Royalty Pharma plc 10-K

Item 1. BUSINESS Overview We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. 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 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. Our capital-efficient business model enables us to benefit from many of the most attractive characteristics of the biopharmaceutical industry, including long product life cycles, significant barriers to entry and noncyclical revenues, but with substantially reduced exposure to many common industry challenges such as early stage development risk, therapeutic area constraints, high research and development costs, and high fixed manufacturing and marketing costs. We have a highly flexible approach that is agnostic to both therapeutic area and treatment modality, allowing us to acquire royalties on the most attractive therapies across the biopharmaceutical industry. The success of our business has been the result of a focused strategy of actively identifying and tracking the development and commercialization of key new therapies, allowing us to move quickly to make acquisitions when opportunities arise. We acquire royalties on approved products, often in the early stages of their commercial launches, and development-stage product candidates with strong proof of concept data, mitigating development risk and expanding our opportunity set. From 1996 through 2021, we have deployed more than $22 billion of cash to acquire biopharmaceutical royalties, representing more than 50% of all royalty transactions during this period. From 2012, when we began acquiring royalties on development-stage product candidates, through 2021, we have deployed more than $17 billion of cash to acquire biopharmaceutical royalties, representing approximately 60% of all royalty transactions during this period. In 2021, we generated cash from operating activities of $2.0 billion, Adjusted Cash Receipts (as defined in “—Non-GAAP Financial Results”) of $2.1 billion and Adjusted Cash Flow (as defined in “—Non-GAAP Financial Results”) of $1.8 billion. We deployed $2.7 billion of cash in 2021 for royalties and related securities. Portfolio Overview Our portfolio consists of royalties on more than 35 commercial products and ten development-stage product candidates. We believe that end market sales of the therapies in our portfolio are important drivers of our financial performance as a substantial portion of our royalties are based on end market sales. In addition, end market sales are a strong indicator of the importance of the therapies to both patients and the marketers. The following table provides an overview of our current portfolio of royalties: 1 Product(s) Marketer(s) Product Detail 2021 Royalty Receipts (in millions) 2021 End Market Sales (in millions) (1) Approved Products Cystic fibrosis franchise (2) Vertex Cystic fibrosis $702 $7,573 Tysabri Biogen Relapsing forms of multiple sclerosis 369 2,063 Imbruvica AbbVie, Johnson & Johnson Hematological malignancies and chronic graft versus host disease 353 6,943 Promacta Novartis Chronic immune thrombocytopenic purpura and aplastic anemia 174 2,016 Xtandi Pfizer, Astellas Prostate cancer 158 4,582 Januvia, Janumet, Other DPP-IVs Merck & Co., others Diabetes 151 5,288 HIV franchise (3) Gilead, others Human immunodeficiency virus (HIV) 78 16,315 Nurtec ODT/Biohaven payment (4) Biohaven, Pfizer Migraine 70 455 Prevymis Merck & Co. Prophylaxis of CMV in adult recipients of stem cell transplant 38 370 Farxiga/Onglyza AstraZeneca Diabetes 36 3,365 Tremfya Johnson & Johnson Plaque psoriasis and psoriatic arthritis 36 2,127 Cabometyx/Cometriq Exelixis, Ipsen, Takeda Kidney, liver and thyroid cancers 34 1,590 Crysvita Ultragenyx, Kyowa Kirin X-linked hypophoshatemia 17 179 Evrysdi Roche Spinal muscular atrophy 16 659 Emgality Lilly Migraine prevention & episodic cluster headache 15 577 Erleada Johnson & Johnson Prostate cancer 14 1,291 Trodelvy Gilead Metastatic triple-negative breast cancer 13 380 IDHIFA Bristol Myers Squibb Relapsed/refractory AML with an IDH2 mutation 12 Not disclosed Orladeyo BioCryst Hereditary angioedema prophylaxis 7 117 Tazverik Epizyme Epithelioid sarcoma and follicular lymphoma 3 32 Oxlumo Alnylam Primary hyperoxaluria type 1 1 60 Other products (5)(6) 311 — Total royalty receipts $2,609 Development Stage Product Candidates Aficamten (7) Cytokinetics Obstructive hypertrophic cardiomyopathy (Phase 3) — — BCX9930 BioCryst Paroxysmal nocturnal hemoglobinuria (Phase 3) — — CPI-0209 MorphoSys Hematological malignancies and solid tumors (Phase 2) — — Gantenerumab Roche Alzheimer’s disease (Phase 3) — — Omecamtiv mecarbil (8) Cytokinetics Heart failure (Phase 3) — — Otilimab GlaxoSmithKline Rheumatoid arthritis (Phase 3) — — Pelabresib MorphoSys Myelofibrosis (Phase 3) — — PT027 AstraZeneca Asthma (Phase 3) — — Seltorexant Johnson & Johnson MDD with insomnia symptoms (Phase 3) — — Zavegepant Biohaven Migraine (Phase 3) — — CMV is Cytomegalovirus, AML is Acute Myelogenous Leukemia, IDH2 