Earnings Call Transcript - RPRX Q4 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma Fourth Quarter 2020 Financial Results Conference Call. I would now like to turn the call over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

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

Thank you, operator, and good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's fourth quarter results. You can find the slides to this call on the Investors page of our website at royaltypharma.com. Moving to Slide 3, I would like to 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, Co-Head of Research and Investments and Chief Scientific Officer; Marshall Urist, EVP, Co-Head of Research and Investments and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights after which Jim and Marshall will provide an update on our royalty acquisitions. Terry will then review the financials. And after concluding remarks from Pablo, we will hold a Q&A session. Chris Hite, our Vice Chairman will also join the Q&A session. And with that, I'd like to turn the call over to Pablo.

Pablo Legorreta, Founder and Chief Executive Officer

Thank you, George, and welcome to everyone on the call. 2020 was truly a landmark year for Royalty Pharma. I want to start by focusing on highlights of an incredible year for our company. First, we strengthened our capital base and our access to future capital through our successful IPO and bond offerings. With our balance sheet strengthened, and with our ability to rapidly delever, we're in a very strong position to execute our strategy. Second, we further expanded our royalty portfolio with eight announced acquisitions, totaling $2.4 billion, maintaining our market leadership and enhancing the outlook for our adjusted cash receipts. This royalty transaction spanned multiple therapy areas but had one thing in common; they are associated with potentially transformative medicines, and we're very optimistic about their patient benefit as well as their commercial value. Terry will discuss how this impacts our long-term outlook later in the call. Lastly, we navigated this complex and busy year while delivering double-digit bottom-line growth and building the organization to strengthen our market-leading position. We have made a number of senior-level hires, expanded our board of directors, and started an important new strategy and analytics initiative. On Slide 7, you can see our financial results for the fourth quarter and full year. In the fourth quarter, we delivered 9% growth in adjusted cash receipts, our top line, and 22% growth in adjusted cash flow, which is our bottom line. This excellent momentum puts us in a great position to deliver another year of strong performance in 2021, as Terry will discuss in a bit. For the full year, our top line growth was 1% and bottom-line growth was 15%. When thinking about our adjusted cash receipts growth, keep in mind that we had a large payment for Tecfidera in 2019, which affected year-over-year comparisons in the first quarter, but has no further impact. Excluding Tecfidera, our adjusted cash receipts would have grown at 9% for the full year. So overall, I am delighted with our progress in 2020, and we're very confident in our long-term outlook. With that, I will hand the call over to Jim and Marshall to update you on our royalty portfolio.

Jim Reddoch, EVP, Co-Head of Research and Investments and Chief Scientific Officer

Thank you, Pablo, and good morning and good afternoon everyone. As shown on Slide 9, 2020 was a record year for biopharma royalty funding. Based on our market intelligence, we believe that there were 23 major royalty transactions in the year with a combined value of $5.4 billion. Inevitably, there is some volatility in the trends from year to year. However, as an indicator, the 2020 transaction count and value figures are more than double the average of the preceding five years and each represent record highs. In short, the market is growing significantly, and we are confident that the tailwinds supporting this growth will continue for the foreseeable future. These tailwinds include the fast-growing demand for capital from the biopharma industry, the extraordinary pace of innovation taking place across the entire life science ecosystem, and the secular trends driving increased biopharma market sales. Slide 10 illustrates our transaction funnel in 2020. During the year, we reviewed more than 265 potential transactions. This in turn led to around 70 CDAs being signed and 38 proposals being submitted. Ultimately, we announced eight transactions for a total value of $2.4 billion. The math shows that we transacted on just 3% of the royalty opportunities we initially reviewed. This speaks to both our ability to execute on promising royalty opportunities and the intense level of scientific diligence and financial discipline we apply in the process. The rigor of our approach is part of our unique skill set, and is a key reason why Royalty Pharma has delivered and continues to deliver attractive returns to our investors. Slide 11 provides an overview of the eight transactions I just referenced. We are excited that these encompass a range of transformative therapies across five therapeutic areas. Of the 12 royalty bearing products included in these transactions, nine were for approved therapies and three were for development stage therapies at the time the deals were signed. The products we added to the portfolio spanned five therapeutic areas, including rare disease, cancer, neurology, GI, and infectious disease. This speaks to the unique approach that we take in adding high-quality assets to our portfolio regardless of therapeutic area. One notable development stage deal that we completed in 2020 was for the exciting SMA drug Evrysdi. Around a month after we acquired this royalty, Evrysdi was subsequently approved and launched by Roche, again underscoring the high level of due diligence that we apply in our process. Looking ahead, the street expects a number of these medicines to become blockbusters in the next several years, and we estimate based on consensus analysts' forecast that these transactions will add more than $400 million to our adjusted cash receipts by 2025. And with that, I will hand the call over to Marshall.

Marshall Urist, EVP, Co-Head of Research and Investments

Thank you, Jim, and hello to everyone this morning. Turning to Slide 13, let me start by highlighting that 2020 was a strong year in terms of the scale of royalty acquisition, and builds on the similarly strong year in 2019. In fact, if we look over the past two years, we announced 14 transactions totaling approximately $5 billion. As a result, we have significantly expanded our portfolio of innovative therapies with long duration patents, further diversifying our revenue mix, and we are confident that we will generate returns consistent with our targets. On this slide, you see a summary of our recent portfolio additions since last quarter's call, adding one approved product and two development stage therapies. In December, we acquired a royalty from BioCryst, Orladeyo, the first oral therapy for hereditary angioedema. Orladeyo was recently approved in the US and Japan, and a European approval decision is expected in the second quarter of this year. As an oral agent, we believe Orladeyo will expand options for patients, bringing greater convenience and potentially expanding the use of prophylaxis in this serious disease. The $125 million we provided to BioCryst will be used to support the launch of Orladeyo, as well as to fund development of their oral Factor D inhibitor BCX9930 and complement-mediated diseases. In return, Royalty Pharma is entitled to 8.75% of sales of Orladeyo up to $350 million, with step downs above this up to $550 million. We will also receive a 1% royalty on sales of BCX9930 if commercialized. We look forward to seeing the progress of BCX9930 during 2021. This is a great example of the type of non-dilutive deal structure we're able to offer our partners, in this case to a biotechnology company to facilitate pipeline expansion and the transition to a commercial company. Now moving to our most recent portfolio addition, we announced in January the acquisition of Minerva Neurosciences' royalty interest in Seltorexant. A compound which is in Phase III development by Johnson & Johnson for the treatment of major depressive disorder with insomnia symptoms, in return for an upfront payment of $60 million and up to $95 million in additional milestone payment. We're entitled to receive a mid-single digit royalty on worldwide sales of Seltorexant. We are very excited by this opportunity as Seltorexant is potentially the first medicine to address this important unmet need in patients suffering from depression. While this is the therapy that potentially fits at the higher end of the clinical risk spectrum for us, our extensive due diligence provided significant comfort on this clinical profile based on strong proof of concept data to date. This included four placebo and active controlled efficacy trials that demonstrated consistent safety and efficacy. To summarize; two very different partners which take us into new therapeutic categories and each with the potential to bring important innovation to patients. And with that, I'll hand it over to Terry.

Terry Coyne, EVP, Chief Financial Officer

Thanks, Marshall. Let's move to Slide 15. We had another good quarter with total royalty receipts of 9% compared to last year's fourth quarter on a pro forma basis. On a full year basis, growth of 2% reflected our final receipt associated with Tecfidera of $150 million in the first quarter of 2019. As you can see, royalties from our largest franchise cystic fibrosis grew 37% this quarter and 30% for the full year, driven by the strong launch of Trikafta in the US and Kaftrio in the EU. Imbruvica, Xtandi, and Promacta also contributed strong double-digit growth, both for the quarter and on a full-year basis. Slide 16 shows how our royalty receipts translated to strong adjusted cash flow in the quarter. As you're aware, adjusted cash receipts is a key non-GAAP metric for us, which we arrive at after deducting non-controlling interest. This is what we view as our top line, and it amounted to $484 million in the quarter representing growth of 9% compared with last year's fourth quarter on a pro forma basis. As we move left to right, operating and professional costs of $50 million equated to 10.4% of adjusted cash receipts. This was somewhat below the level of the third quarter, which included certain expenses related to our IPO and bond offering. R&D funding remained at a relatively low level and substantially lower than in the year-ago quarter, given larger ongoing development stage funding payments in 2019. Net interest of just $1 million was sharply lower as it reflected the debt refinancing and a shift to semiannual interest payments arising from our bond offering. The next interest payment will be in March of this year. Interest paid in Q4 would have been $33 million if our interest payments were paid quarterly instead of semiannually. The other item of $9 million includes expenses related to our investment in non-consolidated affiliates, primarily a funding payment to Avillion for ongoing development of AstraZeneca's PTO 27. This resulted in adjusted cash flow, our bottom-line earnings of $423 million, or $0.70 per share. This translated to an adjusted cash flow margin of 87.3%, highlighting the very strong cash conversion in our business model. Looking at our balance sheet on Slide 17, we ended 2020 with cash and marketable securities of $2 billion. The increase over the year was driven by the adjusted cash flow I just mentioned, together with the proceeds from debt refinancing of $728 million and IPO proceeds of $1.9 billion. Cash outflows over the period amounted to $2.5 billion, primarily resulting from the $2.2 billion in capital deployed on royalty acquisitions. Turning to our dividend, we recently announced the 13% increase in our quarterly dividend to $0.17 per Class A ordinary share, which signals our confidence in our growth outlook. We finished the year with $6 billion in investment grade debt, which combined with our $1.5 billion revolving credit facility gives us a strong liquidity position. With leverage of 2.4 times EBITDA on a net basis and 3.6 times EBITDA on a gross basis, we remain well positioned to execute on our business plan. On Slide 18, we set out our full year guidance for 2021. We expect adjusted cash receipts to be in the range of $1.91 billion to $1.96 billion. As you know, our practice is to guide based on our portfolio as of today, and importantly, this does not take into account any future acquisitions. This guidance represents an increase of between 6% and 9% for our existing portfolio only. Turning to operating costs, we expect these to be approximately 9% to 10% of adjusted cash receipts. Lastly, we expect interest paid will be approximately $130 million for the year. Based on the semiannual interest payment schedule for our existing bonds, interest paid is anticipated to be approximately $64 million in the first and third quarters, with a de minimis amount reported in the second and fourth quarters. This projection assumes no additional debt financing in 2021. Turning to my final slide, in August, we stated that our objective was to maintain a long-term compounded annual growth rate in the range of 6% to 9% from 2020 to 2025. Today, we are increasing this outlook to a compounded annual growth rate in the range of 7% to 10%, which is off of a higher pace in 2020 than was expected when we first provided this outlook. The increase in our long-term outlook is due to a couple of important factors. First, our existing portfolio was performing quite well, and we now forecast it to grow in the mid-single digits. Second, our confidence in the growth of the royalty market and in the sustainability of our leadership position has increased with the multiple tailwinds we see and our strong overall performance in 2020. With that, I would like to hand the call back to Pablo.

Pablo Legorreta, Founder and Chief Executive Officer

Thanks, Terry. Let me quickly close by saying that I'm more confident than ever that Royalty Pharma is well positioned to continue our leadership in the rapidly growing market for biopharma royalty funding. With our strong 2021 outlook and our raised long-term guidance, we have many exciting years ahead. This is a remarkable time in the history of our industry, with incredible innovation and groundbreaking therapies that are changing the lives of patients globally. Royalty Pharma is uniquely positioned as a leveraged play on the innovation in life sciences. 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, and operator, we'll now open the call to your questions. Operator, please take the first question.

Operator, Operator

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

Steve Scala, Analyst

Thank you very much, and congratulations on a great 2020. For deals that Royalty Pharma considered but did not do in 2020, what was the most frequent reason? Was Royalty Pharma not sufficiently comfortable with the risk involved? Did a competitor offer more attractive economics? Or was there some other reason? I assumed risk and economics always go hand in hand, so how do you know you have the optimal balance? And how might that balance change in 2021? Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Sure, Steve. So I'm going to ask Jim to add to maybe some initial remarks, but I think, as you probably have heard us already explain in the past, a lot of sort of the thing that drives our evaluation of transactions is just a huge amount of discipline because over two decades of investing, we've looked at so many things, many of which we have passed on, and many that we've done. But we also have the experience of transactions that we did that didn't work out. We always try to learn from those and understand what happened that didn't work - what part of the thesis was incorrect, and then try to apply that in the future. It's not always easy. It's difficult to always - because what's also interesting as an industry is that every opportunity is different in life sciences. Right? Every product is different, the clinical program is different, the size of the market is different, the competitive landscape is different. In many cases, we have unique products with very little competition, but in others, there's more competition. Many, many factors have to be taken into consideration. But discipline is always key, and I always tell the team making a valid investment is very, very difficult and very painful to correct the impact of a bad investment. So it's always trying to find that balance of very attractive underlying attributes that the products have, with very attractive upside. Also understanding the downside well, understanding where things could fail well. But Jim, do you want to add to what I just said?

Jim Reddoch, EVP, Co-Head of Research and Investments and Chief Scientific Officer

Yeah. Thanks, Steve. I mean, I think that you mentioned a couple of things - risk and economics and occasionally competition. But I would add to that, and it's really a mixture of all of these that in some cases the target company we were speaking with was acquired or ends up getting a different flavor of financing or in some cases is still considering our proposal and other proposals. So it just hasn't really happened yet. So it's really a mixture of all of those, but I'm really proud; I think we're all really proud of generating the 260 plus number of opportunities at the top of the funnel, and I think that's really a testament to the number of parties, both corporate and academic and otherwise that are considering royalty transactions these days, because that number has grown from the previous year and from prior years. We also saw 70 opportunities that were really worth going in-depth on and getting confidential information, and we want to be aggressive in putting proposals out there as well. So I think that 30 plus number represents us really wanting to get term sheets out there, but in some cases, those, for reasons that we're mentioning now, don't end up crossing the finish line. But as Pablo says, we want to keep a very high bar for things that we ultimately transact on.

Pablo Legorreta, Founder and Chief Executive Officer

In real life, Steve, what we invested in last year - the $2 billion plus of transactions that we did, which is - what's great is that just looking out this transaction will add over $400 million in revenue in the 2025 timeframe with what we believe are conservative forecasts and with a good level of predictability. So that is quite a positive outcome for us based on the things that happened last year. Thank you.

Steve Scala, Analyst

Thank you.

Operator, Operator

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

Geoff Meacham, Analyst

Hey, guys, thanks for the question. Just had a couple, another one on future deals, I guess the question is, there's the law of large numbers beginning to apply as you continue to grow the top line. I know there are a ton of smaller deals you can do as you just highlighted on Slide 10. But I think the goal is to find perhaps another CF-type opportunity in terms of the magnitude. And then the second question is, Terry, what are the longer-term considerations of a rising interest rate environment? I know - I don't know if you guys have used hedging strategies in the past, but could you deploy that going forward? Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Chris, do you want to take the first part of the question about the scale of the opportunities we see and also some potential for big deals maybe through M&A?

Chris Hite, Vice Chairman

Sure. Thanks, Pablo, and thanks for the question, Geoff. Yeah, look, I mean, as Jim went through the funnel, and Pablo went through the funnel, we see a lot of opportunities. We see a lot of ranging opportunities, right, smaller and larger. Even this past year we actually did a wide range of deals, right, from smaller deals to a bigger deal around the CF and also around Evrysdi. One of the things Pablo just mentioned was M&A. I think we've been actively having discussions around helping people around M&A situations and creating synthetic royalties there. We see that as an interesting opportunity, in addition to the synthetic royalties, which we see really picking up steam. Obviously, we're looking across the spectrum for deals, and they can be small or big, but we don't see a lack of opportunity out there to grow our top line.

Terry Coyne, EVP, Chief Financial Officer

Geoff, on your question on long-term rising rates, we were lucky that we were able to take advantage of the markets in the summer at a very attractive time in sort of history in terms of issuing bonds. Now, 100% of our $6 billion of debt is fixed. It's not something that we have to be as focused on in the near term. The other thing I would say is that as our bonds have traded in the market and bond investors have gotten to know Royalty Pharma better, our spreads have tightened significantly. The spread on our 10 year, while the 10-year Treasury has increased, the spread on the 10 year has actually tightened by almost 80 basis points. We feel like we're still in a great position, to the extent that rates really do see a significant uptick in the long-term, I also think that that will be reflected in asset prices, and prices will be adjusted accordingly. It is sort of a natural hedge in the way that our business works because we're constantly reinvesting, and it would be reflected in asset prices.

Geoff Meacham, Analyst

Okay, thanks, guys.

Operator, Operator

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

Chris Schott, Analyst

Great, thanks so much for the questions. Just if I look at 2020, it was obviously a bigger year for capital deployment for the company and the broader royalty market. I know deal flow can be choppy year-to-year, but the trend seems to clearly be moving higher here. When I think about the longer-term guidance, I didn't want to be conservative. But is there any reason we shouldn't think about capital deployment closer to the range we saw in 2020 versus I think the roughly $1.5 billion or so that reflecting in that guidance? I just want to see is there any rate limiting factors other than just finding attractive terms that whether it's capital structure, etc.? And then the second question I had was just on the funnel of transactions and you've talked about a couple sources of deals whether these are SMID cap biotech M&A, academic. Did you see the mix of those change at all in 2020 in favor of one of those, I guess, verticals versus another, or you're seeing more opportunities as we again think about biotech versus academic versus other sources? I'm trying to get a sense of how that's changing as the market evolves over time. Thanks so much.

Pablo Legorreta, Founder and Chief Executive Officer

Sure, Chris, thank you. And I think, in terms of the guidance, we're a brand-new public company. So we want to be conservative. But obviously, the tailwinds are incredibly strong for the industry in general. Also, for us specifically based on the service that we provide, the potential solutions that we provide to many companies that require very significant amount of capital. The sort of difficult thing to predict is - and I think there was a prior question about a deal like the CF deal that we did in 2014, which was over $3 billion, one transaction, and that year we invested four. In our case, it's not likely that it will be an academic royalty of that size or foundation royalty of that size, but where we could have a large transaction, significant transaction would be in an M&A situation, and those kinds of transactions are obviously difficult to predict. It's not something that is sort of the bread and butter deals that we can do every quarter but I think over the next three to five years, it's likely that there will be a couple of those, at least a couple, I think. That's the more difficult variable to predict in terms of the scale of our investment over the next five years or so. Let me turn it over to Marshall now, who can provide some perspective on the funnel and where we think deals will come from.

Marshall Urist, EVP, Co-Head of Research and Investments

Thanks Chris. To your question about the kind of mix of sources of transactions, I don't think anything has necessarily fundamentally changed in terms of the mix of sources of transactions. Obviously, that can change year-to-year. If you look at 2020, it was a good mix. There is academic or foundation royalties, R&D funding transaction, synthetic royalties and traditional royalties as well across the years, so there's a pretty good mix. We are, as we said, before optimistic about this synthetic royalty opportunity and growing that business in the years to come with BioCryst at the end of last year being a good example. We certainly see growth in that part of the market, but fundamentally, I think you'll continue to see a good mix of different sources of opportunities for us.

Chris Schott, Analyst

Thank you.

Operator, Operator

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

Greg Gilbert, Analyst

Thank you. Going back to that funnel slide again, I was curious to what degree either companies are collections or collections of royalties, existing collections royalties factored into that funnel before or if any exists now? And curious as well, Terry, I don't know if you're willing to be more specific about what specifically changed in the updated CAGR guidance, any comments would be helpful. Lastly Pablo, I was hoping you could comment on how data science may inform your sourcing strategy going forward. Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Of course, so Jim, do you want to take the question on the funnel? And then Terry will answer the second part of the question. I'll close with a comment on data science.

Jim Reddoch, EVP, Co-Head of Research and Investments and Chief Scientific Officer

Yes. Greg, correct me if I'm wrong, but I think your question was sort of how we count the number of opportunities and whether it's on sort of a per company or a per molecule basis? The answer is that it's a per molecule basis. In the case of Biohaven last year, which included Nurtec and zavegepant, that would be sort of two opportunities that we would see. I think increasingly in BioCryst is the same way that also included two molecules. Increasingly, we're seeing this positive trend that companies that we like and trust to really apply best practices developmentally and commercially have multiple assets that we're interested in. Both of those represent times where we can kind of get two interesting assets in one fell swoop. Start to follow these assets, those earlier assets at an earlier stage and really get comfortable with them in an attempt to grow our commitments and our financial commitment to that product over time.

Terry Coyne, EVP, Chief Financial Officer

So Greg, on your question on sort of what's driving the long-term increase and our long-term outlook, I think it's a mix. So one, we had a really good year of investing in 2020. We added a number of attractive products that are going to be contributors there. That being said, a number of them were already in sort of our initial guidance that we provided back in August. But it's also the strength of our existing portfolio sort of broadly. It's driven by in particular, CF, Imbruvica, Xtandi, Tysabri has continued to perform quite well and Promacta. Also, our outlook for some of the launching products like Trodelvy and Evrysdi. We expect all of those products to be healthy contributors and to also offset some of the explorations that we will face over the next couple of years. In terms of the mix of volume versus price, our expectation is the vast majority of growth will be driven by volume and price will be less of a factor.

Pablo Legorreta, Founder and Chief Executive Officer

One thing to just mention about just adding to what Terry said, is all of those products I think he mentioned five or six that are just incredible drugs, blockbusters, that many companies have one or two of those. We have six of these amazing drugs, with very significant growth, high - double-digit growth, some are growing at 30% per year or more, because they're in their launch phases. What’s very attractive about Royalty Pharma is that the growth is driven by a diversified portfolio of blockbusters, different set of blockbusters, not one, not two, but many of them. This makes our growth much more predictable than many companies. I think that's something that many investors have probably not appreciated enough; the diversification we have helps our top line and bottom line and makes both fairly predictable.

Mike DiFiore, Analyst

Great. Thanks so much.

Operator, Operator

Thank you. And our next question comes from David Risinger with Morgan Stanley. Your line is open.

David Risinger, Analyst

Yes, thanks very much. Let me add my congrats as well. So I have two questions. First, Pablo, if you could discuss the potential for future M&A transactions, what could they look like? When you say M&A transactions, could you provide a little bit more color on what the company could be acquiring beyond just royalties? Second, with respect to the comment about funding late-stage trials, obviously, Royalty Pharma has had some successes, but also a mixed track record. How will the company ensure that it's not just taking on trials that big pharma or other biopharma companies are hesitant to fund internally? Thank you.

Pablo Legorreta, Founder and Chief Executive Officer

Yeah, so the last comment you made, made me reflect, there are many things that we have passed on, because there was a question to Jim before of what are the some of the themes we have - why we have passed on investment. In many cases, it was exactly what you just said, when we have discussions with companies, often they want us to fund assets that maybe don't make the cut that they decided not to fund. It's amazing when I reflect on the past how many things - with big companies, and medium-sized companies where the asset looks great. We dig in, and we realize that in the end, they decided not to fund that. We ended up passing in many of those cases. It's something very important for us to tease out when we're having these conversations. In fact, what we generally try to do is to tell those companies what we would like to do is find the ones that you are funding the top programs in by us funding those, we're going to free up capital, that's going to let you then expand the number of opportunities that you're funding into others that might be a bit more risky. But this has worked out relatively well in many cases. If you look at the track record in the past, the over $6 billion we've invested in unapproved products over the last eight years, and now we're going into the ninth year, 90% of those worked out. We just had a couple of failures with Ibrance and a cardiovascular drug after we went public, but we had maybe six or seven successes before that. So I think trying to look at the ones that did work out on a relative basis, looking at the returns of those providing how they make up for a lot of the - they make up for the losses on the ones that didn't work out and more than make up because obviously the returns are generally very attractive. Regarding M&A, there's been conversations that we've had in prior years of transactions that could be transformative, large, multiple billions of dollars of us deploying capital in M&A situations. What happens in some of those cases is that we had a conversation in one situation where it went far; we made an offer, and in the end, another company paid more. It was going to be a fairly large transaction for a large company, and we were going to put to work billions of dollars of capital creating a new royalty. What form will they take? I think in some cases, we will provide capital, invest capital and create a new royalty that could be fairly large, the investment we make. In some of these cases, it's rare that it will be a couple hundred million dollars, because those numbers really don't move the needle for companies. When a transaction or that happens, it is likely to be billion plus, it could be $500 million in a middle-sized M&A transaction, but for the larger ones, it's likely to be significantly more capital. We could put capital to work and create a royalty, or in some cases, the target could have royalty assets that fit very well with us and do not fit at all with the acquirer, and it could also be fairly large. We need to be very open-minded and see how we can work with them in a win-win situation, providing solutions and creating a great outcome for the acquirer and for us.

David Risinger, Analyst

That's great. Thanks very much.

Operator, Operator

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Mr. 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 continuing to share our progress with you. If you have any follow-up questions, please feel free to reach out to George. Thank you for today. We're here to continue having discussions with all of you.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.