What changed in this filing

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Item 1A. Risk Factors

2022-02-15 compared with 2021-02-24 · 89 added, 165 removed, 675 unchanged (27% of the section changed)

9 unchanged sentences

• the ability of the Manager to identify suitable assets for us to acquire;

• uncertainties related to the acquisition of interests in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates and late-stage funding opportunities to our product portfolio;

• potential strategic acquisitions of biopharmaceutical companies;

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General Risk Factors

• the impact of COVID-19 on our operations.

• the impact of COVID-19, or the future outbreak of any other infectious or contagious diseases, on our operations.

Risks Relating to Our Business

Biopharmaceutical products are subject to sales risks.

Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, obsolescence, loss of patent protection, the impact of the COVID-19 global pandemic or other factors and development-stage product candidates may fail to reach the market.

Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures, insufficient demand, product competition, failure of clinical trials, lack of market acceptance, obsolescence, lack of acceptance by government healthcare programs and private insurance plans, loss of patent protection, the impact of the COVID-19 global pandemic or other factors and development-stage product candidates may fail to reach the market.

Unexpected side effects, safety or efficacy concerns can arise with respect to a product, leading to product recalls, withdrawals or declining sales.

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The royalty market may not grow at the same rate as it has in the past, or at all, and we may not be able to acquire sufficient royalties to sustain the growth of our business.

We have been able to grow our business over time by acquiring numerous royalties, including those relating to many of the industry’s leading therapies.

We may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, to invest the full amount of capital that may be available to us in the future, which could prevent us from executing our growth strategy and negatively impact our results of operations.

We have been able to grow our business over time by primarily acquiring royalties.

However, we may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, to invest the full amount of capital that may be available to us in the future, or at our targeted amount and rate of deployment, which could prevent us from executing our growth strategy and negatively impact our results of operations.

Changes in the royalty market, including its structure and participants, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire royalties, fewer royalties (or royalties of significant scale) being available, or increased competition for royalties.

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Acquisitions of royalties from development-stage biopharmaceutical product candidates are subject to a number of uncertainties.

We may continue to and in the future acquire more royalties on development-stage product candidates that have not yet received marketing approval by any regulatory authority.

There can be no assurance that the FDA, the EMA or other regulatory authorities will approve such products or that such products will be brought to market timely or at all, or that the market will be receptive to such products.

For example, in January 2016, we partnered with Pfizer to provide up to $300 million in funding for Pfizer’s ongoing Phase III clinical trials, the PALLAS and PENELOPE-B trials, of Ibrance (palbociclib) for the adjuvant treatment of breast cancer.

On May 29, 2020, Pfizer reported that the independent data monitoring committee for the PALLAS trial had concluded after the recent interim analysis that the PALLAS trial is “unlikely to show a statistically significant improvement in the primary endpoint of invasive disease-free survival.” Subsequently on October 9, 2020, Pfizer announced that the Phase III PENELOPE-B trial did not meet the primary endpoint of improved invasive disease-free survival in women with hormone receptor-positive (HR+), human epidermal growth factor-negative early breast cancer who have residual invasive disease after completing neoadjuvant chemotherapy.

If the FDA, the EMA or other regulatory authority approves a development-stage product candidate that generates our royalties, the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements.

We may acquire more royalties on development-stage product candidates that have not yet received marketing approval by any regulatory authority.

There can be no assurance that the FDA, the European Medicines Agency (“EMA”) or other regulatory authorities will approve such products or that such products will be brought to market timely or at all, or that the market will be receptive to such products.

For example, in January 2016, we partnered with Pfizer to provide up to $300 million in funding for Pfizer’s ongoing Phase 3 clinical trials, the PALLAS and PENELOPE-B trials, of Ibrance (palbociclib) for the adjuvant treatment of breast cancer.

On May 29, 2020, Pfizer reported that the independent data monitoring committee for the PALLAS trial had concluded after the recent interim analysis that the PALLAS trial is “unlikely to show a statistically significant improvement in the primary endpoint of invasive disease-free survival.” Subsequently on October 9, 2020, Pfizer announced that the Phase 3 PENELOPE-B trial did not meet the primary endpoint of improved invasive disease-free survival in women with hormone receptor-positive (HR+), human epidermal growth factor-negative early breast cancer who have residual invasive disease after completing neoadjuvant chemotherapy.

If the FDA, the EMA or other regulatory authority approves a development-stage product candidate that generates our royalties, the labeling, packaging, manufacturing, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements.

The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the product, and could include withdrawal of the product from the market.

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Losses from such assets could adversely affect our business, financial condition and results of operations.

We intend to continue, and may increase, this strategy of acquiring development-stage product candidates.

While we believe that we can readily evaluate and gain conviction about the likelihood of a development-stage product candidate’s approval and achieving significant sales, there can be no assurance that our assumptions will prove correct, that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market timely or at all, or that such products will achieve commercial success.

While we believe that we can evaluate the likelihood of a development-stage product candidate’s approval and achieving significant sales, there can be no assurance that our assumptions will prove correct, that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market timely or at all, or that such products will achieve commercial success.

Our strategy of acquiring royalty interests in development-stage product candidates, including by co-funding clinical development and acquiring securities of biopharmaceutical companies, is subject to risks and uncertainties.

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We may undertake strategic acquisitions of biopharmaceutical companies with significant royalty assets.

Our failure to realize expected benefits of such acquisitions or our incurrence of unanticipated liabilities, could adversely affect our share price, operating results and results of operations.

Our failure to realize expected benefits of such acquisitions or our incurrence of unanticipated liabilities, could adversely affect our business, financial condition and results of operations.

