Hi everyone, thanks for joining us. My name is Mike Nedeljkovic, I'm part of TD Cowan's pharmaceuticals research team and I'm very pleased to be joined by top management from Royalty Pharma, Terry Coyne, who is EVP and CFO, and Marshall Urist, who is an EVP and the Head of Research and Investments. Thank you for joining us.

Thanks Mike, thanks for having us.

So Royalty Pharma has a phenomenal portfolio, there's a ton to talk about.

I actually want to start though with an announcement you made recently vis-a-vis your ambitions in China and Asia more broadly you hired a head of Asia it seemed like an impressive hire and quite the coup maybe you could tell us a little bit about the new head of Asia and your ambitions in that region yeah sure um so yeah we we made a really exciting announcement yesterday we announced that we were hiring Ken Su who is joining us from Morgan Stanley where He was head of Asia-Pacific Healthcare Investment Banking, and that Morgan Stanley has an incredible franchise in China, and so it was really, you know, I think we got the best person we could possibly get there. And it's really exciting for us. It's a big opportunity. There's been a lot of licensing deals out of China. uh we had our first transaction last year with b1 which is a which is uh its roots are in china and uh and we think that there can be a lot more royalty opportunities coming from china over the years we felt like it was really important to have a local presence and so we started a process to figure out who would be the right fit for us culturally who had a great reputation and ken brings all of those things so we're really excited um we think that over the next couple of years china could become a more and more important market for us and for our business and we want

to kind of we helped establish the royalty market in the u.s and west and in the west and we think that we can do the same in china with ken's help so we're really excited about it all right i failed to mention at the top if anybody has a question in the room please feel free to raise your hands and we can call on you um can you elaborate a little bit more on the china opportunity what what's so important about the region how how is it an opportunity for royalty pharma specifically yeah i think it probably not lost on anyone in this room or at this conference the kind of explosion of uh business development activity licenses partnerships that's happened over the last few years and you know the the exciting thing one of the exciting things for us is you know it's a whole new market that is creating new royalties right and when you look at what these are these are you know royalties in the hands of multinational pharma companies that are being paid to a you know kind of biotech innovator and if that fact pattern you don't mention china has been our business from the very beginning right and so um you know like terry said you know just the volume of activity i think you know momentum there we will see that continue and you know that's a real opportunity for us and we want to be there it's early right that you know you haven't seen any you know of very many deals other than our transaction with b1 last year so you know we see this as a you know as sort of a greenfield opportunity and we're hiring the right team and we have the patience to develop that market right let's talk about some of your recent deals you actually just announced one with zymeworks can you summarize that deal and the asset in question sure so uh yesterday we announced a uh 250 million dollar transaction where we bought a royalty from zymeworks on a product marketed by jazz called zany datamab or zihira it just had some incredible data for gastric cancer um for her two positive gastric cancer um horrible disease with a horrible outcome and this showed of you know this product showed a really robust uh overall survival benefit in a phase three trial so we're super excited um super excited about that product sort of very consistent with our strategy of you know high quality products that are bringing real value to patients and so the way that uh investment will work is like i said we uh paid zymer 250 million dollars up front we'll get 30 of their global royalties both from jazz um who has the rights in the us and europe and then uh from b1 who has the rights in uh in in asia and you know that will continue until we until we achieve a certain cumulative return when it will go back

to them and so but we expect to own this for a while at this point you know nice long duration so sort of checked all the boxes for us great maybe are there one or two other deals that you've done over say the last 12 to 18 months that you would highlight because they're notable for one reason or another or maybe for the uninitiated that exemplify what royalty pharma does and what the opportunity is that lies before you I think the revolution medicines deal that we announced last year was sort of a marquee transaction for us last year it on a lot of fronts when it was it was very large over two billion dollars so the scale was really big but it also kind of created what we think is a roadmap for other emerging small mid-cap biopharma companies who want to retain the rights uh to their product and but have big ambitions to develop to to you know become a global player in in these markets and um you know rep met is just that and i think that that uh for us it's we see royalties emerging as not just the alternative to traditional equity financing or converts or debt but also emerging as an as an alternative to a form of partnership where we can bring the same scale that a form of partnership would bring without without the other baggage that comes along with a partner and losing losing sort of strategic control and the strategic optionality by maintaining that I think is something that will accrue to rev meds benefit their shareholders benefit and we think that it's a model for other companies to follow so that was a that was a really big deal last year and one that we think every company you know that that's a lot of companies in these hallways took notice of that and it's it's led to a lot of really good discussions and hopefully some some uh deals that come will come from it over the next couple years i don't know maybe other ones to talk about yeah i think some other just to give people a sense of the spectrum of of what we do you know we've done we funded large sort of we funded large clinical development programs um

