Earnings Call Transcript - RPRX Q3 2020

George Grofik, Senior Vice President, Head of Investor Relations and Communications

Thank you, Shannon. And good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma’s third quarter results. You can find the slides to this call on the Investors page of our website at royaltypharma.com. Moving to slide three, I would 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. I refer you to our S-1, Prospectus on file with the SEC for a description of these risk factors. And with that, please advance to slide 4. Our speakers on the call today are; Pablo Legorreta, Founder and Chief Executive Officer; Jim Reddoch, EVP, Head of Research & Investments; and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights of the quarter after which Jim will provide an update on our Royalty 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; and Marshall Urist, SVP, Research and Investments will also join the Q&A session. And with that, I’d like to turn the call over to Pablo.

Pablo Legorreta, Founder and Chief Executive Officer

Thank you, George, and welcome to everyone on the call. And we would also like to express our deep appreciation today to the first responders, doctors, nurses who are keeping us healthy and safe, as well as those who have served and continue to serve in the country’s services and their families. Slide six. I’m delighted to share that Royalty Pharma continued its strong business momentum in the third quarter. On our second quarter earnings call in August, I described 2020 as a landmark year for the Company. Not only does this remain the case for reasons we will discuss during the course of this presentation, but we believe we have further strengthened our prospects. In terms of our third quarter financial results, we continued to deliver our strong performance with double-digit growth in adjusted cash receipts and adjusted cash flow, our top and bottom lines. We also substantially improved our balance sheet through our initial $6 billion bond offering. This not only lowered our weighted average cost of debt, but doubled our average debt maturity as we achieved some of the best borrowing terms in the entire biopharma industry. Meanwhile, we continue to expand our portfolio through new royalty acquisitions, taking our total for the year-to-date announced transactions to $2.3 billion. I’m particularly excited by the recent expansion of our agreement with the Cystic Fibrosis Foundation, which is a great example of how we can deliver win-win solutions based on our longstanding relationships and our unique capabilities. Lastly, we executed a successful secondary offering of approximately 3% of our share capital ahead of the December expiration of the IPO lockup. This offering has improved the overall liquidity of our stock. As I mentioned upfront, we’re continuing to deliver strong financial performance. We maintained double-digit momentum with 12% growth in third quarter adjusted cash receipts and 27% growth in adjusted cash flow. The pace of our growth really speaks to our unique position within the biopharma ecosystem, coupled with the extraordinary innovation currently taking place in the industry. With that, I will hand it over to Jim to update you on our royalty portfolio.