We may acquire companies with significant royalty assets or where we believe we could create significant synthetic royalties.

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• to the extent that interest rates at which we borrow increase, our borrowing costs will increase and our leveraging strategy will become more costly, which could lead to diminished net profits.

• because our Revolving Credit Facility utilizes LIBOR as a factor in determining the applicable interest rate, the expected discontinuation and transition away from LIBOR may increase the cost of servicing debt, lead to higher borrowing costs and adversely affect our results of operations and cash flows.

We do not employ our own personnel and are entirely dependent upon the Manager for all the services we require.

Because we are “externally managed,” we do not employ our own personnel but instead depend upon the Manager, its executive officers and its employees for virtually all of the services we require.

Because we are “externally managed,” we do not employ our own personnel but instead depend upon the Manager, its executive officers and its employees for all of the services we require.

The Manager selects and manages the acquisition of royalties and similar payment streams that meet our investment criteria and provides all of our other administrative services.

Accordingly, our success is largely dependent upon the expertise and services of the executive officers and other personnel provided to us through the Manager.

The Management Agreement has an initial term of ten years, after which it can be renewed for an additional term of three years, unless either we or the Manager provides notice of non-renewal 180 days prior the expiration of the initial term or renewal term.

Accordingly, our success is dependent upon the expertise and services of the executive officers and other personnel provided to us through the Manager.

The Management Agreement has an initial term of ten years, after which it can be renewed for an additional term of three years, unless either we or the Manager provide notice of non-renewal 180 days prior the expiration of the initial term or renewal term.

The Manager may not be removed during the initial or any renewal term without cause.

While our agreement with the Manager requires its executives to devote substantially all of their time to managing us and any legacy vehicles related to Old RPI or RPI unless otherwise approved by Board, such resources may prove to be inadequate to meet our needs.

While our agreement with the Manager requires its executives to devote substantially all of their time to managing us and any legacy vehicles related to Old RPI or RPI unless otherwise approved by the board of directors, such resources may prove to be inadequate to meet our needs.

The success of our business depends upon key members of the Manager’s senior advisory team who may not continue to work for the Manager.

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Our future success depends to a significant extent on the continued service and coordination of the senior advisory professionals of the Manager, particularly Mr.

Pursuant to the Management Agreement, executives of the Manager must devote substantially all of their business time to managing us, unless otherwise approved by the Board.

Pursuant to the Management Agreement, executives of the Manager must devote substantially all of their business time to managing us, unless otherwise approved by the board of directors.

Despite this, Mr.

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We are a beneficiary of this agreement.

In addition, executives of the Manager must devote substantially all of their business time to managing us and any legacy vehicle related to Old RPI or RPI, unless otherwise approved by the Board.

In addition, executives of the Manager must devote substantially all of their business time to managing us and any legacy vehicle related to Old RPI or RPI, unless otherwise approved by the board of directors.

Despite this, the ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreement, may reduce the amount of time our Manager, its officers or other employees spend managing us.

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Legorreta does not have any material constraints on the time he has available to devote to us and the Manager.

From time to time, the Manager and Pharmakon may pursue similar investment opportunities for their respective clients, although we believe that actual conflicts of interest are rare due to the differing investment strategies of Pharmakon and us, and the fact that royalty holders, rather than the Pharmakon and us, determine the type of transaction they seek.

From time to time, the Manager and Pharmakon may pursue similar investment opportunities for their respective clients, although we believe that actual conflicts of interest are rare due to the differing investment strategies of Pharmakon and us, and the fact that royalty holders, rather than Pharmakon and us, determine the type of transaction they seek.

Under arrangements with Pharmakon, the Manager subleases office space to Pharmakon, and the parties may provide research, business development, legal, compliance, financial and administrative services to one another.

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In addition, the structure of our Manager’s compensation arrangements may have unintended consequences for us.

We have agreed to pay our Manager the Operating and Personnel Payments (as defined below), a portion of which is based on the mark-to-market value of security investments, including equity securities and derivative financial instruments, at the end of each quarter and is payable to the Manager regardless of whether we realize any gain on the security investments when sold.

We have agreed to pay our Manager or its affiliates quarterly operating and personnel expenses (the “Operating and Personnel Payments”), a portion of which is based on the mark-to-market value of security investments, including equity securities and derivative financial instruments, at the end of each quarter and is payable to the Manager regardless of whether we realize any gain on the security investments when sold.

Consequently, the Manager may be incentivized to have us make security investments regardless of our expected gain on such investments, which may not align with our or our shareholders’ long-term interests.

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As of December 31, 2021, our total principal amount of Notes outstanding was $7.3 billion .

In addition, we have up to $1.5 billion of available revolving commitments under our Revolving Credit Facility.

Our ability to make payments on our indebtedness, including the Notes, and to fund our planned capital expenditures and our other ongoing liquidity needs will depend on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors beyond our control.

In addition, we have up to $1.5 billion of available revolving commitments under our unsecured revolving credit facility (the “Revolving Credit Facility”).

Except for RP Holdings, our subsidiaries that do not guarantee the Notes will have no obligation, contingent or otherwise, to pay amounts due under the Notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment.

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Absent sufficient cash flow and the ability to refinance, we could also be forced to sell assets to make up for any shortfall in our payment obligations.

However, the terms of our Revolving Credit Facility and the indenture that governs the Notes will limit, our and our subsidiaries’ ability to sell assets and also restrict the use of proceeds from such a sale.