is isocitrate dehydrogenase-2 and MDD is Major Depressive Disorder. Amounts shown in the table may not add due to rounding. Notes: (1) Represents end market sales for the year ended December 31, 2021 as reported by respective product marketers or based on Visible Alpha projections as of February 9, 2022 where marketers have not reported end market sales. Sales shown for Crysvita represent Europe, the Middle East and Africa only. For the majority of our royalties, royalty receipts lag product performance by one quarter and can generally be estimated by applying our publicly disclosed royalty rate to the preceding quarter’s marketer-announced net revenues on a product-by-product basis. (2) The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio. (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). (5) Excludes duplicate end-market sales where we have multiple royalties on the same product: Kombiglyze, Nesina, Onglyza and Soliqua. (6) 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 and Mircera. Other products includes a one-time $45.0 million milestone payment that we received on Soliqua and contributions from the Legacy SLP Interest (defined below). (7) Royalty was acquired in January 2022. (8) The financial royalty asset associated with omecamtiv mecarbil was written off in the year ended December 31, 2020 given the uncertainty around the future of omecamtiv mecarbil at the time. 2 Biopharmaceutical Industry and the Role of Royalties Our business is supported by significant growth and unprecedented innovation within the biopharmaceutical industry. Global prescription pharmaceutical sales are projected to grow from approximately $0.9 trillion in 2021 to approximately $1.3 trillion in 2026, representing a CAGR of 7% according to EvaluatePharma despite more than $130 billion in cumulative sales being lost to expected patent expiries during the same period. The growth of the biopharmaceutical industry is driven by global secular trends, including population growth, increasing life expectancy and growth of the middle classes in emerging markets. In addition, a dramatic acceleration of medical research in recent years has led to a better understanding of the molecular origins of disease and identification of potential targets for therapeutic intervention. This has created research and development opportunities for new drugs. The significant pace of biopharmaceutical innovation coupled with the proliferation of new biotechnology companies and the increasing cost of drug development has created a significant capital need over recent years that we believe will provide a sustainable tailwind for our business. Royalties play a fundamental and growing role in the biopharmaceutical industry. As a result of the increasing cost and complexity of drug development, the creation of a new drug today typically involves a number of industry participants. Academia and other research institutions conduct basic research and license new technologies to industry for further development. Biotechnology companies typically in-license these new technologies, add value through applied research and early-stage clinical development, and then either out-license the resulting development-stage product candidates to large biopharmaceutical companies for late-stage clinical development and commercialization, or commercialize the products themselves. As new drugs are transferred along this value chain, royalties are created as compensation for the licensing or selling institutions. Biotechnology companies are also increasingly creating royalties on existing products within their portfolios, known as synthetic royalties, in order to provide a source of non-dilutive capital to fund their businesses. As a result of this industry paradigm, the development of a single new drug can lead to the creation of multiple royalties. Given our leadership position within the biopharmaceutical royalty sector, we are able to capitalize on the growing volumes of royalties that are created as new therapies are developed to address unmet medical needs. Our Business Model We believe that the following elements of our business and product portfolio provide a unique and compelling proposition to investors seeking exposure to the biopharmaceutical sector. Our portfolio provides direct exposure to a broad array of blockbuster therapies. As of December 31, 2021, our portfolio included royalties on 14 therapies that each generated end-market sales of more than $1 billion, including five therapies that each generated end-market sales of more than $3 billion. The therapies within our royalty portfolio are marketed by leading global biopharmaceutical companies for whom these products are important sources of revenue. Given the marketers’ significant focus on and investment in these products, they are motivated to invest substantial resources in driving continued sales growth. Our portfolio is highly diversified across products, therapeutic areas and marketers. Our portfolio consists of royalties on more than 35 marketed biopharmaceutical therapies which address a wide range of therapeutic areas, including rare diseases, cancer, neurology, immunology, hematology and diabetes. In the year ended December 31, 2021, no individual therapy accounted for more than 19% of our royalty receipts, no therapeutic area accounted for more than 29% of our royalty receipts and no marketer represented more than 27% of our royalty receipts. The royalties in our portfolio entitle us to payments based directly on the top-line sales of the associated therapies, rather than the profits of these therapies. As such, the diversification of our profits directly reflects the diversification of our royalty receipts, rather than varying levels of product-level profitability, as would typically be expected within a biopharmaceutical company. The graphic below shows the diversification within our 2021 royalty receipts by product, therapeutic area and marketer. 3 Note: Only categories of at least 5% are separately presented in the charts. (1) Comprised of royalty receipts from Januvia, Janumet and other DPP-IVs The key growth-driving royalties in our portfolio are protected by long patent lives. The estimated weighted average royalty duration of our portfolio is approximately 13 years based on projected cumulative cash royalty receipts. Our largest marketed royalty in 2021 was on Vertex’s cystic fibrosis franchise, and existing patent applications covering Trikafta, the most significant product in that franchise, are expected to provide exclusivity through 2037. Our right to receive royalties is perpetual, but we expect that the 2037 patent expiration for Trikafta may result in potential sales declines based on potential generic entry. Several of our marketed royalties have unlimited durations and could provide cash flows for many years after key patents have expired. Simple and efficient operating model generates substantial cash flow for reinvestment in new biopharmaceutical royalties . Our capital-efficient operating model requires limited operating expenses and no material capital investment in fixed assets or infrastructure in order to support the ongoing growth of our business. As a result, we generate high Adjusted Cash Flow relative to our Adjusted Cash Receipts and we convert the vast majority of our Adjusted Cash Flow into operating cash flow. In 2021, we generated cash from operating activities of $2.0 billion, Adjusted Cash Receipts of $2.1 billion and Adjusted Cash Flow of $1.8 billion. We deployed $2.7 billion of cash in 2021 for royalties and related securities. Our high cash flow conversion provides us with significant capital that we can deploy for new royalty acquisitions and also use to grow our dividend to shareholders. Our business model captures many of the most attractive aspects of the biopharmaceutical industry, but with reduced exposure to many common industry challenges . The biopharmaceutical industry benefits from a number of highly attractive characteristics, including long product life cycles, significant barriers to entry and non-cyclical revenues. We have a highly flexible approach that is agnostic to both therapeutic area and treatment modality, allowing us to acquire royalties on the most attractive therapies from across the biopharmaceutical industry. We focus on the acquisition of royalties on approved products or development-stage product candidates that have generated strong proof of concept data, avoiding the risks associated with early stage research and development. By acquiring royalties, we are able to realize payments based directly on the top-line sales of leading biopharmaceutical therapies, without the costs associated with fixed research and development, manufacturing and commercial infrastructure. Our unique role in the biopharmaceutical ecosystem positions us to benefit from multiple compounding growth drivers . As a result of our significant scale and highly flexible business model, we believe that we are uniquely positioned to capitalize on multiple compounding growth drivers: an accelerating understanding of the molecular origins of disease, technological innovation leading to the creation of new treatment modalities, an increasing number of biopharmaceutical industry participants with significant capital needs, competitive industry dynamics which reward companies that can rapidly execute broad clinical development programs, increasing U.S. Food and Drug Administration (“FDA”) drug approvals which reached an all-time high in 2018 and the potential for multiple royalties to be created from each new drug that reaches the market. 