in uh mostly in phase three so we did a deal with biogen at the beginning of last year to fund um to fund a program they have in lupus so we can work with you know big we can work with big pharma to help them fund r d um terry mentioned synthetic royalty and then we uh and then you know a typical kind of royalty transaction we're still doing those as well so we bought a royalty um that we referenced earlier on a great lung cancer product called imdeltra last year for almost a billion dollars from b1 that amgen's launching right now and has um you know and is and is uh and is doing and is doing really well commercially so gives you a sense of the spectrum of how we

work with all the parts of the ecosystem let's talk about capital deployment you're tracking ahead of your five-year goal for capital deployment at least toward royalty acquisitions um tell us a little bit about how you've achieved that level of capital deployment what we should expect going forward so it's uh we're really happy with the level of deployment um but it's not just the number that's that matters much less than the quality of the products that we're bringing in That's really what drives us and why has it grown so much over the last, you know, couple of years? It's because companies are recognizing the role of royalties as a really attractive alternative funding source. The Royalty Pharma is recognized as a really great partner for companies. We can be there as they continue to scale. and so all of these things and then also I mean the the macro is that the capital needs of the industry are large and growing and so every company needs to be thinking about a whole menu of options that they can use to fund themselves and royalties are you know at the top of the list where we haven't displaced equity and we're probably not going to displace equity but we're kind of in that number two spot which is pretty pretty remarkable considering 10 years ago there were barely any companies looking at royalties as a as a way that they funded themselves um and so when we think about the forward uh you know we we've continued to say that we're gonna we're we're gonna do at least two to two and a half billion dollars we would describe that more as sort of a modeling assumption that we're giving to to to investors is like plug this in your model if you need to think about what the what the cash flows are going to look like from new investments assume two to two and a half billion dollars i think everyone at royalty forum feels like that's probably a pretty conservative number and that the number can be could be a lot bigger than that but it's going to be totally dependent on the quality of the products that come along and we don't feel like we have to do more um and if there are years where we can't even do that that's totally fine we'll be patient we'll wait for the right for the right

things to come along but the market has uh has clearly shown that it's a lot deeper now than it was you know a couple years ago and that's that's a really good thing for our business okay any questions from the room so of course all these deals are meant to drive your top line you have some long-term guidance uh out to 2030 for 4.7 billion in revenue what does that imply about your to grow from here and how do we achieve that goal?

Yeah, so I think we feel like at our investor day in September, we laid out, actually we reiterated guidance that we had given a couple of years prior, $4.7 billion. And at that time, consensus for Royalty Farm was only $4.1 billion. And it's ticked up a little bit, but it's still not all the way there. And so what that implied at the time of investor day was at least around 9%, I think, was the the growth number um that stack stacks up really favorably you know as you know to any other large pharma company and when you think about how we're going to get there um about half of it from things we already own and then half of it are things that we're going to that we're going to invest in over time um we feel like that number you know could that number be bigger yeah you know potentially sorry half of the growth half of the growth yeah yeah sorry half the growth could that number uh be bigger absolutely i think but we feel like at this when we gave the number uh consensus was still quite you know quite low and it still hasn't even gotten to that number so i feel like we're in a really good spot and um you know can continue to show investors that we can deliver predictable top-tier long-term growth um that's diversified because our portfolio is so diversified and that translates to continual cash flow that we get to reinvest in new deals and continue to generate really attractive returns and return capital to shareholders.