However, the terms of the agreements that govern our existing outstanding debt limit, our and our subsidiaries’ ability to sell assets and also restrict the use of proceeds from such a sale.

Accordingly, we may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations on our indebtedness.

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We make assumptions regarding the royalty duration for terms that are not contractually fixed, and a shortened royalty term could result in a reduction in the effective interest rate, a decline in income from royalties, significant reductions in royalty payments compared to expectations, or a permanent impairment.

In accordance with generally accepted accounting principles in the United States, or U.S.

GAAP, we classify most royalty assets that we acquire as financial assets that are measured at amortized cost using the prospective effective interest method described in ASC 835-30.

In accordance with generally accepted accounting principles in the United States GAAP, we classify most royalty assets that we acquire as financial assets that are measured at amortized cost using the prospective effective interest method described in ASC 835-30.

The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount, net of any purchased receivables.

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It is common for royalty durations to expire earlier or later than anticipated due to unforeseen positive or negative developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing for the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations.

An unexpected shortening of a royalty term has not caused a permanent impairment in recent years.

However, if an unexpected shortening of a royalty term were to occur, it could result in a reduction in the effective interest rate, a decline in income from royalties, a significant reduction in royalty payments compared to expectations, or a permanent impairment.

If an unexpected shortening of a royalty term were to occur, it could result in a reduction in the effective interest rate, a decline in income from royalties, a significant reduction in royalty payments compared to expectations, or a permanent impairment.

Our reliance on a limited number of products may adversely affect our business, financial condition and results of operation.

While our current asset portfolio includes royalties relating to over 45 marketed therapies and five development-stage product candidates, the top five therapies accounted for 61% of our royalty receipts in the year ended December 31, 2020.

While our current asset portfolio includes royalties relating to over 35 marketed products and ten development-stage product candidates, the top five product franchises accounted for 67% of our royalty receipts in the year ended December 31,

In addition, our asset portfolio may not be fully diversified by geographic region or other criteria.

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The opportunity cost of diverting management and financial resources could negatively impact our ability to locate and acquire other assets.

Most of our royalties are classified as financial assets that are measured at amortized cost using the effective interest method of accounting as a result of which our U.S.

GAAP results of operations can be volatile and unpredictable.

In accordance with U.S.

GAAP, most of the royalty assets we acquire are treated as investments in cash flow streams and are thus classified as financial assets.

Most of our royalties are classified as financial assets that are measured at amortized cost using the effective interest method as a result of which our GAAP results of operations can be volatile and unpredictable.

In accordance with GAAP, most of the royalty assets we acquire are treated as investments in cash flow streams and are thus classified as financial assets.

Under this classification, our financial royalty assets are treated as having a yield component that resembles loans measured at amortized cost under the effective interest accounting methodology.

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The yield, which is calculated at the end of each reporting period and applied prospectively, is then recognized via accretion into our income at the effective rate of return over the expected life of the financial royalty asset.

As a result of applying the effective interest method of accounting, our income statement activity in respect of many of our royalties can be volatile and unpredictable as a result of non-cash charges associated with the provision.

Small declines in sell-side equity research analysts’ consensus forecasts over a multi-year period can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future.

For example, in late 2014 we acquired the cystic fibrosis franchise royalty, which was treated as a financial royalty asset.

Beginning in the second quarter of 2015, declines in near-term sales forecasts of sell-side equity research analysts caused us to build up a provision for this financial royalty asset.

Over the course of 10 quarters, we recognized non-cash charges to the income statement as a result of these changes in forecasts, ultimately accumulating a peak cumulative provision of $1.3 billion by September 30, 2017, including a non-cash expense of $743.2 million in 2016 related to this financial royalty interest.

With the approval of the Vertex triple combination therapy, Trikafta, in October 2019, sell-side equity research analysts’ consensus forecasts increased to reflect the larger addressable market and the increase in the expected duration of the Trikafta royalty.

While small reductions in the cumulative provision for the royalties related to our cystic fibrosis franchise were recognized in 2018, there remained a $1.1 billion cumulative provision balance that was fully offset by a $1.1 billion credit to the provision in 2019 as a result of an increase in sell-side equity research analysts’ consensus forecasts from the Trikafta approval.

As a result of the non-cash charges associated with the application of the effective interest method accounting methodology, our income statement activity in respect of many of our royalties can be volatile and unpredictable.

Small declines in sell-side equity research analysts’ consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future.

For example, in late 2014 we acquired the cystic fibrosis franchise royalty, which is classified as a financial royalty asset.

Beginning in the second quarter of 2015, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expenses to the income statement and build up a corresponding cumulative allowance which reduced the gross balance for this financial royalty asset.

Over the course of 10 quarters, we recognized non-cash provision expenses as a result of these changes in forecasts, including a non-cash expense of $743.2 million in 2016, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017 related to this financial royalty asset.

With the approval of the Vertex triple combination therapy, Trikafta, in October 2019, sell-side equity research analysts’ consensus sales forecasts increased to reflect the larger addressable market and the extension of the expected duration of the Trikafta royalty.

While small reductions in the cumulative allowance for the cystic fibrosis franchise were recognized as provision income in 2017 and 2018, there remained a $1.10 billion cumulative allowance that was fully reduced by $1.10 billion in 2019 as a result of an increase in sell-side equity research analysts’ consensus sales forecasts associated with the Trikafta approval.

The financial statement impact caused by the application of the effective interest accounting methodology could result in a negative perception of our results in a given period.

