease of just over $200 million since the start of the year reflects the $521 million deployed on Royalty acquisitions, which was largely offset by the strong adjusted cash flow I have just described. We finished the quarter with $6 billion of investment grade debt, which alongside our undrawn $1.5 billion revolving credit facility, gives us a strong liquidity position. Taken together with leverage of 2.4x EBITDA on a net basis and 3.4x EBITDA on a gross basis, we remain well-positioned to continue to fund important innovation in biopharma. My final slide provides our 2021 full year guidance. We now expect adjusted cash receipts to be in the range of $1.94 billion to $1.98 billion, an increase from our previous guidance. Our near-adjusted cash receipt guidance represents an increase of between 8% to 10% over the $1.8 billion we delivered in 2020 and reflects a number of pushes and pulls. In particular, this raised guidance reflects the new Royalty acquisitions Marshall spoke about, as well as the strength of our portfolio, offset by declines in HIV that were more substantial than we initially expected. We are quite encouraged to see that despite headwinds within our HIV franchise, which we do not expect to be a contributor to our business beyond 2021, we are still able to increase guidance to year-over-year growth of 8% to 10%. Looking forward to the second quarter, we expect adjusted cash receipts, excluding new investments, to be at a similar level as the second quarter of last year. Turning to operating costs, we expect these to be approximately 9% to 10% of adjusted cash receipts for the year, which is unchanged from our prior guidance. Consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account any future acquisitions. With that, I would like to hand the call back to Pablo for his closing comments.

Thanks, Terry. So in conclusion, we are experiencing a really strong start to the year. We continue to be very excited about the growing role of Royalty funding to advance health outcomes for patients globally, as well as the powerful dynamics in our business. With that, I would like to open the call to Q&A. Back to you, George.

Thanks, Pablo. We will now open the call to your questions. Operator, please take the first question.

Our first question comes from Christopher Schott with JPMorgan. Your line is open.

Good morning. This is Chris on behalf of Chris Schott. My first question pertains to inflation. How might the prospect of rising inflation affect Royalty Pharma’s business model moving forward? Additionally, how do you assess the trade-off between the cost of funding future transactions and the potential for declining sector valuations? My second question concerns synthetic royalty deals. Royalty Pharma launched synthetic royalty deals a few years ago and has completed multiple transactions, yet this segment remains relatively small in the overall royalty market. How do you envision these transactions fitting into your business mix in the future, and what success have you had in negotiating synthetic royalty deals with potential partners? Thank you.

Terry, would you mind taking the first question and maybe Marshall can take the second one?

Yes. And maybe before I answer the first one, could you just sort of clarify the question? I want to make sure I understand the question.

Yes. So with the higher inflation, we are seeing the potential for kind of a negative impact on sector valuations. So we are just – I am just trying to think through all the pushes and pulls on Royalty Pharma’s business model and what impact inflation may have on your business going forward?

Okay, understood. So yes, others could weigh in as well, but I would say our view is if valuations across the sector are impacted by higher inflation then that could actually increase our opportunity sets as companies look for alternative ways to fund themselves beyond just the traditional equity capital markets that we think could actually enhance our business.

Good morning. On the second half of your question on synthetic royalties, thanks for the question. As we talked about in the past, we are really excited about the potential for synthetic royalties as a new and ultimately important way of funding drug development and innovation in our sector. We are very active there and expect it to become an important and increasing part of our business over time. I think as you have seen in the past, we do have a very high bar when we look at new opportunities and we are going to maintain that going forward. So, I think it’s exciting we are seeing a lot of traction there actually. And I would remind everyone, our last transaction there with BioCryst at the end of last year, Orladeyo’s launch there is off to a great start. So, we think the BioCryst team is doing a great job with that launch. And I think you will continue to see us do those deals in the future and continue to add to our portfolio through synthetic royalties over the coming years.

Thanks for taking the questions.

Our next question comes from Geoff Meacham with Bank of America. Your line is open.

Hey, guys. Good morning and thanks for the question. I just have a few. The first one is how much of a contributor can the MSCI collaboration ultimately be? I just want to know if you get any more detail about how it could generate cash for Royalty? And the second question is, Terry, you mentioned that the HIV erosion was worse than you guys originally modeled. I know you typically look at consensus numbers for each product, but going forward, are there additional analyses that you could conduct? I am just trying to think of all the inputs and outputs to what you guys provide as guidance and how that could be enhanced? Thank you.