Jim Reddoch, EVP, Head of Research & Investments

Thank you, Pablo, and good morning and good afternoon, everyone. Slide 9 summarizes the regulatory and commercial progress across our portfolio since the second quarter. Overall, the progress across the portfolio was very positive. A few highlights include the FDA approval and launch of Roche’s Evrysdi for SMA just weeks after we acquired that royalty from PTC Therapeutics, the expansion of our Biohaven partnership, the European approval for Vertex’s Kaftrio, which is an important growth driver within our cystic fibrosis franchise, and the positive clinical data for Immunomedics’ Trodelvy in both urothelial cancer and triple-negative metastatic breast cancer. However, I think you’re all well aware that the PENELOPE-B trial of Pfizer’s Ibrance was disappointing and that the GALACTIC top-line results of omecamtiv need to be elucidated further. Finally, the $21 billion acquisition of Immunomedics by Gilead provides a strong validation of our hybrid funding strategy, and I want to expand on this a little bit in my next slide. So, this is slide 10. As a reminder, at the start of 2018, Royalty Pharma provided $250 million in capital to Immunomedics to fund the development and launch of Trodelvy in metastatic triple negatives breast cancer and other indications. This includes $175 million to acquire a royalty on Trodelvy and $75 million to acquire equity in Immunomedics. As the clinical data for Trodelvy has been released and following the FDA approval of Trodelvy in April of this year, there’s been a significant increase in analyst consensus expectations with 2029 consensus sales rising from $1 billion at the time of our transaction to over $4 billion today. In September of this year, Gilead announced the acquisition of Immunomedics. And when we step back and think about this, it’s our belief that the outcome of our hybrid funding strategy has been beneficial to all parties, as well as to the future of cancer treatment. On a purely financial basis, the proceeds from our equity investment already guarantee a 1.5x cash return on our $250 million investment, equivalent to a high teens IRR, without even factoring in the future royalties. And of course, beyond this, we will continue to receive royalties on a perpetual basis. Looking at this more broadly, we were able to provide capital at scale to Immunomedics at a critical time in their development, a time when equity would have been highly dilutive. And this capital allowed them to further develop Trodelvy to maintain key global rights and to avoid a significantly dilutive equity raise. So, we believe the additional global marketing capabilities of Gilead and its ability to further fund R&D on the molecule can only enhance Trodelvy’s potential and bring the benefit of this important therapy to more patients. So, while you often hear us talk about a win-win deal, this is a win for multiple stakeholders, most importantly, cancer patients that need Trodelvy. On slide 11, I want to highlight our most recent transaction wherein we acquired the residual royalty interest of the Cystic Fibrosis Foundation in Vertex’s CF franchise. So, in exchange for a $575 million upfront payment and a potential $75 million milestone, Royalty Pharma will receive all royalties on annual franchise sales above the threshold of $5.8 billion, whereas previously, these were shared 50-50 between our Company and the Cystic Fibrosis Foundation. As you may have seen from Vertex’s Q3 results, this franchise is growing very rapidly following the successful launch of the triple therapy, Trikafta. And Vertex has guided to franchise sales of $6.0 billion to $6.2 billion in 2020, representing more than a 50% increase at the midpoint over the $4 billion reported in 2019. With Trikafta, Vertex has expanded the proportion of cystic fibrosis patients that may receive benefit from potentiator and corrector treatment to around 90%, and further sales growth is expected from launches in new geographies and younger age groups. As we do with all of our transactions, we carried out comprehensive due diligence, examining all facets of our royalty agreement. And we confirmed that the royalty is perpetual and not tied to patent expirations of the individual components of franchise products. In terms of the financials, we are confident that the transaction will enhance our long-term adjusted cash-flow compound annual growth rate based on a range of forecast scenarios. We’ve been clear with investors that for approved products, we are targeting unlevered returns in the high single digits to low double digits. And for this investment, we expect a return at least on the high end of that range and likely better. So, with that, I’ll hand it over to Terry.

Terry Coyne, EVP, Chief Financial Officer

Thanks, Jim. Let’s move to slide 13. We had another good quarter with total royalty receipts up 7% compared to last year’s third quarter on a pro forma basis. As you can see, royalties from our largest franchise, cystic fibrosis, grew 36% this quarter, driven by the strong launch of Trikafta in the U.S. and more recently, Kaftrio in the EU. Imbruvica, Xtandi, and Promacta all demonstrated strong double-digit growth in the quarter. Slide 14 shows how our royalty receipts translated to strong adjusted cash flow in the quarter. As you’re aware, adjusted cash receipt is a key non-GAAP metric for us, which we arrive at after deducting non-controlling interest. This amounted to $472 million in the quarter, growth of 12% compared with last year’s third quarter on a pro forma basis. When we move left to right, operating and professional costs of $59 million equated to 12.6% of adjusted cash receipt. The step-up over the second quarter of this year reflected certain IPO expenses as well as expenses related to our bond offering. R&D funding was substantially lower than the year-ago quarter, given the completion of the Ibrance adjuvant breast cancer funding in 2019. Net interest of $15 million was sharply lower as it reflected the impact of the debt refinancing on a shift to semiannual interest payments arising from our bond offering for which the next interest payment is not due until March of 2021. As a result, interest expense paid in the fourth quarter will be close to zero. Had we refinanced our debt and the unfunded revolving credit facility was in place as of July 1 and interests were paid quarterly, interest expense would have been $33 million in the third quarter. We also recorded no expenses related to the investment in non-consolidated affiliates, as we included an accelerated payment related to Avillion that otherwise would have been paid in Q3. This payment occurred in Q2. We anticipate that a funding payment for Avillion will occur in Q4. This resulted in adjusted cash flow, what we view as our bottom line earnings of $394 million or $0.65 per share. This is an adjusted cash flow margin of 83.4%, highlighting the strong financial leverage in our business model. Slide 15 gives you some greater context as to why we were delighted with our successful $6 billion unsecured bond refinancing, which extended our cost of capital advantage. Pablo alluded to the terms being among the best achieved across the biopharma space. Here, you can see that the weighted average coupon on our bond of 2.125% is the second lowest among our peers and is more than 100 basis points below the median of 3.19%. On the right, you can see that we’ve doubled our weighted average maturity to over 12 years through the offering, which is again ahead of the industry median. We also have access to a $1.5 billion revolving credit facility, which provides additional flexibility for capital department. To assist with year-over-year comparisons, on a normalized basis, if the new debt had been in place for the full-year, interest expense paid would have been $131 million for 2020, which also includes a small fee for the revolving credit facility. Looking at our balance sheet on slide 16. We ended September with cash and marketable securities of $2.1 billion. The increase over the first nine months was driven mainly by the adjusted cash flow I just described, together with the proceeds from debt refinancings of $728 million and IPO proceeds of $1.9 billion. Cash outflows over the period amounted to $1.9 billion. The largest cash outflow was the $1.4 billion deployed on royalty acquisitions. We finished the quarter with $6 billion of investment-grade debt. And we now have a $1.5 billion revolving credit facility, which enhances our liquidity. Taken together with leverage of 2.3 times EBITDA on a net basis and 3.5 times EBITDA on a gross basis, we remain well-positioned to execute on our business plan. On my final slide, we’re raising our full-year 2020 guidance. We now expect adjusted cash receipts to be in the range of $1.78 billion to $1.8 billion, an increase from $1.7 billion to $1.76 billion previously. There will be no contribution in 2020 from our recently announced deal with the Cystic Fibrosis Foundation. The first potential contribution from that acquisition would be in the first quarter of 2021 as royalties are paid on a lag. We continue to expect our operating costs to be approximately 10% of adjusted cash receipts. Importantly, 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.