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In both the U.S.

markets, sales of medical, biopharmaceutical products, and the success of such products, depends in part on the availability and extent of coverage and reimbursement from third-party payors, including government healthcare programs and private insurance plans.

markets, sales of biopharmaceutical products, and the success of such products, depends in part on the availability and extent of coverage and reimbursement from third-party payors, including government healthcare programs and private insurance plans.

In the United States, pharmaceutical product pricing is subject to enhanced government regulation, public scrutiny and calls for reforms.

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The procedures to approve biopharmaceutical products for commercialization vary among countries and can involve additional testing and time.

Such procedures may include on-site inspections by regulatory authorities at clinical trial sites or manufacturing facilities, which inspections may be delayed by travel restrictions imposed in response to the COVID-19 pandemic or other pandemics.

Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA.

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Typically, we have no ability to control the prosecution, maintenance, enforcement or defense of patent rights, but must rely on the willingness and ability of our partners or their marketers to do so.

While we believe that these third parties are in the best position and have the requisite business and financial motivation to do so, there can be no assurance that these third parties will vigorously prosecute, maintain, enforce or defend such rights.

There can be no assurance that these third parties will vigorously prosecute, maintain, enforce or defend such rights.

Even if such third parties seek to prosecute, maintain, enforce or defend such rights, they may not be successful.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has, in recent years, been the subject of much litigation.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has been the subject of much litigation.

Furthermore, changes in patent laws or interpretation of patent laws in the United States and in other jurisdictions could increase the uncertainties surrounding the successful prosecution of patent applications and the successful enforcement or defense of issued patents by our partners, all of which could diminish the value of patent protection relating to the biopharmaceutical assets.

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The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and may be challenged in the courts or patent offices in the United States and abroad.

Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit the ability of our partners and their marketers from stopping others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of their products, development-stage product candidates and technologies.

Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit the ability of our partners and their marketers from preventing others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of their products, development-stage product candidates and technologies.

Any loss or reduction in the scope or duration of patent protection for any product that generates our royalties, or any failure to successfully prosecute, maintain, enforce or defend any patents that protect any such product may result in a decrease in the sales of such product and any associated royalties payable to us.

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Any of these parties may breach the agreements and disclose the confidential information or competitors might independently develop or learn of the information in some other way, which could harm the competitive position of the products and therefore reduce the amount of cash flow generated by our royalty interest.

The internal computer systems of our partners may fail or suffer security breaches, which could result in a significant disruption of their ability to operate their business effectively, adversely affect the cash flow generated by the related biopharmaceutical products, and adversely affect our business and operating results.

The internal computer systems and cloud-based computing services of our partners and those of their current and any future collaborators and other contractors or consultants are vulnerable to damage or interruption from computer viruses, data corruption, cyber-based attacks, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

If such an event were to occur and cause interruptions in their operations, it could result in a disruption of their development and commercialization programs and business operations, whether due to a loss of trade secrets or other proprietary information or other similar disruptions.

To the extent that any disruption or security breach were to result in a loss of, or damage to, a partner’s data or applications, or inappropriate disclosure of confidential or proprietary information, our partners’ operations may be harmed and the development and commercialization of their products, development-stage product candidates and technologies could be delayed.

The internal computer systems of our counterparties may fail or suffer security breaches, which could result in a significant disruption of their ability to operate their business effectively, adversely affect the cash flow generated by the related biopharmaceutical products, and adversely affect our business, financial condition and results of operations.

The internal computer systems and cloud-based computing services of our counterparties and those of their current and any future collaborators and other contractors or consultants are vulnerable to damage or interruption from computer viruses, data corruption, cyber-based attacks, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

We have been subject to cyber-based attacks and unauthorized access in the past.

If such an event were to occur in the future and cause interruptions in their operations, it could result in a disruption of their development and commercialization programs and business operations, whether due to a loss of trade secrets or other proprietary information or other similar disruptions.

To the extent that any disruption or security breach were to result in a loss of, or damage to, a counterparties’ data or applications, or inappropriate disclosure of confidential or proprietary information, our partners’ operations may be harmed and the development and commercialization of their products, development-stage product candidates and technologies could be delayed.

Such an event may reduce the amount of cash flow generated by the related biopharmaceutical products and therefore adversely affect our business, financial condition and results of operations.

Our ability to pay periodic dividends to our shareholders may be limited by applicable provisions of English law and contractual restrictions and obligations.

Our ability to pay periodic dividends to our shareholders or make share repurchases may be limited by applicable provisions of English law and contractual restrictions and obligations.

Under English law, we will only be able to declare dividends, make distributions or repurchase shares (other than out of the proceeds of a new issuance of shares for that purpose) out of profits available for distribution.

Profits available for distribution are accumulated, realized profits, to the extent that they have not been previously utilized by distribution or capitalization, less its accumulated, realized losses, to the extent that they have not been previously written off in a reduction or reorganization of capital duly made.

The amount of our distributable reserves is a cumulative calculation.

We may be profitable in a single financial year but unable to pay a dividend or make share repurchases if our accumulated, realized profits do not offset all previous years’ accumulated, realized losses.

Additionally, we may only make a distribution if our net assets are not less than the amount of our aggregate called-up share capital and distributable reserves, and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.

Subject to the terms of our indebtedness or other contractual obligations, the approval and payment of any interim dividends are at the sole discretion of our board of directors, which may change our dividend policy at any time and the payment of any final dividends will be subject to majority approval by holders of Class A ordinary and Class B ordinary shares and in each case will be paid out of profits available for that purpose under English law.

There can be no assurance that any dividends, whether quarterly or otherwise, will or can be paid.

Our ability to pay dividends to our shareholders depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our business and acquisition opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of dividends by us to our shareholders and such other factors as our board of directors may deem relevant.