Yeah actually maybe you could talk a little bit about how that 4.7 billion falls to the bottom line and some of the specifics around royalty farmers P&L that make it we think very attractive.

Yeah, so the beauty of the business is it's pretty simple. So $4.7 billion on the top line, we've said between that we expect our operating and professional costs to be about 4% to 5% of that, so call it 95% adjusted EBITDA margins. And then the only other cost below that is interest expense. and you know we've said we've you know we've we've guided to in the around 360 370 million dollars this year I think of interest expense George correct me if I'm wrong and that's that's that's kind of the that's kind of the runway run rate I'm gonna go up a little bit as we as we refinance and and rates have gone up a little bit so but overall it's a it's a very efficient business model so So all of that cash drops to the bottom line. We have a lot of optionality in what we can do with it. We can increase the volume of royalty deals and increase the amount of capital we deploy. We can increase the dividend and we can also increase our share of repurchase programs. We already have a repo in place, we have $1.8 billion remaining on that as of the end of last year. And, you know, that's one of the tools that we'll also keep using. Great.

So you touched on this a little bit already, Terry, but your ability and the cadence of capital deployment depends a bit on the opportunity set and the quality thereof. Let's say we get to 2032, we look back five years. What do you think is the likelihood that Royalty Pharma has deployed less capital in that span of the previous five years? It sounds like the likelihood is pretty low, but maybe you can answer that question.

And then just tell us, what are the forces that push in either direction, Marshall, in terms of quality versus quantity? yeah i think like like terry said the first part of your question i think we feel super confident in the scale of the opportunity you know when you look at how much um the role and the role of royalties in funding our ecosystem has changed i think we still feel really strongly we're still on the upswing with that and you know that's why we mentioned you know companies that own royalties are increasingly seeing them as a source of capital companies see creating royalties to fund their launch or their phase three trial as a key part of the capital structure and you know there's the opportunity to fund r d with global pharma companies so when you think about all of those things coming together um the capital needs the industry is only growing you know i think we feel we feel good about about the opportunity and certain and certainly upside upside to it um the most important thing though terry mentioned it too is that look it we are really really disciplined and patient right and so if it's not there we're not going to do it you know i'm sure we'll talk about our capital deployment framework but we've sort of laid out for shareholders kind of how we think about all of that if you know um there's not a pressure on us to deploy capital so you know i think it is going to be opportunity driven but you know there's just so much of that out there that we're really excited any questions from the room

Let's talk a bit about the portfolio, but from a bird's eye view, what is the source of your royalties and the split of your current portfolio in terms of biopharma, foundations, universities, and then also development stage versus commercial stage? And how has that changed over the years?

So, in terms of the mix of biopharma versus foundations and universities, the dominant source is biopharma. The foundations, the CF royalty came from the Cystic Fibrosis Foundation, so that's a big one. But we don't really have much else there. We certainly have a number of academic royalties, but the area that's been growing the most has been the biopharma market and particularly synthetic royalties so those are royalties that we created like like like the revolution medicines deal as far as the mix of the portfolio right now of development stage versus approved development stage represents around 10 percent of our total capital at work so it's pretty small when you think about the overall portfolio and within that there are things there are there are products with varying levels of risk there are things that have already been that have already seen their phase three card read out and we're just waiting for for FDA approval and there are and then there are things that are that we're still you know in phase three trials and waiting for that for that card to turn over but when we think about the overall risk profile the business it's it's quite low and quite and we think really manageable um it's been around that you know high single digit 10 level for a while um and it will you know i think could it go up a little bit from there potentially but overall the you know when you think about the the size of the overall portfolio it's a very manageable risk level the other um cool context for that i think is if you compare that to our capital deployment on that

same metric right which is you know pre-approval capital deployment has been closer to probably 40 percent of our total capital over the last over the last 10 years it's been very stable there so you think about what's been happening and i think that's a you know interesting part about our business is you know it's cumulatively it's 40 at any one time like terry said it's like high single digits 10 because you know the things the the composition changes right we've had really great success with phase three trials reading out positively products being approved and launches and then they obviously go into our commercial portfolio so you know it's been a really important driver of our business but if you take that snapshot it's actually very small which i think