Pablo Legorreta, Founder and Chief Executive Officer

Thanks, Terry. I want to close by reiterating our confidence in our outlook for long-term sustainable growth. The third quarter encapsulated a number of themes that support this confidence. We delivered strong financial results, which allow us to raise our full-year guidance. We improved our capital structure through a highly successful bond offering and our secondary share offering. Recent news flow has been very positive on our royalty portfolio, reinforcing our long-term growth outlook. And we have not only remained active in deal-making, announcing total transactions of $2.3 billion so far this year, but our transaction pipeline remains active and very exciting. The chart on the right shows that we continue to capture a leading share of available royalty acquisitions in a market that is growing, fueled by the innovation in our industry and the growing appreciation of the value of royalties to provide non-dilutive financing to bring practice-changing medicines to patients. In short, Royalty Pharma continues to be at the heart of funding the golden age of life sciences innovation. With that, I would like to open the call to Q&A. Back to you, George.

George Grofik, Senior Vice President, Head of Investor Relations and Communications

Thank you, Pablo. I will now open the call to your questions. Operator, please take the first question.

Operator, Operator

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

Geoff Meacham, Analyst

Thanks for the question, guys, and congrats on the quarter. I just had a couple. The first one is the rationale for the expanded CF agreement. The question is, what’s changed from when you signed the original deal with the CF Foundation, and how do you see CF revenues scaling now to warrant the $650 million acquisition cost? And the second question, I guess, at a higher level, concentration risk is pervasive throughout the biopharma industry, and you guys have some risk as well. But, you do have a long duration with respect to CF. So, I guess, the question is, is diversifying outside of CF a major strategic priority, or do you guys feel like you have plenty of time to address that? Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Sure. Thank you for the question. I’ll answer the first part of the question related to the rationale for the CF transaction and then turn it over to Terry to answer the question on diversification. So, the CF space for us has been one where we’ve actually made investments now for close to 20 years. I recall having acquired a royalty in one of the first antibiotics that was reformulated for cystic fibrosis. I think it was 1997 or 1998, TOBI. And we established a relationship with the foundation at the time with a man that ran it, Bob Beall, who really built it into a formidable patient advocacy foundation that has also been very important in funding research for that patient population. In 2014, while Bob Beall was still leading the foundation, we did that landmark deal, a $3.3 billion acquisition when we acquired the royalties on the Vertex CF franchise from the foundation. At the time, the foundation, having sold $3.3 billion of the asset, retained a smaller portion, which is really 50% of the sales of the royalties produced by sales above $5.8 billion. And when we did that deal in 2014, only Kalydeco was approved; the other doubles and triples were not approved. The foundation retained that sharing portion essentially to capture upside if it materialized. What’s happened since then, obviously, is the doubles have been launched, the triples. The franchise has grown very nicely. It turns out now that that residual has value. And the foundation is in a very unusual position being an entity institution that is an advocate for cystic fibrosis patients. They have always felt very uncomfortable in actually earning payments, having economics on products that they funded but which are being sold to the cystic fibrosis community. At times in the past, for example, I recall Bob telling me stories of how when they were trying to get governments to reimburse the product and add them to the formularies, the state senators in some cases had said to the foundation, of course, you’re going to advocate for that, you own a royalty. He was very uncomfortable in that position. So, now that this residual has value, it was just a very natural thing for the foundation to seek to monetize the residual so they wouldn’t have any economic interest on drugs being sold to CF patients where they could be accused of having an economic interest. From our perspective, having had a 20-plus year relationship with the foundation, and knowing them intimately, having a constant dialogue with them, we were in an extremely strong position to acquire this asset. We’re very happy about that investment and are extremely excited about the economic return expectations and growth it’s going to provide to Royal Pharma. Terry, I’ll pass it on to you now to talk about diversification.