Our Articles of Association authorize the board of directors to approve interim dividends without shareholder approval to the extent that such dividends appear justified by profits available for such purpose.

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No such dividend may exceed the amount recommended by the board of directors.

Under English law, dividends and distributions may only be made out of profits available for that purpose.

The amount of our distributable reserves is a cumulative calculation.

We may be profitable in a single financial year but unable to pay a dividend if our accumulated, realized profits do not offset all previous years’ accumulated, realized losses.

There can be no assurance that any dividends, whether quarterly or otherwise, will or can be paid or that any shares will or can be repurchased.

Our ability to pay dividends to our shareholders or make share repurchases depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our business and acquisition opportunities, our financial condition and results of operations, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, restrictions and other implications on the payment of dividends by us to our shareholders or make any share repurchases and such other factors as our board of directors may deem relevant.

A shareholder who receives a distribution under circumstances where he or she knows or has reasonable grounds for believing that the distribution is unlawful in the circumstances is obliged to repay such distribution (or that part of it, as the case may be) to us.

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In addition, even though Equity Performance Awards are payable on a portfolio-by-portfolio basis (with portfolios comprised of investments made during sequential two-year periods) in order to reduce the risks that affiliates of the Manager will be paid Equity Performance Awards on individual investments even though our overall portfolio of investments is not performing well, Equity Performance Awards may nevertheless be payable to affiliates of the Manager when our overall portfolio of investments is not performing as well as the individual portfolios that are used as the basis for measuring the Equity Performance Awards.

Our board of directors may make decisions with respect to the cash generated from our operations that may result in no dividends paid to our shareholders.

Our board of directors is under no obligation to pay dividends to our shareholders, and it may decide to use cash to fund asset acquisitions or operations in lieu of paying dividends.

We will pay Equity Performance Awards to an affiliate of the Manager based on our Net Economic Profit regardless of whether any dividends are made to our shareholders.

Our board’s decisions with respect to our cash may result in no dividends to our shareholders.

Furthermore, our board’s decisions with respect to dividends may adversely affect the market price of our Class A ordinary shares.

Our board of directors may make decisions with respect to the cash generated from our operations that may result in no dividends paid to our shareholders or no repurchases made of our ordinary shares.

Our board of directors is under no obligation to pay dividends, make distributions or repurchase our ordinary shares and it may decide to use cash to fund asset acquisitions or operations in lieu of paying dividends, making distributions or repurchasing our ordinary shares.

We will pay Equity Performance Awards to an affiliate of the Manager based on our Net Economic Profit regardless of whether any dividends are paid to our shareholders or any ordinary shares are repurchased.

Our board of directors’ decisions with respect to our cash may result in no dividends to our shareholders and no ordinary shares repurchased.

Furthermore, our board of directors’ decisions with respect to dividends or repurchases of ordinary shares may adversely affect the market price of our Class A ordinary shares.

In the event that we generate positive income, but pay limited or no dividends, holders of Class A ordinary shares may, if they have made certain elections for U.S.

federal income tax purposes with respect to their Class A ordinary shares, have a tax liability on our income in excess of the actual cash dividends received by such holders.

If our board of directors decides to approve limited or no dividends, the primary remedy for holders of Class A ordinary shares will be to sell their at prevailing market prices, including at a loss, which prices may be low due to unfavorable or inconsistent dividends.

If our board of directors decides to approve limited or no dividends or repurchases of ordinary shares, the primary remedy for holders of Class A ordinary shares will be to sell their shares at prevailing market prices, including at a loss, which prices may be low due to unfavorable or inconsistent dividends or repurchases of our ordinary shares.

The royalties that we acquire may fall outside the biopharmaceutical industry, and any such assets, and the cash flows therefrom, may not resemble the assets in our current portfolio.

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Our principal asset is our controlling equity interest in RP Holdings.

As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends on our ordinary shares.

Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions.

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• market conditions in the broader stock market in general, or in our industry in particular;

including as a result of impacts of the ongoing COVID-19 pandemic;

• variations in our quarterly operating results or dividends to shareholders;

• additions or departures of key management personnel at the Manager;

• timing and rate of capital deployment, including relative to estimates;

• changes in our portfolio mix or acquisition strategy;

• failure to meet analysts’ earnings estimates;

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We have obtained authority from our shareholders to disapply preemptive rights for a period expiring on May 31, 2025, which disapplication will need to be renewed upon expiration (i.e., at least every five years) to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period).

English law also generally prohibits a public company from repurchasing its own shares without the prior approval of shareholders by ordinary resolution, being a resolution passed by a simple majority of votes cast, and other formalities.

Such approval may be for a maximum period of up to five years.

English law also generally prohibits a public company from repurchasing its own shares by way of “off market purchases” without the prior approval of shareholders by ordinary resolution, being a resolution passed by a simple majority of votes cast, and other formalities.

Such approval may be for a maximum period of up to five years but may be sought more frequently.

English law prohibits us from conducting “on market purchases” as our shares are listed on the NASDAQ and will not be traded on a recognized investment exchange in the United Kingdom.

The United Kingdom’s vote in favor of withdrawing from the European Union may have a negative effect on global economic conditions, financial markets and our business, which could reduce the market price of our Class A ordinary shares.

The withdrawal of the United Kingdom from the European Union (commonly referred to as “Brexit”) took effect on January 31, 2020 (the “Exit Day”).

A post-Brexit transition period started on the Exit Day and expired on December 31, 2020.

