Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma First Quarter 2026 Earnings Conference Call. I would like now to turn the conference over to George Grofick, Senior Vice President, 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 press release with our earnings results and slides to this call on the Investor's page of our website at royaltypharma.com. On slide two, I'd like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these statements. We refer you to our most recent 10-K on file with the SEC for a description of these risks. All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP liquidity measures will be used to help you understand our financial results, and the reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. And with that, please advance to slide three. Our speakers on the call today are Pablo Legareta, Chief Executive Officer and Chairman of the Board, Chris Height, Chairman of Partnering and Investments, Marshall Uris, EVP, Head of Research and Investments, and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Chris will discuss the growing opportunity for R&D co-funding. Marshall will then provide a portfolio update, and Terry will review the financials. Following concluding remarks from Pablo, we will hold 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 happy to report a strong start to 2026 as we execute towards our goal to be the premier capital allocator in life sciences with consistent compounding growth. Slide five summarizes our strong business momentum in the first quarter. Starting with the financials, we delivered 10% growth in portfolio receipts, our top length, and 13% growth in royalty receipts, which are our recurring cash flows. The sustained double-digit momentum was driven by strengths of our diversified portfolio. We also maintained strong returns in our business, with returns on invested capital of around 14% and returns on invested equity of around 20%. By combining strong growth and attractive returns, we're confident that we have a clear path to drive shareholder value creation. Turning to capital allocation, we had a busy quarter with $1.25 billion of announced transactions on three attractive therapies. While capital deployed was in excess of half a billion dollars. We also repurchased 1 million shares for $50 million in the quarter and increased our dividend by 7%. Moving to our portfolio, we're thrilled to see a number of positive clinical and regulatory updates, including the extraordinary phase three results for Revolution Medicines in pancreatic cancer and FDA approval of Denali's aviaya in Hunter syndrome. We also expanded our portfolio to R&D co-funding agreements with Teva, which we discussed on our previous earnings call, and recently with J&J for their autoimmune therapy 4804. Chris will highlight the growing market opportunity for R&D co-funding with Global Biopharma. Lastly, we were pleased to acquire a royalty on Jazz and D1 Sahara and approve cancer therapy with blockbuster potential. Looking ahead, we're increasing our 2026 full-year guidance based on the strong business momentum I just highlighted. Slide six is one that I keep coming back to each quarter as it demonstrates our consistent double-digit growth on average since our IPO. We have delivered this impressive record year-in, year-out, regardless of the market backdrop. This speaks to the quality of our investment selection and our unique business model. In the first quarter, we also took major steps to strengthen our global platform and capabilities in partnering the Asia-Pacific region and artificial intelligence. We have brought in exceptional new leaders to our team with Greg Bobbs, Ken Sun, and Lucas Glass. Their expertise will support our long-term growth, ambitions, and help to strengthen our competitive modes as the undisputed leader in the biopharma royalty market. Chris Hyde, who has served as our vice chairman throughout our journey as a public company, has moved into a new role as chairman partnering and investment. In this role, we will continue to expand our global relationship, network, and play a central role in transactions. Chris has been an incredible partner, and I am delighted that he will continue to provide strong leadership and leverage his relationships in this role. With that, I will hand it over to Chris.