is you know and it's really attractive part of our business where you know it's not binary event driven you doesn't have that aspect of what you know a lot of biopharma investing is okay um maybe could talk about the market backdrop and whether that affects royalty pharma's business at all uh a lot of macro in the news at the moment um does the performance of public markets matter to your ability to deploy capital or your rate of return so this comes up all the time and there there seems to be a assumption that we will do better in bad markets where the capital markets are are closed uh and worse in good markets where where funding is readily available we don't feel like that's true at all we feel like our business is totally agnostic to the to the market backdrop we did we had great years in 20 and 2021 2020 and 2021 when the markets were booming um and we did well throughout 23, 24, 25. We don't feel like we're driven by the overall market environment. Why is that? Because I understand why people would make that assumption. It's because the needs are so big. The capital needs are so big that for a company to bring a drug to market, it's billions of dollars. They have to pull from so many different resources. It's hard to do that all with equity. Even if you're really successful and even if the markets are open, it's very tough to do that all with equity. We're also more attractive than equity from a cost of capital perspective, from a dilution perspective. It's product specific. We're taking risk alongside the partner directly in a program. For all of those reasons, we feel like it's a really attractive alternative to equity even when companies valuations are are stronger um and we've and we've shown it and so we feel like we can continue to to to have to who knows what the rest of this year is going to look like but we think we can continue to perform well uh regardless of the backdrop anything else let's talk about competition to the extent that there is any um what would you say are the key differences between wealthy pharma and your competitors yeah i think we this is another question we get asked a lot and uh you know i think um there's also a perception that you know in the past the market was totally not competitive and today

it's competitive and i think that's not that's not true right you know there there have always been competitors around um and we've continued to build the business and be successful because of those competitive advantages which i'll talk about in a second but the other really important thing is i think if you ask all of all of us on our team we really think that competition has been a major positive having other people in the market for our market it is without question made the market bigger deeper stronger created more volume the pie is bigger um and we've benefited from that so i think you know as royalties are and structured financing is more attractive there's going to be other people around we're not here to do every deal in our space right and i think it having having a really robust market is without question been a real been a real positive um you know why have we been successful i think it's a few things i think number one um it's our brand and our tenure in this in this market right we've been here for 30 years we operate in a really partner friendly win-win way and i think we um say what we're going to do and we do it and we try to be a really great partner i think that's number one number two the scale that we have in our core underlying financial strength of our business is without peer in our industry by a wide margin you know having three billion dollars plus of royalty revenue every year being able to redeploy two to two and a half billion dollars as a self-funding evergreen business is completely differentiated from how other people function in our market and i think that's a that's a major differentiator that allows us to compete from deals like we announced yesterday which is a very mature about to launch product to you know working on phase three with things that are not going to be on the market for years and years and then the third thing i'd mentioned is, you know, is our team, you know, in our infrastructure and our ability to to due diligence and really invest in our analytical and due diligence platform that we have is also bigger and bigger and broader and deeper than any of our peers. And then, you know, you bring all of that together.

And I think, you know, we feel really excited about our ability to not just to compete but to be an innovator who can grow our market and figure out new and different ways for us to work with companies any questions from the room so uh the marketers of the drugs on which you purchase royalties are not always competitors for those royalties but they are competitors in the sense that they compete uh for the attention and capital of the folks in this room what are the what are some of the differences between royalty pharma's business model and traditional biopharma that should make them pay more attention to you than perhaps they do it's just very different i mean we're we're we're a very large diversified business with that has um consistent

consistent growth in cash flow so so the cash flow is a bit as is very always a very big difference versus a lot of the other companies that are presenting at this conference probably um but uh Yeah, I mean, and that and the diversification is something that also oftentimes gets overlooked. So right now, in 2025, the top three products in our portfolio represented around 30% of our top line. You can, or sorry, 45% of our top line. When you compare that to big pharma, top three products represented around 55% of their top line and mid cap biotech, it's more like 85%. When you fast forward to our estimate for 2030, we think that the top three products in our portfolio are only going to be around 30% of our top line. Big Pharma is going to stay around the same, they're around 50%, and MidCap Biotech is expected to be around 75%. When you take it a step further, and this is something that oftentimes gets overlooked with our business, the strength of our business, is our diversification on the top line is exactly the same on the bottom line. So there are no costs that come along with these with these drugs. And so 30, so 2030, top three products are expected to represent 30% of our top line, 30% of our bottom line. Compare that to big pharma, where we know that the biggest products tend to be have a outsized impact on their profits. The top three products are expected to represent around 80% of their bottom lines. And then mid cap biotech, they're using all of their profits and then some to fund their pipelines. And so that's an area where we feel like it it's you know a real differentiator for our business model it allows us to deliver this predictable predictable top and bottom line growth and then the just the size of the market and how we operate in the market is so different from everyone else because we're completely therapeutic area agnostic when you look at the deals we did last year it's you know it's every different we touch almost every different therapeutic area and and we do that year in and year out and we're focused on the highest quality products we have no sort of constraints driven by previous infrastructure or therapeutic area biases and so that allows us to generate find the best products that consistently outperform and we have a have a track record of of really strong consistent out performance and the last thing i should mention is just returns we're we're we're in the returns business we've can we've delivered consistent irrs on the deals we did since our ipo we're expected to generate mid-teens irrs our return on invested capital has been consistently year in and year out in the mid-teens our return on equity has been in the low 20 range and so these are real differentiators when you compare us with with other companies that probably don't know what their returns are when they're doing business development deals

or maybe to make one other point related to that which is you know the other thing i think that's differentiated about our business is i think our ability to grow through the you know natural um loss of exclusivity in our in our portfolio we have a way easier time than than large pharma very often does i mean how much debate and time is spent thinking about sources to offset loe of successful products right you know what we've shown is because we're completely agnostic because we can look everywhere because we have no constraints like jerry said you know our ability to continue to grow over time you know is we have such a larger number of opportunities and sources to find those things to sustain our portfolio and our growth especially over the next decade that's going to be an important differentiator uh i'm going to ask you a very unfair question it's one that i get a lot about you all are you better than your peers at picking molecules um you know look we uh we we always want to be humble right about this and you know we we come to every deal you know and really focus on doing the highest quality work and the deepest work than we can i think one thing we do have over our peers is look we've been at this longer right we have more we talked about this a lot at our analyst day we have more institutional knowledge you know of doing of doing royalty deals and looking at products and looking at products in the way a royalty investor should right we probably do bring greater sort of diligence resources like I was saying you know because we are set up as an ongoing business you know we can spend millions of dollars a year to do to you know to have to have all the sources of data we have to do the work we need to do so you know i think all of that comes together in the fact that we feel really confident like terry said about our ability to our ability to pick winners and win the transactions we want to win right um a big theme so far at this conference and obviously in the zeitgeist is ai and its role in biopharma um maybe we could distill it down to a single example maybe just from the last week where you all have used ai in your day-to-day business activities at realty tomorrow just an example yeah um so i'm only hesitating because like you know i i think we've done some really cool and interesting things to uh to use ai in our diligence process but um maybe without talking about any sort of details we've definitely seen in lots and lots of opportunities to analyze data at scale using using LLMs in really interesting ways that we then combine with our internal data sets you know that being said I think we're you know very open and trying to figure out exactly where are the best kind of value add opportunities out there and we're going to continue continue to invest and most importantly make sure we have the right team there to um you know to apply all of these incredible technologies in our business correct um we're just at the top of the hour but i want to ask a final question which is in 10 years what will be the biggest surprise or change when we look at royalty pharma from that vantage point relative to today and from from ai or just in general in general yeah i hope that in 10 years people realize that this business is sustainable and that that that we can continue

to grow consistently year in and year out and we probably hopefully get less questions about competition fair enough great place to end thank you so much for your time guys yeah thank you