4 We have the ability to access innovation from across the biopharmaceutical ecosystem. Our approach is to first assess innovative science in areas of significant unmet medical need and then evaluate how to acquire royalties on therapies that we believe are attractive. We closely follow a broad range of therapeutic areas and treatment modalities and are therefore able to move quickly when we identify compelling opportunities to acquire new royalties. We have deep access to attractively priced investment grade debt that provides a significant cost of capital advantage. We believe that we have an attractive cost of capital that enables us to acquire high-quality biopharmaceutical royalties at competitive prices while still creating value for our shareholders. As of December 31, 2021, we had an aggregate principal amount of $7.3 billion of senior unsecured notes outstanding with a weighted average coupon of 2.24% and a weighted-average maturity of approximately 13 years. In addition, we have an undrawn $1.5 billion senior unsecured revolving credit facility. We have a talented, long-tenured team with extensive experience and deep industry relationships. Our team has significant experience identifying, evaluating and acquiring royalties on biopharmaceutical therapies. Together they have been responsible for more than $22 billion of acquisitions of biopharmaceutical royalties and related assets. Our acquisitions have included many of the industry’s leading therapies across the past three decades, such as Humira, Imbruvica, Trikafta, Lyrica, Tecfidera, Truvada, Xtandi, Neupogen, Remicade and Rituxan, among others. Our long history of collaboration has resulted in deep relationships with a broad range of participants across the biopharmaceutical industry. We are the leader in acquiring biopharmaceutical royalties. We are the leader within the space, having executed transactions with an aggregate announced transaction value of more than $17 billion from 2012 through December 31, 2021. We estimate this to represent an estimated market share of approximately 60% by value. This compares to our next nearest competitor, which we believe has executed $2.8 billion of transactions, which we estimate to represent market share of 9%. Given the scale of our business relative to our competitors, we have a particularly strong leadership position within large royalty transactions. Since 2012, there have been 11 transactions with an aggregate value of more than $500 million each. We executed 9 of these 11 royalty transactions, for a total aggregate transaction value of $11.6 billion of cash and estimated market share of more than 80%, in this transaction size range. The charts below show our market share since 2012 across all transaction sizes and in royalty transactions with an aggregate value of more than $500 million. Note: Graphs above include transactions through December 31, 2021 and exclude royalty debt transactions from market share calculations. 5 Our Strategic Plan to Grow the Portfolio We intend to grow our business by continuing to partner with constituents across the biopharmaceutical value chain to fund innovation. The three key pillars of our growth strategy are summarized below. • Acquisition of royalties on approved products which provide dependable cash flows . We intend to continue capturing a leading share of royalties on approved products, particularly those that are early in their life cycles, so that we can participate in the growth that is generated as they penetrate their markets, and enter new indications or geographies. • Acquisition of royalties on attractive development-stage product candidates. We intend to supplement our diverse portfolio of royalties on approved products with acquisitions of royalties on development-stage product candidates that have generated strong clinical proof of concept data to minimize risk and provide attractive upside potential. • Acquisition of royalties in connection with merger and acquisition (“M&A”) transactions. We acquire royalties in connection with M&A transactions in a number of ways: by purchasing non-strategic assets following the closing of acquisitions, by partnering with biopharmaceutical companies to acquire other biopharmaceutical companies that own significant royalties, or in select circumstances, by seeking to acquire biopharmaceutical companies on our own that have significant royalties or products that could be out-licensed to create royalties. We acquire royalties in a number of ways including by acquiring existing royalties, acquiring new synthetic royalties and by funding R&D in exchange for future royalties and/or milestones. During the early years of our business, we focused our acquisitions on royalties on approved biopharmaceutical products. However, as we grew and diversified our business, we began acquiring royalties on development-stage product candidates that had demonstrated strong clinical proof of concept. These development-stage transactions have broadened our landscape of potential opportunities where we are able to leverage our scientific expertise and financial strength. From 2012 through 2021, we deployed $7.8 billion of cash to acquire royalties and milestones on development-stage product candidates. Products underlying $6.3 billion of these acquisitions have already been approved, representing a success rate to date of 81%, while products underlying $0.3 billion were not approved and products underlying $1.1 billion are still in development. Notes: (1) Reflects cash deployed for royalty acquisitions from 2012 through 2021. (2) Not approved includes investments in vosaroxin, palbociclib, and Merck KgaA’s anti-IL17 nanobody M1095. 