In December 2020, the United Kingdom and the European Union agreed on a trade and cooperation agreement that will apply provisionally after the end of the transition period until it is ratified by the parties to the agreement.

On December 31, 2020, the United Kingdom passed legislation giving effect to the trade and cooperation agreement, with the E.U.

expected to formally adopt the agreement in early 2021.

The withdrawal of the United Kingdom from the European Union (commonly referred to as “Brexit”) took effect on January 31, 2020.

On December 30, 2020, the United Kingdom passed legislation giving effect to a trade and cooperation agreement, with the EU, which became effective on May 1, 2021.

The trade and cooperation agreement covers the general objectives and framework of the relationship between the United Kingdom and the European Union, including as it related to trade, transport, visas, judicial, law enforcement and security matters, and provides for continued participation in community programs and mechanisms for dispute resolution.

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While our Class A ordinary shares are eligible for deposit and clearing within the DTC system and DTC has agreed to accept our Class A ordinary shares for deposit and clearing within its facilities in certain specified circumstances, DTC will generally have discretion to cease to act as a depository and clearing agency for the Class A ordinary shares, including to the extent that any changes in U.K.

law (including changes as a result of the U.K.’s withdrawal from the EU, which could affect the stamp duty or stamp duty reserve tax (“SDRT”) position) change the stamp duty or SDRT position in relation to the Class A ordinary shares.

law change the stamp duty or stamp duty reserve tax (“SDRT”) position in relation to the Class A ordinary shares.

If DTC determined at any time that the shares were not eligible for continued deposit and clearance within its facilities, then we believe the shares would not be eligible for continued listing on a U.S.

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The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public entity, we are subject to the reporting requirements of the U.S.

Securities Exchange Act of 1934, as amended (“U.S.

Exchange Act”), the requirements of the U.S.

Sarbanes-Oxley Act of 2002 (“U.S.

Sarbanes-Oxley Act”), and the requirements of the U.K.

As a public company, we are subject to the reporting requirements of the Exchange Act, the requirements of the U.S.

Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), and the requirements of the U.K.

Companies Act and, if applicable, the Takeover Code.

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In addition, we are subject to other reporting and corporate governance requirements, including certain requirements of Nasdaq and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which will impose significant compliance obligations upon us.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting.

In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required, and management’s attention may be diverted from other business concerns.

Our compliance with the requirements under the U.S.

Exchange Act, the U.S.

Sarbanes-Oxley Act, the U.K.

We are required to comply with Section 404 of the Sarbanes-Oxley Act, which requires management assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures.

If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately and to prepare financial statements within required time periods could be adversely affected, which could subject us to regulatory consequences, including sanctions by the SEC, negatively affect investor confidence in our financial statements, restrict access to capital markets and adversely impact the market price of our Class A ordinary shares.

Our compliance with the requirements under the Exchange Act, the Sarbanes-Oxley Act, the U.K.

Companies Act and, if applicable, the Takeover Code and the rules and regulations thereunder increases our legal and financial compliance costs and makes some activities more time consuming and costly.

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We may not be able to predict or estimate accurately the amount of additional costs we may incur or the timing of such costs.

Failure to establish and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could adversely affect our business, reputation and the trading price of our Class A ordinary shares.

Prior to our initial public offering, we were not required to comply with the requirements of the U.S.

Sarbanes–Oxley Act, including the internal controls evaluation and certification requirements of Section 404 of that statute.

Accordingly, our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 that we will eventually be required to meet.

We are required to meet these standards in the course of preparing our financial statements as of and for the year ended December 31, 2021, which will be the second annual report that we file with the SEC.

We are in the process of addressing our internal controls over financial reporting and are establishing formal policies, processes and practices related to financial reporting and to the identification of key financial reporting risks, assessment of their potential effect and linkage of those risks to specific areas and activities within our organization.

Additionally, we have begun the process of documenting our internal controls procedures to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments.

During the course of our ongoing evaluation and integration of the internal controls over financial reporting, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review.

For example, we anticipate that the Manager will hire additional administrative and accounting personnel to conduct our financial reporting.

Because we do not currently have comprehensive documentation of our internal controls over financial reporting and have not yet tested our internal controls over financial reporting in accordance with Section 404, we cannot conclude in accordance with Section 404 that we do not have a material weakness in our internal controls over financial reporting or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal controls over financial reporting.

As a public entity, we are required to complete our initial assessment in a timely manner.

If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our financial reporting could be adversely affected.

We may be unable to report our financial information on a timely or reliable basis, which may subject us to adverse regulatory consequences, including sanctions by the SEC or violations of applicable stock exchange listing rules, and result in a breach of the covenants under the agreements governing any of our financing arrangements.

There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.

Confidence in the reliability of our financial statements could also suffer if our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting.

This could adversely affect our business and lead to a decline in the trading price of our Class A ordinary shares.

Risks Relating to Taxation

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Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.

The tax treatment of shareholders and us (including the Irish, U.K.

Our tax treatment, including Irish, U.K.

federal income tax treatment, depends in some instances on determinations of fact and interpretations of complex provisions of applicable tax law for which no clear precedent or authority may be available.

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These review processes could result in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations.

The present tax treatment of an investment in our Class A ordinary shares and of our operations may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments and commitments previously made.

No ruling will be sought from the relevant tax authority regarding any of the tax issues discussed herein, and no assurance can be given that the relevant tax authorities will not challenge any of our tax positions and that such challenge would not succeed.

If any such position is successfully challenged, our tax liabilities could materially increase, which would have an adverse effect on our profitability, cash flows and the value of our Class A ordinary shares.