Terry Coyne, EVP, Chief Financial Officer

Sure. Thanks, Pablo. We’re very happy with our current diversification. I think, this quarter, a little over 25% of our royalty receipts were from CF. I think, what you’ll see over time, even as that franchise continues to grow, is that we will just sort of naturally diversify as we continue to make investments, and as other products within the portfolio continue to ramp. So, I think, we feel very good about it, and we’ll continue to sort of naturally diversify over time.

Operator, Operator

Thank you. Our next question comes from Steve Scala with Cowen. Your line is open.

Steve Scala, Analyst

Thank you, and congratulations as well on a terrific quarter. Two questions. Given Royalty Pharma’s business model, it generally is not considered to be a beat-and-raise situation, but nonetheless, this quarter, it was. So, what aspect of the business surprised management? And are there aspects of your business that can be surprising in future quarters, even when you’re looking at a one quarter delay in reporting? The second question is more a big picture, but neuroscience appears to be the next frontier, things like Huntington’s, Alzheimer’s, DMD, autism and so forth. Royalty Pharma has made some investments in neuroscience, but in lower risk areas, such as migraine and SMA. Is this because of Royalty Pharma’s concern over risk of technical failure, or are there just not that many opportunities in neuroscience? Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Terry, do you want to take the first question on surprises during the quarter? And maybe Jim and Marshall can address the question on neuroscience?

Terry Coyne, EVP, Chief Financial Officer

Sure. Yes, Steve, our royalties are reported with a delay, which can lead to some uncertainty regarding the actual percentage of royalty-bearing sales on a quarterly basis. Despite this, the primary reason for our better-than-expected performance this quarter is the overall strength in our portfolio. When we provided our guidance, we typically relied on consensus estimates and the information shared by the companies. This quarter, sales have been particularly strong. CF, Tysabri, Xtandi, and HIV all performed exceptionally well. The outstanding performance of these products was the key factor that prompted us to raise our guidance.

Jim Reddoch, EVP, Head of Research & Investments

Hey, Steve. Yes, I’ll start on your second question about neuroscience. To a degree, our pipeline is based on where the industry goes in terms of the diseases and therapeutic areas and indications that it focuses on. It’s been a very cancer-focused world and a very autoimmune-focused world for the past decade or so. Our recent acquisitions do reflect that a bit. But, I would completely agree with you that neuroscience is very important. Those represent some huge opportunities, both in terms of unmet disease need and also commercially. So, we’re very interested in it, and probably shouldn’t go into too much detail on what’s in the pipeline. But I would just agree with you that that is an important area that we need to make sure we cover. We do remain careful and responsible in ensuring that there’s sufficient evidence for the products and the royalties that we invest in. But, I do think that with time, some of the diseases that you’re talking about will lend themselves to fit nicely in our portfolio and help to continue to diversify the portfolio.

Marshall Urist, SVP, Research and Investments

No, I think that covers it, Steve. I would just add that this is an area we’ve spent a lot of time in and have looked at multiple things as part of the pipeline, and we will continue to do so. But, as Jim said, our bar and our approach and what we’re looking for in new opportunities is not going to change going forward. I think we have and will continue to apply those same standards as we look at neuroscience as well.

Pablo Legorreta, Founder and Chief Executive Officer

Steve, maybe I’ll add to Terry’s response on performance. One interesting thing this year has been the resilience of our portfolio. Terry talked about the products that comprise our portfolio and their qualities. In the ‘08-’09 financial crisis, the business continued to grow very nicely despite those conditions. The current economic situation is different from that crisis. It’s been pleasant to see that even in these times, our portfolio has continued to perform well because of the attributes of the products that we have. It has, as you pointed out, performed better than expected going into the year. I think it speaks to our business model with strong financial leverage and great diversification and products that are the premier product in many therapeutic areas that tend to deliver growth and profitability.

Operator, Operator

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

David Risinger, Analyst

Great. Thanks very much, and let me add my congrats as well. So, I have one question for Pablo and one for Terry. Pablo, could you discuss your plans for future investments, including the mix of investments that you anticipate in on-market drugs versus development-stage drugs? And then, Terry, with respect to the recent cystic fibrosis transaction, how should we think about the blended royalty rates going forward relative to the roughly 10% that Royalty Pharma has been recording in recent years? And, what is the potential timing of the $75 million milestone payment, and what is that tied to? Thanks very much.

Pablo Legorreta, Founder and Chief Executive Officer

Thank you, David. So, in response to your question about the mix of investments, as we’ve highlighted before during a roadshow and in other earnings calls, our business has an opportunistic element where we’re talking to many potential partners in academia, universities, hospital foundations, biotech, and pharma. It’s difficult for us to predict which deals will close. However, I would tell you that we’re excited about our current pipeline which is larger, diverse, and more extensive than ever. This is because of the need for capital among biotech and pharma to develop great drugs in their pipelines. More and more, innovation is occurring at universities and academic institutions, which can lead to royalties. In terms of the mix, our portfolio of investments in unapproved product is relatively low; it’s less than $0.5 billion of investments in products not yet approved. In the past, it had been much higher, with $3 billion, $4 billion after 2014 when we did the Cystic Fibrosis Foundation transaction. Many of those have been approved and have become attractive investments for us like Imbruvica, Tecfidera, cystic fibrosis, and others. The hybrid investment strategy will play a growing role as we continue to fund biotech companies through hybrid transactions. If you look at past investments from 2012 to 2020, we’ve done a little more than $14 billion of deals split roughly 55% in approved products and 45% in unapproved. A mix like that in the future wouldn’t be unusual, but it should be viewed over a couple of years because it could be the case that in one year, maybe we do 80% in unapproved or vice versa. We have a large value portfolio that generates predictable cash flow of close to $2 billion from approved products. This enables us to take risks on unapproved products with potential upside for Royalty Pharma and our investors. It’s an area we’re excited about for future prospects.

Terry Coyne, EVP, Chief Financial Officer

Thank you, David. We have not provided specific royalty rates for the CF transaction, but there are two buckets. You have ivacaftor, lumacaftor, and tezacaftor, which have single-digit to sub-teens royalty rates. The other bucket is elexacaftor, which has a mid-single-digit royalty. Bucket one includes Kalydeco, Orkambi, and Symdeko, which generally has a higher royalty rate because they don’t include elexacaftor. As the mix shifts towards the triple therapy, which includes one-third at a mid-single-digit royalty, the overall royalty is expected to trend lower over time. We haven’t gone into specifics regarding the timing and trigger for the $75 million milestone payment, but we are very happy to pay those milestone payments. However, the details of the milestone remain confidential.

Operator, Operator

Our next question comes from Chris Schott with JP Morgan. Your line is open.

Chris Schott, Analyst

Great. Thanks so much. I just had two questions. Coming back to deal structure and some of the hybrid deals, how important is it for you to take an equity stake in the partner as you consider returns on deals versus just a pure royalty? Would you prefer a pure royalty structure, or do you actively seek out an equity stake when evaluating development-stage deals? My second question is on development-stage deals; for the deals you’ve pursued that haven’t happened, what’s the primary pushback or rationale you get from that partner for not working with royalty? Is it just that it was a more favorable return-wise equity raise, is it the complexity of the deal, or is it that the competitor stepped in? Trying to get a sense of what the hurdle rate is for deals you’ve missed on.

Pablo Legorreta, Founder and Chief Executive Officer

Sure. I’ll answer the first question, and I’ll ask Jim to address the second. Regarding equity and hybrid deals, we are incredibly open-minded about structuring deals flexibly. What we really aim to do is to be the best partner for companies and holders of royalties, addressing their needs and concerns, essentially solving problems for them. We have no issue financing purely with a royalty if that’s what the holder of our royalty wants. We’re also open to acquiring equity if it adds value. We generally acquire equity when the investment we’re making in the product will significantly drive the long-term performance of the equity. Our approach is creative; you probably saw in the recent Biohaven deal where we structured preferred equity, which we see as capital for launching a product. We’re open-minded and approach each situation with a blank slate, taking into account that every investment is unique.

Jim Reddoch, EVP, Head of Research & Investments

Hey, Chris. So, in terms of deals that don’t happen, I would say, to some degree, earlier I mentioned the situation where issues don’t check out during diligence. Another scenario is when a company gets acquired, and we’ve seen that a few times. If a company’s stock runs up, previously selling a royalty to us may have been beneficial, but equity issuance may become a better cost of capital. If it’s a product we have confidence in, we can usually work with them to show them something attractive. The beauty of our world is that if you don’t like the price of a stock, you have to move on; in our world, we can structure our product, and we can have a different forecast and still have constructive conversations that result in win-win outcomes.

Operator, Operator

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

Greg Gilbert, Analyst

Thanks. Good morning, everyone. Pablo, to what degree can your existing team and set of capabilities assess all the opportunities that exist out there? And curious what capabilities you’d like to add or bolster as you look out over the next five-plus years? It would seem that a lot of the expertise you need to diligence things are sort of rentable or borrowable from external experts. But curious on your vision as to what you would like to bring in-house, if anything additional. And then, also for Pablo and maybe Chris, do you see other companies that have purchased or otherwise accumulated various royalty streams as possible acquisition targets, given your super efficient structure and potential cost of capital advantages? Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Thank you for the questions. Regarding our team, Royalty Pharma ten years ago had a smaller team that has grown gradually over time in a thoughtful manner. Recently, we’ve added great additions to our team. The team has grown by about 20% over the next 12 to 24 months to maintain our capabilities. There’s significant work needed before we make an investment; our research team follows the therapeutic area and the products we’re interested in constantly, often over a decade. As opportunities arise, our team can quickly take an informed approach because they’ve been following the asset. We also leverage internal expertise with many external consultants who have expertise in specific areas such as regulatory, reimbursement, and IP fields. We aim to maintain an efficient and flexible approach because this industry requires specialized knowledge. Regarding your second question, we may see companies that own portfolios of royalties as potential partners or targets. It’s more about companies that have a platform technology; they may present interesting opportunities for us.

Chris Hite, Vice Chairman

The only thing I would add, Greg, is that we believe we could be more efficient by acquiring royalties out of companies rather than outright acquisitions. Often it makes more sense for those companies to reposition themselves and invest their capital into R&D or other areas. We could partner to help them accomplish M&A and acquire royalties, allowing us to avoid the costs and inefficiencies of outright acquisitions.

Operator, Operator

Our next question comes from Navin Jacob with UBS. Your line is open.

Navin Jacob, Analyst

Hi. Thanks for taking the question. Your guidance bumped on the cash royalty receipt. It was about $50 million, of which probably $20 million by my math is perhaps due to the cystic fibrosis deal, but rest of the $30 million, if my math is correct, which products are driving that better performance? And that leads to the next question, which is, as you look at consensus estimates for the next five to ten years, for the 100% economics, what products do you think are underappreciated by the Street? Is it Xtandi, cystic fibrosis, Trodelvy or something else, please? And then, just a longer-term question. You stated that the biopharma royalty market has grown by 50% from 2015 to 2020. Where do you see that growth over the next five years, and do you expect to maintain your share of 60% of the market? Thank you so much.

Terry Coyne, EVP, Chief Financial Officer

Yes. To clarify, the increase in our guidance was not due to CF or the recent CF acquisition, which will not affect 2020 at all. The real drivers of our performance are the strength across our portfolio, especially the CF franchise, Tysabri, HIV, and to some extent, diabetes products like Januvia and Janumet. Those areas showed particularly strong results. As for products we believe may be underestimated by the Street, we prefer not to discuss that at this time. However, we are excited about many products launching in our portfolio, as we maintain a long-term perspective.

Jim Reddoch, EVP, Head of Research & Investments

You make a good point that we’ve had incredible growth in the royalty industry over the past several years. We believe there are many great royalty assets out there that will continue to fuel growth. Adding in synthetic royalties, the ability to create a royalty on virtually any product represents further growth potential. We’re sensing an interest in doing synthetic royalties, and we can’t guarantee we’ll maintain a dominant market position at 60%, but we are encouraged with the growth in the industry overall. Even if we lose some market share, it would be offset by continued growth in potential acquisitions.

Operator, Operator

Our next question comes from Michael DiFiore with Evercore. Your line is open.

Michael DiFiore, Analyst

Hi, guys. Congrats on the quarter. Thanks so much for taking my questions. Just a couple of quick ones for me. Given all the current political uncertainty, how might Royalty Pharma’s tax structure get affected, depending on who gets control of the Senate? And how do you see drug pricing pressure evolving next year? And then, just a more general follow-up. If you could just point to the most important clinical readouts for your portfolio in the next 12 to 18 months, that would be very helpful. Thank you.

Terry Coyne, EVP, Chief Financial Officer

This is something that’s come up fairly regularly, and I think that there is a misunderstanding. The discussion on U.S. tax reform relates to U.S. individuals and corporations. We are a UK plc, we’re not a U.S. corporation. So this discussion is really not applicable to Royalty Pharma. We’re not aware of any potential changes to the UK or Irish tax code that would change our tax status. We’ve really been structured in much the same way as a pass-through with no corporate or withholding taxes since 2003. We don’t anticipate that there will be any significant changes there.

Marshall Urist, SVP, Research and Investments

So, first, just on the pricing and policy landscape. We feel good about both where the current portfolio is and our approach moving forward. Our portfolio is highly diversified, with important products that meet real unmet medical needs. Regardless of how the landscape evolves, we think a portfolio like that is best positioned. We have flexibility across therapeutic areas to be tactical and respond to new information on the policy front as we evaluate new products. We feel good about both our portfolio and strategy set up to evolve with the industry. Regarding key readouts, Royalty Pharma is not defined by a single readout or a handful of readouts. But, as we look forward, Trodelvy and the readout in HR-positive metastatic breast cancer will be crucial in significantly increasing the addressable market. Xtandi and M0 prostate cancer in the EMBARK trial, we are also looking forward to that. And lastly, PT027, an AstraZeneca product in asthma will have data next year. Another is the recent Biohaven deal with an intranasal vazegepant, with data from Phase 3 due next year. Again, our diversified portfolio isn’t defined by these single readouts.

Operator, Operator

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

Terence Flynn, Analyst

Hi. Thanks for taking the questions. Maybe two for me. I was just wondering if you can comment broadly, Terry, on how to think about expenses for 2021, if we should expect those to generally be similar to this year on a percentage basis, or if there’s any kind of high-level puts or takes that we should consider? And then, on omecamtiv, probably for Marshall, just wondering if you have any initial perspective there on the data. I know, we’re going to learn more later this week. And any key learnings that you might apply to future pre-commercial deals? Thank you.

Terry Coyne, EVP, Chief Financial Officer

On expenses, we’re not going to provide specific guidance, but I can speak generally. There’s a fixed component and a variable component. The fixed is going to be in the 7% of adjusted cash receipts range. The variable will include IPO expenses, audit and legal costs and other expenses related to rating agencies and D&O insurance. Those do add up; those are the rough parameters for thinking about it going forward.

Marshall Urist, SVP, Research and Investments

First of all, just on omecamtiv. We’re excited to see the presentation this Friday, which will include top line data and more details from Amgen and Cytokinetics. In terms of learnings, we always incorporate learnings from what goes well or doesn’t into our process. Overall, pre-commercial or development-stage investments have been highly positive for Royalty Pharma and have added great products to both our past and current portfolios. We feel good about our process, and although some things will work and some won’t, we’ll continue to stick to that discipline when evaluating pre-commercial opportunities.

Operator, Operator

Thank you, and I’m currently showing no further questions at this time. I’d like to turn the call back over to Pablo Legorreta for closing remarks.

Pablo Legorreta, Founder and Chief Executive Officer

Thank you, operator, and thank you to everyone on the call for your continuing interest in Royalty Pharma. My team and I look forward to sharing our progress with you as we build our unique leadership role in funding life sciences innovation. If you have any follow-up questions, please feel free to reach out to George. With that, we’ll conclude the call. Thank you.

Operator, Operator

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.