Thanks, Pablo. I'm genuinely excited about the new capabilities we're building and the opportunity to forge even stronger, more meaningful relationships across the biopharma ecosystem. For my section today, I want to focus on the major opportunity we see for R&D co-funding with global biopharma. Beginning on slide 9, we see R&D co-funding as a win-win solution for global biopharma and for royalty pharma. This market has enormous potential with over $1 trillion of cumulative projected R&D spend by global biopharma in the next five years. Co-funding arrangements allow biopharma to share risk at scale, to enhance program return on investment, to expand R&D capacity, and to diversify pipelines. From Royalty Pharma's perspective, we see multiple potential benefits. These include unlocking a new market opportunity, gaining access to high-priority clinical programs, leveraging our partners' global development and commercialization expertise and the ability to conduct deep diligence to drive high conviction in our investments. Slide 10 illustrates the strong momentum for this funding modality. The demand by biopharma was impacted by accounting uncertainty last decade, but over the last several years, more clarity around contra-R&D accounting treatment has resulted in a surge for co-funding deals. As an example, in the first quarter alone, we signed deals with J&J and Teva, totaling $1 billion in announced value. On the right-hand side of this slide, you can see that the number of global biopharma companies that have utilized this funding modality has doubled since 2020, which underscores the growing acceptance of this form of funding. Slide 11 shows our capital deployment mix by funding modality and how this has changed over time and where we see it heading in the future. At the start of the 2000s, we were a business focused almost exclusively on acquiring existing royalties. Today, existing royalties remain a stable and important component of our capital deployment, but we have evolved into a more diversified with a growing emphasis on providing capital through innovative funding structures, most notably synthetic royalties with emerging biopharma companies, which has been a key growth driver. While R&D co-funding with large biopharma companies has historically represented a smaller share of our activity, we see a clear opportunity to scale this significantly in response to increasing demand. Importantly, this shift creates meaningful upside potential. In addition, potential business from acquiring existing royalties that have originated in China, where we are actively building a platform, represents another avenue for future growth that could drive the existing royalty market significantly. Slide 12 highlights the number of the R&D co-funding agreements that we have entered into since 2022. Together, these five highlighted deals at the time of announcements had the potential to provide up to $1.8 billion in capital to our partners, including up to $1 billion alone in the Teva and J&J transactions that we announced in the first quarter this year, as I previously As you can see, these deals check the core elements of our investment framework. Specifically, each transaction involves a biopharma with deep clinical expertise and global commercial infrastructure and provides royalty pharma with royalty rights to a potentially transformative therapy covering a diverse range of indications. On slide 13, I want to close by highlighting why we are so confident that royalty pharma is well positioned to scale R&D co-funding. that we have been partnering with Biopharma for approximately 30 years as we pioneered the royalty market. When we think about the depth of our relationships, our brand reputation, our responsiveness, and our flexibility in structuring, royalty pharma is the clear leader. In addition, we take a long-term view with royalties and milestones paid over many years, and we have a cost of capital similar to pharma, so we can offer competitive pricing and win more deals. For these reasons, we expect to be able to capitalize strongly on this tremendous growth opportunity in the coming years. With that, let me hand it over to Marshall.

Thanks, Chris. I want to focus today on several exciting updates to our portfolio. First, our recent royalty deal for Zahira and approved cancer therapy. Second, the incredible phase three data that was recently disclosed by our partner, Revolution Medicines for Diracin, Racib, and pancreatic cancer. And third, a look forward to important upcoming events across our broad development stage portfolio. Beginning on slide 15, we entered into a strategic funding agreement in March with Zymarks, where we provided $250 million upfront in return for 30% of their royalty on JAZ and B1 Zihira, which translates to a low- to mid-single-digit royalty for royalty pharma. For those less familiar, Zahira is a HER2-targeted bispecific antibody which is FDA-approved for a rare tumor, metastatic biliary tract cancer. From a patient and commercial perspective, the real excitement here is that Zahira was recently submitted for approval in gastric cancer, which represents a particularly high unmet need with a five-year survival rate of less than 10%. The pivotal study in this indication demonstrated an impressive five to seven-month, or nearly 40% overall survival advantage over currently available therapies. In our view, this positions Zahira to become the standard of care in this very tough-to-treat indication, supporting blockbuster potential. Consensus models include peak sales of Zahira of greater than $2 billion. Based on this outlook, we expect the transaction to deliver attractive returns with an unlevered IRR in the low double digits. Moving to Diracxon RASIV on slide 16, Revolution Medicines recently reported unprecedented results from the RASOLUTE phase 3 trial and second-line pancreatic cancer. On our last earnings call, I said that DRAXON RASIB has the potential to revolutionize this devastating disease, and these phase 3 results certainly support this. The key headline is that DRAXON RASIB nearly doubled overall survival from just under 7 months with chemotherapy to over 13 months. These are truly remarkable outcomes for patients in a disease that has seen no true innovation for decades. The next step for Revolution Medicines is to submit for approval by global regulatory agencies, including the FDA under the Commissioner's National Priority Voucher that has the potential to speed the time to approval. In terms of the implications for Royalty Pharma, as a reminder, we agreed in 2025 to provide up to $2 billion in long-term funding to Revolution Medicines to help the company aggressively pursue clinical development and commercialization of giraxin or acids. With the positive data, Royalty Pharma has now invested a total of $500 million for a synthetic royalty that begins at 4.55% on sales up to $2 billion and then tiers down from there. Based on consensus peak annual sales of greater than $10 billion, we expect peak potential annual royalties to be in the range of approximately $180 million based on the currently funded amount and up to $340 million if they draw the additional $750 million of synthetic royalty funding. We are excited to see what the future holds for this incredible medicine backed by a phenomenal team. Next, I'll turn to our development stage pipeline and upcoming events. We're exceptionally well positioned for our next wave of value creation with a deep and innovative pipeline. Slide 17 shows that in addition to Daraxin-Racid, our portfolio has delivered a number of successful clinical readouts and regulatory approvals already in 2026. Just yesterday, we were thrilled to see the positive top-line results for Mycorzo in its pivotal trial in non-obstructive hypertrophic cardiomyopathy. Other highlights include positive clinical trial results for Zenes' obexilumab in IgG4-related disease, positive phase 2 results for Biogen's litafilumab in cutaneous lupus, FDA approval of Denali's Avlaya in Hunter syndrome, and the filing of Nuvalent's Neladelkib in ALK-positive non-small cell lung cancer. As you can see, there are plenty more events anticipated this year, and we expect these to lead to several new royalty-generating launches in 2026 and 2027. To highlight positive news on one of our pipeline products, last week, Teva announced the acquisition of MLX for up to $900 million, with regulatory submission planned for MLX's echo pipe amp for Tourette's in the second half of the year. As a reminder, Royalty Pharma is entitled to royalties of 6% on EchoPyPem sales up to $400 million and 10% on sales of $400 million or greater. And we are excited to see EchoPyPem in the hands of Teva, a marketer with deep commercial expertise in neuroscience. Expanding on this theme, slide 18 shows that there is much more to come from our development stage pipeline with multiple major pivotal readouts expected over 2026 and 2027. Over the remainder of 2026, we'll see the results of the outcomes trial for Novartis' polycarsin. We continue to believe that the LP little a class can be the next major class of drugs in cardiovascular disease, and we're perfectly positioned with the two lead pipeline products in polycarsin and amgenzolpaceran. We'll also see phase 3 data for lidofilumab in systemic lupus. In 2027, we expect pivotal data from Sanofi's rexalamab in multiple sclerosis, and from J&J's cell terexan in major depressive disorder, we also expect phase 3 results from durexan rasib in non-small cell lung cancer and lidofilumab in cutaneous lupus. Each of these potentially transformative therapies would add significant royalties to our top line. So to close, we see tremendous potential for our pipeline to unlock substantial value in the near

term. With that, I'd like to hand it over to Terry. Thanks, Marshall. Let's move to slide 20. This slide shows how our efficient business model generates substantial cash flow to be reinvested. Royalty receipts grew by 13% in the first quarter, reflecting the strength of our diversified portfolio. Portfolio receipts, our top line, grew 10% in the quarter, which was strong performance considering a sizable year-over-year decline in milestones and other contractual receipts. As we move down the column, operating and professional costs were 3.9% of portfolio receipts in the first quarter. This is a clear reflection of the benefit of the cash savings we are delivering from the internalization transaction, which we completed last May. Net interest paid was $167 million in the quarter. This reflects the semi-annual timing of our interest payment schedule, with payments primarily in the first and third quarters. Moving further down the column, we have consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to portfolio cash flow, which is adjusted EBITDA, less net interest paid. This amounted to $722 million for the quarter. Our net margin of around 78% again demonstrates the high underlying level of cash conversion and efficiency in the business. Capital deployment in the quarter of $528 million mainly reflected upfront payments for the Zahara and Ablea transactions and a milestone payment related to Trilogy. Lastly, our weighted average share count declined by approximately 4% in the quarter versus the prior year period, reflecting the impact of our share buyback program. Slide 21 provides more detail on the evolution of our top line in the first quarter. Royalty receipts, which we consider our recurring cash inflows, grew by 13%. Key drivers were the strong performances of Trumfaya, Voronego, and Ebrisdi. In the case of Ebrisdi, on top of the underlying growth, we benefited from the additional royalties we acquired in December. I should also note that we were able to absorb a 3% headwind to royalty receipts due to the loss of exclusivity of Promacta and still deliver double-digit growth. Moving to portfolio receipts, these grew by 10%, reflecting the lower one-time milestones and other contractual receipts.

Slide 22 updates our portfolio return metrics for the quarter.

Return on invested capital was 14.1% for the last 12 months, ending in the first quarter of 2026. And return on invested equity, which shows the impact of conservative leverage on our equity returns, was 19.7% for the last 12 months, ending in the first quarter. As I've previously stated, we are in the returns business, and these metrics show that we are continuing to invest at attractive returns that will drive long-term value for our shareholders. Slide 23 shows that we continue to maintain the financial flexibility to execute our strategy and return capital to shareholders. At the end of March 2026, we had cash and equivalents of $586 million. In terms of borrowings, we have investment-grade debt outstanding of $9.2 billion, and the weighted average duration is around 12 years. Importantly, Fitch recently upgraded our credit rating to BBB from BBB-. Our leverage now stands at 2.9 times total debt to adjusted EBITDA, or 2.7 times on a net basis. We also have access to our $1.8 billion revolver, which is undrawn. Taken together, we have access to approximately $4 billion of financial flexibility through cash on our balance sheet, the cash our business generates, and access to the debt market. Turning to our capital allocation framework, we deployed $528 million of capital on attractive royalty deals in the quarter. At the same time, we returned approximately $186 million to our shareholders, including share repurchases of $50 million and our growing dividend. on slide 24 we are raising our full year 2026 financial guidance we now expect portfolio receipts to be in the range of 3.325 billion to 3.45 billion up from 3.275 billion to 3.425 billion previously this assumes growth in royalty receipts of around four percent to eight percent which reflects the strong underlying momentum of our diversified portfolio Our guidance takes into account the loss of exclusivity for Promacta as well as the launch of biosimilar Tysabri in the United States and the potential impact of IRA. It also reflects an expected decrease in milestones and other contractual receipts from $128 million in 2025 to approximately $60 million in 2026. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today, and does not take into account the benefit of any future royalty acquisitions. For modeling purposes, we would remind you that several of our largest royalties, such as the CF franchise, Trilogy, Avrisdi, and others, are upward-tiering royalties, which means they reset to a lower rate in the first quarter. As our royalty receipts lag reported sales by the marketers by one quarter, this has the effect of decreasing royalties sequentially in the second quarter. Given these dynamics, we are providing guidance for the second quarter portfolio oversees, which we expect to be between $740 million and $760 million. Turning to expenses, payments for operating and professional costs are still expected to be in the range of approximately 5.5% to 6.5% of portfolio oversees in 2026, reflecting cost savings from the internalization of the manager. Interest paid is still expected to be around $350 million to $360 million in 2026. Based on our semiannual payment cycle, we anticipate interest paid to be around $175 million in the third quarter, with de minimis amounts payable in Q2 and Q4. This guidance does not take into account interest received on our cash balance, which was $6 million in the first quarter. To close, we have had a great start to the year. We have again raised our guidance and we expect to deliver another full year of strong financial performance in 2026. Now before I hand it over to Pablo, I want to provide a brief update on the timing of the arbitration with Vertex. Based on the arbitration panel's final schedule, we now expect the dispute to be resolved by around the middle of 2027. With that, I would like to hand the call back to Pablo.

Thanks, Terry. To conclude, I am delighted with our strong start to 2026. We have again delivered strong growth and returns. We've continued to diversify our portfolio of attractive biopharma royalties, and we have strengthened our leadership team and capabilities. I want to close on slide 26 with a reminder of why we believe we're well positioned to drive strong value creation. First, we're the clear leader in the rapidly expanding biopharma royalty market with strong fundamental tailwinds, reflecting the huge demand for funding life sciences innovation. Second, we have a best-in-class platform for investing in the most transformative and innovative products marketed by premier biopharma companies, and we expect to remain the undefeated I am confident that the expansion of our global platform and capabilities that I talked about today will further strengthen our position at the forefront of our industry. Third, we expect to deliver strong, low volatility, top and bottom line growth through 2030 and beyond. Lastly, we have an incredible track record of delivering consistent and attractive returns, including an IRR and return on invested capital in the mid-teens and return on invested equity in the 20%-plus range. With that, we will be happy to take your questions.

Thank you.

To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. The first question comes from Christopher Schott with J.P. Morgan. Your line is open.

Hi, this is Hardik Parikin for Chris Schott. Thank you for taking our questions. I think you've set like a portfolio receipts target for 2030 of approaching $5 billion. I was just wondering, now with these recent updates you've had in your development pipeline, can you talk about how much of that 2030 target is de-risked and how much do you think it comes from investors that are already commercial?

Barry, that's a question for you, if you can please take it.

Yeah, so, Hartig, we feel like we're really on track to, you know, meet or exceed that target. The portfolio is doing really well. We've had a lot of positive developments. We've executed some great deals. So, you know, we haven't gotten into specifics on that at this point, but I feel like we're very much on track, feel very confident in, you know, in meeting or exceeding that long-term guidance.

Operator, next question, please.

Thank you. And the next question is going to come from Mike Nadelkovich with TD Cohen. Your line is open.

Hi. Thanks so much for the questions. I have three, if you'll allow me. My first is on the arbitration update you just provided. Can you provide any insight into the reason for the push-out? Then my second question is on my Corzo. how much of an advantage do you think approval in a non-obstructive HCM setting could be relative to Kanzios? And did you assume success of the ACACIA trial in your internal valuation? And then my third question is on Frexalamab. The multiple sclerosis category is evolving somewhat rapidly, especially with the prospect of oral BTK inhibitors gaining approval. Has anything changed relative to your initial assumptions around Frexalamab's competitive

positioning, assuming it succeeds in the clinic. Thank you. Sure. Thanks for the question, Mike. And I guess, Terry, you can take the question on arbitration, and then Marshall will take the

question on Mike Corzo and Frick's element. Sure. So, on the timing of the arbitration, it's just simply based on the availability of the arbitration panel. And hi, Mike. Good morning. So,

on your other two questions. So, first, thanks for the question on Mike Corzo. There were, I think multiple parts to it, but just to give you our thoughts, we were really excited to see the data yesterday. And I think it's clear evidence that by the strength of the team in a well-designed trial and a really good medicine in AFI-Campton. So multiple parts to your question. I think the first one was, did we assume that in our base thesis when we made the investment. The answer to that is no. The base investment was really premised on the obstructive or the currently approved indication and its potential there. And I think the early evidence that we saw from the early launch with cytokinetics yesterday, you know, is evidence of, you know, is evidence of that, that, you know, that the team is doing a great job launching into that market. And we're really excited to see where that goes. The adding non-obstructive to the label can only be helpful. It gives a broader label. It provides another patient population for doctors to use the medicine in. And overall, we'll certainly be helpful in the launch and certainly upside to our original estimates when we made that partnership with cytokinetics. Your third question was on Frexalamab and on the multiple sclerosis market in general. No real change, I think, if you go back in our view, despite some of the changes that are going on with oral medicines there. What we said at the time of that investment was what really excited us and what we saw as an unmet need and what continues to be an unmet need in that market is novel mechanisms that aren't solely focused on B-cells. And so I think that opportunity in the market very clearly still exists, and we're really excited about Frexalamab and seeing those data next year.

Thanks so much.

Thank you. And the next question comes from Jeff Meacham with Citi. Your line's open.

Great. Morning, guys. Thanks for the question. Just had a couple. The first one, maybe for Terry, You guys had a higher level of capital deployment this quarter or last quarter looking forward. Are you at the upper end of the range leverage-wise, or is there a capacity constraint or just status quo? And then the second one, I guess maybe for Marshall, in deals like RevMed or Servier where the royalties could really ramp pretty quickly based on a strong launch, You know, are there considerations on some of these types of products where you could add additional royalty investments depending on the pace of the launch? I think that, you know, I don't know if that's been under consideration before, but that, you know, seems like you'd want to add capital to the drugs that are launching pretty quickly.

Terry and Marshall, do you want to go ahead?

Yeah. So, Jeff, so on your leverage question, we're actually, you know, have quite low leverage right now, 2.9 times total debt to adjusted EBITDA. And so we have a lot of financial flexibility. If deal flow increases, we feel like we absolutely will be, you know, prepared to invest if the right opportunities come along. I think we laid out in our slides that we have $4 billion of financial capacity, and that grows every quarter, as you can imagine. So we feel like the balance sheet has never been stronger. We're in a really great position there.

And, Jeff, good morning on your other two questions. So on launching products and opportunities to deploy additional capital. So, you know, nothing specific with respect to the ramp, but I would say that, you know, the Voronigo launch, as you pointed out, has gone incredibly well, and we're so excited to have that as part of the portfolio. As a reminder, there is a sharing component to that one. So, you know, we do share a portion of the royalty above a billion dollars with Back to Agios. And then second, RevMed, we are, as we talked about in the prepared remarks, we are really excited about this data, agree with you that the unmet need is so great that this could be a really rapid launch. As a reminder, the RevMed deal, we've done $500 million of the $1.25 billion of synthetic royalty. There are additional opportunities that will come at FDA approval, which we expect to see this year. And then with a certain sales milestone, and then there's a label expansion later on. So there are other opportunities. However, the future tranches are all at the option of Revolution Medicine. And it was one of the really, I think, attractive and exciting parts of our partnership with them that it gave our partner lots of flexibility in terms of access to capital going forward. So there certainly is that potential, and we will see what happens in the months and years to come.

Thank you. Thank you. And our next question is going to come from Jason Gerberry with Bank of America. Your line's open.

Hey, good morning, guys. Thanks for taking my questions. First is the policy question. And I'm just curious how you guys are thinking about forecasting underwriting value for OUS launches around MFN risk, just given that we haven't really seen how pharma companies launch behaviors and pricing strategies or mirroring in those select OUS markets. So in the absence of that concrete information, I'm just kind of curious how you guys navigate that risk. And then on the R&D co-funding deals flagged in the slides, the two recent deals, can you help us understand, do the IRR expectations meaningfully differ at all for the co-funding structure versus, say, a traditional royalty acquisition, and if those two deals have a royalty payment capping mechanism embedded in them?

Sure, Jason. Marshall, I think both questions are for you, the one on Exios launches and also on co-funding.

