Royalty Pharma plc Class A Ordinary Shares 2026 Q2 Earnings Call

Please go ahead, sir. Good morning, and good afternoon to everyone on the call.

Thank you for joining us to review Royalty Pharma's second quarter results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com. On slide two, I'd 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 from these statements. We refer you to our most recent 10-K on file with the SEC for a description of these risks. All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements.

Non-GAAP liquidity measures will be used to help you understand our financial results, the reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. With that, please advance to slide three. Our speakers on the call today are Pablo Legorreta, Chief Executive Officer and Chairman of the Board, Marshall Urist, EVP, Head of Research and Investments, Chris Hite, Chairman Partnering and Investments, and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Marshall will provide a portfolio update. Chris will then discuss our development stage pipeline, and Terry will review the financials. Following concluding remarks from Pablo, we will hold a Q&A session. With that, I'd like to turn the call over to Pablo.

Thank you, George, and welcome everyone. I am pleased to report another quarter of strong financial performance and disciplined execution. Our 25th consecutive quarter as a public company with strong, predictable double-digit growth, and we're achieving this as we continue to deliver on our goal of being the premier capital allocator in life sciences, driving consistent compounding growth. Slide five summarizes our strong business momentum in the second quarter. Starting with the financials, we delivered 6% growth in portfolio receipts, our top line, and 14% growth in total receipts, which are our recurring cash flows. Our top-line performance was ahead of our guidance for the quarter and reflects the tremendous momentum of our diversified portfolio. We also maintained attractive returns in our business with return on invested capital of 14.2% and return on invested equity of 20.1%.

By consistently delivering strong growth and superior returns, we believe we have a clear path to drive continued shareholder value creation. Turning to capital allocation, we have deployed $1.1 billion of capital on royalty acquisitions so far this year, with an announced value of $1.7 billion. Most importantly, we acquired a royalty on AstraZeneca's cliramitug, a potential blockbuster therapy for transthyretin amyloid cardiomyopathy. As we look ahead, our deal pipeline remains robust. Under our value-driven capital allocation framework, we also returned around $370 million to shareholders in dividends and share repurchases in the first half of the year. Moving to our portfolio, we continue to see a number of positive updates. Our partner, Revolution Medicines, completed its rolling submission for daraxonrasib in pancreatic cancer, with accelerated review also underway in Europe. We were also delighted to see key regulatory approvals for Gilead's TRODELVY, GSK's Jideytro, and Amgen's IMDELLTRA.

We look forward to these therapies contributing to our top line in the years ahead. Looking ahead, we're increasing our 2026 full-year guidance for the second consecutive quarter based on the strong business momentum I just highlighted. Slide six is one that I return to each quarter as it demonstrates our consistent double-digit growth on average since our IPO. We have delivered this impressive record year in and year out, regardless of the market backdrop. This reflects the quality of our asset selection and our unique business model. Slide seven, my final slide, underscores the quality of our diligence process and our deep understanding of the life sciences ecosystem. In short, we've been ahead of the curve in identifying some of the most exciting innovators. Nuvalent and Emalex are just the latest examples of companies whose therapies we acquired royalties on that were subsequently acquired by large pharma companies.

This, of course, validated our internal views of their programs and will also likely increase the value of our royalties as large pharma brings significant clinical resources and commercial scale. With that, I will hand it over to Marshall.

Thanks, Pablo. I want to focus today on our recent royalty deal for cliramitug, which is our second investment in TTR amyloidosis. Beginning on Slide nine, we recently acquired a portion of Neurimmune's royalty interest in AstraZeneca's cliramitug for up to $425 million. The transaction was structured to include a $125 million upfront payment to Neurimmune, an additional $125 million payment in the first quarter of 2027, and up to $175 million payable on key clinical and regulatory milestones. In return, Royalty Pharma will receive a royalty of 3.75% on worldwide net sales. Cliramitug is a highly novel therapy for TTR amyloidosis with cardiomyopathy, or ATTR-CM. ATTR-CM is an age-associated progressive disease in which misfolded TTR proteins accumulate in the heart, severely impacting heart function and ultimately survival. There are several approved therapies for this indication, including AMVUTTRA, our first investment in this indication.

The approved therapies slow disease progression by preventing ATTR accumulation, but they do not impact the amyloid deposits that have already accumulated in the heart. As a first-in-class TTR fibril-depleting antibody, cliramitug is designed to remove amyloid and potentially reverse the course of the disease, a clearly differentiated role for cliramitug with significant benefit for patients. The early clinical data for cliramitug are impressive. phase I demonstrated strong amyloid clearance via biomarkers that correlate with improved cardiovascular outcomes. A phase III outcomes trial is fully enrolled around 1,200 patients, and results are expected in 2028. We see clear blockbuster potential for cliramitug in an expanding market, which was more than $7 billion last year.

There are over half a million patients worldwide with ATTR-CM, including around 200,000 in the U.S., and of these, around 80% of patients are untreated, underscoring the scale of the unmet need and the scope for market growth. AstraZeneca has provided peak annual sales for cliramitug of between $3 billion-$5 billion. Based on this, we would expect to generate an internal rate of return in the teens, consistent with our development stage target range, and peak annual royalties of approximately $110 million-$190 million based on AstraZeneca's peak sales expectations. Moving to slide 10. This latest transaction is a compelling example of how Royalty Pharma builds significant therapeutic expertise over many years, allowing us to invest in the best potentially transformative medicines, often across multiple products in the same class.

In the case of ATTR, we've been closely following this therapeutic category over the past decade and have evaluated many of the therapies that are now approved. Our first investment was AMVUTTRA in 2025, which has had a strong launch in cardiomyopathy. With the addition of cliramitug to our portfolio, we now have two differentiated approaches to this serious, rare disease, as you have seen us do this in many other indications such as prostate cancer, spinal muscular atrophy, immunology, and multiple sclerosis. This ability to build a portfolio with multiple therapies in a category is unique to Royalty Pharma. When combined with our proven deep diligence, we are well-positioned to invest in the most practice-changing and innovative therapeutic categories in the industry for years to come. With that, let me hand over to Chris.

Thanks, Marshall. For my section of today's presentation, I want to highlight the significant expansion of our development stage pipeline, together with important upcoming events across the portfolio. You can see on slide 12 that we have achieved strong, consistent growth in our development stage pipeline since our IPO in June 2020. At that time, we had three potential therapies in the pipeline. Today, we have 19, a more than six-fold increase. More importantly, the peak royalty potential of our pipeline has increased by more than 30 fold over the period, with peak potential royalties from our late-stage pipeline now totaling approximately $2 billion. We have also demonstrated an excellent success rate, with around 90% for development-stage investments ultimately achieving regulatory approval, which provides us confidence that these products will be an important driver of growth into 2030 and beyond.

The track record of success is underscored by Slide 13, which shows that in addition to daraxonrasib, our portfolio has delivered a number of successful clinical readouts and regulatory events so far in 2026. These include positive clinical trial results for Cytokinetics' MYQORZO, Zynessis' obexilumab, and Biogen's litifilimab, FDA approvals of GSK's Jideytro, Sanali's Avleya, and Gilead's Trovartinvelvi, as well as a number of FDA regulatory submissions. Expanding on this theme, Slide 14 shows there is much more to come from our development stage pipeline, with several major pivotal trial readouts expected through 2027. In 2026, we expect to see the results of the outcomes trial for Novartis' pelacarsen. We continue to believe that the Lp(a) class could be the next major class of cardiovascular disease drugs, and we're strongly positioned to leverage this with the two lead pipeline products in pelacarsen and Amgen's olpasiran.