If any such position is successfully challenged, our tax liabilities could materially increase, which would have an adverse effect on our profitability and cash flows.

There have been significant changes both made and proposed to international tax laws that increase the complexity, burden and cost of tax compliance for all multinational groups.

We expect to continue to monitor these and other developments in international tax law.

We expect to be classified as a passive foreign investment company for U.S.

federal income tax purposes, which could subject U.S.

holders of our Class A ordinary shares to adverse U.S.

federal income tax consequences.

We expect to be classified as a passive foreign investment company (“PFIC”) for U.S.

federal income tax purposes.

A foreign corporation is generally a PFIC if either at least 75% of its gross income is “passive income,” or 50% of the gross value of its assets is attributable to assets that produce, or are held for the production of, passive income.

We generally expect that our income, which consists primarily of passive income, and our assets, which consist primarily of assets that produce passive income, will satisfy these tests and result in our treatment as a PFIC for the current taxable year and any future taxable year.

holders of our Class A ordinary shares who do not make a qualified electing fund (“QEF”) election with respect to us or a mark-to-market election with respect to our Class A ordinary shares will be subject to potentially material adverse tax consequences, including (i) the treatment of any gain on disposition of our Class A ordinary shares as ordinary income and (ii) the application of a deferred interest charge on such gain and the receipt of certain distributions on our Class A ordinary shares.

In addition, regardless of whether a QEF or mark-to-market election is made with respect to us, a U.S.

holder of our Class A ordinary shares will be required to file an annual report on IRS Form 8621 containing such information with respect to its interest in a PFIC as the IRS may require.

Failure to file IRS Form 8621 for each applicable taxable year may result in substantial penalties and result in the U.S.

holder’s taxable years being open to audit by the IRS until after such Forms are properly filed.

Further, if we are a PFIC for any taxable year during which a U.S.

holder holds our Class A ordinary shares, we generally would continue to be treated as a PFIC with respect to that U.S.

holder for all succeeding years during which the U.S.

holder holds our Class A ordinary shares, even if we ceased to meet the threshold requirements for PFIC status, unless the U.S.

holder makes a special “purging” election on IRS Form 8621.

The effect of these adverse tax consequences could be materially adverse to you.

If you are a U.S.

holder and make a valid, timely QEF election for us, the potentially adverse tax consequences discussed above may be mitigated, but you could still recognize taxable income in a taxable year with respect to our Class A ordinary shares in excess of any distributions that we make to you in that year, thus giving rise to so-called “phantom income” and to a potential tax liability in excess of actual cash received.

In addition, U.S.

holders will also need to make the QEF election with respect to any PFIC owned by us in order to avoid being subject to the adverse tax consequences described above.

We expect to provide information to all electing shareholders needed to comply with the QEF election, including with respect to any of our subsidiaries that may be classified as a PFIC.

However, no assurance can be given that we will be able to provide information necessary to make QEF elections with respect to any subsidiary that is a PFIC and that we will not control.

As a result, even if a U.S.

holder validly makes a timely QEF election with respect to our Class A ordinary shares, the U.S.

holder may continue to be subject to the adverse tax consequences described above with respect to its indirect interest in any of our subsidiaries that are PFICs and that we will not control.

holders should consult their tax advisors as to the availability and desirability of a QEF election, as well as the impact of such election on interests in any lower-tier PFICs.

If you are a U.S.

holder and make a valid, timely mark-to-market election with respect to our Class A ordinary shares, you will recognize as ordinary income or loss in each year that we are a PFIC an amount equal to the difference between your basis in our Class A ordinary shares and the fair market value of the Class A ordinary shares, thus also possibly giving rise to phantom income and a potential tax liability in excess of actual cash received.

Ordinary loss generally is recognized only to the extent of net mark-to-market gains previously included in income.

holders should also be aware that there is no provision in the U.S.

Internal Revenue Code, Treasury regulations or other published authority that would allow them to make the mark-to-market election with respect to any of our subsidiaries that are PFICs (because shares in such subsidiaries are not expected to be publicly traded), potentially rendering such election less beneficial to U.S.

holders than the QEF election.

Distributions that we pay to individual and other non-corporate U.S.

holders will not be eligible for taxation at reduced rates, which could potentially adversely affect the value of your Class A ordinary shares.

Distributions made to non-corporate U.S.

holders will not be eligible for taxation at reduced tax rates generally applicable to dividends paid by certain U.S.

corporations and “qualified foreign corporations” because of our expected status as a PFIC.

The more favorable rates applicable to qualifying corporate dividends could cause individuals to perceive investment in our Class A ordinary shares to be relatively less attractive than investment in the shares of other corporations, and this perception could adversely affect the value of our Class A ordinary shares.

We could be liable for significant taxes due to changes in our eligibility for certain income tax treaty benefits or challenges to our tax positions with respect to the application of income tax treaties.

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ownership requirement or an alternative Treaty exemption) and such royalties were subject to a 30% U.S.

withholding tax, our financial position and profitability, and the value of your investment in our Class A ordinary shares could be materially and adversely affected.

withholding tax, our financial position, profitability and cash flows could be adversely affected.

Furthermore, on August 25, 2016, the Irish Department of Finance announced that, in the context of the publication by the United States Treasury Department of a revised U.S.

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If our subsidiaries are unable to qualify for the benefits of the Treaty, or if any benefits of the Treaty that otherwise would have been available to us are eliminated or reduced, then all or a portion of our income may become subject to increased withholding taxes, and such taxes could be very significant and materially and adversely affect our financial position, profitability and cash flows.

