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Item 5. Market for Registrant’s Common Equity

2022-02-15 compared with 2021-02-24 · 594 added, 620 removed, 377 unchanged (76% of the section changed)

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Use of Proceeds

On June 15, 2020, our registration statement on Form S-1 (File No.

333-238632), as amended, was declared effective by the SEC for our Initial Public Offering (“the IPO”) of our Class A ordinary shares.

There has been no material change in the planned use of proceeds from our IPO as described in the prospectus relating to the offering.

Subsequent to our IPO, we declared and paid two quarterly cash dividends for an aggregate amount of $112.5 million, or $0.15 per share to holders of our Class A ordinary shares during the year ended December 31, 2020.

In the year ended December 31, 2021, we declared and paid four quarterly cash dividends of $0.17 per Class A ordinary share for an aggregate amount of $285.2 million to holders of our Class A ordinary shares.

Future dividends are subject to declaration by the board of directors.

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Recent Sales of Unregistered Securities

The following is a description of all securities sold or issued by the predecessors to the registrant in 2020.

No underwriters were involved in these sales.

There was no general solicitation of investors or advertising, and we did not pay or give, directly or indirectly, any commission or other remuneration, in connection with the offering of these shares.

On February 6, 2020, RPI US Partners 2019, LP and RPI International Partners 2019, LP formed Royalty Pharma Ltd., a private limited company organized under the laws of England and Wales (“RP Ltd.”), which issued one Class B ordinary share and one Class R redeemable share to each of RPI US Partners 2019, LP and RPI International Partners 2019, LP in exchange for a nominal capital contribution.

On February 10, 2020, RP Ltd.

formed RP Holdings, which issued one Class A ordinary share to RP Ltd.

in exchange for a nominal capital contribution.

In connection with our IPO, each of RPI US Partners 2019, LP and RPI International Partners 2019, LP transferred their shares of Royalty Pharma Investments 2019 ICAV to RP Holdings in exchange for the issuance by RP Holdings of 226,704,600 and 308,678,380 Class B shares (or depository receipts representing such shares), respectively, to each of RPI US Partners 2019, LP and RPI International Partners 2019, LP and one Class C ordinary share to EPA Holdings.

On March 25, 2020, RPI US Partners 2019, LP and RPI International Partners 2019, LP each subscribed for an aggregate of 24,999 Class R redeemable shares of RP Ltd.

for an aggregate purchase price of £24,999.

On April 22, 2020, RP Ltd.

was re-registered as Royalty Pharma plc.

The offers, sales and issuances of the securities described above were deemed to be exempt from registration under the

Securities Act in reliance upon Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering.

The recipients in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof.

There were no unregistered sales of equity securities in the year ended December 31, 2021.

Issuer Purchases of Equity Securities

SELECTED FINANCIAL DATA

We have elected to voluntarily comply with Item 301, as amended in a final rule issued by the SEC which is effective for filings on or after February 10, 2021, and eliminate the Selected Financial Data section.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition, cash flows and other changes in financial condition.

MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Special Note Regarding Forward-Looking Statements and the section titled “Risk Factors” in Part I, Item 1A.

Royalty Pharma plc is an English public limited company incorporated under the laws of England and Wales that was created for the purpose of consolidating our predecessor entities and facilitating the IPO of our Class A ordinary shares that was completed in June 2020.

“Royalty Pharma,” “Royalty Pharma Investments,” “RPI,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis.

After the consummation of the Exchange Offer Transactions (as defined below) and execution of the New Management Agreement (as defined below) (collectively, the “Reorganization Transactions”) in February 2020 and before the consummation of the IPO, “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma Investments 2019 ICAV.

Royalty Pharma plc is an English public limited company incorporated under the laws of England and Wales that was created for the purpose of consolidating our predecessor entities and facilitating the initial public offering (“IPO”) of our Class A ordinary shares that was completed in June 2020.

“Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis.

After the consummation of the Exchange Offer Transactions (as defined below) and execution of the Management Agreement (collectively, the “Reorganization Transactions”) in February 2020 and before the consummation of the IPO, “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma Investments 2019 ICAV (“RPI 2019 ICAV”).

Prior to the Reorganization Transactions, “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma Investments, an Irish unit trust (“Old RPI”).

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Since our founding in 1996, we have been pioneers in the royalty market, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies.

We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 45 commercial products, including AbbVie and J&J’s Imbruvica, Astellas and Pfizer’s Xtandi, Biogen’s Tysabri, Gilead’s HIV franchise, Merck’s Januvia, Novartis’ Promacta, Vertex’s Kalydeco, Orkambi, Symdeko and Trikafta, and five development-stage product candidates.

We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Biogen’s Tysabri, Johnson & Johnson’s Tremfya, Gilead’s Trodelvy, Merck’s Januvia, Novartis’ Promacta, Vertex’s Kalydeco, Orkambi, Symdeko and Trikafta, and ten development-stage product candidates.

We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators.

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From 2012, when we began acquiring royalties on development-stage product candidates, through 2021, we have deployed $7.8 billion to acquire royalties on development-stage product candidates.

While we classify our acquisitions in these two broad segments, several of our acquisitions of royalties on approved products were driven by the long-term potential of these products in other, unapproved indications.

While we classify our acquisitions in these two broad categories, several of our acquisitions of royalties on approved products were driven by the long-term potential of these products in other, unapproved indications.

Similarly, some of our royalty acquisitions in development-stage product candidates are for products that are approved in other indications.

We acquire product royalties in a variety of ways that can be tailored to the needs of our partners.

We classify our product royalty acquisitions by the following structures:

We classify our product royalty acquisitions according to the following structures:

• Third-party Royalties – A royalty is the contractual right to a percentage of top-line sales from a licensee’s use of a product, technology or intellectual property.

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• Synthetic/Hybrid Royalties – A synthetic royalty is the contractual right to a percentage of top-line sales created by the developer and/or marketer of a therapy in exchange for funding.

In many of our synthetic royalties, we also make investments in the public equity of the company, where the main value driver of the company is the product for which we concurrently acquired a royalty.

• R&D Funding – We fund R&D, typically for large biopharmaceutical companies, in exchange for future royalties and/or milestones if the product or indication we are funding is approved.

• M&A – We acquire royalties in connection with mergers and acquisitions (“M&A”) transactions, often from the buyers of biopharmaceutical companies when they dispose of the non-strategic assets of the target company following the closing of the acquisition.

A synthetic royalty may also include contingent milestone payments, or be structured as a long-term stream of fixed-payments with a predetermined schedule.

In many of our synthetic royalties, we may also make investments in the public equity of the company, where the main value driver of the company is the product on which we concurrently acquired a royalty.

• Research & Development (“R&D”) Funding – We have historically funded ongoing R&D, typically for large biopharmaceutical companies, in exchange for future royalties and/or milestones if the product or indication we are funding is approved.

We have also made upfront R&D payments to biotechnology companies to acquire royalties and/or milestones on development-stage product candidates.

• M&A – We acquire royalties in connection with M&A transactions, often from the buyers of biopharmaceutical companies when they dispose of the non-strategic assets of the target company following the closing of the acquisition.

We also seek to partner with companies to acquire other biopharmaceutical companies that own significant royalties.

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In connection with our IPO, we consummated an exchange offer on February 11, 2020 (the “Exchange Date”).

Through the exchange offer, investors representing 82% of the aggregate limited partnership in the various partnerships owned by Old RPI (the “Legacy Investors Partnerships”), exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP, a Delaware limited partnership, RPI International Holdings 2019, LP, (together, the “Continuing Investors Partnerships”).

Through the exchange offer, investors representing 82% of the aggregate limited partnership in the various partnerships owned by Old RPI (the “Legacy Investors Partnerships”), exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP, a Delaware limited partnership or RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”).

The exchange offer transaction together with (i) the concurrent incurrence of indebtedness under a new credit facility and (ii) the issuance of additional interests in Continuing Investors Partnerships to satisfy performance payments payable in respect of assets acquired prior to the date of the IPO are referred to as the “Exchange Offer Transactions.”

Following our IPO, we operate and control the business affairs of Royalty Pharma Holdings Ltd, (“RP Holdings”) through our controlling ownership of RP Holdings’ Class A ordinary shares and RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”).

Following our IPO, we operate and control the business affairs of Royalty Pharma Holdings Ltd, (“RP Holdings”) through our controlling ownership of RP Holdings’ Class A ordinary shares (the “RP Holdings Class A Interests”) and RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”).

We include RP Holdings and its subsidiaries in our consolidated financial statements.

RP Holdings is the sole owner of Royalty Pharma Investments 2019 ICAV, which is an Irish collective asset management entity formed to facilitate our Exchange Offer Transactions.

As a result of the Exchange Offer Transactions, we own, through our wholly-owned subsidiary RPI 2019 Intermediate Finance Trust, a Delaware statutory trust (“RPI Intermediate FT”), an 82% economic interest in Old RPI.

RP Holdings is the sole owner of RPI 2019 ICAV, which is an Irish collective asset management entity formed to facilitate our Exchange Offer Transactions.

As a result of the Exchange Offer Transactions, we own, through our subsidiary RPI 2019 Intermediate Finance Trust, a Delaware statutory trust (“RPI Intermediate FT”), an 82% economic interest in Old RPI.

Through our 82% indirect ownership of Old RPI, we are legally entitled to 82% of the economics of Old RPI’s wholly-owned subsidiaries, RPI Finance Trust, a Delaware statutory trust (“RPIFT”) and RPI Acquisitions (Ireland), Limited (“RPI Acquisitions”), an Irish private limited company, and 66% of Royalty Pharma Collection Trust, a Delaware statutory trust (“RPCT”).

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From the Exchange Date until the expiration of the Legacy Investors Partnerships’ investment period on June 30, 2020 (the “Legacy Date”), the Legacy Investors Partnerships had the option to participate proportionately in any investment made by Old RPI.

Following the Legacy Date, Old RPI has ceased making new investments and each of Old RPI and the Legacy Investors Partnerships became legacy entities.

Following the Legacy Date, we have made and will continue to make new investments solely through our wholly-owned subsidiaries, including RPI Intermediate FT.

Following management’s determination that a high degree of common ownership exists in RPI both before and after the Exchange Date, RPI recognized Old RPI’s assets and liabilities at the carrying value reflected on Old RPI’s balance sheet as of the Exchange Date.

Following the Legacy Date, Old RPI ceased making new investments and each of Old RPI and the Legacy Investors Partnerships became legacy entities.

Following the Legacy Date, we have made and plan to make new investments solely through our subsidiaries.

Following management’s determination that a high degree of common ownership exists in Royalty Pharma both before and after the Exchange Date, Royalty Pharma recognized Old RPI’s assets and liabilities at the carrying value reflected on Old RPI’s balance sheet as of the Exchange Date.

Old RPI is our predecessor for financial reporting purposes.

The references in the following discussion to all periods ending on and prior to December 31, 2019 refer to the financial results of Old RPI for the same periods.

The results of operations in the following discussion is comprised of the financial results of Old RPI prior to the Reorganization Transactions, RPI 2019 ICAV subsequent to the Reorganization Transactions and before the consummation of the IPO, and Royalty Pharma plc subsequent to the consummation of the IPO.

Understanding Our Financial Reporting

In accordance with generally accepted accounting principles in the United States (“GAAP”), most of the royalties we acquire are treated as investments in cash flow streams and are thus classified as financial assets.

These investments have yield components that most closely resemble loans measured at amortized cost under the effective interest method accounting methodology.

In accordance with U.S.

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

These investments have yield components that most closely resemble loans measured at amortized cost under the effective interest accounting methodology.

Under this accounting methodology, we calculate the effective interest rate on each financial royalty asset using a forecast of the expected cash flows to be received over the life of the financial royalty asset relative to the initial acquisition price.

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The most significant judgments and estimates applied by management are associated with the measurement of income derived from our financial royalty assets, including management’s judgment in forecasting the expected future cash flows of the underlying royalties and the expected duration of the financial royalty asset.

Our cash flow forecasts are generated and updated each reporting period by manually compiling sell-side equity research analysts’ consensus estimates for each of the products in which we own royalties.

We then calculate our expected royalty cash flows using these consensus forecasts.

In any given reporting period, any decline in the expected future cash flows associated with a financial royalty asset is recognized as a provision which is expensed through our income statement as a non-cash charge.

Our cash flow forecasts are generated and updated each reporting period by manually compiling sell-side equity research analysts’ consensus sales estimates for each of the products in which we own royalties.

We then calculate our expected royalty cash flows using these consensus sales forecasts.

In any given reporting period, any decline or increase in the expected future cash flows associated with a financial royalty asset is recognized in our income statement as non-cash provision expense or provision income, respectively.

As a result of the non-cash charges associated with applying 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 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 was 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 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 non-cash provision of $1.30 billion by September 30, 2017, including non-cash provision expense of $743.2 million in 2016 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 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 cystic fibrosis franchise were recognized in 2017 and 2018, there remained a $1.10 billion cumulative provision balance that was fully offset by a $1.10 billion credit to the provision in 2019 as a result of an increase in sell-side equity research analysts’ consensus forecasts associated with the Trikafta approval.

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 non-cash provision 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 recognized in 2019 as a result of an increase in sell-side equity research analysts’ consensus sales forecasts associated with the Trikafta approval.

This example illustrates the volatility caused by our accounting model.

Therefore, management believes investors should not look to income from royalties or the associated provision for changes in future cash flows as a measure of our near-term financial performance or as a source for predicting future income or growth trends.

Therefore, management believes investors should not look to income from royalties and the associated provision for changes in future cash flows as a measure of our near-term financial performance or as a source for predicting future income or growth trends.

Our operations have historically been financed primarily with cash flows generated by our royalties.

Due to the nature of our accounting methodology for our financial royalty assets, there is no direct correlation between our income from royalties and our royalty cash receipts.

Due to the nature of our accounting methodology for our financial royalty assets, there is no direct correlation between our income from royalties and our royalty receipts.

As noted above, income from such royalties is measured at amortized cost under the effective interest method accounting methodology.

Given the importance of cash flows to management’s operation of the business and their predictability, management uses royalty receipts as the primary measure of our operating performance.

Given the importance of cash flows and their predictability to management’s operation of the business, management uses royalty receipts as the primary measure of our operating performance.

Royalty receipts refer to the summation of the following line items from our GAAP Statement of Cash Flows:

Cash collections from financial royalty assets, Cash collections from intangible royalty assets , Other royalty cash collections and Distributions from non-consolidated affiliates (which line item is included in both Net cash provided by operating activities and Net cash used in investing activities ).

Cash collections from financial royalty assets, Cash collections from intangible royalty assets , Other royalty cash collections, Proceeds from available for sale debt securities and Distributions from non-consolidated affiliates .

In addition to analyzing our results on a GAAP basis, management also reviews our results on a non-GAAP basis.

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Portfolio Overview

Our portfolio consists of royalties on more than 45 marketed therapies and five development-stage product candidates.

The therapies in our portfolio address therapeutic areas such as rare disease, oncology, neurology, infectious disease, cardiology and diabetes, and are delivered to patients across both primary and specialty care settings.

The table below includes royalty cash receipts for the years ended December 31, 2020, 2019 and 2018 grouped by Growth Products and Mature Products.

“Growth Products” are defined as royalties with a duration beyond December 31, 2020.

We define all other royalties as “Mature Products.”

Our portfolio consists of royalties on more than 35 marketed therapies and ten development-stage product candidates.

The therapies in our portfolio address therapeutic areas such as rare disease, cancer, neurology, infectious disease, hematology and diabetes, and are delivered to patients across both primary and specialty care settings.

The table below includes royalty receipts for the years ended December 31, 2021 and 2020 in order of contributions to royalty receipts for the year ended December 31, 2021.

Royalty Receipts

(in thousands) Years Ended December 31,

Marketer Therapeutic area 2020 2019 2018

Growth Products

Marketer(s) Therapeutic Area 2021 2020

Cystic fibrosis franchise (1) Vertex Rare disease $ 702,140 $ 551,338

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Imbruvica AbbVie, Johnson & Johnson Cancer 352,911 322,071

HIV franchise (2) Gilead, others Infectious disease 293,808 262,939 224,321

Xtandi Pfizer, Astellas Cancer 146,374 120,096 105,958

Januvia, Janumet, Other DPP-IVs (3) Merck, others Diabetes 143,754 143,298 106,689

Promacta Novartis Hematology 173,621 143,741

Xtandi Pfizer, Astellas Cancer 158,103 146,374

Januvia, Janumet, Other DPP-IVs (2) Merck & Co., others Diabetes 151,158 143,753

HIV franchise (3) Gilead, others Infectious disease 78,038 293,808

Nurtec ODT/Biohaven payment (4) Biohaven, Pfizer Neurology 70,188 3,667

Prevymis Merck & Co.

Infectious disease 37,505 21,492

Farxiga/Onglyza AstraZeneca Diabetes 36,378 25,004

Prevymis Merck Infectious disease 21,492 — —

Emgality Eli Lilly Neurology 9,529 2,440 —

Tremfya Johnson & Johnson Immunology 35,718 —

Cabometyx/Cometriq Exelixis, Ipsen, Takeda Cancer 33,722 —

Crysvita Ultragenyx, Kyowa Kirin Rare disease 16,741 9,454

Evrysdi Roche Rare disease 16,098 273

Emgality Lilly Neurology 15,481 9,529

Erleada Johnson & Johnson Cancer 14,227 7,876

IDHIFA Celgene, Bristol-Myers Squibb Cancer 6,111 — —

Trodelvy Gilead Cancer 13,395 3,031

Nurtec ODT Biohaven Neurology 667 — —

IDHIFA Bristol Myers Squibb Cancer 12,404 6,111

Orladeyo BioCryst Rare disease 6,740 —

Tazverik Epizyme Cancer 2,794 522

Evrysdi Roche Neurology 273 — —

Other Growth Products (4) 246,545 205,043 192,241

Total Royalty Receipts - Growth Products $ 2,277,435 $ 1,850,880 $ 1,401,291

Mature Products

Tecfidera (5) Biogen Neurology $ — $ 150,000 $ 750,000

Letairis Gilead Cardiology 40,170 112,656 130,078

Lyrica Pfizer Neurology 22,850 128,246 126,916

Remicade Johnson & Johnson, Merck Immunology — 6,068 121,055

Humira AbbVie Immunology — — 499,055

Other mature products (6) 3,944 21,047 45,450

Total Royalty Receipts - Mature Products $ 66,964 $ 418,017 $ 1,672,554

Oxlumo Alnylam Rare disease 1,248 —

Other products (5) 310,783 310,510

Total royalty receipts $ 2,608,542 $ 2,344,399

(1) The cystic fibrosis franchise includes the following approved products:

Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio.

(2) The HIV franchise includes the following approved products:

Atripla, Truvada, Emtriva, Complera, Stribild, Genvoya, Descovy, Odefsey, Symtuza and Biktarvy.

Royalties are received on the emtricitabine portion of sales only.

(2) Januvia, Janumet, Other DPP-IVs include the following approved products:

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The Other DPP-IVs are marketed by Boehringer Ingelheim, AstraZeneca, Novartis and Takeda.

(4) Other Growth Products include royalties on the following products:

Bosulif (a product co-developed by our joint venture investee, Avillion, for which receipts are presented as Distributions from non-consolidated affiliates on the Statement of Cash Flows), Cimzia, Conbriza/Fablyn/Viviant, Entyvio, Lexiscan, Mircera, Myozyme, Nesina, Priligy and Soliqua.

Other Growth Products for 2020 also include contributions from the Legacy SLP Interest, a payment from Biohaven in respect of an expired option to exercise additional funding of the Biohaven Series A Preferred Shares which is presented as Proceeds from available for sale debt securities on the Statement of Cash Flows, and a distribution from Avillion in respect of the Merck KGaA Asset, for which development ceased in 2020, and for which the receipt is presented as Distributions from non-consolidated affiliates in both the operating and investing section of the Statement of Cash Flows.

(5) Receipts from Tecfidera milestone payments are presented as Proceeds from available for sale debt securities on the Statement of Cash Flows.

(6) Other Mature Products primarily include royalties on the following products:

Prezista, Rotateq and Thalomid.

(3) The HIV franchise includes the following approved products:

Atripla, Truvada, Emtriva, Complera, Stribild, Genvoya, Descovy, Odefsey, Symtuza and Biktarvy.

Royalties are received on the emtricitabine portion of sales only.

(4) Includes royalty receipts for Nurtec ODT of $7.7 million for the year ended December 31, 2021 and quarterly redemptions of $15.6 million of the Series A Biohaven Preferred Shares (presented as Proceeds from available for sale debt securities on the Statement of Cash Flows) in 2021.

For the year ended December 31, 2020, the amount also includes a payment from Biohaven in respect of an expired option to exercise additional funding of the Biohaven Series A Preferred Shares which is presented as Proceeds from available for sale debt securities on the Statement of Cash Flows in 2020.

(5) Other products primarily include royalties on the following products:

Bosulif (a product co-developed by our joint venture investee, Avillion, for which receipts are presented as Distributions from non-consolidated affiliates on the Statement of Cash Flows), Lexiscan, Soliqua, Nesina, Cimzia, Letairis, Entyvio, Myozyme, Mircera and Lyrica.

Other products for the year ended December 31, 2021 includes a one-time milestone payment of $45.0 million that we received on Soliqua.

Other products for the year ended December 31, 2020 includes a one-time $21.3 million distribution from Avillion in respect of the Merck KGaA Asset (defined below) for which the receipt is presented as Distributions from non-consolidated affiliates in both the operating and investing section of the Statement of Cash Flows.

Subsequent to the Exchange Offer Transactions, other products also includes contributions from the Legacy SLP Interest (defined below).

Financial Overview

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Understanding Our Results of Operations

In connection with our IPO, Royalty Pharma plc became a holding company whose principal asset is a controlling equity interest in RP Holdings, which is the sole equity owner of Royalty Pharma Investments 2019 ICAV, an entity that is included in our consolidated financial statements.