I will take the first question, Geoff. Thank you for the question and it's good to hear from you. Briefly on HIV, this marks the end of this investment, so it won't significantly impact the future, but Terry can provide more information there. Regarding MSCI, stepping back for a broader perspective, I have valued this business for decades, having built a relationship with the Chairman and CEO over many years. I remember discussing with him that his business is fascinating because the index functions like a royalty on global assets under management. MSCI, in my opinion, is the most innovative among the major index creators. They receive compensation as asset managers that license their indexes pay them a few basis points on the assets managed by specific funds. For instance, companies like Capri and Fidelity that license these indexes would pay MSCI based on their managed assets. Over the long term, assets under management tend to grow despite quarterly fluctuations due to market volatility, thanks to economic growth and increased savings by people. This indicates a compelling dynamic. During discussions with him, I expressed my admiration for the business and how it acts as a royalty on global assets under management. That relationship has continued, and he is now on our board. About a year ago, we started exploring opportunities in life sciences, which is a critical part of the global economy and a rapidly growing and complex field. In biopharma, we have major pharmaceutical companies and biotech, but there are limited indexes available that attract investor attention. Biotech consists of over 8,000 companies and about 3,000 are public, making it highly complex as companies specialize in specific products, whether in oncology or other areas. Investors often struggle to navigate this space; while many opt for mutual funds, there's much potential for thematic indexes that allow investors to engage with specific themes in life sciences. We see a great opportunity to create indexes that better reflect various themes within this area, like an oncology index or an early-stage biotech index, making investment safer and more manageable compared to selecting individual stocks, where risks are significant. Moreover, we could create indexes focused on Chinese companies or other dimensions such as CROs or hospitals. What excites us at Royal Pharma is our ability to leverage our extensive knowledge and expertise to generate revenue from life sciences linked to these indexes. We will receive a portion of the revenue generated, which, while recognizing MSCI's substantial business and infrastructure, will be a notable royalty. Initially, the revenue might be modest, but looking ahead 3, 5, or even 10 years, it could become a significant revenue source for us. Importantly, our costs will be minimal since we already possess much of this knowledge. We are investing approximately $0.5 million to $1 million to expand our strategy and analytics group, which is a small investment for the potential returns. To conclude, consider the transformative potential of various technologies shaping our world, including biotech. The market cap value created by disruptive technologies was around $10 trillion in 2020 and is projected to exceed $60 trillion in new market cap. New companies going public and achieving growth should drive this increase to about $16 trillion by the mid-2030s. In terms of thematic investing, which is rapidly expanding, it currently represents a $400 billion market, with $100 billion in ETFs and $300 billion in mutual funds. This market has grown significantly from $150 billion in 2015 to $400 billion in 2020, highlighting the growth opportunity. I hope this answers your question, Geoff.

And then, Geoff, on HIV and how we think about consensus, we still do feel generally pretty comfortable with using consensus for sort of the guidance that we provide. HIV is a little unique in that there is sort of two factors. There is net sales of the Gilead’s products, but then there is also the percent of those sales that is attributable to emtricitabine. And that’s actually the part that actually came in much lower than we initially anticipated. But as Pablo mentioned, HIV has been an amazing investment for us, but it’s not a part of our future. And we are really encouraged to see that the growth across the rest of the business more than offset those substantial declines within HIV.

Okay, great. Thanks, guys, for the detail.

Your next question comes from Terence Flynn with Goldman Sachs. Your line is open.

Great. Thanks so much for taking the question. I had one on Trodelvy. There has been some discussion recently about the impact of prior CDK4/6 treatment that that could have on efficacy of the drug and the ongoing HR-positive Phase 3 trial. In the – if you look back at the Phase 1/2 data in HR positive, there is a bigger benefit for the drug in people that were naive to CDK4/6 versus those that were previously exposed. So, just wondering, Marshall, if you could comment and if you have any perspective on this trial as I know it’s a pretty important growth driver for the future opportunity here? Thank you.

Sure. Hey, Terence. Good morning. So, on Trodelvy, thanks for the question. We have certainly been following the debate out there. And it’s certainly interesting. I would say bigger picture first just bigger picture, taking a step back, we think Trodelvy is an exciting and is and will be an important therapy. And certainly, HR positive is one aspect of that. But if you think taking a step back, there is a lot more there in terms of growing within triple-negative as well as bladder and then other indications. So, this has been a real kind of win-win for us in terms of adding this to our portfolio, in terms of a great example of the power of the synthetic royalty transaction. That being said, with respect specifically to the HR positive trial, we have – we know what you guys know about this. So I think we are following this and look forward to the readout this year. Gilead, obviously, took a close look at this, I think as they have talked about and has powered the trial adequately for what will hopefully be a positive readout later this year. So I think it’s something that is interesting. But regardless, we think there is a lot of growth in the future for Trodelvy.

Thank you, Terence. Operator, we will take the next question.

Your next question comes from Greg Gilbert with Truist Securities. Your line is open.

Good morning, team. A couple of strategy questions. You have made it clear that you would continue to consider development stage deals for products in pipelines, but what’s your appetite to invest in earlier stage, but maybe more platform-oriented technologies that could later span multiple products in multiple areas where you are not sure what those areas or products are yet? And then back to the MSCI arrangement, really interesting announcement there. Are there other themes under consideration in the near-term or is the goal to sort of observe these two and see how they go? But maybe as an offshoot of that, is this effort potentially helpful to your core business in sourcing new deals unrelated to the MSCI collaboration? Thank you.

Pablo, are you on?

Sorry, sorry, I was muted. So Jim can provide the answer to the question related to the early-stage investments. And I will answer your question about MSCI. So, I think what this really shows is, how Royalty Pharma’s model is actually not constrained. We can be creative and look for ways to actually create new sources of revenue like we have with this MSCI collaboration. And I think there could be other things that over time develop like this that could create sources of revenue. For us, it’s interesting, because it will give us potentially an exposure – economic exposure to other parts of life sciences where we are not likely to invest in. So, the focus, as you know, is therapeutics. We can and probably will over time invest in other things that are not therapeutics, like it could be diagnostics and devices. We are very careful there, because we want to make sure that these assets have very long lifecycles, which is an important thing, which therapeutics do have. But we will also potentially – we are able to create indexes that are going to track those things like devices and diagnostics. But also, as I said, could be an index for CROs or other things. So that’s obviously in the index category, but there could be other things. And maybe just one other thing that occurred to me, just to give people a sense of the economics here. So if you have a fund that has $10 billion of assets under management and MSCI is going to charge somewhere between 3 and 6 basis points, it generates $3 million to $6 million of revenue per year. Now if that fund doubles or triples over time, the revenues will double or triple. And I think what’s also very interesting for us about this is that it’s perpetual. As you know, the royalties that we invest in have a life of 10, 12, 15 years, sometimes a little bit more, but they expire and we need to replace them. In the case of the indexes, this is perpetual. It will go on for many – forever. So with that, I’ll turn it over – I’ll turn it back to Jim to give you a little bit more perspective on our strategy regarding earlier-stage investments.

Hey, Greg, thanks for the question. Yes, it’s a good question on going earlier stage and looking at whether there are opportunities to invest in platforms and potentially bring in multiple products at a time. I do think that over the years, we’ve demonstrated that we’re creative and really kind of pushed the envelope in the royalty industry for going earlier and finding ways that are risk-aware to go into earlier stages of development. We kind of pushed the envelope into pre-approval. We’ve since then done products that are even pre-Phase 3 in a smart way and gotten returns on those. We actually made an investment just recently, as part of the Orladeyo investment we made an investment in BioCryst Factor D drug called 9930, which was in Phase 1/2 right now. So that’s an example of us going early as part of a larger deal. So there are a variety of creative structures that we’re looking at right now that can give us some exposure to exciting new platforms and modalities and perhaps kind of groupings of products. So I think that we will just leave it at we’re exploring those as a way to keep the opportunities coming. But we do think it’s a good thing for us to be apprised of. And actually, part of the reason that we wanted to form the strategy and analytics team is to make sure that we’re using data. And the best way to make sure we know where all the promising opportunities are and to really kind of be mining opportunities earlier than we would before as a way of, a, following them from an earlier stage, but b, seeing if there might be opportunities for us to invest earlier.

Thanks a lot.

Our next question comes from Kathleen Miner with Cowen & Company. Your line is open.

Thank you very much for taking the questions. Just a couple. First, could you just clarify on the HIV that the royalty expires this year or is it sometime during the year? And are there any other notable royalties that expire during 2021? Second question is on the adjusted cash receipts guidance that you gave. You said the increase was based both on the existing portfolio and on some of your recent additions. But is there also any change in your expectations for distribution? And the last question is a little more big-picture: do you expect drug pricing reform to increase or decrease the number, magnitude, and potential of royalties? Thank you.

Yes. So on your question on HIV, what we’ve said is that we expect it to substantially end in 2021, and we have not been more specific than that. Your question on distributions as it relates to adjusted cash receipts, I assume you’re referring to the distributions to non-controlling interest. And in the back of our deck, we actually lay out what those different non-controlling interests are or were for the quarter. And so that’s a pretty good guide for you for how to think about what they’ll look like going forward. And then your last question was on drug pricing. And I think that Marshall is probably the best person to answer that one.

Sure. Thanks, Terry. Good morning. Thanks for the question. So specifically to your question of how we think what the outcome of – what may happen on the drug pricing front could impact our opportunity set for royalties. And regardless of what happens, I think we are very optimistic about the size of our market, the number of companies that are going to be looking for funding. I think certainly, we’re all watching what is going to happen in Washington and all of the stops and starts and puts and takes that we’ve seen. But I think we would – we’re focused on two things. One is, I think in terms of our current portfolio, we are – we have a portfolio that’s highly diversified across products, therapeutic areas, marketers, geographies, payer types, all different types of diversification. And we’ve really focused on important drugs that are – that really impacts patients’ lives. And so regardless of what happens, I think we feel good about where our portfolio stands now. I think looking forward, we really don’t think that whatever happens will meaningfully impact the number of new opportunities for us. When you look at the rate of company formation over the last few years, we see that as a really encouraging leading indicator of the number of companies and the number of opportunities for us, the amount of innovation, how much is happening right now. We think those are all kind of overwhelmingly positive in terms of how things may look going forward. So I think, certainly, for all of us who have been around the industry for a long time, we are continuing to follow what’s happening on the policy front. But we think all the positives and tailwinds for our business remain and will remain in years to come.

Our next question comes from David Risinger with Morgan Stanley. Your line is open.

Yes. Thanks very much, and thank you for the comprehensive update. So I have two questions. First, regarding the MSCI indices global recurring revenue opportunity, could you just put that in a little bit more financial perspective? I mean, it makes a lot of strategic sense for you. I think you had mentioned, Pablo, 3 to 6 basis points on assets for MSCI. What could Royalty Pharma realize and should we think about this as being a potentially $5 million revenue opportunity in a couple of years for Royalty Pharma or a $20 million revenue opportunity? Just so that we have some context, that would be appreciated. And then second, Vertex has been advocating at recent investor conferences that it’s excited about novel cystic fibrosis candidate development, including potentially reducing royalties as part of that. Could you remind us about your position and next developments to watch? Thanks very much.

Thank you, David. So with respect to MSCI, I actually would like, at this stage, to just be very cautious about the revenue contribution, just because it’s something totally new to us that we would like to understand better. And we do believe that revenue contribution, this year, probably we won’t get anything. Why? Because the indexes have to be created, then they have to be sold to the team at MSCI and ourselves. We will start to talk to some of the major investors in life sciences to actually see if they want to license the indexes. But what you will start to see is maybe some of the bigger ones, a BlackRock or a Mundi or others, they might create an ETF. If we launch an oncology – oncology ETF or we launch an early-stage biotech and maybe an early-stage biotech ETF and then mutual funds. So it will take time. And I even think that the revenue next year is going to probably be very small because, again, it’s all in the launch phase. But at some point, this will gain momentum. And if you just look at the fact that today there is $400 billion invested in thematic indexes already, $100 billion in ETFs and $300 billion in mutual funds, and a lot of that is technology because there really – life sciences is behind. It hasn’t really happened. So could that $400 billion grow over the next 10 years to $1 trillion? I think it will, probably. And what share of that is going to be life sciences? And then you have to sort of go through the economics that MSCI will get and then what we will get. So I think this is something that looking in sort of the second half of this decade could become important. But maybe as time evolves and we get a better sense of how this could grow, we could be a little bit more specific. At this stage, I am very excited because it not only shows what we can do with the Royal Pharma model in things that were totally unexpected. I mean nobody thought about this, had it in their model. So it’s potentially something new for us. And it also will benefit – I mean, there was a question before about whether this will benefit our core business. And absolutely, it will. Why? Because in that effort of us really looking into life sciences and trying to look in 3, 5 years as to what are going to be the important therapeutic areas. And we will also start to look at the companies that are starting to invest in that, many of which may have things in preclinical. But if you start to look at those companies and track them through an index, and you start to see how the value creation begins or how capital is shifting from – into those areas, it will give us a feel for that. And just as an illustration, I mean things that – a Chinese biotech, for example. We looked at it last fall as we were starting to talk to MSCI about this. And I was blown away to realize, we, myself and the team have been going to China in the past years to try to explore if there is anything for us to do in that market. And I was blown away last fall when I checked the market cap of Chinese biotech, and it was about $700 billion. And I think it went those guys maybe $1 trillion. And there is about 800 Chinese biotech companies that are public, 800 biotech companies, which is a very significant number. So it gives you a sense of what’s going on in other markets, and it will help us at Royal Pharma to make sure we are really understanding the space in a very deep way and we can understand the trends better. So that’s additional perspective that I wanted to provide.

And then, Dave, on your question on the cystic fibrosis franchise. We’ve certainly heard comments from Vertex about future potential combinations and potential lower royalty rates on those combos. Our position’s unchanged. So as it relates to any combination that includes deuterated Kalydeco, our position is that deuterated Kalydeco is simply Kalydeco, and Kalydeco is a collaboration compound that’s royalty-bearing. And with regard to any other components of combination products, I think there is a number of factors to consider. So which components are they? And are they royalty-bearing? And at what level? And then as those combos move forward, it’s time to enroll its clinical trials in a population that is, at this point, pretty well served and then the success and timing of potential regulatory approvals and then ultimate uptake versus Trikafta, which is a pretty remarkable drug for CF patients. So our view is we expect CF to be a very important contributor to our business for many years to come. And in the meantime, we’re going to keep focusing on executing our business plan and adding innovative new therapies to the portfolio.

Thank you.

Your next question comes from Umer Raffat with Evercore. Your line is open.

Hi, guys. This is Mike DiFiore in for Umer. Thanks so much for taking my questions. Just two for me. Just to piggyback on the previous question before on Vertex. They have, again, recently been very clear that what their next-gen triple combo may be, and that Phase 3 is going to start this year. So my question is, given that things are starting to be more definitive, has anything changed regarding Royalty Pharma’s long-term outlook and potential or willingness to do earlier-stage deals? Just given the more certain step done in future royalties? And secondly and separately, just the oral CGRP market outlook, especially with AbbVie’s recent atogepant data in preventative migraine. What are your – has your outlook changed regarding the implications for Biohaven’s future royalty potential? Thank you.

Thanks for the question, Mike. Terry, can you take the CF question? And Marshall, the migraine CGRP question.

Yes, Mike, I think, to be honest, I think it’s really premature to be talking about any changes to our long-term outlook. I think what I just said holds: we feel really confident in the long-term performance of the CF franchise. As other products come along, it’s all going to be sort of case-dependent. But they are going to have to compete against Trikafta, which again is a great drug, and we’re entitled to very attractive royalties on Trikafta. And then would it change our strategy? No, absolutely not. I think we’re going to keep doing what we’ve been doing and keep reinvesting in what we think are the most exciting wave of new products in this industry. And that’s the plan, and that’s what we’re going to stick to.

Good morning, Mike. Thank you for your question about the CGRP class. There are several points to consider regarding your inquiry. Overall, we are thrilled with the growth we are witnessing in the oral CGRP market, particularly the success that Biohaven and AbbVie are experiencing. AbbVie has expressed their enthusiasm about the potential of this category during past conference calls this quarter and earlier ones, and we are equally excited to be involved alongside Biohaven. It's important to note that we have various entry points into this market. Currently, Nurtec ODT is a key player in the acute market, and Biohaven is working on achieving the first-ever dual label for both acute treatment and prevention, with the PDUFA date approaching. We find this prospect very interesting. Additionally, we have collaborated with Biohaven since last summer to support the zavegepant development program, which includes their exploration of oral zavegepant in the prevention market. This is indeed an exciting category for us, and we appreciate our multiple participation avenues. Lastly, this situation underscores the advantageous nature of the Royalty Pharma business model, allowing us to engage in this promising class of drugs through various channels. We also have a royalty interest in other oral CGRPs, showcasing the unique aspects of our business model, as we recognize a market with significant potential. The early launches of the oral CGRPs reinforce our strategic flexibility to engage in multiple ways. We are optimistic about the future of CGRPs and anticipate positive developments in the coming years.

Got it. Thanks so much.

And our last question comes from Andrew Baum with Citi. Your line is open.

Thank you. Global events like the pandemic appear to be changing the dynamic between governments and the industry in several ways. You've already mentioned drug pricing, but when considering intellectual property in relation to vaccine waivers and tax issues, it's clear that there may be heightened risks compared to what we anticipated before. How do you view these factors in terms of the risks they pose to your operating model going forward? That’s my first question. My second question is regarding the increase in competitors within your field. Former KKR executives have entered your market, and they are not limited to royalties but are also involved in SPACs. How do you perceive the competitive landscape, and how does the stability of your cash flows influence your ability to continue acquiring the most appealing assets? Thank you.

Yes. So maybe Chris can take the first question. With regards to competition, in fact all of those facts that have been created that – and there is many of them that are impressive in sciences, I see those as actually additive to our effort. Because what’s happening there is that there is a ton of capital that actually has been raised by the SPACs that are focused in life sciences, many billions of dollars. And again, that’s going to fund private companies, give them the capital they need to continue to invest in research to bring products forward. And eventually, they could become partners of ours, companies that we could partner with and collaborate to help them eventually bring products to market. So I think the more capital that is invested in life sciences, the better. And one other comment to make about this new index collaboration, I was – in a conversation I had with the MSCI team, the Chairman and CEO mentioned that in the conversations they have had with world governments, World Bank, how capitals flow around the globe in the investment community. And when markets open and here markets, not only geographically, but also think about it from an industry perspective, the fact that MSCI creates indexes attracts many billions of dollars of capital into that space. And I gave the example of maybe an early-stage biotech index or an oncology index or you name it, it can be many others. Then what is likely to happen over time is that as products are created like ETFs or mutual funds to focus on that specific theme or new market, capital flows and then companies end up getting additional capital to fund their research. So it’s a very interesting phenomenon, but one that – like this whole – the development of thematic indexes and life sciences is going to make the whole life sciences investment opportunity more understandable, more accessible to investors, and this will attract capital. So it’s quite interesting from that perspective. And I think it – so I’ll let Chris answer the other question about impact to life sciences from big trends.

Sure. Thanks, Pablo. And Andrew thanks for the question. I think as it relates specifically to the intellectual property waiver, we don’t see that as something that’s going to impact our business long-term. I know the idea has been floated. And obviously, there is a global pandemic. And from a compassionate perspective, you want to get as many vaccine doses around the world as you possibly can, and there is probably more efficient ways. Actually, just transfer excess doses once the supply is there as opposed to trying to waive intellectual property. And with know-how, obviously, these vaccines are very difficult to make the manufacturer. So I think it’s probably more efficient ways to get the vaccines around the world than just waving intellectual property. We don’t see the need for compassionate use right now as impacting the intellectual property laws going forward. So we don’t see that as impacting our business going forward.

There are no further questions. I’d like to turn the call back over to Pablo Legorreta for concluding remarks.

Sure, operator. Thank you. Thank you to everyone on the call for your continuing interest in Royalty Pharma. My team and I look forward to continuing to share our progress with you. If you have any follow-up questions, please feel free to reach out to George. And thank you for joining the call, and I hope everyone has a good week. Thank you.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.