If we were to become subject to increased withholding taxes, we potentially could reorganize Royalty Pharma plc and/or RPI and its wholly-owned subsidiaries, but no assurance can be provided that any such reorganization transaction could be implemented without triggering any taxable gains to us and/or our shareholders, and such taxable gains could be material.

We could be liable for significant U.S.

taxation if our subsidiaries are considered to be engaged in a U.S.

trade or business.

If our subsidiaries are considered to be engaged in a U.S.

trade or business, we could be liable for significant U.S.

In general, if a foreign corporation, such as Royalty Pharma plc, is considered to be engaged in a U.S.

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If we are able to conduct our activities in this way, income or gains realized by us will not be subject to U.S.

net federal income taxation.

federal income taxation.

However, no assurance can be provided in this regard.

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taxes plus interest and possible penalties, and our financial position, cash flows and profitability could be materially and adversely affected.

Transfers of our Class A ordinary shares outside DTC may be subject to stamp duty or SDRT, in the U.K., which would increase the cost of dealing in our Class A ordinary shares.

Except for Class A ordinary shares received by a holder deemed to be an affiliate of us for purposes of U.S.

securities laws, our Class A ordinary shares have been issued to a nominee for DTC, and corresponding book-entry interests credited in the facilities of DTC.

On the basis of current law, no charges to U.K.

stamp duty or SDRT are expected to arise on the issue of Class A ordinary shares into DTC’s facilities or on transfers of book-entry interests in Class A ordinary shares within DTC’s facilities and you are strongly encouraged to hold your Class A ordinary shares in book-entry form through the facilities of DTC.

A transfer of title in the Class A ordinary shares from within the DTC system to a purchaser out of DTC and any subsequent transfers that occur entirely outside the DTC system, will generally result in a charge to stamp duty at a rate of 0.5% (rounded up to the nearest £5) of any consideration, which is payable by the transferee of the ordinary shares.

Any such duty must be paid (and the relevant transfer document, if any, stamped by HM Revenue & Customs) before the transfer can be registered in our company books.

However, if those Class A ordinary shares are redeposited into DTC, the redeposit will generally attract stamp duty or SDRT at the rate of 1.5% to be paid by the transferor.

We have put in place arrangements to require that our Class A ordinary shares held in certificated form or otherwise outside the DTC system cannot be transferred into the DTC system until the transferor of the Class A ordinary shares has first delivered the ordinary shares to a depositary specified by us so that stamp duty (and/or SDRT) may be collected in connection with the initial delivery to the depositary.

Any such ordinary shares are evidenced by a receipt issued by the depositary.

Before the transfer can be registered in our books, the transferor will also be required to put funds in the depositary to settle the resultant liability to stamp duty (and/or SDRT), which will be charged at a rate of 1.5% of the value of the shares.

We expect to operate, and expect that RP Holdings will operate, so as to be treated solely as a resident of the U.K.

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However, a number of conditions must be met in order for such dividends to qualify for this tax exemption, including (in respect of dividends paid by RPI, which are tax resident in Ireland) conditions relating to the application of Irish tax law.

As such, it cannot be guaranteed that these conditions for the U.K.

As such, it cannot be guaranteed that these conditions for the

tax exemption in respect of distributions will continue at all times to be satisfied.

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Changes to, or adverse interpretations of, the offshore funds rules, or changes in the nature of our investments, may alter this position and could impact our group’s effective rate.

Distributions that we pay to individual and other non-corporate U.S.

Holders will not be eligible for taxation at reduced rates, which could potentially adversely affect the value of our Class A ordinary shares.

Distributions made to non-corporate U.S.

Holders will not be eligible for taxation at reduced tax rates generally applicable to dividends paid by certain U.S.

corporations and “qualified foreign corporations” because of our status as a passive foreign investment company (“PFIC”).

The more favorable rates applicable to qualifying corporate dividends could cause individuals to perceive investment in our Class A ordinary shares to be less attractive than investment in the shares of other corporations because of our PFIC status, and this perception could adversely affect the value of our Class A ordinary shares.

General Risk Factors

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Financial Accounting Standards Board or other standard-setting bodies may adversely affect our financial statements.

Our financial statements are prepared in accordance with U.S.

GAAP, which are periodically revised, interpreted and/or expanded.

Our financial statements are prepared in accordance with GAAP, which are periodically revised, interpreted and/or expanded.

From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies.

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Such changes could adversely affect our financial condition and results of operations.

The current outbreak of the novel coronavirus, or COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could materially and adversely affect our results of operations, financial condition and cash flows.

The current outbreak of the novel coronavirus, or COVID-19, or the future outbreak of any other infectious or contagious diseases, could materially and adversely affect our results of operations, financial condition and cash flows.

Further, the spread of the COVID-19 outbreak has caused severe disruptions in the U.S.

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and (iii) pauses to or delays of trial procedures (particularly any procedures that may be deemed non-essential), patient dosing, shipment of our partners’ development-stage product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis due to reasons related to the pandemic, each of which could cause or continue to cause a disruption or delay to the development or the approval of development-stage product candidates underlying our biopharmaceutical assets.

The rapid development and fluidity of this situation makes it impossible to predict the ultimate adverse impact of COVID-19.

To date, certain marketers of some of our portfolio products have commented that the performance of these products have been impacted by the COVID-19 pandemic.

However, the COVID-19 pandemic has not resulted in a material effect to our results of operations and liquidity and we do not believe it is reasonably likely to in the future.

Nevertheless, COVID-19 presents material uncertainty which could adversely affect our results of operations, financial condition and cash flows.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors