8-K
Royalty Pharma plc (RPRX)
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):
August 19, 2020
Royalty Pharmaplc
(Exact Name of Registrant as Specified in its Charter)
| England and Wales | 001-39329 | Not Applicable |
|---|---|---|
| (State or other jurisdiction<br><br> <br><br><br> <br>of incorporation) | (Commission<br><br> <br><br><br> <br>File Number) | (I.R.S. Employer<br><br> <br><br><br> <br>Identification No.) |
| 110 East 59th Street<br><br> <br><br><br> <br>New York, New York | 10022 | |
| (Address of Principal Executive<br><br> <br><br><br> <br>Offices) | (Zip Code) |
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):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading symbol(s) | Name of each exchange on which<br><br> <br><br><br> <br>registered |
|---|---|---|
| Class A Ordinary Shares, par value<br>$0.0001 per share | RPRX | The Nasdaq Stock Market LLC |
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 Operations and Financial Condition.
On August 19, 2020, Royalty Pharma plc (the “Company”) announced its intent to offer, subject to market and other conditions, senior unsecured notes (the “Notes”) in a private offering only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended. The Notes will be guaranteed on a senior unsecured basis by Royalty Pharma Holdings Ltd. The Company intends to use the net proceeds from the Notes, together with available cash on hand, to repay its existing Term Loan and Term Loan B facilities and to pay fees and expenses incurred in connection with the offering, with any remainder to be used for general corporate purposes.
A copy of the press release announcing the offering of the Notes is being furnished as Exhibit 99.1 attached hereto and is incorporated by reference herein.
In connection with the offering of the Notes, the Company provided certain unaudited pro forma financial information to prospective eligible investors in a preliminary offering memorandum, dated August 19, 2020 (the “Offering Memorandum”). The Company is furnishing on this Current Report on Form 8-K such unaudited pro forma financial information excerpted from the Offering Memorandum, which is incorporated herein by reference as Exhibit 99.2.
The unaudited pro forma information does not purport to be indicative of the Company’s results of operations or financial position had the relevant transactions occurred on the dates assumed and does not project the Company’s results of operations or financial position for any future period or future date.
The information furnished pursuant to this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed to be “filed” for purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into any filing under the Securities Act or in the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits
| (d) | Exhibits |
|---|---|
| 99.1 | Press Release<br> dated August 19, 2020. |
| --- | --- |
| 99.2 | Unaudited<br> Pro Forma Financial Information. |
| 104 | Cover Page Interactive Data File (embedded<br> within the Inline XBRL document) |
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: August 19, 2020
| ROYALTY PHARMA PLC | |
|---|---|
| By: | /s/ Pablo Legorreta |
| Pablo Legorreta | |
| Chief Executive Officer |
Exhibit 99.1
ROYALTYPHARMA ANNOUNCES LAUNCH OF SENIOR NOTES OFFERING
NEWYORK (NY) - August 19, 2020 – Royalty Pharma plc announced today that it intends to offer, subject to market and other conditions, senior unsecured notes in multiple tranches (the “Notes”) in a private offering exempt from registration in accordance with Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Notes will be guaranteed on a senior unsecured basis by Royalty Pharma Holdings Ltd.
Royalty Pharma intends to use the net proceeds from the Notes, together with available cash on hand, to repay its existing Term Loan A and Term Loan B facilities and to pay fees and expenses incurred in connection with the offering, with any remainder to be used for general corporate purposes.
The Notes are being offered only to persons reasonably believed to be qualified institutional buyers in reliance upon Rule 144A under the Securities Act and, outside the United States, only to non-U.S. persons pursuant to Regulation S under the Securities Act. The Notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements under the Securities Act or any state securities laws.
This press release does not constitute an offer to sell or a solicitation of an offer to buy any securities, nor does it constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.
AboutRoyalty Pharma
Founded in 1996, Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. Royalty Pharma has assembled a portfolio of royalties which entitles it to payments based directly on the top-line sales of many of the industry’s leading therapies. Royalty Pharma funds innovation in the biopharmaceutical industry both directly and indirectly - directly when it partners with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators. Royalty Pharma’s current portfolio includes royalties on more than 45 commercial products, including AbbVie and J&J’s Imbruvica, Astellas and 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.
Forward-LookingStatements
This press release contains statements that constitute “forward-looking statements” as that term is defined in the United States Private Securities 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 reflect historical facts. Examples include discussion of our strategies, financing plans, growth opportunities and market growth. In some cases, 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 these terms or similar expressions. Forward-looking statements are based on management’s current beliefs and assumptions and on information 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, uncertainties and other variable circumstances, and other factors. Such risks and uncertainties may cause the statements to be inaccurate and readers are cautioned not to place undue reliance on such statements. Many of these risks are outside of the company’s control and could cause its actual results to differ materially from those it thought would occur. The forward-looking statements included in this document are made only as of the date hereof. The company does not undertake, and specifically declines, any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except as required by law.
RoyaltyPharma Investor Relations and Communications:
+1 (212) 883-0200
ir@royaltypharma.com
Exhibit 99.2
Unaudited pro forma financial information
The unaudited pro forma condensed consolidated statements of comprehensive income for the six months ended June 30, 2020 present our consolidated results of operations after giving effect to:
| · | the Reorganization Transactions; |
|---|---|
| · | the sale by us of 89,333,920 shares of our Class A ordinary shares, of which 71,652,250 and 17,681,670 shares were offered<br>by the Company and selling shareholders, respectively pursuant to a registration statement on Form S-1 filed with the U.S. Securities<br>and Exchange Commission ("SEC") at a price to the public of $28.00 per share, including the exercise in full of the underwriters'<br>option to purchase 11,652,250 additional Class A ordinary shares from us; and |
| --- | --- |
| · | the Exchange Agreement entered into by RP Holdings, the Continuing Investors Partnerships and the Continuing Investors in connection<br>with the offering that provides that the Continuing International Investors Partnership promptly distribute to its holders substantially<br>all of the RP Holdings Class B ordinary shares or depository receipts that represent such shares (the “RP Holdings Class<br>B Interests”) it holds which were exchanged for our Class A ordinary shares. |
| --- | --- |
The statements of comprehensive income for the six months ended June 30, 2020 present the consolidated results of operations to give pro forma effect to all transactions identified above as if all such events had been completed as of January 1, 2020.
The unaudited pro forma consolidated financial information has been prepared by management and is based on the historical financial statements of Royalty Pharma plc, Old RPI prior to the Exchange Date, and its successor for financial reporting purposes, RPI, from the Exchange Date until completion of our initial public offering, and their consolidated subsidiaries and the assumptions and adjustments described in the notes to the unaudited pro forma financial information below. The presentation of the unaudited pro forma financial information is prepared in conformity with Article 11 of Regulation S-X.
The historical financial information of Royalty Pharma plc, Old RPI, RPI and their consolidated subsidiaries has been derived from the consolidated financial statements and accompanying notes included elsewhere in this prospectus.
We based the pro forma adjustments on available information and on assumptions that we believe are reasonable under the circumstances in order to reflect, on a pro forma basis, the impact of the relevant transactions on the historical financial information of Royalty Pharma plc, Old RPI, RPI and their consolidated subsidiaries. Refer to the notes to the unaudited pro forma financial information below for a discussion of assumptions applied. The pro forma adjustments represent only those transactions which are directly attributable to this offering, factually supportable, and expected to have a continuing impact on our results of operations. The unaudited pro forma financial information does not purport to be indicative of our results of operations or financial position had the relevant transactions occurred on the dates assumed and does not project our results of operations or financial position for any future period or date.
1
Unaudited Pro Forma Consolidated Statement of Comprehensive Income
For the six months ended June 30, 2020
| Six Months Ended June 30, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Historical | Pro Forma | ||||||||
| Royalty Pharma plc and Subsidiaries | Pro Forma Adjustments | Royalty Pharma plc and Subsidiaries | |||||||
| ( in thousands except per share amounts) (unaudited) | |||||||||
| Total income and revenues | |||||||||
| Income from financial royalty assets | $ | — | $ | 937,021 | |||||
| Revenue from intangible royalty assets | — | 68,428 | |||||||
| Other royalty income | — | 6,362 | |||||||
| Total income and other revenues | — | 1,011,811 | |||||||
| Operating expenses | |||||||||
| Research and development funding expense | — | 13,415 | |||||||
| Provision for changes in expected cash flows from financial royalty assets | — | 135,290 | |||||||
| Amortization of intangible assets | — | 11,466 | |||||||
| General and administrative expenses | 28,923 | (a) | 109,787 | ||||||
| Total operating expenses | 28,923 | (a) | 269,958 | ||||||
| Operating income | (28,923 | ) | (a) | 741,853 | |||||
| Other expense/(income) | |||||||||
| Equity in loss/(earnings) of non-consolidated affiliates | ) | (3,044 | ) | (f) | (23,262 | ) | |||
| Interest expense | (4,355 | ) | (b) | 83,418 | |||||
| Other non-operating income, net | ) | (10,900 | ) | (b) | (18,751 | ) | |||
| Total other expense/(income), net | (18,299 | ) | (a),(b),(f) | 41,405 | |||||
| Consolidated net income before tax | (10,624 | ) | (a),(b),(f) | 700,448 | |||||
| Income tax benefit (expense) | — | — | |||||||
| Consolidated net income | (10,624 | ) | (a),(b),(f) | 700,448 | |||||
| Less: Net income attributable to non-controlling interest | ) | (195,942 | ) | (c) | (393,700 | ) | |||
| Net income attributable to controlling interest | (206,566 | ) | (a),(b),(c), (f) | 306,748 | |||||
| Other comprehensive income/(loss): | |||||||||
| Reclassification of loss on interest rate swaps included in net income | (4,066 | ) | (b) | — | |||||
| Change in unrealized movement on available for sale debt securities | — | 59,674 | |||||||
| Other comprehensive income | (4,066 | ) | (b) | 59,674 | |||||
| Comprehensive income | (210,632 | ) | (a),(b),(c),<br> (f) | 366,422 | |||||
| Less: Other comprehensive income/(loss) attributable to non-controlling interest | ) | (18,734 | ) | (b)(c) | (30,030 | ) | |||
| Comprehensive income attributable to controlling interest | (229,366 | ) | (a),(b),(c),<br> (f) | 336,392 | |||||
| Pro forma earnings per share: | |||||||||
| Basic | (d) | $ | 0.84 | ||||||
| Diluted | (d) | $ | 0.84 | ||||||
| Pro forma number of shares used in computing earnings per share: | |||||||||
| Basic | (d) | 365,899 | |||||||
| Diluted | (d) | 365,899 |
All values are in US Dollars.
2
_______________
| (a) | Reflects the recognition of incremental Operating and Personnel Payments of $29.6 million for the Company and a reduction of<br>$0.7 million for the amount attributable to RPI US Partners, LP; RPI US Partners II, LP; RPI International Partners, LP; and RPI<br>International Partners II, LP (the “Legacy Investors Partnerships”), for the six months ended June 30, 2020. The Operating<br>and Personnel Payments are calculated according to the formula described in the Management Agreement. The Operating and Personnel<br>Payment for Old RPI, an obligation of the Legacy Investors Partnerships as the holder of a noncontrolling interest in Old RPI,<br>for which the expense is reflected in RPI’s consolidated statements of income, is calculated as the greater of $1 million<br>per quarter and 0.3125% of Royalty Investments (as defined therein). | |
|---|---|---|
| (b) | Reflects the repayment of the RPI Finance Trust (“RPIFT”) senior secured<br>credit facilities, the issuance of the new RPI Term Loan A and Term Loan B facilities (the “Term Loans”), including<br>deferred financing fees, and the termination of the interest rate swaps that were unwound in connection with the refinancing. The<br>terms of the New Term Loans are as follows, with required annual amortization payments of $160 million and $28.4 million associated<br>with Term Loan A and Term Loan B, respectively: | |
| --- | --- | |
| Credit<br>Facility | Principal | Maturity |
| --- | --- | --- |
| ( thousands) | ||
| RPI Term Loan A Facility | 3,200,000 | 2025 |
| RPI Term Loan B Facility | 2,840,000 | 2027 |
All values are in US Dollars.
| (c) | As a result of our initial public offering and the Reorganization Transactions, we own approximately 50% of the economic interest<br>of Old RPI (excluding the RP Holdings Class C Special Interest). |
|---|
The net income and other comprehensive income attributable to non-controlling interests from the Exchange Date relates to the following: (i) 18% ownership of Old RPI held by the Legacy Investors Partnerships and (ii) a de minimis percentage is attributable to non-controlling interest holders of certain subsidiaries of Old RPI, which has existed in the historical financial statements since 2011. Immediately following the completion of our initial public offering a new non-controlling interest was created which is attributable to the RP Holdings Class B Interests held indirectly by the Continuing Investors, which represent a 40% ownership interest in RP Holdings and are exchangeable for Class A ordinary shares of Royalty Pharma plc. Pro forma adjustments to Net income attributable to non-controlling interest for the six months ended June 30, 2020, by interest holder are shown below.
| Adjustments for Net income attributable to non-controlling interests: | Pro Forma Six Months Ended June 30, 2020 |
|---|---|
| ( thousands) (unaudited) | |
| Legacy Investors Partnerships | |
| Continuing Investors Partnerships(1) | |
| Total pro forma adjustment for net income attributable to non-controlling interests |
All values are in US Dollars.
(1) Related to the Continuing Investors Partnerships' ownership of approximately 40% in RP Holdings through their ownership of the RP Holdings Class B Interests.
| (d) | Historical basic and diluted earnings per share were only presented for the period from June 16, 2020 through June 30, 2020,<br>representing earnings per share for the period subsequent to our initial public offering. The basic and diluted pro forma earnings<br>per Class A ordinary share represent net income attributable to controlling interest divided by a combination of Class A ordinary<br>shares issued in our initial public offering and Class A ordinary shares exchanged by the Continuing International Investors Partnership<br>in exchange for their RP Holdings Class B Interests as described in “Organizational Structure.” Pro forma RP Holdings<br>Class B interests of 241,207,425 were evaluated under the if-converted method for potential dilutive effects and were determined<br>to be antidilutive. The table below presents the computation of pro forma basic and dilutive earnings per share (“EPS”)<br>for the controlling interest. |
|---|
3
| Earnings per Ordinary Share | Pro Forma Six Months Ended June 30, 2020 |
|---|---|
| ( thousands, except share-related amounts) (unaudited) | |
| Numerator: | |
| Net income attributable to controlling interest—basic and diluted | |
| Denominator: | |
| Weighted average Class A ordinary shares outstanding—basic and diluted | |
| Basic earnings per share | |
| Diluted earnings per share |
All values are in US Dollars.
| (f) | Reflects the contribution of the Legacy Special Limited Partnership Interest in the Legacy Investors Partnerships (the “Legacy<br>SLP Interest”) that arose as part of the Reorganization Transactions. The Legacy SLP Interest entitles us to the equivalent<br>of performance distribution payments that would have been paid to the general partner of the Legacy Investors Partnerships and<br>an income allocation on a similar basis. The income allocation attributable to Royalty Pharma plc is equal to the general partner’s<br>former contractual rights to the income of the Legacy Investors Partnerships. The adjustment reflects an increase to Equity in<br>(earnings)/loss of non-consolidated affiliates due to the new equity method investment in the Legacy Investors Partnerships and<br>an increase to the Investment in non-consolidated affiliates. |
|---|
4