We report non-controlling interests related to four minority interests in our subsidiaries held by third parties.

In connection with our IPO, Royalty Pharma plc became a holding company whose principal asset is a controlling equity interest in RP Holdings, which is the sole equity owner of RPI 2019 ICAV, an entity that is included in our consolidated financial statements.

We report non-controlling interest related to four minority interests in our subsidiaries held by third parties.

The first minority interest is attributable to the Legacy Investors Partnerships’ 18% ownership interest in Old RPI.

The value of this non-controlling interest will decline over time as the assets in Old RPI expire.

The second minority interest is attributable to the RP Holdings Class C Special Interests held by EPA Holdings, an affiliate of the Manager.

Income will not be allocated to this non-controlling interest until certain conditions are met, which we do not expect to occur for several years.

The third minority interest is attributable to the RP Holdings Class B Interests held indirectly by the Continuing Investors, which represent an approximate 36% ownership interest in RP Holdings as of December 31, 2020 and are exchangeable for Class A ordinary shares.

The value of this non-controlling interest will decline over time if the investors who indirectly own the RP Holdings Class B Interests exchange those shares for our Class A ordinary shares.

The fourth minority interest is attributable to a de minimis interest in RPCT held by certain legacy investors as a result of a 2011 reorganization transaction that created a prior legacy entity.

The value of this non-controlling interest will decline over time as the assets in RPCT expire and is expected to be substantially eliminated by the end of 2022.

The fourth non-controlling interest related to ownership in RPCT held by Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), is the only non-controlling interest that existed prior to the Reorganization Transactions and is reflected in our historical financial statements for periods through December 31, 2019 and discussed in this MD&A.

The non-controlling interest related to the Legacy Investors Partnerships’ 18% ownership interest in Old RPI exists from the Exchange Date and is reflected in our financial statements from the first quarter of 2020.

The second minority interest is attributable to the RP Holdings Class C ordinary share (the “RP Holdings Class C Special Interest”) held by RPI EPA Holdings, LP (“EPA Holdings”), an affiliate of the Manager.

Income will not be allocated to this non-controlling interest until certain conditions are met.

The third minority interest is attributable to the RP Holdings Class B Interests held indirectly by the Continuing Investors Partnerships, which represent an approximate 29% ownership interest in RP Holdings as of December 31, 2021 and are exchangeable for our Class A ordinary shares.

The value of this non-controlling interest will decline over time if the investors who indirectly own the RP Holdings Class B Interests conduct exchanges for our Class A ordinary shares.

During the year ended December 31, 2021, 44,763 thousand RP Holdings Class B Interests were exchanged for our Class A ordinary shares.

The fourth minority interest is attributable to a de minimis interest in RPCT held by RPSFT as a result of a 2011 reorganization transaction.

The value of this non-controlling interest will decline over time as the royalty assets owned by RPCT expire and is expected to be substantially eliminated by the end of 2022.

The fourth non-controlling interest related to ownership in RPCT held by RPSFT, is the only non-controlling interest that existed prior to the Exchange Offer Transactions and is reflected in our financial statements through December 31, 2019.

The non-controlling interest related to the Legacy Investors Partnerships’ 18% ownership interest in Old RPI is reflected in our financial statements from and after the Exchange Date.

The other two non-controlling interests are reflected in our financial statements from and after the date of our IPO.

All of the results of operations of RP Holdings, Old RPI and RPCT are consolidated into our financial statements.

Following the IPO, EPA Holdings is entitled to receive Equity Performance Awards through its RP Holdings Class C Special Interests.

Equity Performance Awards owed to EPA Holdings will be recognized as an equity transaction when the obligation becomes due and will impact the income allocated to non-controlling interests related to the RP Holdings Class C Special Interests at that time.

Following the IPO, EPA Holdings is entitled to receive Equity Performance Awards through its RP Holdings Class C Special Interest.

Equity Performance Awards owed to EPA Holdings will be recognized as an equity transaction when the obligation becomes due and will impact the income allocated to non-controlling interest related to the RP Holdings Class C Special Interest at that time.

We do not currently expect any material Equity Performance Awards to be payable until certain performance conditions are met, which we do not expect to occur until the mid-2020s.

Total income and other revenues

Total income and other revenues is primarily comprised of income from our financial royalty assets, royalty revenue from our intangible royalty assets, and royalty income arising from successful commercialization of products developed through joint R&D funding arrangements.

Most of our royalties on both approved products and development-stage product candidates are classified as financial royalty assets as our ownership rights are generally passive in nature.

In instances in which we acquire a royalty that does include more substantial rights or ownership of the underlying intellectual property, we classify such royalties as intangible royalty assets.

Most of our royalties on both approved products and development-stage product candidates that are not accounted for as R&D funding expense are classified as financial assets as our ownership rights are generally passive in nature.

In instances in which we acquire a royalty that does include more substantial rights or ownership of the underlying intellectual property, we classify such royalties as intangible assets.

We recognize interest income related to our financial royalty assets.

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AbbVie Imbruvica 17 % 19 %

Gilead HIV franchise, Letairis, Trodelvy (1) 14 % 19 % 12 %

Gilead HIV franchise, Letairis, Lexiscan, Trodelvy (1) * 14 %

Biogen Tysabri * 10 %

(1) We did not recognize any income related to Trodelvy prior to 2020.

(1) We began recognizing income related to Trodelvy in the three months ended June 30, 2020.

*Represents less than 10%.

Income from financial royalty assets

Our financial royalty assets represent investments in cash flow streams with yield components that most closely resemble loans measured at amortized cost under the effective interest method.

We calculate the effective interest rate using forecasted expected cash flows to be received over the life of the financial royalty asset relative to the initial acquisition price.

We calculate the effective interest rate using forecasted expected cash flows to be received over the life of the royalty asset relative to the initial acquisition price.

Interest income is recognized at the effective rate of return over the expected life of the asset, which is calculated at the end of each reporting period and applied prospectively.

As changes in sell-side equity research analysts’ consensus estimates are updated on a quarterly basis, the effective rate of return changes.

For example, if sell-side equity research analysts’ consensus forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods.

As changes in sell-side equity research analysts’ consensus sales estimates are updated on a quarterly basis, the effective rate of return changes.

For example, if sell-side equity research analysts’ consensus sales forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods.

Variables affecting the recognition of interest income from financial royalty assets on individual products under the prospective effective interest method include any one of the following:

(1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus forecasts, (3) regulatory approval of additional indications leading to new cash flow streams, (4) changes to the duration of the royalty (i.e., patent expiration date) and (5) amounts and timing of royalty receipts.

(1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (i.e., patent expiration date) and (5) changes in amounts and timing of projected royalty receipts and milestone payments.

Our financial royalty assets are directly linked to sales of underlying pharmaceutical products whose life cycle typically peaks at a point in time, followed frequently by declining sales trends due to the entry of generic competition, resulting in natural declines in the asset balance and periodic interest income over the life of our royalties.

The recognition of income from royalties requires management to make estimates and assumptions around many factors, including those impacting the variables noted above.

The recognition of interest income from royalties requires management to make estimates and assumptions around many factors, including those impacting the variables noted above.

Revenue from intangible royalty assets

Revenue from intangible royalty assets is derived from our Januvia, Janumet and other DPP-IV patents classified as intangible royalty assets.

Revenue from intangible royalty assets is derived from sales of Januvia, Janumet and other DPP-IV products by our licensees.

Other royalty income

Other royalty income primarily includes income from former royalties for which the asset balances have been fully amortized and royalty income from synthetic royalties arising out of R&D funding arrangements.

Other royalty income includes primarily income from financial royalty assets that have been fully amortized by the expected expiry date and royalty income from synthetic royalties arising out of R&D funding arrangements.

Occasionally, a royalty asset may be amortized on an accelerated basis due to collectability concerns, which, if resolved, may result in future cash collections when no financial royalty asset remains.

Similarly, we may continue to collect royalties on a financial royalty asset beyond the estimated patent expiration date by which the financial royalty asset was amortized in full.

In each scenario where a financial royalty asset no longer remains, such income is recognized as other royalty income.

R&D funding expense

R&D funding expense consists of (1) upfront R&D payments we have made to counterparties to acquire royalties on development-stage product candidates and (2) ongoing R&D payments to fund development-stage product candidates undergoing clinical trials with our partners in exchange for royalties if the products are successfully developed and commercialized.

These expenditures relate to the activities performed by our counterparties to develop and test new products, to test existing products for treatment in new indications, and to ensure product efficacy and regulatory compliance prior to launch.

Below is a summary of the ongoing R&D agreements in place, upfront R&D funding completed, and the associated R&D funding expense during the years ended December 31, 2020, 2019 and 2018:

(in thousands) Years Ended December 31,

Partner/ Counterparty Product Current stage of development 2020 2019 2018

Immunomedics Trodelvy (sacituzumab govitecan-hziy) The FDA approved Trodelvy (sacituzumab govitecan-hziy) in April 2020 $ — $ — $ 181,428

Biohaven Nurtec ODT (rimegepant) and Zavegepant The FDA approved Nurtec ODT (rimegepant) in February 2020 — — 103,011

Pfizer Palbociclib/ Ibrance No longer in Phase III clinical trial for adjuvant breast cancer;

approved for other indications — 62,796 99,265

Other Various Various 26,289 20,240 8,905

Total R&D funding expense $ 26,289 $ 83,036 $ 392,609

Similarly, we may continue to collect royalties on a financial royalty asset beyond the estimated patent expiration date by which the financial asset was amortized in full.

In each scenario where a financial royalty asset has been fully amortized, income from such royalty is recognized as Other royalty income .

Provision for changes in expected cash flows from financial royalty assets

The provision for changes in expected future cash flows from financial royalty assets includes the following activities:

The provision for changes in expected future cash flows from financial royalty assets includes the following:

• the movement in the cumulative allowance for changes in expected future cash flows;

• the movement in the allowance for credit losses subsequent to adoption of ASU 2016-13 on January 1, 2020.

The provision for changes in expected cash flows is the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows, which is a netted against the balance sheet account Financial royalty assets , net balance on the consolidated balance sheets.

• expense or income related to the provision for current expected credit losses subsequent to adoption of ASU 2016-13 on January 1, 2020.

The provision for changes in expected cash flows is the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows, which is netted against the non-current portion of Financial royalty assets , net balance on the consolidated balance sheets.

As discussed above, income is accreted on our financial royalty assets using the effective interest method.

As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly to the income statement through the line item Provision for changes in expected future cash flows from financial royalty assets .

If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reduce the cumulative allowance previously established for a financial royalty asset for the incremental increase in the present value of cash flows expected to be collected.

This results in a credit to provision expense.

This results in provision income (i.e., a credit to the provision).

Most of the same variables and management’s estimates affecting the recognition of interest income on our financial royalty assets also impact the provision.

In any period, we will recognize provision income (i.e., a credit to the provision) or expense as a result of the following factors:

(1) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus forecasts, (2) regulatory approval of additional indications which leads to new cash flow streams, (3) changes to the duration of the royalty (i.e., patent expiration date) and (4) amounts and timing of royalty receipts.

In any period, we will recognize provision income or expense as a result of the following factors:

(1) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus sales forecasts, (2) regulatory approval of additional indications which leads to new cash flow streams, (3) changes to the estimated duration of the royalty (i.e., patent expiration date) and (4) changes in amounts and timing of projected royalty receipts and milestone payments.

Upon the adoption on January 1, 2020 of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), we recorded a cumulative adjustment to Retained earnings of $192.7 million to recognize an allowance for current expected credit losses on our portfolio of financial royalty assets.

The Provision for changes in expected cash flows from financial royalty assets reflects the activity for the period that relates to the change in estimates applied to calculate the allowance for current expected credit losses, namely any new financial royalty assets with limited protective rights and changes in the underlying cash flow forecasts used in the effective interest model to measure income from our financial royalty assets.

The Provision for changes in expected cash flows from financial royalty assets reflects the activity for the period, primarily new financial royalty assets with limited protective rights and changes in the underlying cash flow forecasts used in the effective interest model to measure income from our financial royalty assets.

R&D funding expense

R&D funding expense consists of upfront and ongoing R&D payments we have made to counterparties to acquire royalties and/or milestones on development-stage product candidates.

Ongoing R&D payments are made as the related development-stage product candidates undergo clinical trials with our counterparties.

General and administrative expenses

General and administrative (“G&A”) expenses primarily include Operating and Personnel Payments, bad debt expense, legal reserves, other expenses for professional services, and share-based compensation.

Beginning in 2020, the Operating and Personnel Payments paid to our Manager have been significantly higher than they were in historical periods.

Prior to the Reorganization Transactions, the Operating and Personnel Payments were fixed, growing at 5% annually, and not linked to any financial line item.

Under the management agreement which is effective from the Exchange Date (“New Management Agreement”), Operating and Personnel Payments for RPI are calculated as 6.5% of the Adjusted Cash Receipts for each quarter and 0.25% of the GAAP value of our security investments as of the end of each quarter.

The operating and personnel payments for Old RPI, an obligation of the Legacy Investors Partnerships as a non-controlling interest in Old RPI and for which the expense is reflected in our net income, is payable in equal quarterly installments and is calculated as the greater of $1 million per quarter and 0.3125% of Royalty Investments (as defined in the New Management Agreement).

The expenses incurred in respect of RPI’s Operating and Personnel Payments are expected to comprise the most significant component of G&A expenses on an ongoing basis.

Equity in (earnings)/loss of non-consolidated affiliates

General and administrative (“G&A”) expenses include primarily Operating and Personnel Payments, legal expenses, other expenses for professional services and share-based compensation.

The expenses incurred in respect of Operating and Personnel Payments are expected to comprise the most significant component of G&A expenses on an ongoing basis.

Under the Management Agreement, we pay Operating and Personnel Payments equal to 6.5% of the Adjusted Cash Receipts for each quarter and 0.25% of the value of our security investments under GAAP as of the end of each quarter.

The operating and personnel payments for Old RPI, an obligation of the Legacy Investors Partnerships as a non-controlling interest in Old RPI and for which the expense is reflected in our consolidated net income, are payable in equal quarterly installments and calculated as the greater of $1 million per quarter and 0.3125% of royalties from Royalty Investments (as defined in the limited partnership agreements of the Legacy Investors Partnerships) during the previous twelve calendar months.

Prior to the Exchange Date, operating and personnel payments were fixed and grew at 5% annually and were not linked to any financial line item.

Equity in losses/(earnings) of non-consolidated affiliates

Legacy SLP Interest

In connection with the Exchange Offer Transactions, we acquired a new equity method investment from the Continuing Investors Partnerships in the form of a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) in exchange for issuing shares in our subsidiary.

In connection with the Exchange Offer Transactions, we acquired an equity method investment from the Continuing Investors Partnerships in the form of a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) in exchange for issuing shares in our subsidiary.

The Legacy SLP Interest entitles us to the equivalent of performance distribution payments that would have been paid to the general partner of the Legacy Investors Partnerships and a performance income allocation on a similar basis.

The performance income allocation attributable to us is equal to the general partner’s former contractual rights to the income of the Legacy Investors Partnerships.

As the Legacy Investors Partnerships are no longer participating in investment opportunities, the value of the Legacy SLP Interest is expected to decline over time.

As the Legacy Investors Partnerships no longer participate in investment opportunities, the value of the Legacy SLP Interest is expected to decline over time.

Our equity method investee, the Legacy Investors Partnerships, also owns a non-controlling interest in Old RPI.

The Avillion Entities

During 2014, we entered into an agreement with our equity method investee Avillion Financing I, LP (“Avillion I”) to invest up to $46.0 million over three years to fund a portion of the costs of a pivotal Phase III study for Pfizer’s Bosulif (bosutinib) to expand its label into front-line chronic myeloid leukemia.

The FDA approved a supplemental New Drug Application (“sNDA”) for Pfizer’s Bosulif (bosutinib) in December 2017, which triggered a series of contractual fixed payments from Pfizer to Avillion I over a 10-year period, which we recognize through receipt of distributions from non-consolidated affiliates on the Statement of Cash Flows.

In March 2017, we entered into an agreement with BAv Financing II, LP (“Avillion II”, or, together with Avillion I, the “Avillion Entities”), amended in December 2019, to fund up to $19.0 million of the costs of a clinical trial for the use of the Merck KGaA Asset for the treatment of psoriasis in exchange for certain milestone and royalty payments.

Development for the Merck KGaA Asset ceased in 2020 and we do not expect to record significant earnings or losses in the future related to this investment.

In 2018, we agreed to fund up to approximately $105 million over multiple years to fund a portion of the costs for Phase II and III clinical trials of Avillion II, who simultaneously entered into a co-development agreement with AstraZeneca to advance PT027 (the “AZ Asset”) through a global clinical development program for the treatment of asthma in exchange for a series of deferred payments and success-based milestones.

The business model of the Avillion Entities includes partnering with global biopharmaceutical companies to perform R&D in exchange for success-based milestones and/or royalties once products are commercialized.

Other (income)/expense, net

Other (income)/expense, net primarily includes the change in fair market value of our equity securities, the unrealized gains or losses on our derivatives and non-derivative forwards, losses on extinguishment of debt and interest income.

The Avillion entities (as defined below) partner with global biopharmaceutical companies to perform R&D in exchange for success-based milestones and/or royalties once products are commercialized.

In December 2017, our equity method investee Avillion Financing I, LP (“Avillion I”) received U.S.

Food and Drug Administration (“FDA”) approval of a supplemental New Drug Application for Pfizer’s Bosulif to expand its label into front-line chronic myeloid leukemia, which triggered a series of contractual fixed payments from Pfizer to Avillion I over a 10-year period, which we recognize through receipt of Distributions from non-consolidated affiliates on the Statement of Cash Flows.

In 2019, we entered into an amended agreement with BAv Financing II, LP (“Avillion II”, or, together with Avillion I, the “Avillion Entities”), to invest $19.0 million to fund approximately 50% of the costs of a Phase 2 clinical trial for the use of Merck KGaA’s anti-IL 17 nanobody M1095 (the “Merck KGaA Asset”) for the treatment of psoriasis in exchange for certain milestone and royalty payments.

During 2020, our involvement in the development for the Merck KGaA Asset ceased.

We do not expect to record significant earnings or losses in the future related to this investment.

In July 2021, we entered into an amended agreement with Avillion II to increase our investment from $105.0 million to $122.5 million over multiple years to fund a portion of the costs for Phase 2 and 3 clinical trials of Avillion II, which is a party to a co-development agreement with AstraZeneca to advance PT027 through a global clinical development program for the treatment of asthma in exchange for royalties, a series of success-based milestones, and other potential payments.

Other expense/(income), net

Other expense/(income), net primarily includes the change in fair market value of our equity securities and the unrealized (gains)/losses on our available for sale debt securities, including related forwards and derivatives.

Other expense/(income), net also includes losses on extinguishment of debt and interest income.

Net income attributable to non-controlling interest

Prior to the Exchange Date, the net income attributable to non-controlling interest related to RPSFT’s 20% share of earnings in RPCT, which is a consolidated subsidiary of Old RPI.

Subsequent to our IPO, net income attributable to non-controlling interest includes the RP Holdings Class B Interests held by the Continuing Investors Partnerships and will include net income attributable to the Class C Special Interest held by EPA Holdings once certain conditions have been met.

Future net income attributable to the non-controlling interest related to the RP Holdings Class B Interests held by the Continuing Investors Partnerships will decline over time if the investors who indirectly own the RP Holdings Class B Interests conduct exchanges for our Class A ordinary shares.

As of and following the Exchange Date, the net income attributable to non-controlling interest also includes the Legacy Investors Partnerships ’ approximately 18% share of earnings in Old RPI.

As the Legacy Investors Partnerships are no longer participating in investment opportunities of RPI, the related net income attributable to this non-controlling interest is expected to decline over time.

In connection with our IPO, this line item also includes net income attributable to the RP Holdings Class B Interests held by the Continuing Investors Partnerships, and will include net income attributable to the Class C Special Interests held by EPA Holdings once certain conditions have been met.

Net income attributable to the non-controlling interest related to the RP Holdings Class B Interests held by the Continuing Investors Partnerships will decline over time if the investors who indirectly own the RP Holdings Class B Interests exchange those shares for our Class A ordinary shares.

As the Legacy Investors Partnerships no longer participate in investment opportunities, the related net income attributable to this non-controlling interest is expected to decline over time.

Net income attributable to non-controlling interest also includes RPSFT’s 20% share of earnings in RPCT, which is a consolidated subsidiary of Old RPI.

We expect net income attributable to this non-controlling interest to decline over time as the royalty assets owned by RPCT expire and to be substantially eliminated by the end of 2022.

Results of Operations

For the Years Ended December 31, 2020, 2019 and 2018

In this section, we discuss the results of our operations for the year ended December 31, 2021 compared to the year ended December 31, 2020.

For a discussion of the year ended December 31, 2020 compared to the year ended December 31, 2019, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The comparison of our historical results of operations for the years ended December 31, 2021 and 2020 is as follows:

(in thousands) Years Ended December 31, 2021 vs.

2019 2019 vs.

2021 2020 $ %

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Operating expenses:

Research and development funding expense 26,289 83,036 392,609 (56,747) (68.3) % (309,573) (78.9) %

Provision for changes in expected cash flows from financial royalty assets 452,842 230,839 222,003 96.2 %

Amortization of intangible royalty assets 23,058 23,924 33,267 (866) (3.6) % (9,343) (28.1) %

Research and development funding expense 200,084 26,289 173,795 661.1 %

Amortization of intangible assets 22,996 23,058 (62) (0.3) %

General and administrative expenses 182,826 181,715 1,111 0.6 %

Other operating expenses — 65,053 (65,053) (100.0) %

Total operating expenses 526,954 (808,922) 430,448 1,335,876 (165.1) % (1,239,370) (287.9) %

Total operating expense, net 858,748 526,954 331,794 63.0 %

Operating income 1,430,715 1,595,399 (164,684) (10.3) %

Other (income)/expense:

Equity in (earnings)/loss of non-consolidated affiliates (44,459) 32,517 7,023 (76,976) (236.7) % 25,494 363.0 %

Other expense/(income)

Equity in losses/(earnings) of non-consolidated affiliates 19,490 (44,459) 63,949 (143.8) %

Interest expense 166,142 157,059 9,083 5.8 %

Realized gain on available for sale debt securities — — (419,481) — — % 419,481 (100.0) %

Other income, net (219,155) (139,333) (20,907) (79,822) 57.3 % (118,426) 566.4 %

Total other (income)/expenses, net (106,555) 161,757 (153,409) (268,312) (165.9) % 315,166 (205.4) %

Other expense/(income), net 3,882 (219,155) 223,037 (101.8) %

Total other expense/(income), net 189,514 (106,555) 296,069 (277.9) %

Consolidated net income 1,241,201 1,701,954 (460,753) (27.1) %

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(in thousands) Years Ended December 31, 2021 vs.

2019 2019 vs.

2021 2020 $ %

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Imbruvica 385,350 396,285 (10,935) (2.8) %

HIV franchise 244,268 253,837 197,211 (9,569) (3.8) % 56,626 28.7 %

Tysabri 211,422 218,370 (6,948) (3.2) %

Xtandi 107,833 102,791 5,042 4.9 %

Promacta 73,372 53,314 20,058 37.6 %

Tazverik 70,326 56,464 13,862 24.6 %

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Total income from financial royalty assets $ 2,065,083 $ 1,959,975 $ 105,108 5.4 %

Years ended December 31, 2020 and 2019

Income from financial royalty assets increased by $311.1 million, or 18.9%, in 2020 compared to 2019, primarily driven by increased income from the cystic fibrosis franchise and Imbruvica.

Additionally, we recorded $51.7 million in income in 2020 related to new assets acquired in 2020, primarily Evrysdi and Prevymis.

Also, a full year of income related to Crysvita and income from Tazverik following its FDA approval date in January 2020, both of which were acquired in the fourth quarter of 2019, contributed to the increase.

The increased income was partially offset by declines from maturing assets, such as Lyrica and Letairis.

Years ended December 31, 2019 and 2018

Income from financial royalty assets increased by $124.0 million, or 8.1%, in 2019 compared to 2018, primarily due to increased income from the following royalty assets:

Imbruvica, HIV franchise, cystic fibrosis franchise, Letairis, Promacta and Emgality, the latter two of which were newly acquired in 2019.

Imbruvica, the HIV franchise and cystic fibrosis franchise generated increased income as a result of strong product performance.

We extended the duration of our Letairis royalty as a result of new information, which resulted in increased income from Letairis for the year.

Partially offsetting the increase in income from financial royalty assets was a significant decline in income related to Humira, which expired in 2018.

Income from financial royalty assets increased by $105.1 million, or 5.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the performance of the cystic fibrosis franchise, including additional interest income attributable to the residual royalty interest that we acquired in the three months ended December 31, 2020.

We also recorded $57.0 million in income in the year ended December 31, 2021 related to newly acquired assets in 2021, primarily Cabometyx/Cometriq, Tremfya and Oxlumo.

The increase in income was partially offset by declines from the maturity of our royalties from the HIV franchise.

Revenue from intangible royalty assets

Years ended December 31, 2020 and 2019

Revenue from intangible royalty interests decreased by $2.4 million, or 1.6%, in 2020 compared to 2019, primarily driven by the Januvia and Janumet royalties approaching maturity, and the maturity of the other DPP-IVs.

Years ended December 31, 2019 and 2018

Revenue from intangible royalty assets increased $11.7 million, or 8.7%, due to a full year of royalties earned on the Januvia and Janumet products marketed by Merck & Co.

In 2016, we entered into a contractual amendment to our license agreement and a settlement with Merck & Co.

(the “Merck Settlement”) that provided for a cumulative catch-up payment for past-due royalties on Januvia and Janumet products between 2014 and 2016 of $297.5 million in exchange for a five-quarter payment holiday that began in January 2017.

In 2018, we only earned royalties on product sales during the last three quarters of the year, following the expiration of the holiday period.

Revenue from intangible royalty interests increased by $27.9 million, or 19.4%, in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily related to the expected recovery of underpaid royalties on Tradjenta of approximately $16.5 million based on a legal judgment received in a litigation with Boehringer Ingelheim.

Other royalty income

Years ended December 31, 2020 and 2019

Other royalty income decreased by $0.6 million, or 3.3% , in 2020 compared to 2019, primarily due to the loss of royalty income from Remicade, which expired in 2018, but for which we continued collecting royalties through the three months ended March 31, 2019, as well as the expiration of our Prezista royalty in 2019.

The decrease was offset by higher royalty income in 2020 related to Soliqua, the product we co-funded with Sanofi on which we are entitled to royalties indefinitely, and royalty income related to Trodelvy, the product for which we provided upfront R&D funding to Immunomedics in 2018 and which was approved by the FDA in 2020 .

Years ended December 31, 2019 and 2018

Other royalty income of $19.6 million in 2019 primarily included income from our final royalties on Remicade and royalty income from Soliqua.

Other royalty income of $136.0 million in 2018 primarily included income from our Remicade and Prezista royalties of $93.7 million and $35.6 million, respectively, after the financial royalty assets were amortized.

R&D funding expense

Years ended December 31, 2020 and 2019

R&D funding expense decreased by $56.7 million, or 68.3%, in 2020 as compared to 2019, due to the completion of our funding requirements in the three months ended December 31, 2019 under our agreement with Pfizer.

In 2019, we recorded $62.8 million in R&D funding expense under our agreement with Pfizer.

Years ended December 31, 2019 and 2018

R&D funding expense decreased by $309.6 million, or 78.9%, in 2019 compared to 2018, primarily due to the royalty acquisitions from Immunomedics and Biohaven that occurred in 2018, which resulted in upfront development-stage funding expense of $181.4 million and $103.0 million, respectively.

We did not have upfront development-stage funding expense in 2019.

Other royalty income increased by $34.1 million, or 179.7% , in the year ended December 31, 2021 compared to the year ended December 31, 2020, driven primarily by increased income from Nurtec ODT and Trodelvy that arose from our R&D funding agreements with Biohaven and Immunomedics, respectively.

Other royalty income in the year ended December 31, 2021 also includes income from the HIV franchise, a fully amortized financial royalty asset, and Letairis, which was also fully amortized, but for which we expect minimal residual royalty income.

Provision for changes in expected cash flows from financial royalty assets

The breakdown of our provision for changes in expected cash flows includes the

(1) provision for current expected credit losses upon adoption of ASU 2016-13 on January 1, 2020;

(2) income and expense activity for financial royalty assets whose cash flow forecasts have changed from the prior period.

As the latter activity is a combination of income and expense items, the provision breakdown by product, exclusive of the provision for current expected credit losses, is as follows, based on the largest contributors to each year’s provision income or expense:

The breakdown of our provision for changes in expected future cash flows includes the following:

• movement in the cumulative allowance for changes in expected future cash flows;

• expense or income related to the provision for current expected credit losses subsequent to adoption of ASU 2016-13 on January 1, 2020.

As the former activity is a combination of income and expense items, the provision breakdown by product, exclusive of the provision for current expected credit losses, is as follows, based on the largest contributors to each year’s provision income or expense:

(in thousands)

Product 2020 Product 2019 Product 2018

IDHIFA $ 87,835 Cystic fibrosis franchise $ (1,101,675) Imbruvica $ (45,577)

Imbruvica 46,872 Tysabri (66,451) Tysabri (43,355)

Tysabri 40,931 Emgality 38,262 Cystic fibrosis franchise (40,287)

Soliqua 32,735 Soliqua 42,002 Letairis (31,888)

Xtandi (187,059) Xtandi 76,568 Xtandi 63,442

Other 53,339 Other (8,027) Other 40,331

Total provision, exclusive of provision for credit losses 74,653 Total provision, exclusive of provision for credit losses (1,019,321) Total provision, exclusive of provision for credit losses (57,334)

Provision for current expected credit losses 156,186 Provision for current expected credit losses — Provision for current expected credit losses —

Total provision $ 230,839 Total provision $ (1,019,321) Total provision $ (57,334)

Years ended December 31, 2020, 2019 and 2018

In 2020, we recorded provision expense of $230.8 million for changes in expected cash flows in comparison to provision income of $1.0 billion for 2019.

The provision expense for 2020 is primarily driven by current expected credit losses of $156.2 million as a result of our adoption of the new accounting standard in 2020 and for which we did not have comparable activity in 2019.

The 2020 provision for current expected credit losses was predominantly driven by increases to our portfolio of financial royalty assets during 2020, such as the additional tranche of Tazverik acquired from Epizyme and our acquisition of the zavegepant royalty from Biohaven.

In 2020, we recognized provision expense of $87.8 million related to IDHIFA, which was acquired in 2020.

In addition, we recorded provision expenses of $46.9 million and $40.9 million related to Imbruvica and Tysabri, respectively, due to decreases in sell-side research analysts’ consensus forecasts during 2020.

The provision expense was partially offset by the reversal of the cumulative allowance for Xtandi of $187.1 million due to increases in sell-side research analysts’ consensus forecasts during 2020.

In 2019, we recognized provision income of $1.0 billion primarily driven by the full reversal of the remaining provision of $1.1 billion recorded against the cystic fibrosis franchise as a result of the approval of the Vertex triple combination therapy, Trikafta, in October 2019.

Upon the approval, we began including sell-side equity research analysts’ consensus forecasts for Trikafta in the consensus forecasts for the franchise and also extended the duration of our expected cash flows from the cystic fibrosis franchise to reflect the longer patent duration of Trikafta.

In addition, we recognized provision income for Tysabri of $66.5 million due to increases in sell-side research analysts’ consensus forecasts.

The provision income was offset by provision expenses recorded for Xtandi, Soliqua and Emgality totaling $156.8 million, which were all driven by declines in sell-side equity research analysts’ consensus forecasts.

In 2018, we recognized provision income of $57.3 million.

The cumulative allowance for Imbruvica of $45.6 million was fully reversed in 2018 due to an increase in sell-side equity research analyst consensus forecasts.

In 2018, we partially reversed $43.4 million of cumulative allowance related to Tysabri as Tysabri sales did not decline as quickly as sell-side equity research analysts expected and we saw a subsequent increase in sell-side equity research analyst consensus forecasts in 2018.

In addition, we recorded provision income of $31.9 million for Letairis in 2018 due to the delayed entry of generics that was initially expected in the third quarter of 2018, which caused a partial reversal of a previously recognized cumulative provision against this asset.

While the cystic fibrosis franchise generated provision income in 2018, this was primarily the result of variability in the consensus forecasts during both years and not representative of any significant underlying driver in franchise product sales.

Throughout 2017, we recorded significant provision expense for Xtandi as consensus forecasts for future years dropped significantly in 2017, contributing to declines in analyst consensus compared to forecasts from prior periods.

Product sales and sell-side equity research analyst consensus forecasts improved for Xtandi in 2018, resulting in a partial reversal of the cumulative allowance in late 2018, and net expense of $63.4 million for the year.

Years ended December 31, 2020 and 2019

G&A expenses increased $78.3 million, or 75.7%, in 2020 compared to 2019, primarily due to a $39.1 million increase in Operating and Personnel Payments under the New Management Agreement and an increase of $26.2 million in fees related to our debt refinancing in 2020, for which there was no comparable activity in 2019.

We also incurred non-recurring professional services costs in connection with the IPO, two full quarters of expense associated with the directors and officers liability insurance policy and $5.7 million of share-based compensation expense, which further contributed to the increased G&A expenses in 2020.

Years ended December 31, 2019 and 2018

G&A expenses increased $41.5 million, or 67.1%, during 2019 compared to 2018, primarily due to a $26.4 million increase in costs for consulting and professional services related to our Reorganization Transactions.

In addition, the 2018 reversal of an $8.7 million legal reserve from a dispute related to one of our DPP-IV products contributed to the increase year over year in 2019.

Product 2021 Product 2020

Tazverik $ 210,567 IDHIFA $ 87,835

Imbruvica 189,999 Imbruvica 46,872

Emgality 68,716 Tysabri 40,931

Cystic fibrosis franchise 48,636 Soliqua 32,735

Tysabri (96,103) Xtandi (187,059)

Other 43,940 Other 53,339

Total provision, exclusive of provision for credit losses 465,755 Total provision, exclusive of provision for credit losses 74,653

Provision for current expected credit losses (12,913) Provision for current expected credit losses 156,186

Total provision expense $ 452,842 Total provision expense $ 230,839

In the year ended December 31, 2021, we recorded total provision expense of $452.8 million, of which $465.8 million and $12.9 million related to provision expense for changes in expected cash flows and provision income for current expected credit losses, respectively.

We recorded provision expense for Tazverik, Imbruvica, Emgality and the cystic fibrosis franchise, primarily due to significant declines in sell-side research analysts’ consensus sales forecasts.

The provision expense was partially offset by provision income from a significant increase in sell-side equity research analysts’ consensus sales forecasts for Tysabri.

The current expected credit loss activity in the year ended December 31, 2021 resulted in provision income that was primarily driven by a significant decrease in current expected credit losses related to Tazverik as a result of the corresponding significant decline in the financial asset value.

This was partially offset by provision expense for credit losses recognized as a result of the increases to our portfolio of financial royalty assets with limited protective rights, primarily related to zavegepant from a $100.0 million funding payment we made to Biohaven upon the start of the oral zavegepant Phase 3 program and a new royalty interest in Cabometyx/Cometriq.

In the year ended December 31, 2020, we recorded total provision expense of $230.8 million, of which $74.7 million and $156.2 million related to provision expense for changes in expected cash flows and provision expense for current expected credit losses, respectively.

We recorded provision expense for IDHIFA, which was acquired in the year ended December 31, 2020, and for Imbruvica and Tysabri due to declines in sell-side research analysts’ consensus sales forecasts.

The provision expense was partially offset by provision income from a significant increase in sell-side equity research analysts’ consensus sales forecasts for Xtandi.

We recognized provision expense for current expected credit losses as a result of our adoption of the new accounting standard in the year ended December 31, 2020.

The provision expense for current expected credit losses in the year ended December 31, 2020 was driven primarily by certain additions to our portfolio of financial royalty assets, including the additional tranche of Tazverik and our acquisition of the zavegepant royalty.

R&D funding expense

R&D funding expense incurred in the year ended December 31, 2021 was comprised of $193.2 million in upfront R&D funding and $6.9 million in ongoing R&D expenses, primarily under our co-funding agreement with Sanofi.

The increase of R&D funding expense of $173.8 million, or 661.1%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily driven by upfront R&D funding of $103.2 million related to an additional royalty on a development-stage product that we acquired from BioCryst in November 2021 and $90.0 million related to royalties on two development-stage products acquired from MorphoSys in July 2021.

R&D funding expense incurred in the year ended December 31, 2020 was comprised of $20.5 million in ongoing development-stage funding payments, primarily under our co-funding agreement with Sanofi, and $5.8 million in upfront funding related to a royalty on a development-stage product that we acquired from BioCryst.

G&A expenses were relatively flat in the year ended December 31, 2021 compared to the year ended December 31, 2020.

Other operating expenses

Years ended December 31, 2020, 2019 and 2018

Other operating expenses was $65.1 million in 2020 due to the recognition of a non-cash impairment charge related to the write-off of our omecamtiv financial royalty asset balance of $90.2 million, net of cumulative allowance of $25.2 million.

During the three months ended December 31, 2020, it was announced that omecamtiv, a development stage product did not meet the clinical trial objectives.

We did not have comparable activity in 2019 or 2018.

Equity in (earnings)/loss of non-consolidated affiliates

Years ended December 31, 2020 and 2019

Equity in earnings of non-consolidated affiliates was $44.5 million in 2020 and was comprised of equity in earnings from the Legacy SLP Interest and equity in losses from the Avillion Entities.

Equity in earnings from the Legacy SLP Interest, an investment which arose through the Exchange Offer Transactions, was $62.0 million in 2020 .

Equity in losses of the Avillion Entities was $17.6 million and $32.5 million during 2020 and 2019, respectively.

Equity in losses of the Avillion Entities was lower in 2020 compared to 2019 primarily driven by a gain related to Avillion II ’ s completion of the development program for the Merck KGaA Asset during the second quarter of 2020, which triggered a distribution to us in 2020.

Years ended December 31, 2019 and 2018

Equity in losses of non-consolidated affiliates was not material in 2019 or in 2018 and related solely to our investment in the Avillion Entities.

Other operating expenses were $65.1 million in the year ended December 31, 2020 due to the recognition of a non-cash impairment charge related to the write-off of our omecamtiv mecarbil financial royalty asset balance of $90.2 million, net of cumulative allowance of $25.2 million.

During the three months ended December 31, 2020, it was announced that omecamtiv mecarbil, a development stage product, did not meet the clinical trial objectives.

There was no comparable activity in the year ended December 31, 2021.

Equity in losses/(earnings) of non-consolidated affiliates

We recorded equity in losses of non-consolidated affiliates of $19.5 million for the year ended December 31, 2021 compared to equity in earnings of non-consolidated affiliates of 44.5 million for the year ended December 31, 2020.

Equity in earnings of the Legacy SLP Interest was $8.9 million and $62.0 million during the years ended December 31, 2021 and 2020, respectively.

Equity in losses of the Avillion Entities was $28.4 million and $17.6 million during the years ended December 31, 2021 and 2020, respectively.

Interest expense

Years ended December 31, 2020 and 2019

Interest expense decreased by $111.5 million, or 41.5%, in 2020 as compared to 2019, due to the Reorganization Transactions and refinancing of RPIFT’s prior senior secured credit facilities that occurred in February 2020 through the issuance of senior secured credit facilities (“Senior Secured Credit Facilities”) at lower interest rates.

The Senior Secured Credit Facilities were subsequently refinanced through the $6.0 billion senior unsecured notes offering completed in September 2020 (the “Notes”).

The Notes were issued at a weighted average interest rate of 2.125%, which is lower than the weighted average interest rate on RPIFT’s prior senior secured credit facilities of 3.69% that was applicable in 2019.

Refer to the “Liquidity and Capital Resources” section for additional discussion of the Notes and the refinanced senior secured credit facilities.

Years ended December 31, 2019 and 2018

Interest expense remained relatively consistent between 2019 and 2018, as expected.

Realized gain on available for sale debt securities

Years ended December 31, 2019 and 2018

We did not record any realized gains on available for sale debt securities subsequent to December 31, 2018 because our contractual agreement in respect of Tecfidera milestones was satisfied as of December 31, 2018.

In 2018, four Tecfidera milestones totaling $600.0 million were triggered, with an associated cost basis of $180.5 million.

Other income, net

Years ended December 31, 2020, 2019 and 2018

Other income was $219.2 million in 2020 and was primarily comprised of realized and unrealized gains on equity securities of $247.1 million.

We recognized a gain of $292.3 million related to an increase in the share price of Immunomedics common stock as a result of its acquisition by Gilead in the fourth quarter of 2020 and a $66.0 million unrealized gain related to an increase in share price of our investment in Biohaven common stock.

These gains were partially offset by an unrealized loss of $120.1 million related to a decrease in share price of our investment in Epizyme common stock.

We also recorded income of $18.6 million related to the movement in fair value of our commitment to acquire the Series B Biohaven Preferred Shares ( “Series B Forwards”), for which we did not have comparable activity in 2019.

We also recorded a loss on debt extinguishment of $30.5 million in 2020 due to unamortized loan issuance costs and original issue discount related to our credit facilities written off as a result of the 2020 debt refinancings, for which we did not have comparable activity in 2019.

Other income was $139.3 million in 2019 and was primarily comprised of the movement in fair market value of equity securities purchased in 2019.

As part of our transaction with Epizyme in November 2019, we acquired common stock and warrants with an initial fair value of $87.8 million.

By the end of 2019, the market value of the common stock and warrants of Epizyme had increased by $107.0 million to $194.8 million.

We also recorded unrealized gains of $67.0 million for the increases in market value of our investment in common stock of Biohaven and Immunomedics.

Finally, we recognized an unrealized loss of $72.6 million on our interest rate swaps due to adverse movements in the LIBOR curve.

Other income was $20.9 million in 2018 primary due to the adoption of ASU 2016-01, which resulted in the recognition of $13.9 million in unrealized losses on equity securities in earnings.

Unrealized gains and losses on equity securities were previously recorded as a component of accumulated other comprehensive income.

This loss was offset by increased interest income compared to prior periods due to carrying a significantly larger cash and cash equivalents balance over the year, on which we earned interest.

Interest expense increased by $9.1 million, or 5.8%, in the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily driven by interest expense related to the $1.3 billion senior unsecured notes issued in July 2021 (“2021 Notes”) offset by the lower interest expense related to the $6.0 billion senior unsecured notes issued in September 2020 (the “2020 Notes”), which had a lower weighted average interest rate compared to the senior secured credit facilities that were in place during the year ended December 31, 2020.

We refer to the 2020 Notes and 2021 Notes, collectively, as the “Notes”.

Refer to the “Liquidity and Capital Resources” section for additional discussion of the Notes and our debt refinancings in 2020.

Other expense/(income), net

Other expense, net of $3.9 million in the year ended December 31, 2021 was primarily comprised of net losses on equity securities of $48.1 million, including losses on MorphoSys ordinary shares and Epizyme common stock, partially offset by a gain on Biohaven common shares;

and losses of $21.5 million on our derivative financial instruments related to our treasury rate lock contracts that were unwound and settled in connection with the issuance of the 2021 Notes.

The losses were partially offset by interest income of $50.9 million related to our Series A Biohaven Preferred Shares and a gain of $17.9 million on the unrealized change in fair value of our available for sale debt securities.

Other income, net of $219.2 million in the year ended December 31, 2020 was primarily comprised of net gains on equity securities of $247.1 million, of which $292.3 million was driven by the redemption of our investment in Immunomedics common stock upon Gilead’s acquisition of Immunomedics in October 2020 and $66.0 million was related to an increase in share price of our investment in Biohaven common shares.

These gains were partially offset by a loss of $120.1 million related to a decrease in share price of our investment in Epizyme common stock.

In the year ended December 31, 2020, we also recognized $42.1 million in losses on our derivative financial instruments, primarily related to Epizyme warrants as a result of the decrease in Epizyme common stock price.

Additionally, we recognized a loss on debt extinguishment of $30.5 million related to the debt refinancings completed in the year ended December 31, 2020.

Net income attributable to non-controlling interest

Years ended December 31, 2020 and 2019

Net income attributable to the Legacy Investors Partnerships and the Continuing Investors Partnerships was $321.0 million and $317.0 million, respectively, in 2020.

The net income attributable to non-controlling interest in 2020 was larger than in 2019 as a result of ownership changes related to the Exchange Offer Transactions and the IPO.

As a result of the Exchange Offer Transactions, a new non-controlling interest exists related to the ownership in Old RPI by the Legacy Investors Partnerships of approximately 18%.

As a result of the IPO, holders of our Class B ordinary shares also represent a non-controlling interest through the respective holders’ Class B Interests in RP Holdings.

We now have four different components of non-controlling interest and total ownership by non-controlling interest of 51% as of December 31, 2020 compared to ownership by non-controlling interest related solely to RPSFT in the prior year period of less than 1% as of December 31, 2019.

During 2020 and 2019, we recorded net income attributable to RPSFT of $88.9 million and $112.9 million, respectively.

Income attributable to RPSFT is expected to continue to decline as the assets held by RPCT mature.

Years ended December 31, 2019 and 2018

Net income attributable to RPSFT declined by $27.2 million, or 19.4%, in 2019 compared to 2018, primarily due to declines in expired and maturing royalty assets held by RPCT.

Key recent developments and upcoming events relating to our portfolio

Net income attributable to the Continuing Investors Partnerships was $297.3 million and $317.0 million in the years ended December 31, 2021 and 2020, respectively.

The net income attributable to the Continuing Investors Partnerships reflects a partial period of net income subsequent to the IPO in the year ended December 31, 2020 compared to the full period of net income in the year ended December 31, 2021.

The decrease in net income attributable to Continuing Investors Partnerships was primarily driven by lower net income attributable to RP Holdings in the year ended December 31, 2021.

The decrease was further driven by the ongoing exchanges in 2021 by investors in the Continuing Investors Partnerships who indirectly own the RP Holdings Class B Interests for our Class A ordinary shares, resulting in a decline in the Continuing Investors Partnerships’ ownership of RP Holdings.

Net income attributable to the Legacy Investors Partnerships, which arose in February 2020 in connection with the Exchange Offer Transactions, was $266.6 million and $321.0 million in the years ended December 31, 2021 and 2020, respectively.

The net income attributable to the Legacy Investors Partnerships reflects a partial period of net income subsequent to the Exchange Date in the year ended December 31, 2020.

The decrease in net income attributable to the Legacy Investors Partnerships was primarily driven by lower net income attributable to Old RPI in 2021.

Net income attributable to RPSFT was $57.6 million and $88.9 million in the years ended December 31, 2021 and 2020, respectively.

We expect net income attributable to RPSFT to continue to decline as the royalty assets owned by RPCT mature.

Key developments and upcoming events relating to our portfolio

The key developments impacting our cash receipts and income and revenue from our royalty interests are discussed below:

2 unchanged sentences

In October 2019, Vertex received approval from the FDA for Trikafta for the treatment of patients with cystic fibrosis ages 12 years and older who have at least one copy of the F508del mutation.

In November 2019, Vertex announced that it reached an agreement with France’s Economic Committee of Health Care Products for a national reimbursement deal for Orkambi.

As a result, we experienced a reduction in our royalty receipts in 2020 of approximately $41 million, to reflect a true-up related to prior periods where we collected royalties on sales in France of Orkambi at a higher selling price.

In October 2019, Vertex announced that it reached an agreement with England’s National Health Service, where eligible patients will receive access to Orkambi and Symkevi, and access to Kalydeco will be expanded.

In August 2020, Vertex announced that the European Commission had granted marketing authorization of Kaftrio in a combination regimen with ivacaftor for the treatment of patients with cystic fibrosis ages 12 years and older with one F508del mutation and one minimal function mutation, or two F508del mutations in the CFTR gene.

In August 2020, Vertex announced that the EC had granted marketing authorization of Kaftrio in combination with ivacaftor for the treatment of patients with cystic fibrosis ages 12 years and older with one F508del mutation and one minimal function mutation, or two F508del mutations in the cystic fibrosis transmembrane conductance regulator gene.

In December 2020, the FDA expanded the eligibility for Trikafta to include people with cystic fibrosis ages 12 and older with certain mutations that are responsive to Trikafta based on in vitro data.

In January 2021, Vertex announced that the FDA accepted a supplemental New Drug Application (sNDA) for Trikafta for the treatment of children with cystic fibrosis ages 6 to 11 who have at least one F508del mutation or have certain mutations that are responsive to Trikafta based on in vitro data.

The FDA granted Priority Review of the sNDA and assigned a Prescription Drug User Fee Act (PDUFA) target action date of June 8, 2021.

In January 2019, Biogen announced the start of the two-year global Phase IIIb NOVA study evaluating the efficacy and safety of extended interval dosing for natalizumab compared to standard interval dosing in patients with relapsing multiple sclerosis.

Data from the study is expected to readout in 2021.

In June 2020, Biogen submitted a Supplemental Biologics License Application for a subcutaneous formulation of Tysabri to the FDA.

This followed a regulatory submission for a subcutaneous formulation of Tysabri to the European Medicines Agency in March 2020.

Biogen expects US and EU approvals for the subcutaneous formulation of Tysabri in mid-2021.

In April 2021, Vertex announced EC approval for Kaftrio in combination with ivacaftor for the treatment of patients with cystic fibrosis ages 12 and older who have at least one F508del mutation.

In June 2021, Vertex announced that FDA approved Trikafta for the treatment of children with cystic fibrosis ages 6 through 11 who have at least one F508del mutation or have certain mutations that are responsive to Trikafta based on in vitro data.

In January 2022, Vertex announced that the EC granted approval for the label expansion of Kaftrio in combination with ivacaftor for the treatment of cystic fibrosis in patients ages 6 through 11 years old who have at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator gene.

In April 2021, Biogen announced that the EC granted marketing authorization for a subcutaneous injection of Tysabri to treat relapsing-remitting multiple sclerosis.

Biogen also announced that it had received a Complete Response Letter from the FDA for its sBLA for subcutaneous Tysabri.

The Complete Response Letter indicates that the FDA is unable to approve Biogen’s filing as submitted.

Biogen announced that it is evaluating the Complete Response Letter and will determine next steps in the United States.

In August 2021, Biogen announced results from Phase 3b NOVA study evaluation every six-week dosing with Tysabri intravenous administration in relapsing-remitting multiple sclerosis.

Results show that every six-week Tysabri intravenous administration provides a high level of efficacy in controlling multiple sclerosis disease activity in patients who switched from the approved every four-week dosing regimen.

In April 2020, Imbruvica received FDA approval for use in combination with rituximab for the treatment of previously untreated patients with chronic lymphocytic leukemia (CLL) or small lymphocytic lymphoma (SLL).

In August 2020, the European Commission granted marketing authorization for Imbruvica in combination with rituximab for the treatment of adult patients with previously untreated CLL.

In August 2020, the EC granted marketing authorization for Imbruvica in combination with rituximab for the treatment of adult patients with previously untreated CLL.

This milestone marked the 11 th FDA approval for Imbruvica since it was first approved in 2013 and sixth in CLL.

The primary completion date for the Phase III SHINE trial for treatment of frontline mantle cell lymphoma is expected to be June 2021 and AbbVie has indicated that approval could occur in 2022.

The primary completion date for the Phase III GLOW trial of Imbruvica in combination with Venetoclax for treatment of frontline CLL and SLL is expected to be February 2021 and AbbVie has indicated that approval could occur in 2022.

In October 2018, the European Commission approved Xtandi for the treatment of adult men with high-risk non-metastatic castration-resistant prostate cancer.

Xtandi was previously approved by the EC for the treatment of adult men with metastatic CRPC.

In June 2021, Phase 3 GLOW study results for Imbruvica in combination with Venetoclax for the treatment of first-line CLL and SLL demonstrated superior progression-free survival versus chlorambucil plus obinutuzumab as a first-line treatment of CLL.

The study also showed improved duration of remission and significantly improved depth of remission.

AbbVie has indicated that approval could occur in 2022.

In August 2021, AbbVie announced that the U.S.

District Court for the District of Delaware had issued a decision holding patent rights relating to Imbruvica were valid and infringed by a generic product from Alvogen and Natco.

The decision, which is subject to appeal, prohibits regulatory approval of that generic product until the last AbbVie patent expires.

Previously, AbbVie entered into several settlement and license agreements with other generic companies.

Consequently, AbbVie does not expect any generic product entry prior to March 30, 2032, assuming pediatric exclusivity is granted.

In December 2019, Astellas and Pfizer announced that the FDA approved Xtandi for the treatment of patients with metastatic castration sensitive prostate cancer.

Xtandi is currently under review by the European Medicines Agency for the treatment of patients with metastatic castration sensitive prostate cancer.

Astellas and Pfizer have indicated that there could be a potential readout of the Phase III EMBARK trial for high-risk non-metastatic prostate cancer in 2021, with a primary trial completion date anticipated in 2023.

In April 2020, Immunomedics announced that the FDA granted accelerated approval of Trodelvy for the treatment of patients with metastatic triple-negative breast cancer who have received at least two prior therapies for metastatic disease.

In September 2020, Gilead and Immunomedics announced that Gilead would acquire Immunomedics for approximately $21 billion in cash and the transaction closed in October 2020.

In 2018, we entered into a partnership with Immunomedics whereby we acquired a tiered sales-based royalty on Trodelvy for $175.0 million and acquired 4,373,178 shares of Immunomedics common stock for $75.0 million.

Gilead’s acquisition of Immunomedics closed in October, resulting in gross cash proceeds upon redemption of our Immunomedics common stock of approximately $385 million.

In September 2020, Immunomedics presented results from the confirmatory Phase III ASCENT study that showed that Trodelvy significantly extended overall survival and improved overall response rate and clinical benefit rate, compared to treatment of choice standard single-agent chemotherapy in brain metastases-negative patients with metastatic triple negative breast cancer who had previously received at least two prior therapies for metastatic disease.

In December 2020, Gilead filed two supplemental biologics license applications with the FDA for full approval of Trodelvy as a treatment for adult patients with metastatic triple-negative breast cancer and accelerated approval of Trodelvy for metastatic urothelial carcinoma.

Gilead anticipates potential approval for both indications in the first half of 2021.

In January 2021, Gilead also announced that progression-free survival data from the Phase III TROPiCS-02 trial testing Trodelvy versus physician’s choice in hormone receptor positive/human epidermal growth factor receptor 2 negative metastatic breast cancer who have previously failed at least two, and no more than four, prior chemotherapy regimens for metastatic disease was expected in the second half of 2021.

In February 2021, Gilead announced that the company expects to submit a European Medicines Agency filing for Trodelvy for the treatment of patients with metastatic triple-negative breast cancer who have received at least two prior therapies for metastatic disease in the first half of 2021.

In May 2021, Astellas and Pfizer announced that the EC approved Xtandi for the treatment of patients with metastatic hormone-sensitive prostate cancer.

In September 2021, Astellas Pharma and Pfizer announced that Xtandi plus androgen deprivation therapy (ADT) reduced the risk of death by 34% compared to placebo plus ADT in the Phase 3 ARCHES study in men with metastatic hormone-sensitive prostate cancer.

The primary results from the ARCHES trial were published in 2019.

Astellas and Pfizer have indicated that there could be a potential readout of the Phase 3 EMBARK trial for high-risk non-metastatic prostate cancer in the second half of 2022.

• Nurtec ODT.

In February 2020, Biohaven announced that the FDA approved Nurtec ODT for the acute treatment of migraine in adults.

The FDA approval of Nurtec ODT triggered a redemption provision related to our investment in Biohaven’s Series A Preferred Shares, which entitles us to receive a fixed payment amount of $250.0 million payable in nominal quarterly payments from March 31, 2021 through December 31, 2024.

In October 2020, Biohaven announced that the FDA had filed and accepted for review its recently submitted supplemental new drug application for Nurtec ODT for the preventive treatment of migraine.

The PDUFA target date for completion of the FDA review of the preventive application for Nurtec ODT is in the second quarter of 2021.

In August 2020, the FDA approved Evrysdi, the first at-home, orally administered treatment for spinal muscular atrophy in adults and children ages 2 months and older.

In August 2020, the European Medicines Agency accepted the filing for Evrysdi for the treatment of spinal muscular atrophy.

The European Medicines Agency’s Committee for Medicinal Products for Human Use opinion for Evrysdi is expected in the first half of 2021, and priority review of the Japanese New Drug Application is ongoing.

In December 2020, BioCryst announced that Orladeyo was approved by the FDA for prophylaxis to prevent attacks of hereditary angioedema in patients ages 12 years and older.

The FDA approval of Nurtec ODT triggered a redemption provision related to our investment in the Series A Biohaven Preferred Shares, which entitles us to receive a fixed payment amount of $250.0 million payable in equal quarterly payments from March 31, 2021 through December 31, 2024.

In May 2021, Biohaven announced that the FDA approved Nurtec ODT for the preventative treatment of migraine, indicated for adult patients with episodic migraine who experience less than 15 headache days per month.

In November 2021, Biohaven announced a strategic collaboration with Pfizer for the commercialization of rimegepant outside the United States.

Pfizer also gains rights outside the U.S.

to zavegepant, which is being studied in an intranasal delivery and an oral formulation in Phase 3 clinical trials for migraine indications.

Biohaven has indicated it expects an EMA decision on Vydura (rimegepant) in the first half of 2022.

In April 2020, Immunomedics announced that the FDA granted accelerated approval of Trodelvy for the treatment of patients with metastatic triple-negative breast cancer (TNBC) who have received at least two prior therapies for metastatic disease.

In September 2020, Gilead and Immunomedics announced that Gilead would acquire Immunomedics for approximately $21 billion in cash.

Gilead’s acquisition of Immunomedics closed in October 2020, resulting in gross cash proceeds upon redemption of our Immunomedics common stock of approximately $385 million.

In April 2021, Gilead announced the FDA granted full approval to Trodelvy for adult patients with unresectable locally advanced or metastatic TNBC who have received two or more prior systemic therapies, at least one of them for metastatic disease.

The approval is supported by data from the Phase 3 ASCENT study.

In April 2021, Gilead announced that the FDA granted an accelerated approval of Trodelvy for use in adult patients with locally advanced or metastatic urothelial cancer who have previously received a platinum-containing chemotherapy and either a programmed death receptor-1 or a programmed death-ligand 1 inhibitor.

The accelerated approval was based on data from the international Phase 2, single-arm TROPHY study.

In June 2021, Gilead announced superior outcomes to standard of care in second-line treatment of metastatic TNBC in the Phase 3 ASCENT study.

Trodelvy more than doubled overall survival as a second-line treatment in the new ASCENT subgroup analysis.

In October 2021, Gilead announced a collaboration with Merck & Co.

to investigate Trodelvy in combination with Keytruda as a first-line treatment for people with locally advanced or metastatic TNBC.

In November 2021, Gilead announced that the EC granted marketing authorization for Trodelvy as a monotherapy indicated for the treatment of adult patients with unresectable or metastatic TNBC who have received two or more prior systemic therapies, at least one of them for advanced disease.

The EC’s decision is supported by results from the Phase 3 ASCENT study, where Trodelvy reduced the risk of death by 49% and improved median overall survival to 11.8 months versus 6.9 months with physician’s choice of chemotherapy.

In January 2022, Gilead announced it has entered into two clinical trial collaboration and supply agreements with Merck & Co.

to evaluate the combination of Trodelvy and Merck’s anti-PD-1 therapy Keytruda in first-line metastatic non-small cell lung cancer (NSCLC).

As part of the collaboration, Merck will sponsor a global Phase 3 clinical trial of Trodelvy in combination with Keytruda as a first-line treatment of patients with metastatic NSCLC.

Additionally, the companies recently established an agreement whereby Gilead will sponsor a Phase 2 signal-seeking study evaluating combinations that include pembrolizumab in first-line NSCLC.

Gilead has indicated that it expects progression-free survival data as well as the first planned interim analysis of overall survival data from the Phase 3 TROPiCS-02 trial in hormone receptor positive/human epidermal growth factor receptor 2 negative metastatic breast cancer in March 2022.

In January 2021, Exelixis announced that the FDA approved Cabometyx for patients with advanced renal cell carcinoma (RCC) as a first-line treatment in combination with Bristol Myers Squibb’s Opdivo.

The approval was based on the Phase 3 CheckMate -9ER trial, in which the combination of Cabometyx and Opdivo significantly improved overall survival while doubling progression-free survival and objective response rate versus sunitinib as a first-line treatment for patients with advanced RCC.

In March 2021, Ipsen announced that the EC approved the combination of Cabometyx and Opdivo for the first-line treatment of advanced RCC.

In May 2021, Exelixis announced results from cohort six of COSMIC-021, a Phase 1b trial evaluating Cabometyx in combination with atezolizumab in patients with locally advanced or metastatic solid tumors, including patients with metastatic castration-resistant prostate cancer (CRPC).

In high-risk patients, the combination of Cabometyx and atezolizumab resulted in objective response rates of 27% and 18% per investigator assessment and Blinded Independent Radiology Committee, respectively.

In June 2021, Exelixis and Ipsen announced that COSMIC-312, a Phase 3 trial evaluating Cabometyx in combination with atezolizumab versus sorafenib in patients with previously untreated advanced hepatocellular carcinoma.

The trial met one of its primary endpoints by demonstrating significant improvement in progression-free survival at the planned primary analysis.

However, a prespecified interim analysis was not statistically significant for the second primary endpoint of overall survival.

Based on the preliminary overall survival data, Exelixis anticipates that the probability of reaching statistical significance at the time of the final analysis is low.

In August 2021, Exelixis announced that their partners Takeda and Ono received approval in Japan for Cabometyx in combination with Opdivo for the treatment of unresectable or metastatic RCC.

Approval is based on the CheckMate -9ER trial of Cabometyx in combination with Opdivo, which demonstrated superior overall survival and doubled mean progression-free survival and objective response rate versus sunitinib, with a favorable safety profile.

In September 2021, Exelixis announced detailed results from the expanded Cohort 6 of the Phase 1b COSMIC-021 trial of Cabometyx in combination with atezolizumab in patients with metastatic CRPC, which included patients with metastatic CRPC who had been previously treated with novel hormone therapies enzalutamide and/or abiraterone acetate used along with prednisone.

Following discussions with FDA, Exelixis will not pursue a regulatory submission for the combination regimen based on cohort 6 of COSMIC-021.

CONTACT-02, a global Phase 3 pivotal trial that initiated enrollment in June 2020 may serve as a basis for future regulatory applications.

In September 2021, Exelixis announced FDA approved Cabometyx for patients with previously treated radioactive iodine-refractory differentiated thyroid cancer.

The approval was based on the Phase 3 COSMIC-311 pivotal trial.

Exelixis has indicated it expects Phase 3 data from the COSMIC-313 trial in 1L RCC in the first half of 2022 and initial Phase 3 data in the second half of 2022 from CONTACT-01 in metastatic NSCLC and CONTACT-03 in advanced or metastatic RCC.

In August 2020, the FDA approved Evrysdi, the first at-home, orally administered treatment for spinal muscular atrophy (SMA) in adults and children ages 2 months and older.

In March 2021, Roche announced that the EC approved Evrysdi for the treatment of SMA in patients two months of age and older, with a clinical diagnosis of SMA Type 1, Type 2 or Type 3 or with one to four splicing modifier of motor neuron 2 copies.

In June 2021, Evrysdi was approved in Japan for the treatment of SMA.

In December 2020, BioCryst announced that Orladeyo was approved by the FDA for prophylaxis to prevent attacks of hereditary angioedema (HAE) in patients ages 12 years and older.

In January 2021, Orladeyo was approved in Japan, becoming the first and only prophylactic HAE medication approved in the region.

The European Medicines Agency validated BioCryst’s application for Orladeyo and formal review is underway.

BioCryst expects a decision from the European Medicines Agency in the second quarter of 2021.

We continued collecting milestone receipts quarterly throughout 2018;

however, our contractual agreement covering our milestones on cumulative sales of Tecfidera ended in 2018, and therefore receipts from Tecfidera ceased after the final milestone was collected in the first quarter of 2019.

Our royalties on Humira expired in June 2018.

The patents covering our royalties on Remicade expired in September 2018.

In April 2021, BioCryst announced that the EC approved Orladeyo for the prevention of recurrent HAE attacks in patients 12 years and older.

In April 2021, BioCryst announced approval of Japanese National Health Insurance System price listing of Orladeyo for prophylactic treatment of HAE.

In July 2021, Alnylam announced results from ILLUMINATE-C, a Phase 3 open-label study of lumasiran in patients of all ages with advanced primary hyperoxaluria type 1 associated with progressive decline in renal function.

Results from the primary analysis at six months demonstrated a substantial reduction in plasma oxalate from baseline in patients with advanced disease, including those on hemodialysis.

The safety and tolerability profile of lumasiran following six months of treatment was encouraging across all ages, with no drug related serious adverse events and injection site reactions as the most common adverse event.

In December 2021, Alnylam submitted a supplemental New Drug Application for lumasiran to the FDA and a Type II Variation with the EMA for the reduction of plasma oxalate in the treatment of patients with advanced primary hyperoxaluria type 1.

Development-Stage Product Candidates

• Zavegepant.

In December 2019, Biohaven announced positive topline results from the Phase II/III trial of intranasal zavegepant for the acute treatment of migraine.

In October 2020, Biohaven commenced a Phase III pivotal trial of intranasal zavegepant for the acute treatment of migraine.

In October 2020, Biohaven also began a one-year long-term safety trial of zavegepant.

Biohaven expects a potential NDA filing at the end of 2021 if the pivotal acute trial proves to be positive.

In February 2022, Cytokinetics announced positive topline results from Cohort 3 of the REDWOOD-HCM Phase 2 trial.

Results from Cohort 3 showed that substantial reductions in the average resting LVOT-G as well as the post-Valsalva LVOT-G were achieved for patients with oHCM and a resting or post-Valsalva LVOT-G of ≥50 mmHg whose background therapy included disopyramide and in the majority a beta-adrenergic blocker.

The safety and tolerability of aficamten were consistent with prior experience in REDWOOD-HCM with no treatment interruptions and no serious adverse events attributed to treatment reported by the investigators.

In December 2021, Cytokinetics announced the FDA granted Breakthrough Therapy Designation for aficamten for the treatment of symptomatic oHCM based on results from REDWOOD-HCM.

Cytokinetics has indicated it plans to initiate a pivotal study of aficamten in oHCM in the first quarter of 2022.

• Gantenerumab.

In October 2021, Roche announced that gantenerumab, an anti-amyloid beta antibody developed for subcutaneous administration, has been granted Breakthrough Therapy Designation by the FDA for the treatment of people living with Alzheimer’s disease.

This designation is based on data showing that gantenerumab significantly reduced brain amyloid plaque, a pathological hallmark of Alzheimer’s disease, in the ongoing SCarlet RoAD and Marguerite RoAD open-label extension trials, as well as other studies.

Roche has indicated it expects Phase 3 data from the GRADUATE 1/2 trial in Alzheimer’s disease in the fourth quarter of 2022.

• Omecamtiv mecarbil .

In November 2020, Amgen, Cytokinetics and Servier presented the results of GALACTIC-HF study, a Phase III trial of omecamtiv mecarbil in patients with heart failure, at the American Heart Association Scientific Sessions.

In November 2020, Amgen, Cytokinetics and Servier presented the results of GALACTIC-HF study, a Phase 3 trial of omecamtiv mecarbil in patients with heart failure, at the American Heart Association Scientific Sessions.

The trial met the primary composite endpoint of reduction in cardiovascular death or heart failure events, but did not meet the secondary endpoint of reduction in cardiovascular death.

Cytokinetics subsequently regained global rights to develop and commercialize omecamtiv mercarbil when Amgen and Servier elected to terminate their collaboration agreement effective, May 2021.

Following the Phase III results and termination of the collaboration, we recorded a $90 million write-off to the royalty investment given the uncertainty around the future of omecamtiv.

In May 2020, Pfizer reported that the independent data monitoring committee for the PALLAS trial had concluded after the interim analysis that the PALLAS trial was “unlikely to show a statistically significant improvement in the primary endpoint of invasive disease-free survival.” In October 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, human epidermal growth factor-negative early breast cancer who have residual invasive disease after completing neoadjuvant chemotherapy.

As a result, we will not be entitled to any royalties or milestone payments from our R&D funding arrangement.

Cytokinetics subsequently regained global rights to develop and commercialize omecamtiv mecarbil when Amgen and Servier elected to terminate their collaboration agreement effective, May 2021.

Following the Phase 3 results and termination of the collaboration, we wrote off the full value of our financial royalty asset given the uncertainty around the future of omecamtiv mecarbil.

In February 2022, Cytokinetics announced that FDA has accepted and filed the company’s New Drug Application (NDA) for omecamtiv mecarbil.

The FDA assigned the NDA a standard review with a PDUFA target action date of November 30, 2022.

The FDA also indicated that it is currently not planning to hold an advisory committee meeting to discuss the application.

The submission is supported by GALACTIC-HF, which demonstrated a positive effect on the primary composite endpoint of cardiovascular death or heart failure events in patients with heart failure and reduced ejection fraction who were receiving standard of care plus omecamtiv mecarbil.

GlaxoSmithKline has indicated it expects Phase 3 data from the contRast trials in rheumatoid arthritis in the second half of 2022.

• Pelabresib:

In December 2021, MorphoSys presented the latest data from the Phase 2 MANIFEST study evaluating pelabresib in the treatment of myelofibrosis.

As of September 10, 2021, the data cut-off, a total of 84 JAK inhibtor-naive patients were enrolled and received the first-line combination of pelabresib and ruxolitinib.

The data showed 68% (n=57) of patients treated with the combination achieved a greater than or equal to 35% reduction in spleen volume (SVR35) from baseline at week 24 and 60% (n=47) maintained SVR35 at week 48.

Most patients also saw their symptoms reduced, with 56% (n=46) achieving greater than or equal to 50% reduction in total symptom score from baseline at week 24.

In September 2021, AstraZeneca and Avillion announced positive results from MANDALA and DENALI, two Phase 3 trials evaluating PT027 (albuterol/budesonide) in patients with asthma.

PT027 is a potential first-in-class inhaled, fixed-dose combination of albuterol, a short-acting beta2-agonist, and budesonide, an inhaled corticosteroid.

In MANDALA, PT027 demonstrated a statistically significant and clinically meaningful reduction in the risk of severe exacerbations compared to albuterol, when used as a rescue medicine in response to symptoms.

In DENALI, PT027 showed a statistically significant improvement in lung function measured by forced expiratory volume in one second, compared to the individual components albuterol and budesonide, and compared to placebo.

The safety and tolerability of PT027 in both trials was consistent with the known profiles of the components.

AstraZeneca has indicated PT027 regulatory submissions will occur in the first half of 2022.

• Zavegepant.

In December 2019, Biohaven announced positive topline results from the Phase 2/3 trial of intranasal zavegepant for the acute treatment of migraine.

In March 2021, Biohaven announced that it enrolled the first patient in a Phase 2/3 clinical trial of oral zavegepant for the preventive treatment of migraine.

Accordingly, per the agreement with Biohaven announced in August 2020, Royalty Pharma paid $100 million to Biohaven for the achievement of this milestone, bringing the total zavegepant funding to $250 million.

In December 2021, Biohaven announced positive topline results from the second pivotal clinical trial evaluating the safety and efficacy of intranasal zavegepant for the acute treatment of migraine in adults.

The Phase 3 study achieved its co-primary regulatory endpoints of pain freedom and freedom of most bothersome symptom at 2 hours and showed broad efficacy by demonstrating statistically significant superiority to placebo across a total of 15 prespecified primary and secondary outcome measures.

Biohaven plans to file an NDA for zavegepant with the FDA in the first quarter of 2022 and other countries thereafter.

Non-GAAP Financial Results

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Adjusted Cash Receipts is a measure calculated with inputs directly from the Statement of Cash Flows and includes (1) royalty receipts by product:

(i) Cash collections from royalty assets (financial assets and intangible assets), (ii) Other royalty cash collections , (iii) Distributions from non-consolidated affiliates and (iv) Proceeds from available for sale debt securities;

less Distributions to non-controlling interest , which represents distributions to our historical non-controlling interest attributable to a de minimis interest in RPCT held by certain legacy investors and to a new non-controlling interest that was created as a result of the Exchange Offer Transactions in February 2020 related to the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI.

(i) Cash collections from royalty assets (financial assets and intangible assets), (ii) Other royalty cash collections , (iii) Distributions from non-consolidated affiliates, plus (2) Proceeds from available for sale debt securities;

less (3) Distributions to non-controlling interest , which represents contractual distributions of royalty receipts and proceeds from available for sale debt securities to our historical non-controlling interest attributable to a de minimis interest in RPCT held by certain legacy investors and to the non-controlling interest that was created as a result of the Exchange Offer Transactions in February 2020 related to the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI.

Adjusted Cash Receipts is most directly comparable to the GAAP measure of Net cash provided by operating activities .

1 unchanged sentence

Adjusted EBITDA is important to our lenders and is defined under the Credit Agreement as Adjusted Cash Receipts less Payments for operating and professional costs.

Operating and professional costs are comprised of Payments for operating and professional costs and Payments for rebates from the Statement of Cash Flows.

Adjusted Cash Flow is defined as Adjusted EBITDA less (1) Ongoing development-stage funding payments , (2) Interest paid, net , (3) Swap collateral (posted) or received, net , (4) Swap termination payments and (5) Investment in non-consolidated affiliates , and plus (1) Contributions from non-controlling interest- R&D , all directly reconcilable to the Statement of Cash Flows.

Payments for operating and professional costs are comprised of Payments for operating and professional costs and Payments for rebates from the Statement of Cash Flows.

Adjusted Cash Flow is defined as Adjusted EBITDA less (1) Ongoing development-stage funding payments , (2) Interest paid , net of Interest received , (3) Other (including Derivative collateral posted, net of Derivative collateral received, and Termination payments on derivative instruments ) and (4) Investments in non-consolidated affiliates , plus (1) Contributions from non-controlling interest- R&D , all directly reconcilable to the Statement of Cash Flows.

Adjusted Cash Receipts and Adjusted Cash Flow are used by management as key liquidity measures in the evaluation of our ability to generate cash from operations.

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Adjusted EBITDA, as derived from Adjusted Cash Receipts, is used by our lenders to assess our ability to meet our financial covenants.

The table below includes the royalty receipts for the years ended December 31, 2020, 2019 and 2018 by product for our Growth Products and Mature Products, as defined in “—Portfolio Overview” above.

The following is a discussion of our results on a non-GAAP basis for the years ended December 31, 2021 and 2020.

For a discussion comparing our results on a non-GAAP basis for the years ended December 31, 2020 and 2019, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

The table below includes the royalty receipts and non-GAAP financial results for the years ended December 31, 2021 and 2020 by product in order of contribution to royalty receipts for the year ended December 31, 2021.

(in thousands) Years Ended December 31, 2021 vs.

2019 2019 vs.

2021 2020 $ %

Growth Products

Cystic fibrosis franchise (1) $ 702,140 $ 551,338 $ 150,802 27.4 %

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Imbruvica 352,911 322,071 30,840 9.6 %

HIV franchise 293,808 262,939 224,321 30,869 11.7 % 38,618 17.2 %

Promacta 173,621 143,741 29,880 20.8 %

Xtandi 158,103 146,374 11,729 8.0 %

Januvia, Janumet, Other DPP-IVs (2) 151,158 143,753 7,405 5.2 %

Promacta 143,741 86,266 — 57,475 66.6 % 86,266 —

Farxiga/Onglyza 25,004 — — 25,004 — — —

HIV franchise (3) 78,038 293,808 (215,770) (73.4) %

Nurtec ODT/Biohaven payment (4) 70,188 3,667 66,521 *

Prevymis 37,505 21,492 16,013 74.5 %

Emgality 9,529 2,440 — 7,089 290.5 % 2,440 —

Farxiga/Onglyza 36,378 25,004 11,374 45.5 %

Tremfya 35,718 — 35,718 — %

Cabometyx/Cometriq 33,722 — 33,722 — %

Crysvita 16,741 9,454 7,287 77.1 %

Evrysdi 16,098 273 15,825 *

Emgality 15,481 9,529 5,952 62.5 %

Erleada 14,227 7,876 6,351 80.6 %

IDHIFA 6,111 — — 6,111 — — —

Trodelvy 13,395 3,031 10,364 *

Nurtec ODT 667 — — 667 — — —

IDHIFA 12,404 6,111 6,293 103.0 %

Orladeyo 6,740 — 6,740 — %

Tazverik 2,794 522 2,272 *

Evrysdi 273 — — 273 — — —

Other Growth Products (1) 246,545 205,043 192,241 41,502 20.2 % 12,802 6.7 %

Total Royalty Receipts - Growth Products $ 2,277,435 $ 1,850,880 $ 1,401,291 $ 426,555 23.0 % $ 449,589 32.1 %

Mature Products

Tecfidera (2) $ — $ 150,000 $ 750,000 $ (150,000) (100.0) % $ (600,000) (80.0) %

Letairis 40,170 112,656 130,078 (72,486) (64.3) % (17,422) (13.4) %

Lyrica 22,850 128,246 126,916 (105,396) (82.2) % 1,330 1.0 %

Remicade — 6,068 121,055 (6,068) (100.0) % (114,987) (95.0) %

Humira — — 499,055 — — (499,055) (100.0) %

Other Mature Products (3) 3,944 21,047 45,450 (17,103) (81.3) % (24,403) (53.7) %

Total Royalty Receipts - Mature Products $ 66,964 $ 418,017 $ 1,672,554 $ (351,053) (84.0) % $ (1,254,537) (75.0) %

Oxlumo 1,248 — 1,248 — %

Other products (5) 310,783 310,510 273 0.1 %

Total royalty receipts $ 2,608,542 $ 2,344,399 $ 264,143 11.3 %

Distributions to non-controlling interest (479,604) (543,952) 64,348 (11.8) %

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Adjusted EBITDA (non-GAAP) $ 1,944,427 $ 1,620,738 $ 323,689 20.0 %

Ongoing development-stage funding payments (20,479) (83,036) (108,163) 62,557 (75.3) % 25,127 (23.2) %

Interest paid, net (127,295) (95,492) (31,803) 33.3 %

Swap collateral received or (posted), net 45,252 (45,270) 2,957 90,522 (200.0) % (48,227) (1630.9) %

Swap termination payments (35,448) — — (35,448) — % — —

Investment in non-consolidated affiliates (40,155) (27,042) (24,173) (13,113) 48.5 % (2,869) 11.9 %

Investments in non-consolidated affiliates (34,855) (40,155) 5,300 (13.2) %

Ongoing development-stage funding payments (6,876) (20,479) 13,603 (66.4) %

Other (16,093) 9,804 (25,897) (264.1) %

Contributions from non-controlling interest- R&D 7,339 8,482 (1,143) (13.5) %

Adjusted Cash Flow (non-GAAP) $ 1,766,647 $ 1,482,898 $ 283,749 19.1 %

Fully diluted shares outstanding 607,111 n/a n/a

(1) Other Growth Products include royalties on the following products:

(2) Receipts from our Tecfidera milestone payments are presented as Proceeds from available for sale debt securities on the Statement of Cash Flows.

(3) Other Mature Products primarily include royalties on the following products:

Prezista, Rotateq and Thalomid.

Fully diluted Class A ordinary shares outstanding 607,176 607,111

*Percentage change is not meaningful.

(1) The cystic fibrosis franchise includes the following approved products:

Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio.

(2) Januvia, Janumet, Other DPP-IVs include the following approved products:

Tradjenta, Onglyza, Kombiglyze, Galvus, Eucreas and Nesina.

The Other DPP-IVs are marketed by Boehringer Ingelheim, AstraZeneca, Novartis and Takeda.

(3) The HIV franchise includes the following approved products:

Atripla, Truvada, Emtriva, Complera, Stribild, Genvoya, Descovy, Odefsey, Symtuza and Biktarvy.

Royalties are received on the emtricitabine portion of sales only.

(4) Includes royalty receipts for Nurtec ODT of $7.7 million and quarterly redemptions of $15.6 million of the Series A Biohaven Preferred Shares (presented as Proceeds from available for sale debt securities on the Statement of Cash Flows) for the year ended December 31, 2021.

(5) Other products primarily include royalties on the following products:

Bosulif (a product co-developed by our joint venture investee, Avillion, for which receipts are presented as Distributions from non-consolidated affiliates on the Statement of Cash Flows), Lexiscan, Soliqua, Nesina, Cimzia, Letairis, Entyvio, Myozyme, Mircera and Lyrica.

Other products for the year ended December 31, 2021 includes a one-time milestone payment of $45.0 million that we received on Soliqua.

Other products for the year ended December 31, 2020 includes a one-time $21.3 million distribution from Avillion in respect of the Merck KGaA Asset for which the receipt is presented as Distributions from non-consolidated affiliates in both the operating and investing section of the Statement of Cash Flows.

Subsequent to the Exchange Offer Date, other products also includes contributions from the Legacy SLP Interest.

Adjusted Cash Receipts (non-GAAP)

Years ended December 31, 2020 and 2019

Adjusted Cash Receipts declined by $314.4 million to $1.8 billion in 2020 compared to 2019, primarily driven by increased distributions to non-controlling interest as a result of a new non-controlling interest created related to the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI following our Exchange Offer Transactions in February 2020.

The decline in Adjusted Cash Receipts was further attributable to a decline in royalty receipts related to Mature Products, the most significant of which was Tecfidera.

The decline was offset by an increase in royalty receipts from our Growth Products of $426.6 million in 2020 compared to 2019, driven primarily by the performance of cystic fibrosis franchise, Imbruvica and the 2019 acquisition of Promacta.

Below we discuss the key drivers of royalty receipts from our Growth Products.

Growth Products

• Cystic fibrosis franchise – Royalty receipts from the cystic fibrosis franchise, which includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio, all approved for patients with certain mutations causing cystic fibrosis, increased by $126.6 million in 2020 compared to 2019, primarily driven by the highly successful launch of Trikafta in the United States.

• Tysabri – Royalty receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, increased by $13.0 million in 2020 compared to 2019.

• Imbruvica – Royalty receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, increased by $51.5 million in 2020 compared to 2019, driven by continued penetration in patients with chronic lymphocytic leukemia.

• HIV franchise – Royalty receipts from the HIV franchise, which is based on products marketed by Gilead that contain emtricitabine, including Biktarvy, Genvoya and Truvada, among others, increased by $30.9 million in 2020 compared to 2019.

This increase was driven by strong performance of Biktarvy offset by decreases in sales of other combination products.

• Januvia, Janumet, Other DPP-IVs – Royalty receipts from the DPP-IVs for type 2 diabetes, which includes Januvia and Janumet, both marketed by Merck, was relatively consistent in 2020 compared to 2019.

• Xtandi – Royalty receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, increased by $26.3 million in 2020 compared to 2019, driven by demand across various prostate cancer indications.

• Promacta – Royalty receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia and aplastic anemia, increased by $57.5 million in 2020 compared to 2019.

We acquired the Promacta royalty in March 2019 and did not record royalty receipts for Promacta until the second quarter of 2019.

We saw overall global growth of Promacta driven by increased use in chronic immune thrombocytopenia and further acceptance as first-line treatment for severe aplastic anemia in the United States.

Mature Products

The decline in our royalty receipts from Mature Products was primarily related to Tecfidera.

Our contractual agreement covering our milestones on cumulative sales of Tecfidera up to $20 billion ended in 2018 and therefore, receipts from Tecfidera ceased after the final milestone was collected in the first quarter of 2019.

We also saw declines in receipts from the losses of exclusivity for Lyrica and Letairis.

Distributions to Non-Controlling Interest

Distributions to non-controlling interest increased by $389.9 million to $544.0 million in 2020 compared to 2019, which negatively impacts Adjusted Cash Receipts.

This increase is due to the additional 18% contractual non-controlling interest held by the Legacy Investors Partnerships that arose in the Exchange Offer Transactions.

The increased distributions related to the Legacy Investors Partnerships were partially offset by a decline in distributions related to RPSFT from the maturation of several royalties held by RPCT, including Humira and Remicade.

Years ended December 31, 2019 and 2018

Adjusted Cash Receipts declined by $690.3 million in 2019 compared to 2018, primarily as a result of a decline in royalty receipts related to Mature Products, specifically Tecfidera.

Our Growth Products increased by $449.6 million in 2019 compared to 2018, driven by the cystic fibrosis franchise, Imbruvica and Promacta, a royalty we acquired in 2019.

Below we discuss the key drivers of royalty receipts from our Growth Products.

Growth Products

• Cystic fibrosis franchise – Royalty receipts from the cystic fibrosis franchise increased by $200.5 million in 2019 compared to 2018, driven by continued growth of Symdeko.

In addition, we started collecting 100% of the royalties on cystic fibrosis franchise products in the third quarter of 2018, after a pre-existing capped royalty was repaid.

For the first three quarters of 2018, we only collected cash receipts from the cystic fibrosis franchise equal to the residual royalty of 25%.

• Tysabri – Royalty receipts from Tysabri declined by $5.9 million in 2019 compared to 2018, driven by competition from new products approved to treat multiple sclerosis.

Despite increased competition, Tysabri has shown resilience, highlighting the important role Tysabri plays in the multiple sclerosis treatment paradigm.

• Imbruvica – Royalty receipts from Imbruvica increased by $61.4 million in 2019 compared to 2018, driven by continued penetration in patients with chronic lymphocytic leukemia.

• HIV franchise – Royalty receipts from the HIV franchise increased by $38.6 million in 2019 compared to 2018.

This increase was driven by strong performance of Truvada and Biktarvy in the United States, offset by decreases in sales of other combination products and decreased royalties on sales outside the United States.

• Januvia, Janumet, Other DPP-IVs – Royalty receipts from the DPP-IVs increased by $36.6 million in 2019 compared to 2018, driven by increased royalties from Januvia and Janumet.

As part of the Merck Settlement, we agreed to forgo royalties on Januvia and Janumet for a period that expired in the quarter ending March 31, 2018.

The increase reflects a full year of royalty receipts from Januvia and Janumet in 2019, compared to only a partial year of royalty receipts in 2018.

• Xtandi – Royalty receipts from Xtandi increased by $14.1 million in 2019 compared to 2018, driven by demand in metastatic castration-resistant prostate cancer and non-metastatic castration-resistant prostate cancer.

• Promacta – Royalty receipts from Promacta were $86.3 million in 2019.

We acquired the Promacta royalty in March 2019 and recorded no royalty receipts for Promacta in 2018.

Mature Products

The declines in our royalty receipts from Mature Products were primarily related to Tecfidera, Humira and Remicade.

As sales-based performance targets that trigger our milestones on Tecfidera were met, we continued collecting $150 million in milestone receipts quarterly throughout 2018, with a double milestone collected in the first quarter of 2018.

We recorded receipts from Tecfidera of $150 million in 2019 compared to $750 million in 2018, a reduction of $600 million.

Our Humira and Remicade royalties also matured in June and September 2018, respectively, resulting in a reduction in royalty receipts of $499.1 million and $115.0 million, respectively, compared to 2018.

Adjusted Cash Receipts increased by $328.5 million to $2.1 billion in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase in royalty receipts from the cystic fibrosis franchise, including royalty receipts related to the residual interest in the cystic fibrosis franchise that we acquired in October 2020, fixed payments from Biohaven on the Series A Biohaven Preferred Shares and new assets acquired subsequent to the year ended December 31, 2020.

Offsetting the increase in royalty receipts was a decline in royalty receipts from maturing assets, primarily the HIV franchise, Lyrica and Letairis.

Additionally, we received one-time payments of $45.0 million related to a commercial milestone for Soliqua and $21.3 million from Avillion II in connection with the cessation of our involvement in the Merck KGaA Asset development in the years ended December 31, 2021 and 2020, respectively.

The increase in Adjusted Cash Receipts was further driven by a decrease in distributions to non-controlling interest, primarily due to a decline in royalty receipts from maturing assets in the year ended December 31, 2021 and a non-recurring distribution to the Legacy Investors Partnerships made in connection with the Exchange Offer Transactions that occurred in the three months ended March 31, 2020.

Below we discuss the key drivers of royalty receipts.

Royalty Receipts

• Cystic fibrosis franchise – Royalty receipts from the cystic fibrosis franchise, which includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio, which are marketed by Vertex for patients with certain mutations causing cystic fibrosis, increased by $150.8 million in the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily driven by the performance of Trikafta in the United States, including its rapid uptake in children 6 through 11 years old and the launch of Kaftrio in Europe.

The year ended December 31, 2021 also benefited from a clawback adjustment related to Vertex’s agreement with French authorities around reimbursement for Orkambi, which had reduced royalty receipts in the three months ended March 31, 2020 by approximately $41 million (to reflect a true-up in prior periods where we collected royalties on sales in France at a higher selling price).

Following our acquisition of the residual interest in the cystic fibrosis franchise from the Cystic Fibrosis Foundation in the three months ended December 31, 2020, we are entitled to all royalty receipts on annual worldwide net sales above $5.8 billion.

We received royalty receipts related to the residual interest in the cystic fibrosis franchise in the year ended December 31, 2021.

• Tysabri – Royalty receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, increased by $23.3 million in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by continued patient growth.

• Imbruvica – Royalty receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, increased by $30.8 million in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by continued global penetration in patients with chronic lymphocytic leukemia and favorable pricing.

This increase was partially offset by modest market share losses in the United States, lower new patient starts due to the COVID-19 pandemic as well as the impact of COVID-19 inventory stocking.

• Promacta – Royalty receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia and aplastic anemia, increased by $29.9 million in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This growth was primarily driven by increased use in chronic immune thrombocytopenia and as first-line treatment for severe aplastic anemia in the United States.

• Xtandi – Royalty receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, increased by $11.7 million in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by demand across various prostate cancer indications.

• Januvia, Janumet, Other DPP-IVs – Royalty receipts from the DPP-IVs for type 2 diabetes, which includes Januvia and Janumet, both marketed by Merck & Co., increased $7.4 million in the year ended December 31, 2021 compared to the year ended December 31, 2020.

• Nurtec ODT – Royalty receipts from Nurtec ODT, marketed by Biohaven and Pfizer for the acute treatment of migraine, were $7.7 million in the year ended December 31, 2021.

In addition, as a result of the approval of Nurtec ODT in February 2020, we received $62.5 million in fixed payments from Biohaven in the year ended December 31, 2021, which represent the first four of 16 consecutive quarterly payments to be received from Biohaven relating to the Series A Biohaven Preferred Shares.

• Tremfya – Royalty receipts from Tremfya, which is marketed by Johnson & Johnson, were $35.7 million in the year ended December 31, 2021.

We acquired the Tremfya royalty in July 2021.

• Cabometyx/Cometriq – Royalty receipts from Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and Takeda, were $33.7 million in the year ended December 31, 2021.

We acquired the Cabometyx/Cometriq royalty in March 2021.

• HIV franchise – Royalty receipts from the HIV franchise, which is based on products marketed by Gilead that contain emtricitabine, including Biktarvy, Genvoya and Truvada, among others, decreased by $215.8 million in the year ended December 31, 2021 compared to the year ended December 31, 2020.

This decrease was driven by the maturity of our royalties from the HIV franchise in 2021.

Distributions to Non-Controlling Interest

Distributions to non-controlling interest decreased by $114.6 million in 2019 compared to 2018, which impacts Adjusted Cash Receipts.

This decrease reflects a decline in royalty assets held by RPCT, driven by the maturation of several royalties due to RPSFT, including Humira and Remicade.

Distributions to non-controlling interest decreased by $64.3 million to $479.6 million in the year ended December 31, 2021 compared to the year ended December 31, 2020, which positively impacted Adjusted Cash Receipts.

The decrease in distributions to non-controlling interest is primarily due to a decline in royalty receipts from maturing assets, primarily the HIV franchise, and a non-recurring distribution to the Legacy Investors Partnerships made in connection with the Exchange Offer Transactions that occurred in the three months ended March 31, 2020.

Partially offsetting these decreases was a distribution to non-controlling interest related to the one-time milestone payment we received on Soliqua in the year ended December 31, 2021.

Adjusted EBITDA (non-GAAP)

Years ended December 31, 2020 and 2019

Adjusted EBITDA declined by $405.6 million to $1.6 billion in 2020 compared to 2019 as a result of the factors noted above in “Adjusted Cash Receipts (Non-GAAP).” Payments for operating and professional costs, the only adjustment between Adjusted Cash Receipts and Adjusted EBITDA, increased in 2020 as a result of higher costs for Operating and Personnel Payments under the terms of our New Management Agreement and increased costs for professional services paid in connection with the Reorganization Transactions, our IPO and our Notes issuance.

Years ended December 31, 2019 and 2018

Adjusted EBITDA declined by $706.2 million in 2019 compared to 2018 also as a result of the factors noted above in “Adjusted Cash Receipts (Non-GAAP).” Payments for operating and professional costs, the only adjustment between Adjusted Cash Receipts and Adjusted EBITDA, increased in 2019 as a result of higher costs for professional services in connection with the Reorganization Transactions and preparation for our IPO.

Adjusted EBITDA increased by $323.7 million to $1.9 billion in the year ended December 31, 2021 compared to the year ended December 31, 2020 as a result of the factors noted above in “Adjusted Cash Receipts (Non-GAAP).” Payments for operating and professional costs, the only adjustment between Adjusted Cash Receipts and Adjusted EBITDA, increased slightly in the year ended December 31, 2021 as a result of higher Operating and Personnel Payments under the terms of our Management Agreement offset by a decrease in non-recurring professional services fees, restructuring fees and refinancing fees incurred in the year ended December 31, 2020 in connection with the Exchange Offer Transactions and the IPO.

Adjusted Cash Flow (non-GAAP)

Years ended December 31, 2021 and 2020

Adjusted Cash Flow declined by $153.2 million to $1.5 billion in 2020 compared to 2019 primarily for the same reasons noted above in “Adjusted Cash Receipts (Non-GAAP).” In 2020, we paid $35.4 million to terminate our interest rate swaps executed in connection with the Reorganization Transactions, which was offset by the return of collateral, lower ongoing development stage funding payments and lower interest payments on our refinanced debt.

Years ended December 31, 2019 and 2018

Adjusted Cash Flow declined by $723.8 million in 2019 compared to 2018 for the same reasons noted above.

Adjusted Cash Flow is also impacted by ongoing development-stage funding payments, which declined slightly in 2019 as co-funding arrangements are coming to an end, and offset by a large net swap collateral posted in 2019 as compared to prior year due primarily to adverse movements in the LIBOR curve.

Adjusted Cash Flow increased by $283.7 million to $1.8 billion in the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily for the same reasons noted above in “Adjusted Cash Receipts (Non-GAAP)” and “Adjusted EBITDA (non-GAAP).” The adjustments between “Adjusted EBITDA (non-GAAP)” and “Adjusted Cash Flow (non-GAAP)” increased by $39.9 million in the year ended December 31, 2021 compared to the year ended December 30, 2020.

The increase was driven by a $31.8 million increase in net interest paid in the year ended December 31, 2021 due to a shift to semi-annual interest payments on the 2020 Notes and a $16.1 million one-time payment related to the settlement of treasury rate lock contracts in connection with the 2021 Notes issuance.

This increase was partially offset by lower ongoing development-stage funding requirements under our co-funding agreement with Sanofi and lower funding requirements by the Avillion entities in 2021 following the cessation of our involvement in the Merck KGaA Asset development in 2020.

Non-GAAP Reconciliations

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To arrive at Adjusted Cash Receipts, we start with the GAAP line item, Net cash provided by operating activities , and adjust for the following items from the Statement of Cash Flows:

to add back (1) Proceeds from available for sale debt securities (primarily Tecfidera milestone payments), which are cash inflows that management believes are derived from royalties and form part of our core business strategy, (2) Distributions from non-consolidated affiliates classified as Cash used in investing activities, (3) Interest paid , net of Interest received , (4) Development-stage funding payments, (5) Payments for operating and professional costs , (6) Payments for rebates and (7) Swap termination payments , and to deduct (1) Distributions to non-controlling interest , which represents distributions to our historical non-controlling interest attributable to a de minimis interest in RPCT held by certain legacy investors and to a new non-controlling interest that was created as a result of the Exchange Offer Transactions in February 2020 related to the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI and (2) Swap collateral posted or (received), net, both of which are excluded when management assesses its operating performance through cash collections, or, Adjusted Cash Receipts.

to add back (1) Proceeds from available for sale debt securities (primarily the redemption of Biohaven Preferred Shares), which are cash inflows that management believes are derived from royalties and form part of our core business strategy, (2) Distributions from non-consolidated affiliates which are cash inflows from investing activities, (3) Interest paid , net of Interest received , (4) Development-stage funding payments, (5) Payments for operating and professional costs , (6) Payments for rebates and (7) Termination payments on derivative instruments , and to deduct (1) Distributions to non-controlling interest , which represents distributions to our historical non-controlling interest attributable to a de minimis interest in RPCT held by certain legacy investors and to a new non-controlling interest that was created as a result of the Exchange Offer Transactions in February 2020 related to the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI and (2) Derivative collateral posted or (received), net, both of which are excluded when management assesses its operating performance through cash collections, or, Adjusted Cash Receipts.

To arrive at Adjusted EBITDA, we start with Net cash provided by operating activities and adjust for the following items from the Statement of Cash Flows:

to add back (1) Proceeds from available for sale debt securities (primarily Tecfidera milestone payments), (2) Distributions from non-consolidated affiliates classified as Cash used in investing activities, (3) Interest paid , net of Interest received and (4) Development-stage funding payments and (5) Swap termination payments , and to deduct (1) Distributions to non-controlling interest and (2) Swap collateral posted or (received), net.

to add back (1) Proceeds from available for sale debt securities (primarily redemption of Biohaven Preferred Shares), (2) Distributions from non-consolidated affiliates which are cash inflows from investing activities, (3) Interest paid , net of Interest received, (4) Development-stage funding payments and (5) Termination payments on derivative instruments , and to deduct (1) Distributions to non-controlling interest and (2) Derivative collateral posted or (received), net.

To arrive at Adjusted Cash Flow, we start with Net cash provided by operating activities and adjust for the following items from the Statement of Cash Flows:

to add back (1) Proceeds from available for sale debt securities (primarily Tecfidera milestone payments), (2) Distributions from non-consolidated affiliates classified as Cash used in investing activities, (3) Upfront development-stage funding payments and (4) Contributions from non-controlling interest- R&D , and to deduct (1) Distributions to non-controlling interest and (2) Investment in non-consolidated affiliates .

to add back (1) Proceeds from available for sale debt securities (primarily redemption of Biohaven Preferred Shares), (2) Distributions from non-consolidated affiliates classified as Cash used in investing activities, (3) Upfront development-stage funding payments and (4) Contributions from non-controlling interest- R&D , and to deduct (1) Distributions to non-controlling interest and (2) Investments in non-consolidated affiliates .

This is intended to present an Adjusted Cash Flow measure that is representative of cash generated from the broader business strategy of acquiring royalty-generating assets that are available for reinvestment and for discretionary purposes.

(in thousands) Years Ended December 31,

2020 2019 2018

Net cash provided by operating activities (GAAP) $ 2,017,536 $ 2,034,629

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Payments for operating and professional costs 184,511 179,709

Payments for rebates — — 125

Swap termination payments 35,448 — —

Termination payments on derivative instruments 16,093 35,448

Distributions to non-controlling interest (2) (479,604) (543,952)

Swap collateral (received) or posted, net (2) (45,252) 45,270 (2,957)

Derivative collateral received, net (2) — (45,252)

Adjusted Cash Receipts (non-GAAP) $ 2,128,938 $ 1,800,447

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Upfront development-stage funding payments (3) 193,208 5,810

Swap termination payments 35,448 — —

Termination payments on derivative instruments 16,093 35,448

Distributions to non-controlling interest (2) (479,604) (543,952)

Swap collateral (received) or posted, net (2) (45,252) 45,270 (2,957)

Derivative collateral received, net (2) — (45,252)

Adjusted EBITDA (non-GAAP) $ 1,944,427 $ 1,620,738

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Distributions to non-controlling interest (2) (479,604) (543,952)

Investment in non-consolidated affiliates (2), (4) (40,155) (27,042) (24,173)

Investments in non-consolidated affiliates (2), (4) (34,855) (40,155)

Contributions from non-controlling interests-R&D (2) 7,339 8,482

Adjusted Cash Flow (non-GAAP) $ 1,766,647 $ 1,482,898

(1) Receipts from our Tecfidera milestone payments are presented as Proceeds from available for sale debt securities on the Statement of Cash Flows.

In 2020, amount includes a payment from Biohaven in respect of an expired option to exercise additional funding of the Biohaven Series A Preferred Shares.

(1) Receipts from the quarterly redemption of the Series A Biohaven Preferred Shares are presented as Proceeds from available for sale debt securities on the Statement of Cash Flows for the year ended December 31, 2021.

A payment from Biohaven in respect of an expired option to exercise additional funding of the Biohaven Series A Preferred Shares is presented as Proceeds from available for sale debt securities on the Statement of Cash Flows for the year ended December 31, 2020 .

(2) The table below shows the line item for each adjustment and the direct location for such line item on the Statement of Cash Flows.

Reconciling Adjustment Statement of Cash Flows Classification

Proceeds from available for sale debt securities Investing activities

Investments in non-consolidated affiliates Investing activities

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Interest paid, net Operating activities ( Interest paid less Interest received )

Swap collateral (received) or posted, net Operating activities ( Swap collateral received less Swap collateral posted )

Derivative collateral (received)/posted, net Operating activities ( Derivative collateral received less Derivative collateral posted )

Contributions from non-controlling interest- R&D Financing activities

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(3) Our lenders consider all payments made to support R&D activities for products undergoing late-stage development similar to asset acquisitions as these funds are expected to generate operational returns in the future.

All ongoing and upfront development-stage funding payments are reported in R&D funding expense in net income and are added back in aggregate to Net cash provided by operating activitie s to arrive at Adjusted Cash Receipts and Adjusted EBITDA.

As a result, Adjusted Cash Receipts and Adjusted EBITDA capture the full add-back for R&D funding payments while Adjusted Cash Flow only reflects the add-back for the upfront portion of development-stage funding payments due to the fact that ongoing development-stage funding payments are considered an ongoing business expense.

As a result, Adjusted EBITDA captures the full add-back for R&D funding payments while Adjusted Cash Flow only reflects the add-back for the upfront portion of development-stage funding payments due to the fact that ongoing development-stage funding payments are considered an ongoing business expense.

(4) We consider all payments to fund our operating joint ventures that are performing R&D activities for products undergoing late stage development similar to asset acquisitions as these funds are expected to generate operational returns in the future.

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We invest in these therapies through the purchase of royalties, by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets.

For the year ended December 31, 2020, we invested $2.3 billion in royalties and related assets, including nine new investments.

For the year ended December 31, 2021, we invested $2.7 billion in royalties and related assets across five separate transactions.

While volatility exists in the quantum of our new acquisitions on a year-to-year basis due to the unpredictable timing of new investment opportunities, we have consistently deployed significant amounts of cash when measured over multi-year periods.

Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold.

Included below is a table of investment activity over each of the last nine years based on the type of investment at the acquisition date.

Included below is a table of investment activity over each of the last ten years based on the type of investment at the acquisition date.

Amounts presented in the table below reflect cash paid at the acquisition date;

any associated contractual payments are reflected in the period in which cash was paid.

(in thousands)

Average 2020 2019 2018 2017 2016 2015 2014 2013 2012

(in thousands) Average 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012

Approved / marketed royalties $ 1,018,039 $ 1,819,903 $ 1,404,221 $ 1,848,711 $ 269,554 $ 2,200,480 $ 1,197,210 $ 337,882 $ 468,427 $ 510,000 $ 124,000

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Totals $ 1,796,672 $ 2,650,616 $ 2,298,690 $ 2,294,410 $ 839,146 $ 2,420,573 $ 1,296,452 $ 458,167 $ 3,896,957 $ 901,287 $ 910,417

Number of new investments (3) 5 9 8 6 3 2 1 6 2 4

(1) Development stage royalties include:

direct R&D funding arrangements and funding arrangements executed through our joint venture partnership with the Avillion Entities, investments in development-stage product candidates, and investments in securities primarily made in connection with royalty acquisitions from the seller.

(2) In 2014, acquisitions of development-stage royalties included $3.3 billion for the acquisition of royalties on the cystic fibrosis franchise.

At the time of the investment, Kalydeco was the only approved product in the franchise, while the vast majority of the value of our investment was tied to development-stage product candidates.

(3) Excludes continued investments in development-stage product candidates, such as funding paid over time, and subsequent tranches of an accelerated royalty.

Summary of royalty acquisition activity

• In January 2021, we acquired royalty interests in seltorexant from Minerva Neurosciences, Inc.

• In January 2022, we acquired a royalty interest in aficamten from Cytokinetics, Incorporated (“Cytokinetics”) for $150.0 million comprised of an upfront payment of $50 million and two additional $50 million payments, conditional upon the initiation of potential pivotal clinical trials for oHCM and nonobstructive hypertrophic cardiomyopathy, respectively.

Additionally, we will provide Cytokinetics long-term capital of up to $300 million (“Cytokinetics Commercial Launch Funding”) to support potential commercialization of omecamtiv mecarbil and further development of aficamten.

The Cytokinetics Commercial Launch Funding is available in five tranches, including an initial tranche of $50 million funded upon closing and four additional tranches in the aggregate amount of $250 million to be funded upon the occurrence of certain regulatory and clinical development milestones.

• In November 2021, we acquired incremental royalty interests in BCX9930 and Orladeyo (berotralstat) from BioCryst for an upfront cash payment of $150 million.

Additionally, we paid $50 million to purchase 3,846 thousand shares of common stock in BioCryst, which was calculated based on the volume-weighted average price of BioCryst common stock over a period preceding the closing of the transaction.

The funds from this transaction will enable further advancement of BCX9930 and support additional investment in the global launch of Orladeyo (berotralstat).

• In June 2021, we announced a long-term strategic funding partnership with MorphoSys AG (“MorphoSys”) to support MorphoSys’ acquisition of Constellation Pharmaceuticals, Inc.

(“Constellation”), which closed on July 15, 2021.

We agreed to provide up to $2.025 billion of funding to MorphoSys, comprised of an upfront payment of $1.425 billion, additional milestone payments of up to $150 million, up to $350 million of capital (“Development Funding Bonds”), which MorphoSys may draw over a one-year period from the close of its acquisition of Constellation.

MorphoSys is required to draw a minimum of $150 million of Development Funding Bonds.

In connection with the closing of MorphoSys’ acquisition of Constellation, we purchased 1,337,552 ordinary shares of MorphoSys for $100 million at a price of € 63.35 per ordinary share, based on the average trading price of the ordinary shares over a period preceding the closing of the acquisition.

• In April 2021, we acquired a royalty interest in Oxlumo from Dicerna Pharmaceuticals, Inc.

for an upfront cash payment of $180 million and up to $60 million in contingent sales-based milestone payments.

Oxlumo, which has been approved by the FDA and EMA for the treatment of primary hyperoxaluria (PH) type 1, is marketed by Alnylam.

• In March 2021, we acquired a royalty interest in the cabozantinib products Cabometyx and Cometriq from GSK for an upfront payment of $342 million and up to $50 million in additional payments contingent on the achievement of regulatory approvals of cabozantinib for prostate cancer and lung cancer in the United States and Europe.

• In January 2021, we acquired a royalty interest in seltorexant from Minerva Neurosciences, Inc.

for an upfront payment of $60 million and up to $95 million in additional milestone payments, contingent on the achievement of certain clinical, regulatory and commercialization milestones.

Seltorexant is currently in Phase III development for the treatment of major depressive disorder (MDD) with insomnia symptoms by Janssen Pharmaceutica, N.V., a subsidiary of Johnson & Johnson.

• In December 2020, we acquired royalty interests from BioCryst Pharmaceuticals, Inc.

on (1) ORLADEYO (betrotralstat) to support the launch of the product in hereditary angioedema (HAE) and (2) its development stage Factor D inhibitor BCX9930 in exchange for an upfront cash payment of $125 million.

Seltorexant is currently in Phase 3 development for the treatment of major depressive disorder (MDD) with insomnia symptoms by Johnson & Johnson.

• In December 2020, we acquired royalty interests from BioCryst on (1) Orladeyo (berotralstat) to support the launch of the product in hereditary angioedema (HAE) and (2) its development stage Factor D inhibitor BCX9930 in exchange for an upfront cash payment of $125 million.

• In October 2020, we acquired the residual royalty interest in Vertex’s cystic fibrosis franchise owned by the Cystic Fibrosis Foundation.

The agreement includes an upfront payment of $575 million and a potential milestone payment of $75 million.

• In August 2020, we entered into an expanded agreement with Biohaven Pharmaceuticals for up to $450 million to fund the development of zavegepant and the commercialization of Nurtec ODT.

Biohaven received an upfront payment of $150 million and will receive an additional $100 million payment upon the start of the oral zavegepant Phase III program.

• In August 2020, we entered into an expanded agreement with Biohaven for up to $450 million to fund the development of zavegepant and the commercialization of Nurtec ODT.

Biohaven received an upfront payment of $150 million at closing and received an additional $100 million payment in March 2021 upon the start of the oral zavegepant Phase 3 program.

We will receive a royalty on Nurtec ODT and zavegepant and success-based milestone payments based on zavegepant regulatory approvals.

We will also provide further support for the ongoing launch of Nurtec ODT through the purchase of committed, non-contingent Commercial Launch Preferred Equity for a total of $200 million payable between 2021 and 2024.

In return, Biohaven will pay a series of equal fixed payments between 2025 and 2030.

We are also committed to provide further support for the ongoing launch of Nurtec ODT through the purchase of committed, non-contingent Commercial Launch Preferred Equity (defined below) for a total of $200 million payable on a quarterly basis from the three months ended March 31, 2021 through the three months ended December 31, 2024.

In return, Biohaven will pay a series of equal fixed payments from the three months ended March 31, 2025 through the three months ended December 31, 2030.

• In July 2020, we acquired a royalty on risdiplam, a development-stage product for the treatment of Types 1, 2 and 3 spinal muscular atrophy (SMA) from PTC Therapeutics, Inc.

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Evrysdi (risdiplam) was subsequently approved by the FDA in August 2020, representing the first, oral treatment approved for infants, children and adults with all SMA types.

• In the second quarter of 2020, we acquired a royalty on (1) Prevymis, an approved product to prevent cytomegalovirus (CMV) infection in stem cell transplants, from AiCuris Anti-infective Cures GmbH in exchange for an upfront payment of $220 million and (2) IDHIFA, an approved product for the treatment of adult patients with relapsed or refractory acute myeloid leukemia (AML) with an isocitrate dehydrogenase-2 (IDH2) mutation, from Agios Pharmaceuticals, Inc.

• In June 2020, we acquired a royalty on (1) Prevymis, an approved product to prevent cytomegalovirus infection in stem cell transplants, from AiCuris Anti-infective Cures GmbH in exchange for an upfront payment of $220 million and (2) IDHIFA, an approved product for the treatment of adult patients with relapsed or refractory acute myeloid leukemia (AML) with an isocitrate dehydrogenase-2 mutation, from Agios Pharmaceuticals, Inc.

in exchange for an upfront payment of $255 million.

• In the first quarter of 2020, we acquired a royalty on Entyvio, an approved product for the treatment of ulcerative colitis and Crohn’s disease, from The General Hospital Corporation in exchange for an upfront payment of $86.6 million.

• In March 2020, we acquired a royalty on Entyvio, an approved product for the treatment of ulcerative colitis and Crohn’s disease, from The General Hospital Corporation in exchange for an upfront payment of $86.6 million.

• In the fourth quarter of 2019, we agreed to pay $320 million to acquire from Ultragenyx Pharmaceutical, Inc.

a royalty on the European sales of Crysvita, an approved product for the treatment of XLH, a rare genetic orphan disease that has a profound impact on bone development in adults and children, subject to certain caps.

• In the fourth quarter of 2019, we agreed to pay up to $330 million to purchase a royalty owned by Eisai Co., Ltd (“Eisai”), on future worldwide sales outside Japan of Tazerik (tazemetostat), a novel targeted therapy in late-stage clinical development with the potential to be approved in several cancer indications.

We acquired a portion Eisai’s future worldwide royalties on net sales by Epizyme of Tazerik outside Japan, for an upfront payment of $110 million plus up to an additional $220 million for the remainder of the royalty upon FDA approval of Tazverik for certain indications.

a royalty on the European sales of Crysvita, an approved product for the treatment of x-linked hypophosphatemia, a rare genetic orphan disease that has a profound impact on bone development in adults and children, subject to certain caps.

• In the fourth quarter of 2019, we agreed to pay up to $330 million to purchase a royalty owned by Eisai, on future worldwide sales outside Japan of Tazverik (tazemetostat), a novel targeted therapy in late-stage clinical development with the potential to be approved in several cancer indications.

We acquired a portion Eisai’s future worldwide royalties on net sales by Epizyme of Tazverik outside Japan, for an upfront payment of $110 million plus up to an additional $220 million for the remainder of the royalty upon FDA approval of Tazverik for certain indications.

The FDA approved Tazverik in January 2020 for epithelioid sarcoma which triggered our obligation to fund the second $110 million tranche in November 2020.

In June 2020, the FDA approval of additional indications triggered our recognition of a liability for the final tranche payment of $110.0 million in November 2021.

In June 2020, the FDA approval of additional indications triggered our recognition of a liability for the final tranche of $110.0 million, which was paid in November 2021.

• In the fourth quarter of 2019, we made a $100 million investment in Epizyme.

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• In the first quarter of 2019, we acquired the following:

(1) a royalty on Promacta, an approved product for the treatment of chronic immune thrombocytopenia and aplastic anemia, from Ligand Pharmaceuticals in exchange for an upfront payment of $827 million, (2) a royalty on Eli Lilly’s Emgality, an approved product for the treatment of migraine, from Atlas Ventures and Orbimed for $260 million and (3) a royalty on Johnson & Johnson’s Erleada, an approved product for the treatment of prostate cancer, from the Regents of the University of California for $105.4 million and potential future milestones.

• In 2018, we acquired (1) from Zealand Pharma, future royalty streams and $85 million of potential commercial milestones on Sanofi’s Lixisenatide franchise in exchange for $205 million up front, (2) from Biohaven, rights to future cash flows on Nurtec ODT and zavegepant, development-stage product candidates, in exchange for $100 million in up-front R&D funding and a payment of $50 million for Biohaven’s common stock and (3) from Immunomedics, a tiered, sales-based royalty on Trodelvy, which was at the time a development-stage product candidate, in exchange for an up-front payment of $175 million for R&D funding and a payment of $75 million for Immunomedics’ common stock, acquired at a premium.

(1) a royalty on Promacta, an approved product for the treatment of chronic immune thrombocytopenia and aplastic anemia, from Ligand Pharmaceuticals in exchange for an upfront payment of $827 million, (2) a royalty on Lilly’s Emgality, an approved product for the treatment of migraine, from Atlas Ventures and Orbimed for $260 million and (3) a royalty on Johnson & Johnson’s Erleada, an approved product for the treatment of prostate cancer, from the Regents of the University of California for $105.4 million and potential future milestones.

Additionally, in April 2021, we entered into an agreement with MSCI Inc.

(“MSCI”), a leading provider of critical decision support tools and services where we will assist MSCI to design a classification framework and index methodologies which will expand MSCI’s thematic index suite with the launch of new indexes.

In return, we will receive a portion of MSCI’s revenues from those indexes.

The financial statement impact associated with this transaction was not material for the year ended December 31, 2021.

Liquidity and Capital Resources

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For the years ended December 31, 2021, 2020 and 2019, we generated $2.0 billion, $2.0 billion and $1.7 billion, respectively, in Net cash provided by operating activities .

We believe that our existing capital resources, cash provided by operating activities and our Revolving Credit Facility will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions, and contractually obligated equity and R&D funding arrangements, and to meet our debt service obligations for the foreseeable future.

We believe that our existing capital resources, cash provided by operating activities and our Revolving Credit Facility will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions and R&D funding arrangements, and to meet our debt service obligations for the foreseeable future.

We have historically operated at a low level of fixed operating costs.

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In June 2020, we completed our IPO and received net proceeds of approximately $1.9 billion from the IPO after deducting underwriting discounts and commissions of approximately $86.3 million.

In September 2020, we refinanced our syndicated term loan facilities with $6.0 billion of Notes.

Additionally, we entered into a $1.5 billion Revolving Credit Facility in September 2020.

The Revolving Credit Facility remains undrawn and available to us as of December 31, 2020.

Our ability to satisfy our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control.

In February 2020, in connection with the Exchange Offer Transactions, we repaid outstanding debt held by RPIFT in full and issued new long-term debt at RPI Intermediate FT.

In September 2020, we repaid in full our senior secured credit facilities entered into in February 2020 using the proceeds of the 2020 Notes in addition to cash on hand.

In July 2021, we issued an additional $1.3 billion of senior unsecured notes.

Additionally, we have a Revolving Credit Facility which provides for borrowing capacity of up to $1.5 billion that remains undrawn and available to us as of December 31, 2021.

As of December 31, 2021 and 2020, we had total long-term debt outstanding of $7.1 billion and $5.8 billion, respectively.

We have historically funded our acquisition program through free cash flow, equity contributions and debt.

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In the past, we have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.

As of December 31, 2020, we had total long-term debt outstanding of $5.8 billion.

As of December 31, 2019, we had total long-term debt outstanding of $6.0 billion.

In February 2020, in connection with the Exchange Offer Transactions, we repaid our outstanding debt held by RPIFT in full and issued new long-term debt at RPI Intermediate FT.

In September 2020, we repaid in full our Senior Secured Credit facilities entered into in February 2020 using the proceeds of the Notes in addition to cash on hand.

The following table summarizes our cash flow activities:

(in thousands) Years Ended December 31,

2020 2019 2018

The following table and analysis of cash flow changes presents a summary of our cash flow activity for the year ended December 31, 2021 compared to the year ended December 31, 2020.

(in thousands) Years Ended December 31, 2021 vs 2020

2021 2020 Change

Cash provided by (used in):

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Years ended December 31, 2021 and 2020

Cash provided by operating activities increased by $367.4 million in 2020 compared to 2019.

The primary drivers were an increase in cash collections from financial royalty assets of $187.8 million and a decrease in interest paid of $151.8 million.

The decrease in interest paid was driven by lower interest rates under the refinanced senior secured credit facilities and a semi-annual interest payment schedule on the Notes, which resulted in no interest payments made on the Notes in 2020.

Further contributing to the increased cash from operations was a decline in ongoing development-stage funding payments of $62.6 million due to the completion of our co-funding arrangement with Pfizer in 2019.

Partially offsetting these increases were increased payments for operating and professional costs of $91.2 million primarily due to the higher Operating and Personnel Payments under the New Management Agreement and increased costs for professional services in connection with the Reorganization Transactions.

Years ended December 31, 2019 and 2018

Cash provided by operating activities increased by $48.9 million in 2019 compared to 2018, primarily as a result of a smaller amount of upfront payments related to development stage funding.

In 2018, we paid $284.4 million to acquire royalties on development-stage product candidates of Biohaven and Immunomedics.

Partially offsetting the impact of these reduced payments in the current year was a reduction of $179.6 million on cash collections from royalty assets and other royalty cash collections primarily due to the expiration of royalties on Humira and Remicade.

The declines in Mature Products were partially offset by increases in cash collections from royalties primarily on the cystic fibrosis franchise, Promacta, Imbruvica and the HIV franchise.

We also posted collateral of $45.6 million in 2019 related to our interest rate swaps compared to $0.5 million in 2018 as a result of unfavorable movements in LIBOR.

Cash provided by operating activities decreased by $17.1 million in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase of $187.4 million in upfront R&D funding and an increase of $27.2 million in interest paid.

The increase was driven by upfront R&D funding payments of $103.2 million related to an additional royalty on a development-stage product acquired in connection with our expanded funding agreement with BioCryst and $90.0 million related royalties on two development-stage products acquired from MorphoSys.

The increase in interest paid was primarily due to the shift from quarterly to semi-annual interest payments with the issuance of the 2020 Notes, for which we did not make any interest payments on the 2020 Notes in the year ended December 31, 2020.

The higher uses of cash were partially offset by an increase in cash collections from financial royalty assets of $193.9 million.

Investing activities

Years ended December 31, 2021 and 2020

Cash used in investing activities increased by $605.7 million in 2020 compared to 2019, primarily due to using more cash to purchase marketable securities and to acquire financial royalty assets in 2020.

The increase in cash used to purchase marketable securities and acquire financial royalty assets was partially offset by an increase of $90.4 million in proceeds from sales and maturities of marketable securities and $384.8 million in proceeds received from the full redemption of our investment in Immunomedics common stock upon its acquisition by Gilead in the fourth quarter of 2020.

We also purchased available for sale debt securities of $125.1 million in 2019 and made the Tysabri milestone payment of $250.0 million in 2019, for which there was not comparable activity in 2020.

Years ended December 31, 2019 and 2018

Cash used in investing activities in 2019 was $2.2 billion, compared to cash provided by investing activities of $303.4 million in 2018.

In 2019, we made several acquisitions of financial royalty assets, totaling $2.0 billion.

We also spent $213.0 million on investments in securities and warrants in 2019, compared to $152.8 million in 2018.

As our Tecfidera agreement came to an end with the last milestone earned in December 31, 2018, we collected cash receipts on Tecfidera of $150.0 million in 2019 compared to $750.0 million for 2018.

Cash used in investing activities decreased by $889.0 million in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by a $1.3 billion increase in the overall net cash provided by marketable securities which was partially offset by a decrease of $268.9 million in proceeds from equity securities.

We received $116.0 million related to the sale of our Cytokinetics common stock and a portion of our Biohaven common shares in the year ended December 31, 2021, as compared to $384.8 million received from the full redemption of our investment in Immunomedics common stock upon its acquisition by Gilead in the fourth quarter of 2020.

The decrease in cash used in investing activities was further offset by an increase of $85.1 million in purchases of equity securities.

We purchased $135.1 million of equity securities in Morphosys and BioCryst in the year ended December 31, 2021, compared to purchases of equity securities of $50.0 million related to the exercise of the Epizyme put option in the year ended December 31, 2020.

Financing activities

Years ended December 31, 2021 and 2020

Cash provided by financing activities in 2020 was $1.5 billion compared to cash used in financing activities of $1.2 billion in 2019.

The proceeds from the issuance of Class A ordinary shares upon our IPO in June 2020 provided cash of $1.9 billion, net of offering costs paid.

The repayment of RPIFT’s outstanding debt in February 2020, including through amounts contributed by a non-controlling interest, and subsequent Note issuances yielded net proceeds of $727.9 million.

The proceeds from these 2020 financing activities were partially offset by an increase of $571.0 million in cash distributions to non-controlling interest in 2020 due to the new contractual non-controlling interest held by the Legacy Investors Partnerships and dividends paid to shareholders of our Class A ordinary shares of $112.5 million.

Years ended December 31, 2019 and 2018

Cash used in financing activities in 2019 declined by $187.5 million in 2019 compared to 2018, primarily due to decreases in distributions to non-controlling interest and to unitholders.

Distributions to non-controlling interest declined as products held by the RPCT are maturing.

Cash provided by financing activities decreased by $1.1 billion in the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by the $1.9 billion net proceeds received from our IPO in June 2020.

Offsetting the decreases in cash provided by financing activities were net proceeds of $1.3 billion from issuance of 2021 Notes in the year ended December 31, 2021 compared to the net proceeds of $727.9 million related to the debt refinancings in the year ended December 31, 2020.

Sources of Capital

As of December 31, 2021, our cash and cash equivalents and marketable securities totaled $1.5 billion and $581.9 million, respectively.

As of December 31, 2019, our cash and cash equivalents and our marketable securities totaled $246.2 million and $94.5 million, respectively.

We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, sales of short-term marketable securities, future cash flows from operations or the issuance of additional debt.

As of December 31, 2020, our cash and cash equivalents and marketable securities totaled $1.0 billion and $983.3 million, respectively.

We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, sales of marketable securities, future cash flows from operations or the issuance of additional debt.

Our ability to generate cash flows from operations, issue debt or enter into financing arrangements on acceptable terms could be adversely affected if there is a material decline in the sales of the underlying pharmaceutical products in which we hold royalties, deterioration in our key financial ratios or credit ratings, or other material unfavorable changes in business conditions.

Currently, we believe that we have sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support our growth objectives.

Our borrowings at December 31, 2021 and 2020 consisted of the following (in thousands):

Date of Issuance Maturity December 31, 2021 December 31, 2020

Senior Unsecured Notes:

On September 2, 2020, we issued $6.0 billion of Notes with a weighted average coupon rate of 2.125% and requiring interest payments of approximately $127.5 million on an annual basis, paid semi-annually.

The Notes consist of the following:

• $1.0 billion principal amount of 0.750% senior notes due 2023, issued at 99.322% of par;

• $1.0 billion principal amount of 1.200% senior notes due 2025, issued at 98.875% of par;

• $1.0 billion principal amount of 1.750% senior notes due 2027, issued at 98.284% of par;

• $1.0 billion principal amount of 2.200% senior notes due 2030, issued at 97.760% of par;

• $1.0 billion principal amount of 3.300% senior notes due 2040, issued at 95.556% of par;

• $1.0 billion principal amount of 3.550% senior notes due 2050, issued at 95.306% of par.

The indenture governing the Notes contains certain covenants which w e were in compliance with as of December 31, 2020.

$1,000,000, 0.75% (issued at 99.322% of par) 9/2020 9/2023 $ 1,000,000 $ 1,000,000

$1,000,000, 1.20% (issued at 98.875% of par) 9/2020 9/2025 1,000,000 1,000,000

$1,000,000, 1.75% (issued at 98.284% of par) 9/2020 9/2027 1,000,000 1,000,000

$1,000,000, 2.20% (issued at 97.760% of par) 9/2020 9/2030 1,000,000 1,000,000

$600,000, 2.15% (issued at 98.263% of par) 7/2021 9/2031 600,000 —

$1,000,000, 3.30% (issued at 95.556% of par) 9/2020 9/2040 1,000,000 1,000,000

$1,000,000, 3.55% (issued at 95.306% of par) 9/2020 9/2050 1,000,000 1,000,000

$700,000, 3.35% (issued at 97.565% of par) 7/2021 9/2051 700,000 —

Total senior unsecured debt 7,300,000 6,000,000

Unamortized debt discount and issuance costs (203,930) (183,416)

Total long-term debt $ 7,096,070 $ 5,816,584

Senior Unsecured Notes

On July 26, 2021, we issued $1.3 billion of the 2021 Notes with a weighted average coupon rate of 2.80% and requiring annual interest payments of approximately $36.4 million, paid semi-annually.

On September 2, 2020, we issued $6.0 billion of the 2020 Notes with a weighted average coupon rate of 2.125% and requiring annual interest payments of approximately $127.5 million, paid semi-annually.

We used the net proceeds from the 2020 Notes offering, together with available cash on hand, to repay in full the senior secured credit facilities.

Revolving Credit Facility

On September 18, 2020, RP Holdings, as borrower, entered into a five-year Revolving Credit Facility which provides for borrowing capacity up to $1.5 billion for general corporate purposes.

Our revolving credit agreement includes certain customary financial covenants with which we were in compliance as of December 31, 2020.

Indentures governing the Notes contain certain covenants, which w e were in compliance with as of December 31, 2021.

Senior Unsecured Revolving Credit Facility

On September 15, 2021, we entered into an amended and restated revolving credit agreement (the “Credit Agreement”).

The Credit Agreement amends and restates the credit agreement that our subsidiary, RP Holdings, as borrower, entered into on September 18, 2020, which provided for a five-year unsecured Revolving Credit Facility with borrowing capacity of up to $1.5 billion for general corporate purposes.

The Credit Agreement extends the maturity of the Revolving Credit Facility to September 15, 2026.

The Credit Agreement contains certain customary covenants, which we were in compliance as of December 31, 2021.

The Revolving Credit Facility remains undrawn and available to us as of December 31, 2021.

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On February 11, 2020, in connection with the Exchange Offer Transactions and using funds contributed by RPI Intermediate FT and the Legacy Investors Partnerships, RPIFT repaid its outstanding debt and accrued interest, and terminated all outstanding interest rate swaps.

RPI Intermediate FT, as borrower, entered into a term loan credit agreement (the “Senior Secured Credit Agreement”) with Bank of America, N.A., as administrative agent, the lenders party thereto from time to time and the other parties thereto.

In September 2020, we repaid in whole the outstanding principal amounts of term loans under Senior Secured Credit Facilities governed by the Senior Secured Credit Agreement with net proceeds from the Notes.

We had the following indebtedness outstanding at December 31, 2020 and 2019:

(in thousands) Maturity Interest rate December 31, 2020 December 31, 2019

Senior Unsecured Notes:

Senior unsecured notes (issued at 99.322% of par) 9/2023 0.750% $ 1,000,000 $ —

Senior unsecured notes (issued at 98.875% of par) 9/2025 1.200% 1,000,000 —

Senior unsecured notes (issued at 98.284% of par) 9/2027 1.750% 1,000,000 —

Senior unsecured notes (issued at 97.760% of par) 9/2030 2.200% 1,000,000 —

Senior unsecured notes (issued at 95.556% of par) 9/2040 3.300% 1,000,000 —

Senior unsecured notes (issued at 95.306% of par) 9/2050 3.550% 1,000,000 —

RPIFT Senior Secured Credit Facilities:

Term Loan B Facility (1) LIBOR + 200 bps — 4,123,000

Term Loan A Facility (1) LIBOR + 150 bps — 2,150,000

Total senior secured debt 6,000,000 6,273,000

Unamortized debt discount and issuance costs (183,416) (34,878)

Total long-term debt, including current portion $ 5,816,584 $ 6,238,122

(1) In February 2020, the outstanding principal amounts of RPIFT’s prior term loan facilities were repaid in full with net proceeds from our Senior Secured Credit Facilities which we subsequently repaid in full in September 2020 with net proceeds from the Notes and available cash on hand.

RPI Intermediate FT, as borrower, entered into a term loan credit agreement with Bank of America, N.A., as administrative agent, the lenders party thereto from time to time and the other parties thereto.

In September 2020, we repaid in full the outstanding principal amounts of term loans under the senior secured credit facilities with the net proceeds from the 2020 Notes and available cash on hand.

RPIFT Senior Secured Credit Facilities

The RPIFT Senior Secured Credit Facilities (the “Prior Credit Facility”) was issued by our wholly-owned subsidiary, RPIFT and was investment grade rated.

RPIFT used interest rate swap agreements to fix a portion of its floating rate debt.

In February 2020, in connection with the Exchange Offer Transactions, the Prior Credit Facility was repaid in full and new long-term debt was issued by RPI Intermediate FT.

Guarantor Financial Information

Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings, a non-wholly owned subsidiary (the “Guarantor Subsidiary”).

Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the Notes.

Under the terms of the indenture governing the Notes, Royalty Pharma plc and the Guarantor Subsidiary each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on the Notes.

The par value and carrying value of the total outstanding and guaranteed Notes was $6.0 billion and $5.8 billion, respectively as of December 31, 2020.

The following tables present condensed combined summarized financial information for Royalty Pharma plc and RP Holdings.

All intercompany balances and transactions between Royalty Pharma plc and RP Holdings are eliminated in the presentation of the combined financial statements.

RP Holdings’ most significant asset is its investment in operating subsidiaries, which has been eliminated in the table below to exclude investments in Non-Guarantor Subsidiaries.

As a result, our ability to make required payments on the Notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us.

There are no material restrictions on distributions from the operating subsidiaries.

Amounts presented below do not represent our total consolidated amounts as of December 31, 2020 and for the year then ended.

Summarized Balance Sheet

(in thousands) As of

December 31, 2020

Current assets $ 51,625

Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries 15,709

Non-current assets 4,558

Non-current intercompany notes receivable due from Non-Guarantor Subsidiaries 2,101,656

Current liabilities 44,161

Current interest payables on intercompany notes due to Non-Guarantor Subsidiaries 15,709

Current intercompany payables due to Non-Guarantor Subsidiaries 1,182

Non-current liabilities 5,816,133

Non-current intercompany notes payable due to non-Guarantor Subsidiaries 2,101,656

Summarized Statement of Comprehensive Income

(in thousands) For the year ended

December 31, 2020

Interest income on intercompany notes receivable from Non-Guarantor Subsidiaries $ 17,727

Expenses 74,458

Interest expense on intercompany notes payable with Non-Guarantor Subsidiaries 17,727

Net loss 74,458

The RPIFT Senior Secured Credit Facilities were repaid in full in February 2020 and new senior secured credit facilities were issued by RPI Intermediate FT in connection with the Exchange Offer Transactions.

Uses of Capital

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The majority of our current portfolio consists of third-party royalties.

• Synthetic / Hybrid Royalties – A synthetic royalty is the contractual right to a percentage of top-line sales created by the owner of a therapy in exchange for funding.

• Synthetic / Hybrid Royalties – A synthetic royalty is the contractual right to a percentage of top-line sales created by the developer and/or marketer of a therapy in exchange for funding.

A synthetic royalty may also include contingent milestone payments, or be structured as a long-term stream of fixed-payments with a predetermined schedule.

• R&D Funding – We fund R&D, typically for large biopharmaceutical companies, in exchange for future royalties and/or milestones if the product or indication we are funding is approved.

• R&D Funding – We have historically funded ongoing R&D, typically for large biopharmaceutical companies, in exchange for future royalties and/or milestones if the product or indication we are funding is approved.

We have also made upfront R&D payments to biotechnology companies to acquire royalties and/or milestones on development-stage product candidates.

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Distributions to Shareholders/Unitholders

We made distributions of $285.4 million to shareholders prior to the IPO in June 2020.

We paid dividends to holders of our Class A ordinary shares of $112.5 million in 2020 subsequent to the IPO.

We paid dividends to holders of our Class A ordinary shares of $285.2 million in the year ended December 31, 2021 .

We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.

We made distributions of $739.3 million and $814.4 million to unitholders in 2019 and 2018, respectively.

Commercial Launch Preferred Equity and Other Funding Arrangements

On August 7, 2020, we entered into a Series B Biohaven Preferred Share Purchase Agreement (“Series B Biohaven Preferred Share Agreement”) with Biohaven to purchase up to 3,992 shares of Series B Biohaven Preferred Shares at a price of $50,100 per preferred share (the “Commercial Launch Preferred Equity”), for a total of $200.0 million payable on a quarterly basis between March 31, 2021 and December 31, 2024.

We made distributions of $285.4 million to shareholders/unitholders prior to the IPO in June 2020.

We paid dividends to holders of our Class A ordinary shares of $112.5 million in the year ended December 31, 2020 subsequent to the IPO.

We made distributions of $739.3 million to unitholders in the year ended December 31, 2019.

Other Funding Arrangements

In June 2021, we announced a long-term strategic funding partnership with MorphoSys to support MorphoSys’ acquisition of Constellation, which closed on July 15, 2021.

As part of the partnership, we agreed to provide MorphoSys up to $350 million of Development Funding Bonds, which MorphoSys may draw over a one-year period from the close of its acquisition of Constellation.

MorphoSys is required to draw a minimum of $150 million of Development Funding Bonds.

In return, we expect to receive a return of 2.2 times the amount funded on the Development Funding Bonds payable on a quarterly basis over nine years, with the first payment beginning two years after the funding.

As of December 31, 2021, MorphoSys has not drawn any amount under the Development Funding Bonds.

On August 7, 2020, we entered into the Series B Biohaven Preferred Share Purchase Agreement (“Series B Biohaven Preferred Share Agreement”) with Biohaven where we committed to acquire 3,992 shares of Series B Biohaven Preferred Shares at a price of $50,100 per preferred share (the “Commercial Launch Preferred Equity”), for a total of $200.0 million payable on a quarterly basis from the three months ended March 31, 2021 through the three months ended December 31, 2024.

In the three months ended March 31, 2021, we began purchasing the Series B Biohaven Preferred Shares and have a remaining commitment of $129.6 million under our Commercial Launch Preferred Equity as of December 31, 2021 .

We have other funding arrangements where we are contractually obligated to fund R&D activities performed by our development partners and to provide additional capital related to our equity method investment in the Avillion entities.

As our committed capital requirements are based on phases of development, the completion of which is highly uncertain, only the capital required to fund the current stage of development under such funding arrangements is considered committed capital requirements which approximate $41.0 million as of December 31, 2021.

The future principal and interest payments under our Notes as of December 31, 2020, over the next five years and thereafter are as follows:

(in thousands)

Year Principal Payments Interest Payments

We also have certain milestone payments that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones.

As such, these contingent milestone payments are not considered contractual obligations.

In the year ended December 31, 2021, we made a $100.0 million payment to Biohaven related to a development milestone that was achieved upon the start of the oral zavegepant Phase 3 program.

As of December 31, 2021, the future principal and interest payments under our Notes over the next five years and thereafter are as follows:

(in thousands) Principal Payments Interest Payments

2022 $ — $ 167,384

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Total (1) $ 7,300,000 $ 2,858,534

(1) Excludes unamortized discount and loan issuance costs on long-term debt of $183.4 million at December 31, 2020, which are amortized through interest expense over the remaining life of the underlying debt obligations.

Commitments, Contingencies and Guarantees

We are involved in certain legal proceedings arising in the ordinary course of business and, as required, accrue an estimate of the probable costs for resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated.

In general, estimates are developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies.

It is possible, however, that future results of operations for any particular period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings.

Amounts related to contingent milestone payments are not considered contractual obligations and are excluded from the table below, as they are contingent on the successful achievement of certain development, regulatory approval or commercial milestones.

Amounts we expect to fund based on contingent milestones in the next twelve months primarily relate to $100.0 million due to Biohaven upon the start of the oral zavegepant Phase III program.

As of December 31, 2020, we recognized a current liability of $18.6 million related to a sales-based milestone for Erleada that was achieved in the three months ended December 31, 2020.

The table below summarizes our contractual obligations at December 31, 2020 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods.

(in thousands)

Total <1 year 1-3 years 3-5 years >5 years

Long-term debt:

Principal payments on Notes $ 6,000,000 $ — $ 1,000,000 $ 1,000,000 $ 4,000,000

Interest payments on Notes 2,150,000 127,500 255,000 240,000 1,527,500

Commercial Launch Preferred Equity funding 200,000 70,442 93,938 35,620 —

Purchase obligation (1) 110,000 110,000 — — —

Funding commitments (2) 68,225 49,225 8,000 8,000 3,000

Operating and Personnel Payments (3) Refer to footnote (2) below Refer to footnote (2) below Refer to footnote (2) below Refer to footnote (2) below Refer to footnote (2) below

Total (4) $ 8,528,225 $ 357,167 $ 1,356,938 $ 1,283,620 $ 5,530,500

(1) Under the terms of our funding agreement with Eisai, we are obligated to fund the third and final tranche of the Tazverik royalty for $ 110.0 million in November 2021, following the FDA approval of additional indications of Tazverik in June 2020.

The purchase obligation is recorded within current liabilities on the consolidated balance sheet at December 31, 2020.

(2) Funding commitments include amounts we are contractually obligated to fund in respect of R&D funding arrangements with our development partners and committed capital related to our equity method investment in the Avillion entities.

(3) Under the Management Agreement that became effective in February 2020, RPI will pay quarterly operating and personnel payments in respect of operating and personnel expenses to the Manager or its affiliates (the “Operating and Personnel Payments”) equal to 6.5% of the Adjusted Cash Receipts for such quarter and 0.25% of the GAAP value of our security investments, including equity securities and derivative financial instruments, as of the end of such quarter.

Because the fee is variable and based on projected cash receipts, no amounts are fixed.

(4) Excluded from the table are amounts related to various obligations with no specific contractual commitment or maturity.

Other off-balance sheet arrangements

We do not have relationships with structured finance or special purpose entities that were established to facilitate off-balance sheet arrangements.

Therefore, we are not exposed to any financing, liquidity, market or credit risk that may arise if we had engaged in such relationships.

We consolidate variable interest entities when we are the primary beneficiary.

(1) Excludes unamortized debt discount and issuance costs of $203.9 million as of December 31, 2021, which are amortized through interest expense over the remaining life of the underlying debt obligations.

Operating and Personnel Payments

Under the Management Agreement, we pay quarterly Operating and Personnel Payments equal to 6.5% of the Adjusted Cash Receipts for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter.

Because the Operating and Personnel Payments is determined based on Adjusted Cash Receipts, the amounts are fixed.

The expenses incurred in respect of Operating and Personnel Payments are expected to comprise the most significant component of G&A expenses on an ongoing basis.

Guarantor Financial Information

Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings, a non-wholly owned subsidiary (the “Guarantor Subsidiary”).

Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the Notes.

As of December 31, 2021, the par value and carrying value of the total outstanding and guaranteed Notes was $7.3 billion and $7.1 billion, respectively.

The following financial information presents summarized combined balance sheet financial information as of December 31, 2021, and summarized combined statement of operations information for the year ended December 31, 2021 for Royalty Pharma plc and RP Holdings.

All intercompany balances and transactions between Royalty Pharma plc and RP Holdings are eliminated in the presentation of the combined financial statements.

RP Holdings’ most significant asset is its investment in operating subsidiaries, which has been eliminated in the table below to exclude investments in Non-Guarantor Subsidiaries.

Our operating subsidiaries hold the majority of our cash and cash equivalents, marketable securities and financial royalty assets.

As a result, our ability to make required payments on the Notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us.

There are no material restrictions on distributions from the operating subsidiaries.

Amounts presented below do not represent our total consolidated amounts as of December 31, 2021 or for the year ended December 31, 2021.

Summarized Combined Balance Sheet

(in thousands) As of December 31, 2021

Current assets $ 95,946

Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries 16,974

Non-current assets 4,145

Non-current intercompany notes receivable due from Non-Guarantor Subsidiaries 2,039,576

Current liabilities 59,030

Current interest payable on intercompany notes due to Non-Guarantor Subsidiaries 16,974

Non-current liabilities 7,095,450

Non-current intercompany notes payable due to Non-Guarantor Subsidiaries 2,039,576

Summarized Combined Statement of Operations

(in thousands) Year Ended December 31, 2021

Interest income on intercompany notes receivable from Non-Guarantor Subsidiaries $ 50,423

Operating expenses 187,863

Interest expense on intercompany notes payable with Non-Guarantor Subsidiaries 50,423

Other expenses 11,320

Net loss 199,183

Critical Accounting Policies and Use of Estimates

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On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources.

The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of income and expenses that are not readily apparent from other sources.

Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our most critical accounting policies relate to our royalties and the full descriptions can be found in Note 2–Summary of Significant Accounting Policies to the consolidated financial statements.

Similarly, the most significant judgments and estimates applied by management are associated with the measurement of our financial royalty assets.

The application of the prospective approach to measure income from our financial royalty assets requires management’s judgment in forecasting the expected future cash flows of the underlying royalties.

Our most critical accounting policies relate to our financial royalty assets and the full descriptions can be found in Note 2–Summary of Significant Accounting Policies to our consolidated financial statements.

Similarly, the most significant judgments and estimates applied by management are associated with the measurement of our financial royalty assets at amortized cost using the prospective effective interest method.

The application of the prospective approach to calculate interest income from our financial royalty assets requires management’s judgment in forecasting the expected future cash flows of the underlying royalties.

These estimates and judgments arise because of the inherent uncertainty in predicting future events.

Income and provision recognition from financial royalty assets can be impacted by management’s assumptions around (1) product growth rates and sales trends in outer years, (2) the geographical allocation of annual sales data from sell-side equity research analysts’ models, (3) product and pricing mix for franchised products, (4) the strength of patent protection, including anticipated entry of generics and (5) estimates of the duration of the royalty.

The amounts and duration of forecasted expected future cash flows are largely influenced by sell-side equity research analyst coverage, commercial performance of the product and the royalty duration.

For example, based on the level of detail in sell-side equity research analyst models, management may be required to apply assumptions to the sales forecasts to estimate the quarterly and geographical allocation from annual sales projections and, for franchised products, to estimate the product mix and pricing mix, or to exclude from projections sales forecasts for development-stage product candidates or indications.

When royalty-bearing pharmaceutical products have no coverage, limited sell-side equity research analyst coverage or where sell-side equity research analyst estimates are not available for the full term of our royalty, particularly for the later years in a product’s life, management uses reasonable judgment to make assumptions about the growth or decline in the sales of these products based on historical data, publicly available information for the marketer, industry data and market trends, and management’s own expertise.

We evaluate financial royalty assets for impairment on an individual basis by comparing the effective interest rate at each reporting date to that of the prior period.

If the effective interest rate for the current period is lower than the prior period, and if the gross cash flows have declined (expected and collected), management records a provision for the change in expected cash flows.

The provision is measured as the difference between the financial royalty asset’s amortized cost basis and the net present value of the expected future cash flows, calculated based on the prior period’s effective interest rate.

The amount recognized as provision expense increases the financial royalty asset’s cumulative allowance, which reduces the net carrying value of the financial royalty asset.

Factors Impacting Expected Future Cash Flows

The amounts and timing of forecasted expected future cash flows are largely influenced by sell-side equity research analyst coverage, commercial performance of the product and the royalty duration.

• Analyst coverage .

Forecasts of expected future cash flows are developed from sales projections of the underlying biopharmaceutical products as published in sell-side equity research analyst reports.

In projecting future cash flows, our policy is to rely on sell-side research analysts’ consensus sales forecasts for a product to derive annual sales projections for each financial royalty asset over the periods for which we are entitled to royalties or milestones.

When royalty-bearing biopharmaceutical products have no coverage, limited sell-side equity research analyst coverage or where sell-side equity research analyst estimates are not available for the full term of the royalty, particularly for the later years in a product’s life, management uses reasonable judgment to make assumptions about the growth or decline in the sales of these products based on historical data, market trends and management’s own expertise.

• Commercial performance .

The approval of a product for use in new indications can extend the date through which we are entitled to royalties or milestones on that product.

For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and may be entitled to royalties on future combination products, which, once approved, create new cash flow streams which were not initially contemplated and whose sales were previously not reflected in expected future cash flows.

We generally do not recognize income from, or forecast sales for, unapproved products or indications.

If a product is removed from all or a portion of a market, subsequent sell-side equity research analysts’ forecasts will reflect the expected drop in sales.

Both the new cash flow streams and the cessation of cash flow streams related to a product’s performance in the market over the royalty term can materially affect our forecast of expected future cash flows.

• Royalty duration.

The duration of a financial royalty asset can be based on a number of factors, such as regulatory and marketing approval dates, patent expiration dates, the number of years from first commercial sale, the first date of manufacture of the patent-protected product, strength of patent protection, the entry of generics or a contractual date arising from litigation, which are all impacted by the time in the product’s life cycle at which we acquire the financial royalty asset.

Royalty duration varies by geography as United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms.

Products may be covered by a number of patents and, for products whose royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest patent protection to align the period over which management forecasts expected future cash flows to the royalty term.

Significant Assumptions Applied in Developing Forecasted Expected Future Cash Flows

The most significant assumptions used in forecasting the expected future cash flows for our royalties and requiring management’s judgement include (1) estimates of the duration of the royalty , which includes consideration of the strength of patent protection and anticipated entry of generics, and (2) sales trends and product growth rates in outer years of the royalty term, which are primarily based on statistical models.

The royalty duration is important for purposes of accurately measuring interest income over the life of a financial royalty asset.

In making assumptions around the royalty duration for terms that are not contractually fixed, management considers the strength of existing patent protection, expected entry of generics, geographical exclusivity periods and potential patent term extensions tied to the underlying product.

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.

A shortened royalty term can result in a reduction in the effective interest rate, a decline in income from financial royalty assets, significant reductions in royalty payments compared to expectations, or a permanent impairment.

Changes in sell-side equity research analyst consensus forecasts directly impact future interest income and recognition of any provision income or expense in the same manner.

It is common for royalty durations to expire earlier or later than anticipated due to unforeseen 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.

When royalty-bearing pharmaceutical products have limited or no coverage by sell-side equity research analysts, or where sell-side equity research analyst estimates are not available for the full term of our royalty, particularly for the later years in a product’s life, we generally incorporate a statistical curve developed using historical sales data and available consensus sales projections to forecast product sales over the remaining life of the product.

In cases where the statistical curve is not used, we use reasonable judgment to make assumptions about the growth or decline in the sales of these products based on historical data, publicly available information for the marketer, industry data and market trends and our own expertise.

Even though we believe interest income from financial royalty assets and the associated non-cash provision for changes in future cash flows are not indicative of our near-term financial performance and should not be used as a source for predicting future income or growth trends, changes in the aforementioned assumptions could result in a material impact to our financial statements.

A shortened royalty term can result in a reduction in interest income, significant reductions in total royalty payments over time compared to expectations or a permanent impairment.

If the effective interest rate is lower for the current period than the prior period, and if the gross cash flows have declined (expected and collected) this would result in the immediate recognition of non-cash provision expense even though the applicable cash inflows will not be realized for many years into the future.

Changes in sell-side equity research analyst consensus sales forecasts directly impact future interest income and recognition of any provision income or expense in a similar manner.

Below is a summary of the sensitivity of our current year results in relation to the royalty duration for our top three financial royalty assets based on net carrying value as of December 31, 2021.

Because these are long-dated financial royalty assets, we have assumed a change of two years in the estimated duration to sensitize the financial statement impact.

The effect of a change in estimated duration is the factor that would have the most significant impact on our consolidated statement of operations .

There have not been any significant changes to the estimated duration of expected future cash flows for our top three financial royalty assets during the years ended December 31, 2021, 2020 and 2019, with the exception of the cystic fibrosis franchise due to the FDA approval of Trikafta in 2019, which extended the expected duration at that time.

If the duration of these financial royalty assets were extended by two years by assuming the statistically projected growth trends continue and all other royalty terms and assumptions remain unchanged, any impact to interest income would not be reflected until the subsequent period and is therefore not disclosed below.

However, an extended duration for a financial royalty asset could result in the reduction of any cumulative allowance for changes in expected future cash flows, which would be recognized in the current period as provision income and is reflected in the table below for these top three financial royalty assets.

If the duration for these financial royalty assets were shortened by two years by eliminating the estimated expected future cash flows for the final two years while keeping all other royalty terms and assumptions unchanged, we would recognize immediate incremental provision expense in the current period as a result of applying the prospective method of the effective interest rate methodology.

The disclosure of the duration sensitivity below does not include any consideration of the related allowance for current expected credit losses.

The impact of these sensitivity assumptions is summarized as follows (in thousands):

Year Ended December 31, 2021

Estimated Royalty Duration (a) Change in Duration Assumption Applied Provision (Income)/Expense for Changes in Expected Cash Flows

Cystic fibrosis franchise 2037 (b) +/- 2 years $ (48,636) $ 261,265

Tysabri (c) +/- 2 years $ (16,617) $ 173,098

Imbruvica 2027-2032 +/- 2 years $ (99,398) $ 173,129

(a) Dates shown represent our estimates as of the date of this Annual Report on Form 10-K of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, our estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography.

There can be no assurances that our royalties will expire when expected.

(b) Royalty is perpetual;

year shown represents Trikafta expected patent expiration and potential sales decline based on timing of generic entry.

Management has applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed.

Recent Accounting Pronouncements

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Item 5. Market for Registrant’s Common Equity