8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934

Date of Report (Date of earliest event reported):

July 14, 2020

Royalty Pharma plc

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (212) 883-0200

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operationsand Financial Condition

On July 14, 2020, Royalty Pharma plc (the “Company”) released a communication on its website containing information regarding certain factors for consideration when updating financial models ahead of the Company’s Q2 2020 results. A copy of the communication is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

The information included in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be deemed incorporated by reference into any other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.

Item 9.01. Financial Statementsand Exhibits

(d) Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 14, 2020

Exhibit  99.1

PRE-QUARTERLY RESULTSCOMMUNICATION

NEW YORK, NY(US), July 14, 2020 - Royalty Pharma (NASDAQ: RPRX) intends to announce its financial results for the second quarter of 2020 on August 12, 2020. An invitation for the results webcast will follow shortly. To assist in the financial modelling of its Q2 2020 results, the Company has compiled the following items.

Non-GAAP FinancialMeasures

Royalty Pharma focuses on certain non-GAAP financial measures to manage its business. These measures, which are presented as supplemental measures to GAAP financial performance, include Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow.

Royalty Pharma believes these non-GAAP financial measures provide meaningful information on the Company’s ability to generate cash from operations and on its liquidity. In addition, they can help to identify underlying trends in the business and permit investors to more fully understand how management assesses the performance of the Company, including planning and forecasting for future periods (see Appendix 2 ‘Use of Non-GAAP Financial Measures’).

2020 Guidance

Royalty Pharma intends to provide full-year 2020 guidance at the time of its second quarter 2020 results. Management currently anticipates that this guidance will focus on Adjusted Cash Receipts. The full-year guidance will exclude the contribution from any transactions announced subsequent to the date of our earnings release.

Q2 2019 Non-GAAPFinancial Data

Table 1 sets out historical non-GAAP financial data for the second quarter of 2019, which will form the basis for comparison of the Q2 2020 non-GAAP financial results. The figures are presented on an as reported basis. To aid in comparability, the figures are also presented on an unaudited pro forma basis, which adjusts certain cash flow line items as if Royalty Pharma’s Reorganization Transactions (as described in the Company’s final prospectus filed with the SEC on June 17, 2020 (‘Prospectus’)) and its Initial Public Offering (IPO) had taken place on January 1, 2019. The most significant difference between the pro forma and reported figures is the new non-controlling interest that resulted from the Reorganization Transactions. A new contractual non-controlling interest arose in the Reorganization transaction that results in a higher distribution to non-controlling interests on a pro forma basis as compared to prior historical periods. Less material differences also arise in the Royalty Receipts line for ‘Other Growth Products’ as well as Payments for operating and professional costs, interest paid, net, and in the payments associated with our former interest rate swap contracts.

Additional historical non-GAAP financial measures and the respective GAAP to non-GAAP reconciliations for the quarterly and full-year 2019 periods and for the first quarter of 2020 can be found in Appendix 1 to this release. Refer to our Prospectus for additional information on our non-GAAP measures.

Amounts shown in the tables below may not add due to rounding.

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Table 1 –Q2 2019 and Q1 2020 Non-GAAP Financial Results

Net cash providedby operating activities (GAAP)

Royalty Pharma’s Net cash provided by operating activities (GAAP) is a subtotal directly from our Statement of cash flows. In table 6 below, we have provided reconciliations of our non-GAAP financial measures to their most comparable GAAP financial measures, in each case Net cash provided by operating activities.

Adjusted CashReceipts **** Royalty Pharma’sAdjusted Cash Receipts comprise the cash royalties received from the marketers of products to which the Company holds royaltyrights, less distributions to non-controlling interests: | · | Royalty<br> receipts lag product performance by one calendar quarter and can be estimated by applying<br> the publicly disclosed royalty rate to the preceding quarter’s net revenues on<br> a product-by-product basis. For example, the royalty received by Royalty Pharma on Imbruvica<br> in Q2 2020 will reflect worldwide net sales of the product in Q1 2020 ($1,565 million,<br> based on reported results from AbbVie and Johnson & Johnson) and the tiered mid-single<br> digit royalty rate on worldwide net sales. Tables 2 and 3 set out the reported performance<br> of key products in Q1 2020 and the royalty rates, where disclosed. || --- | --- || · | In<br> instances where royalty rates are tiered, royalty rates typically reset at the beginning<br> of the year and lower royalty rates may apply in the earlier quarters of the year until<br> pre-specified sales thresholds have been reached. As a result, royalty rates for certain<br> products or franchises (such as HIV, Promacta and Cystic Fibrosis) have the potential<br> to increase during the course of the calendar year, with the second quarter royalty receipt<br> often including royalties on sales at the lowest royalty tier. || --- | --- || · | Non-controlling<br> interests represent the share of royalties from pre-IPO investments which will be paid<br> out to legacy investors. In the 2019 financial year, distributions to non-controlling<br> interests were $154.1 million. On a pro forma basis the distributions to non-controlling<br> interests would have been $525.8 million. In Q1 2020, distributions to non-controlling<br> interests amounted to $161.4 million as reported. || --- | --- |Table 2 –Net Sales Performance of Key Products, Q1 2020 (unaudited)| ($ in millions) | Marketing<br> Company | Q1<br> 2020 Revenues | %<br> yoy || --- | --- | --- | --- || Growth<br> Products | | | || Cystic fibrosis franchise | Vertex | 1,515 | 77 || Tysabri | Biogen | 522 | 13 || Imbruvica | AbbVie, Johnson<br> & Johnson | 1,565^(1)^ | 24 || HIV franchise | Gilead, others | 4,134^(2)^ | 14 || Januvia, other DPP-IVs | Merck &<br> Co., others | 1,277^(3)^ | (6) || Xtandi | Pfizer, Astellas | 937^(4)^ | 28 || Promacta | Novartis | 403 | 31 || Nurtec ODT | Biohaven | 1 | n/a || Tazverik | Epizyme | 1 | n/a || Notes:<br><br> <br><br><br> <br>(1) AbbVie reported US revenues of $966m (+17%); Johnson & Johnson reported International revenues of $599m (+38%)<br><br> <br><br><br> <br>(2) HIV revenues shown for total Gilead HIV franchise; Royalty Pharma is entitled to royalties on products that contain emtricitabine<br><br> <br><br><br> <br>(3) DPP-IV revenues represented in this Table by Merck’s Januvia/Janumet revenues<br><br> <br><br><br> <br>(4) Xtandi revenues translated from Japanese Yen at assumed average US$ exchange rate of 109; YOY growth as reported by Astellas in Yen<br><br> <br><br><br> <br>Sourced from company earnings releases for the quarter ended March 31 || --- | Table 3 –Public Disclosures of Royalty Rates by Product| Product | Estimated<br> Royalty Expiration | Royalty<br> Rate || --- | --- | --- || Cystic<br> fibrosis franchise^(1)^ | 2037 | For combination<br> therapies, sales are allocated equally to each of the active pharmaceutical ingredients; tiered royalties ranging from single<br> digit to sub-teen percentages on annual worldwide net sales of ivacaftor, lumacaftor and tezacaftor, and mid-single digit<br> percentages on annual worldwide net sales of elexacaftor; 50% of royalties on annual worldwide net sales above $5.8 billion<br> are shared with the Cystic Fibrosis Foundation. || Tysabri | Perpetual | Contingent<br> payments of 18% on annual worldwide net sales up to $2.0 billion and 25% on annual worldwide net sales above $2.0 billion || Imbruvica | 2027-2029 | Tiered royalties<br> in the mid-single digits on annual worldwide net sales || HIV franchise^(2)^ | 2021 | Royalties<br> in the single digit percentages on annual worldwide net sales varying by product depending on contribution of emtricitabine<br> to the total || Januvia and Janumet | 2022 | Royalties<br> in the low single digit percentages on annual worldwide net sales || Xtandi | 2027-2028 | Royalties<br> slight less than 4% on annual worldwide net sales || Promacta | 2025-2027 | Tiered royalty<br> ranging from 4.7% to 9.4% on annual worldwide net sales || Tazverik | 2034-2036 | Royalties<br> in the mid-teen percentages on annual worldwide net sales, stepping down on annual worldwide net sales above certain sales<br> thresholds || Crysvita^(3)^ | 2033-2036 | 10% royalty<br> on EU, UK and Switzerland annual net sales || Trodelvy | Perpetual | 4.15% royalty<br> on annual worldwide net sales up to $2 billion, declining stepwise based on sales tiers to 1.75% on annual worldwide net sales<br> above $6 billion || Nurtec ODT and Vazegepant | 2034-2036 | 2.1% royalty<br> on annual worldwide net sales up to $1.5 billion; 1.5% on annual worldwide net sales above $1.5 billion || Omecamtiv mecarbil | 2032-2033 | 4.5% royalty<br> on annual worldwide net sales || Notes:<br><br> <br><br><br> <br>The royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements; Patent expiry dates shown are based on management’s estimates (which may include patent term extensions) or estimates of the dates on which royalties otherwise expire and are based on each product’s key geographies; duration may differ in other geographies; Royalty expiration dates can change due to patent, regulatory, commercial or other developments<br><br> <br><br><br> <br>(1) For Cystic Fibrosis franchise, year shown represents Trikafta;<br><br> <br><br><br> <br>(2) For HIV franchise, date represents patent expiration date in the U.S. as patents outside the U.S. have expired<br><br> <br><br><br> <br>(3) For Crysvita, royalties expire when we receive royalties equal to 1.9 times our purchase price if that happens prior to December 31, 2030, and otherwise when we receive aggregate royalties of 2.5 times our purchase price || --- |Adjusted EBITDARoyalty Pharma’sAdjusted EBITDA comprises Adjusted Cash Receipts less payments for operating and professional costs.In the 2019 financialyear, payments for operating and professional costs were $88.5 million as reported and $145.2 million (equivalent to 8.2% of AdjustedCash Receipts) on a pro forma basis. In Q1 2020 as reported, payments for operating and professional costs were $25.8 million,versus $17.7m in Q1 2019. In Q2 2020 and Q3 2020, payments for operating and professional costs will reflect certain costs associatedwith the IPO.Adjusted CashFlowRoyalty Pharma’sAdjusted Cash Flow comprises Adjusted EBITDA less ongoing R&D funding payments, interest paid, net and miscellaneous otheritems relating to interest rate swap contracts, investments in non-consolidated affiliates and contributions from non-controllinginterests: | · | Development-stage R&D funding payments were $83.0 million in the 2019 financial year as reported. In Q1 2020, these expenses<br>declined to $7.6 million, versus $23.0 million in Q1 2019, as we made our final payment in Q4 2019 for our collaboration with Pfizer<br>on the Phase 3 studies of Ibrance in adjuvant breast cancer. || --- | --- || · | Interest paid, net reflects the weighted average cost of borrowings and the Company’s capital structure (see ‘Capital<br>Allocation’). In the 2019 financial year, interest paid, net was $214.5 million on a pro forma basis. In Q1 2020, interest<br>paid, net was $48.9 million, versus $54.3 million in Q1 2019. || --- | --- || · | Miscellaneous other items (as described above) totalled $72.3 million on an as reported basis and $43.1 million on a proforma basis in the 2019 financial year. In Q1 2020, these items in aggregate amounted to $2.1 million, reflecting the termination<br>of outstanding interest rate swap contracts in connection with the Reorganization Transactions, versus $9.2 million in Q1 2019. || --- | --- |Capital AllocationAs a result ofthe IPO, Royalty Pharma received cash proceeds, net of underwriting fees and capitalized IPO costs, of approximately $1.9 billionimmediately prior to the closure of the second quarter.The fully dilutednumber of shares outstanding as of June 30, 2020 was 607.1 million. Appendix 1:Historical Non-GAAP FinancialsTable 4 –2019 Quarterly Non-GAAP Pro-Forma Financial Results| ($ in millions) | Pro Forma<br> for the three months of 2019 ended (unaudited) | | | || --- | --- | --- | --- | --- || | March<br> 31 | June<br> 30 | September<br> 30 | December<br> 31 || Net<br> cash provided by Operating activities (GAAP) | 390.8 | 368.1 | 436.2 | 478.2 || Growth<br> Products | | | | || Cystic<br> fibrosis franchise | 106.9 | 85.7 | 115.7 | 116.3 || Tysabri | 82.6 | 82.0 | 83.5 | 84.7 || Imbruvica | 61.1 | 66.2 | 67.3 | 75.9 || HIV<br> franchise | 76.4 | 52.2 | 63.1 | 71.3 || Januvia,<br> Janumet, Other DPP-IVs | 32.7 | 41.1 | 33.9 | 35.6 || Xtandi | 27.6 | 27.0 | 31.8 | 33.7 || Promacta | — | 19.3 | 31.1 | 35.8 || Other<br> Growth Products | 67.6 | 47.3 | 59.3 | 68.5 || Total<br> Royalty Receipts – Growth Products | $<br> 455.0 | $<br> 421.0 | $<br> 485.7 | $<br> 521.8 || Mature<br> Products | | | | || Tecfidera | 150.0 | - | - | - || Lyrica | 29.6 | 35.1 | 32.1 | 31.4 || Letairis | 38.5 | 22.5 | 29.4 | 22.3 || Remicade | 6.1 | - | - | - || Other Mature<br> Products | 10.2 | 7.8 | 2.4 | 0.8 || Total Royalty<br> Receipts – Mature Products | $ 234.3 | $ 65.4 | $ 63.8 | $ 54.5 || Distributions<br> to non-controlling interests | (153.4) | (113.5) | (128.1) | (130.8) || Adjusted<br> Cash Receipts (non-GAAP) | $ 535.9 | $ 372.8 | $ 421.5 | $ 445.5 || Payments for<br> operating and professional costs | (38.0) | (39.3) | (35.8) | (32.1) || Adjusted<br> EBITDA (non-GAAP) | $ 497.9 | $ 333.5 | $ 385.7 | $ 413.4 || Development-stage<br> funding payments – ongoing | (23.0) | (21.5) | (22.7) | (15.9) || Interest paid,<br> net | (52.1) | (57.4) | (54.9) | (50.2) || Swap collateral<br> (posted) or received, net | - | - | - | - || Swap termination<br> payments | (35.4) | - | - | - || Investment<br> in nonconsolidated affiliates | (8.8) | (9.8) | (4.0) | (4.4) || Contributions<br> from non-controlling interest- R&D | 5.6 | 5.5 | 4.7 | 3.6 || Adjusted<br> Cash Flow (non-GAAP) | $ 384.2 | $ 250.3 | $ 308.8 | $ 346.6 | Table 5 –2019 Non-GAAP Financial Results| ($ in millions) | For<br> the year ended December 31, 2019 (unaudited) | || --- | --- | --- || | As<br> reported | Pro<br> forma || Net<br> cash provided by Operating activities (GAAP) | 1,667.2 | 1,673.3 || Growth<br> Products | | || Cystic<br> fibrosis franchise | 424.7 | 424.7 || Tysabri | 332.8 | 332.8 || Imbruvica | 270.6 | 270.6 || HIV<br> franchise | 262.9 | 262.9 || Januvia,<br> Janumet, Other DPP-IVs | 143.3 | 143.3 || Xtandi | 120.1 | 120.1 || Promacta | 86.3 | 86.3 || Other<br> Growth Products | 210.2 | 242.8 || Total<br> Royalty Receipts – Growth Products | 1,850.9 | 1,883.5 || Mature<br> Products | | || Tecfidera | 150.0 | 150.0 || Lyrica | 128.2 | 128.2 || Letairis | 112.7 | 112.7 || Remicade | 6.1 | 6.1 || Other<br> Mature Products | 21.0 | 21.0 || Total Royalty<br> Receipts – Mature Products | 418.0 | 418.0 || Distributions<br> to non-controlling interests | (154.1) | (525.8) || Adjusted<br> Cash Receipts (non-GAAP) | 2,114.8 | 1,775.7 || Payments for<br> operating and professional costs | (88.5) | (145.2) || Adjusted<br> EBITDA (non-GAAP) | 2,026.3 | 1,630.5 || Development-stage<br> funding payments – ongoing | (83.0) | (83.0) || Interest<br> paid, net | (234.8) | (214.5) || Swap<br> collateral (posted) or received, net | (45.3) | - || Swap<br> termination payments | - | (35.4) || Investment<br> in non-consolidated affiliates | (27.0) | (27.0) || Contributions<br> from non-controlling interest- R&D | - | 19.3 || Adjusted<br> Cash Flow (non-GAAP) | 1,636.1 | 1,289.8 | Table 6: Reconciliationsof Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow - Pro forma 2019 Quarters and Full Year| ($<br> in millions) | Pro<br>Forma<br><br> <br>(unaudited) | Pro<br>Forma<br><br> <br>(unaudited) | Pro<br>Forma<br><br> <br>(unaudited) | Pro<br>Forma<br><br> <br>(unaudited) | Pro<br> Forma (unaudited) || --- | --- | --- | --- | --- | --- || | Q1<br> 2019 | Q2<br> 2019 | Q3<br> 2019 | Q4<br> 2019 | FY<br> 2019 || Net cash provided by: | | | | | || Operating activities | 390.8 | 368.1 | 436.2 | 478.2 | 1,673.3 || Net cash provided by operating activities<br> (GAAP) | 390.8 | 368.1 | 436.2 | 478.2 | 1,673.3 || Adjustments: | - | - | - | - | || Tecfidera milestone<br> payments (1) | 150.0 | - | - | - | 150.0 || Interest paid,<br> net | 52.1 | 57.4 | 54.9 | 50.2 | 214.5 || Development-stage<br> funding payments - ongoing | 23.0 | 21.5 | 22.7 | 15.9 | 83.0 || Payments<br> for operating and professional costs | 38.0 | 39.3 | 35.8 | 32.1 | 145.2 || Swap termination<br> payments | 35.4 | - | - | - | 35.4 || Distributions<br> to non-controlling interests | (153.4) | (113.5) | (128.1) | (130.8) | (525.8) || Swap collateral<br> posted