Sure, Jason. so thanks for those two questions. So on your first policy question on MFN, it's certainly something that we, I think like the rest of the industry is thinking through, agree with you. There isn't a lot of precedent. So we've taken the approach that we always have, which is to think through a lot of different scenarios and make sure that given the wide range of possibilities in the future that we're still comfortable with the investment. So I think certainly something that we are taking into account and making sure that we structure and protect us and all of our shareholders appropriately when we think about all the ways this could play out in the future. It is still very new, so I think we're in the same boat with everyone else trying to think this through. So your second question on R&D co-funding, so the first part of your question was on IRR expectations. I think as Chris outlined, the answer to your question is no. You know, we have said that our return expectations for products that are not approved are kind of greater than the low double digits. And so, you know, we certainly see returns in the IRR co-funding as very consistent with what we've communicated publicly in terms of return expectations. And so, you know, that's one of the reasons that we're really excited about that opportunity. In terms of capping, you asked about some of the structural features. You know, we haven't disclosed all of the structural features for these, so it's a little hard to comment generally. But I think our philosophy when we put these together is, you know, we're investing in a phase three program and we certainly want to have every opportunity to to explore and benefit from the full potential from the full potential of these products, both in the near term as the indications that are certainly being pursued right now play out. But then in the long term, as there's potential for label expansion, geographic expansion, and, you know, in general market expansion of what we invest in. So, you know, our philosophy and our discipline in terms of how we structure these and how we make sure that we're getting appropriate risk-adjusted returns for us and for our shareholders are very much consistent with how we've been operating.

Great. Thanks, guys.

Thank you. And the next question will come from Ash Verma with UBS. Your line's open.

Hi, good morning. This is the asking question on behalf of Ash. Congrats on the quarter. I have two questions. The first one, can you update us on your view on thoughts about, like, potential royalty stream from Mike Corzo? So I guess with the positive result now on non-obstructive, do you believe there's a halo effect on their ongoing launch in the obstructive site? And then my second question is, what are your thoughts on the consolidation among the smaller royalty players like Ligand and then Zoma royalty recently? Does this scale up in any way, increase the competition for you in the smaller royalty transaction space? Thanks.

Sure. So maybe I'll take briefly your question on competition and then I'll turn it back to Marshall, you know, to talk about the, my Corso launch. And in terms of competition, we did, I mean, we follow it all the time and, you know, it's not news to us. And in fact, that consolidation, you know, might even reduce competition when you have, you know, Ligand acquire Zoma. There'll be less competition, one entity, you know, consolidating two companies. But the reality is that if you just think of those two players in the market, you know, we have very significant advantages versus companies that are in the royalty space. um obviously we've talked of many of disadvantages in the past scale is one but also another uh issue that you know companies that are you know interested in acquiring royalties have is that they're taxpayers um and as you know we have a very efficient you know tax structure and then other things like access to capital in our case it's it's you know significantly lower cost of capital and access to a lot more capital than the smaller players. So it's no real big change in competition. And at the end, as we've said in the past many times, we think competition is a good thing. We welcome it because it just expands the market. It makes a lot of the potential partners that we do business with have many alternatives. And it just gives them comfort to know that it's a, you know, very dynamic market. So I'll turn it back to Marshall now for the question on my Corso.

Yep. So on my Corso, you know, certainly, yes, we believe that the positive data yesterday, you know, provide an advantage to Affecampton in the marketplace. You know, having a broader label, you know, having experience in a broader selection of patients, you know, can really only help the medicine as cytokinetics launches it. So we're excited about the way cytokinetics is going to execute in the current indication of obstructive disease, and then certainly the broader label and the non-obstructive data is only a tailwind to that.

Thank you. And the next question will come from Nick Jennings with Goldman Sachs. Your line is open.

Thanks, I. It's Nick on for Assad and the Goldman team. We have two questions. First, Chris, congratulations on the new focus with Global Biopharma R&D co-funding. Our question is on the implications of this as a growing part of the portfolio. Should we expect the complexion of the overall portfolio to shift over time as more of these partnerships are done with Global Biopharma companies? And then second, how is the China market progressing? Any update on what types of assets you're looking at there? And when do you think we'll see the first deal? Thank you.

Sure. Chris, why don't you take both questions?

Okay, great. Thanks for the question. In terms of the first one around the R&D co-funding, we have been investing in development stage products since 2012. And for us, it's really just expanding the opportunity when we're now seeing more opportunity to co-fund R&D at the large pharma stage. If you look at our capital at work slide, and I think it's in the appendix, you can see that roughly 85% of our capital at work is in approved products today, and roughly 10% is in development stage, and roughly 3% of those in development stage has already had positive pivotal results. So that's exciting for us. I mean, it's a it's a huge opportunity. These companies need a lot of money to fund their R&D. So we certainly are excited about the opportunity. And and, you know, that certainly could lead to a greater percentage of capital work. But we're going to be very disciplined in how we approach that in terms of China. I just remind you, you know, B1, obviously, we did the transaction with them last year from Delta, which is roughly $900 million. Obviously, that caught the attention of a lot of companies in China that look at B1 as a great company originally coming out of China. We hired Ken's son. He starts actually next week. He was the former head of Asia at Morgan Stanley. Super excited to have him on board. He will hit the ground running. We've obviously been to China a lot, the existing teams here at Royalty Pharma. So we are monitoring all of the out-licensing that's ongoing from China to Western multinationals. We have tracking those very aggressively, and I think the B1 transaction evidences to those companies in China what a great opportunity it is to potentially monetize those royalties they've created over the last five years or so. So we're super excited about China. Ken coming on board will really catalyze that effort.

Thank you. And our next question is going to come from Terrence Flynn with Morgan Stanley. Your line is open.

Hi, thanks for taking the questions. I guess two for me. Maybe first for Marshall, you could just provide your perspective on the J&J Duet data and what this ultimately might mean for the Trimphia tail, given the co-formulation approach there. And then on the use of AI, I think many investors view the company as a beneficiary here. Are you able to provide any kind of case studies of how you're implementing AI across your enterprise and in terms of your processes and what that means in terms of, you know, number of deals or efficiencies that you can comment on? Thanks so much.

Sure, I'll take the first question or the second question on AI and then I'll let Marshall take the other one. But data is extremely, extremely important for our business and for this whole ecosystem. You know, everything is based on data, as you know. And Railforma has been making significant investments in data for many years, decades. And we had in our investor day a slide that actually provided a perspective on what we really mean by, you know, investing in data. We have about 200 million people, claims data for 200 million Americans, and we have relationships with great data providers that are feeding us, you know, this data continuously. We have electronic medical records for 44 million Americans and about nine years of longitudinal data. And the way we use this is for our own internal purposes to, you know, make better investments, understand better what's going on with the products and how we forecast them. But one of the very exciting things for Royalty Farm is to actually use data with our partners and share insights that we gain as we do our analysis and as we follow the ecosystem. And we think that is a differentiating aspect that is important to us because you know we don't see ourselves like others as purely capital providers but we see ourselves as partners with the companies that we're partnering with where we can provide we add value by sharing data and insights with them and they appreciate that and in some cases that has led to you know import to better terms on transactions and we do have case studies Actually, I'll refer you to our Investor Day deck, a couple of them, where we have through claims data and other sources of information have been able to identify asymmetries of information where, you know, we see drugs that we believe could have much stronger launches or peak sales than what others see based on data. One of those is, for example, were an ego where we realized when we made that investment that in that form of cancer, there were about 1,500 patients being diagnosed each year. But, you know, on the sidelines, about 15,000 patients that were not, you know, recurrent to treatment because the options were not attractive, drugs that were, you know, toxic, safety issues, and not that effective. And obviously, when Wear and Eagle came to market, it gave patients the opportunity to be treated with a drug that was very safe and very efficacious. And it brought into the market this warehousing of patients that existed. And as a result of that, we were able to forecast a much stronger launch for Buranigo than I think anybody was seeing and then higher peak sales. And that's a case study. But I'll finish just by saying that we're very fortunate recently to have hired Lucas Glass as head of AI for Royalty Pharma. And he's going to be responsible for developing and implementing AI capabilities across our business, including, you know, automating all of our, you know, diligence processes and, you know, strengthening how we evaluate and invest in royalties and also support our partners. Lucas comes from IQVIA, where he was the head of AI for this huge company that serves our ecosystem. As you know, it's the biggest CRO with Quintiles, and also IMS Health, that part of the business was one of the biggest data providers in life sciences. So we're very excited about where we can take the business now with Lucas and the team that we're building, in addition to the team that we already had. And I'll turn it now to Marshall for the other question.

Hey, Terrence, thanks for the question on the J&J deal. So maybe just a general comment, a general comment. I think this is a great example of exactly what Chris was talking about, right? That we get the opportunity to participate at scale in a first in class biologic combination blockbuster market that's backed by, you know, the world-class, one of the premier marketers in, in that space. And, you know, those are exactly the kind of opportunities that, you know, that, that we're so excited about the, the biopharma creating, the biopharma partnerships creating for us. Specifically on the data, obviously that was something during diligence that, that we spent a good amount of time with. And I think our view is, you know, we're excited about the biologic combination opportunity broadly. 4804 is, you know, the first of those, and I think you'd see the potential in what was a very refractory, you know, patient population who had been, you know, heavily, heavily pretreated, which, you know, when we look to, you know, to continue Pablo's comments, when we look into our claims data, you know, is a really rapidly growing part of this market is patients who have been treated through multiple lines, and I think we see that growing, and certainly by the time 4804 makes it to market, you know, will, is a really substantial opportunity that we're excited about. And, you know, we think there will be other, certainly other biologic combinations to come that will look at other patient populations and other combinations. And so excited to see how that continues to expand the market. And we're excited to be partners with J&J there. The last part of your question on the tail, you know, I think for our base trim fire royalty, just a reminder there that our royalty there is based on a separate set of IP that we acquired from Morphosis. And so we've communicated that that IP will expire in the early 2030s, 2031, 2032 timeframe. So, you know, given the likely timelines for 4804 probably won't have a significant benefit to the Trumpfire royalty, but I think we've created a whole new royalty on this product and will continue to be able to participate in it through 4804. So, thanks for the question.

Thank you. And the next question will come from Umar Rafat with Evercore. Your line's open.

Hi, guys. Thanks for taking my question. I feel like there's been a good amount of discussion today on a lot of the effort Chris has been leading on R&D funding side. And I guess a question I have, maybe first for you, Pablo, how are you thinking about the split going forward for your capital deployment between R&D co-funding versus the traditional royalty investments? And to what extent is that driven by your heavier emphasis on doing larger checks? And then maybe a quick follow-up to that also, So my understanding, or at least the feedback I've heard from some of the big pharmas on their late-stage pipeline programs is that when they go into these R&D co-funding conversations, they're really talking high single-digit IRRs type of thing. Could you maybe speak to your experience working on the J&J 4804? I don't want to cop the Teva vitiligo in there because it's a much earlier stage. So I think the 4804 is a good example of the type of IRR you guys got, and we can expand on that. Thank you.

Umar, so thanks for the question on allocation of capital. And in reality, the way we approach things is with, you know, a significant amount of flexibility because, you know, our business, you know, has the capacity to invest a huge amount of money. And I think, again, during our investor day, we actually had a slide, interesting slide that showed that from now until 2030, we have the capability of investing something like $30 billion, of which $12 billion or so are going to be, is what was guided to, you know, the $2 to $2.5 billion per year. And then when you add to that, you know, the share repurchases and dividends, you know, it takes us to a higher level, but there is an additional sort of $10 billion of capacity that the business has that we might, you know, if the opportunities are there, just increase the investments every year and it gives us, you know, as I said, a capability of deploying more like 20 billion over the next five years in royalty acquisitions. But I think at the end of the day, as we've said in the past, the critical thing for us is the product. And, you know, that's really what drives our excitement for investments if we find really attractive differentiated products that we think are going to do really well in the long term and whether we end up making the investment because it's a royalty that, you know, sort of already exists. there's a license and a royalty holder and we just acquire that royalty like in the case of of in delta with um b1 or whether we create the royalty um by you know funding a clinical trial uh for us it doesn't matter really uh where it comes from now i would point out just to finish that um when we put together our guidance and our business plan there were several things that were really uh not uh included in a major way in our in our sort of you know 10 to 12 billion dollar capital deployment guidance and those things are uh china um it was not in our minds and we we didn't see that as as an important driver of capital deployment and growth and that is definitely now a real market and one that we're very excited about and then the second one is deals with big pharma again we were super conservative and didn't really including our in our forecast our business plan our guidance uh you know much of of any capital employment with big pharma but that is definitely becoming a big opportunity for us and one that we're very very excited and i think uh as more deals like this get done and you talked about the jnj one um and also Teba and there's others. We did a deal with Merck several years ago. It actually is really starting to open that market. And we have noticed very significant excitement from many big pharmas that are not really looking at funding their trials with structures that we've developed, R&D funding structures. And also what's helped there is the fact that we've been, you know, for years of working with, um, you know, the accounting firms to make sure that we have the right, uh, accounting treatment for those transactions, that they can be accounted for as contra R and D. But we have been proactive. Um, there was a bad, you know, decision made years ago, um, with one company, um, going to, to the SEC and, and, you know, with an accounting firm that actually set back, you know, the, the field, but, you know, because it's important to was we decided to hire an expert on accounting. And with him, we have completely turned the tide. And now it is something that is, when you look at the accounting, it's accounted for correctly. So I'll stop there. But the reality is that we're super excited about the opportunities, the universal opportunities, which is purely expanding. Thank you.

Thank you. And there are no further questions in the queue. I will now turn the call back over to Pablo for closing remarks.

Thank you, Operator, and thanks to everyone on the call. And I'll just remind you that if there's any further questions or discussions you want to have, you should reach out to George Grofik and Dana, our IR team, and then we can get involved if it's appropriate. Thank you, everyone.

This concludes today's conference call. Thank you for participating, and you may now disconnect. act.