or (received), net | - | - | - | - | - || Adjusted Cash Receipts | $535.9 | $372.8 | $421.5 | $445.5 | $1,775.7 || Net cash provided by operating activities<br> (GAAP) | 390.8 | 368.1 | 436.2 | 478.2 | 1,673.3 || Adjustments: | - | - | - | - | - || Tecfidera<br> milestone payments (1) | 150.0 | - | - | - | 150.0 || Interest paid,<br> net | 52.1 | 57.4 | 54.9 | 50.2 | 214.5 || Development-stage<br> funding payments - ongoing | 23.0 | 21.5 | 22.7 | 15.9 | 83.0 || Swap termination<br> payments | 35.4 | - | - | - | 35.4 || Distributions<br> to non-controlling interests | (153.4) | (113.5) | (128.1) | (130.8) | (525.8) || Swap collateral<br> posted or (received), net | - | - | - | - | - || Adjusted EBITDA | $497.9 | $333.5 | $385.7 | $413.4 | $1,630.5 || Net cash provided by operating activities<br> (GAAP) | 390.8 | 368.1 | 436.2 | 478.2 | 1,673.3 || Tecfidera milestone<br> payments (1) | 150.0 | - | - | - | 150.0 || Contributions<br> from non-controlling interest | 5.6 | 5.5 | 4.7 | 3.6 | 19.3 || Distributions<br> to non-controlling interests | (153.4) | (113.5) | (128.1) | (130.8) | (525.8) || Investment in<br> non-consolidated affiliates | (8.8) | (9.8) | (4.0) | (4.4) | (27.0) || Adjusted Cash Flow | $384.2 | $250.3 | $308.8 | $346.6 | $1,289.8 |(1) Recorded asProceeds from Available for sale debt securities Table 6 (Cont.):Reconciliations of Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow - As reported Q2 2019, Full Year 2019, and Q12020| ($<br> in millions) | As<br>reported<br><br> <br>(unaudited) | As<br> reported | As<br>reported<br><br> <br>(unaudited) || --- | --- | --- | --- || | Q2<br> 2019 | FY<br> 2019 | Q1<br> 2020 || Net cash provided by (used in): | | | || Operating activities | 336.9 | 1,667.2 | 471.1 || Investing activities | (158.4) | (2,116.1) | (672.9) || Financing activities | (310.2) | (1,191.6) | 542.5 || Net cash provided by operating activities<br> (GAAP) | 336.9 | 1,667.2 | 471.1 || Adjustments: | | | || Tecfidera milestone<br> payments (1) | - | 150.0 | - || Interest paid,<br> net | 61.5 | 234.8 | 48.9 || Development-stage<br> funding payments - ongoing | 21.5 | 83.0 | 7.6 || Payments<br> for operating and professional costs | 29.4 | 88.5 | 25.8 || Swap termination<br> payments | - | - | 35.4 || Distributions<br> to non-controlling interests | (36.4) | (154.1) | (161.4) || Swap collateral<br> posted or (received), net | 26.0 | 45.3 | (45.3) || Adjusted Cash Receipts | $438.8 | $2,114.8 | $382.3 || Net cash provided by operating activities<br> (GAAP) | 336.9 | 1,667.2 | 471.1 || Adjustments: | | | || Tecfidera milestone<br> payments (1) | - | 150.0 | - || Interest paid,<br> net | 61.5 | 234.8 | 48.9 || Development-stage<br> funding payments - ongoing | 21.5 | 83.0 | 7.6 || Swap termination<br> payments | - | - | 35.4 || Distributions<br> to non-controlling interests | (36.4) | (154.1) | (161.4) || Swap collateral<br> posted or (received), net | 26.0 | 45.3 | (45.3) || Adjusted EBITDA | $409.4 | $2,026.3 | $356.4 || Net cash provided by operating activities<br> (GAAP) | 336.9 | 1,667.2 | 471.1 || Tecfidera milestone<br> payments (1) | | 150.0 | - || Contributions<br> from non-controlling interest | - | - | 1.3 || Distributions<br> to non-controlling interests | (36.4) | (154.1) | (161.4) || Investment in<br> non-consolidated affiliates | (9.8) | (27.0) | (13.1) || Adjusted Cash Flow | $290.6 | $1,636.1 | $297.8 |(1) Recorded asProceeds from Available for sale debt securities Appendix 2:Use of Non-GAAP MeasuresAdjusted CashReceipts, Adjusted EBITDA and Adjusted Cash Flow are non-GAAP measures presented as supplemental measures to our GAAP financialperformance. These non-GAAP financial measures exclude the impact of certain items and therefore have not been calculated in accordancewith GAAP. In each case, because our operating performance is a function of our liquidity, the non-GAAP measures used by managementare presented and defined as supplemental liquidity measures. We caution readers that amounts presented in accordance with ourdefinitions of Adjusted Cash Receipts, Adjusted EBITDA, and Adjusted Cash Flow may not be the same as similar measures used byother companies. Not all companies and analysts calculate the non-GAAP measures we use in the same manner. We compensate for theselimitations by using non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliationsof the non-GAAP financial measures to their most comparable GAAP financial measures, in each case being Net cash provided by operatingactivities.Adjusted CashReceipts is a measure calculated with inputs directly from the Statement of Cash Flows and includes (1) royalty receipts:(i) Cash collections from royalty assets (financial assets and intangible assets), (ii) Other royalty cash collections,(iii)Distributions from non-consolidated affiliates, plus (2)Proceeds from available for sale debt securities(Tecfidera milestone payments), and less (3)Distributions to non-controlling interest.Adjusted EBITDAis important to our lenders and is defined under the credit agreement as Adjusted Cash Receipts less payments for operating andprofessional costs. Operating and professional costs are comprised of Payments for operating costs and professional servicesand Payments for rebates from the Statement of Cash Flows.Adjusted CashFlow is defined as Adjusted EBITDA less (1) Development-stage funding payments – ongoing, (2) Interestpaid, net, (3) Swap collateral (posted) or received, net, (4) Swap termination payments, and (5) Investment in non-consolidatedaffiliates, and plus (1) Contributions from non-controlling interest- R&D, all directly reconcilable to the Statementof Cash Flows.We believe thatAdjusted Cash Receipts and Adjusted Cash Flow provide meaningful information about our operating performance because the businessis heavily reliant on its ability to generate consistent cash flows and these measures reflect the core cash collections and cashcharges comprising our operating results. Management strongly believes that our significant operating cash flow is one of theattributes that attracts potential investors to our business.In addition, webelieve that Adjusted Cash Receipts and Adjusted Cash Flow help identify underlying trends in the business and permit investorsto more fully understand how management assesses the performance of the Company, including planning and forecasting for futureperiods. Adjusted Cash Receipts and Adjusted Cash Flow are used by management as key liquidity measures in the evaluation of theCompany’s ability to generate cash from operations. Both measures are an indication of the strength of the Company and theperformance of the business. Management uses Adjusted Cash Receipts and Adjusted Cash Flow when considering available cash, includingfor decision-making purposes related to funding of acquisitions, voluntary debt repayments, dividends and other discretionaryinvestments. Further, these non-GAAP financial measures help management, the audit committee, and investors evaluate the Company’sability to generate liquidity from operating activities.Management believesthat Adjusted EBITDA is an important non-GAAP measure in analyzing our liquidity and is a key component of certain material covenantscontained within the Company’s Credit Agreement. Noncompliance with the interest coverage ratio and leverage ratio covenantsunder the credit agreement could result in our lenders requiring the Company to immediately repay all amounts borrowed. If wecannot satisfy these financial covenants, we would be prohibited under our credit agreement from engaging in certain activities,such as incurring additional indebtedness, paying dividends, making certain payments, and acquiring and disposing of assets. Consequently,Adjusted EBITDA is critical to the assessment of our liquidity.Management usesAdjusted Cash Flow to evaluate its ability to generate cash and performance of the business and to evaluate the Company’sperformance as compared to its peer group. Management also uses Adjusted Cash Flow to compareits performance against non-GAAP adjusted net income measures used by many companies in the biopharmaceutical industry, even thougheach company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s.We believe that non-GAAP financial measures, including Adjusted Cash Flow, are frequently used by securities analysts, investors,and other interested parties to evaluate companies in our industry.The non-GAAP financialmeasures used in this release have limitations as analytical tools, and you should not consider them in isolation or as a substitutefor the analysis of our results as reported under GAAP. Royalty PharmaInvestor Relations and Communications+1 (212) 883-0200ir@royaltypharma.comAbout RoyaltyPharma plcFounded in 1996,Royalty Pharma is a leading funder of innovation across the biopharmaceutical industry, collaborating with innovators from academicinstitutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceuticalcompanies. Royalty Pharma has assembled a portfolio of royalties which entitles it to payments based directly on the top-linesales of many of the industry’s leading therapies. Royalty Pharma funds innovation in the biopharmaceutical industry bothdirectly and indirectly - directly when it partners with companies to co-fund late-stage clinical trials and new product launchesin exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators. Royalty Pharma’scurrent portfolio includes royalties on more than 45 commercial products, including AbbVie and J&J’s Imbruvica, Astellasand Pfizer’s Xtandi, Biogen’s Tysabri, Gilead’s HIV franchise, Merck’s Januvia, Novartis’ Promacta,and Vertex’s Kalydeco, Symdeko and Trikafta, and four development-stage product candidates. For more information, visitwww.royaltypharma.com.Forward-LookingStatementsThe informationset forth herein does not purport to be complete or to contain all of the information you may desire. Statements contained hereinare made as of the date of this document unless stated otherwise, and neither the delivery of this document at any time, nor anysale of securities, shall under any circumstances create an implication that the information contained herein is correct as ofany time after such date or that information will be updated or revised to reflect information that subsequently becomes availableor changes occurring after the date hereof.This documentcontains statements that constitute “forward-looking statements” as that term is defined in the United States PrivateSecurities Litigation Reform Act of 1995, including statements that express the Company’s opinions, expectations, beliefs,plans, objectives, assumptions or projections regarding future events or future results, in contrast with statements that reflecthistorical facts. Examples include discussion of our strategies, financing plans, growth opportunities and market growth. In somecases, you can identify such forward-looking statements by terminology such as “anticipate,” “intend,”“believe,” “estimate,” “plan,” “seek,” “project,” “expect,”“may,” “will,” “would,” “could” or “should,” the negative of theseterms or similar expressions. Forward-looking statements are based on management’s current beliefs and assumptions and oninformation currently available to the Company. However, these forward-looking statements are not a guarantee of our performance,and you should not place undue reliance on such statements. Forward-looking statements are subject to many risks, uncertaintiesand other variable circumstances, and other factors. Such risks and uncertainties may cause the statements to be inaccurate andreaders are cautioned not to place undue reliance on such statements. Many of these risks are outside of the Company’s controland could cause its actual results to differ materially from those it thought would occur. The forward-looking statements includedin this document are made only as of the date hereof. The Company does not undertake, and specifically declines, any obligationto update any such statements or to publicly announce the results of any revisions to any such statements to reflect future eventsor developments, except as required by law.Certain informationcontained in this document relates to or is based on studies, publications, surveys and other data obtained from third-party sourcesand the Company's own internal estimates and research. While the Company believes these third-party sources to be reliable asof the date of this document, it has not independently verified, and makes no representation as to the adequacy, fairness, accuracyor completeness of, any information obtained fromthird-party sources. In addition, all of the market data included in this document involves a number of assumptions and limitations,and there can be no guarantee as to the accuracy or reliability of such assumptions. Finally, while the Company believes its owninternal research is reliable, such research has not been verified by any independent source.For further information,please reference our reports and documents filed with the U.S. Securities and Exchange Commission (SEC). You may get these documentsby visiting EDGAR on the SEC website at www.sec.gov.