6 In recent years, we have increased the scope of our investments beyond royalties to include additional assets such as equity investments and the acquisition of businesses with significant royalty assets. Our broad scope maximizes our total addressable market and has allowed us to provide a broad range of solutions to our partners across the biopharmaceutical ecosystem. Our approach is to first assess innovative science in areas of significant unmet medical need and then evaluate how to acquire royalties on therapies that we believe are attractive. We have a strong base of institutional knowledge of important therapeutic areas and key industry trends. Our team of scientific experts actively monitors the evolving treatment landscape across many therapeutic areas and treatment modalities in order to identify new opportunities. We analyze a wide range of scientific data and stay in constant communication with leading physicians, scientists, biopharmaceutical executives and venture capital firms. This allows us to quickly assess and gain conviction in the value of assets when acquisition opportunities arise. We take a disciplined approach in assessing opportunities and seek to acquire exposure to therapies based on the following key product characteristics: • Clinically validated: therapies that have received regulatory approval or have strong clinical proof-of-concept data that gives us confidence in the clinical and commercial profile. • High unmet need: therapies that address areas of significant unmet medical need that also represent large commercial opportunities. • Significant benefits to patients: therapies that have potential to disrupt or significantly enhance the treatment paradigm for patients and physicians based on compelling clinical data. • Unique competitive positioning: therapies that are well-positioned to be leaders in their respective categories and are expected to maintain a competitive advantage in the long-term. • Growth potential: therapies where we see strong long-term potential, based on our in-depth evaluation and in-house expertise. • Strong marketer: therapies marketed by biopharmaceutical companies that have the resources, capabilities and commitment to successfully develop them and maximize their commercial potential. • Intellectual Property: therapies that have strong patent portfolios and offer durable, long-term cash flows. • Attractive value proposition: therapies that we believe provide value-add to the healthcare system. Our focus is to create significant long-term value for our shareholders by acquiring both approved and development-stage product candidates through a variety of structures. In evaluating these acquisition opportunities, we focus on the following financial characteristics: • Long duration cash flows: we prioritize long-duration assets over short-duration assets that may boost near-term financial performance. The durability of our cash flows also allows us to add leverage to our portfolio, enhancing returns and providing capital that we can use to acquire additional assets. • Attractive risk-adjusted returns: we focus on generating attractive returns on our investments on a risk-adjusted basis. We do not target the same return for all assets and evaluate opportunities across the risk spectrum. • Growth and scale: we seek assets that are accretive to our long-term growth profile and additive to our overall scale. 7 We conduct extensive due diligence when evaluating potential new opportunities. We have end-to-end capabilities that span clinical and commercial analysis, valuation and transaction structuring. We have a highly focused and experienced team that conducts proprietary primary market research, forms its own views on the clinical and commercial outlook for the product, and builds its own financial models, allowing us to generate direct insights and allowing us to take significant accountability and ownership for our investments. We invest significant time and resources across all levels of the organization, including senior leadership, in the evaluation of potential opportunities. Our Portfolio Commercial Products The key royalties in our marketed portfolio related to approved products include the ones listed below. Descriptions of estimated royalty expiration dates are based on our estimates of patent expiry dates (which may include estimated patent term extensions) or estimates of the dates on which the royalties otherwise expire and are based on each product’s key geographies; duration may differ in other geographies. Royalty expiration dates can change due to patent, regulatory, commercial or other developments. In addition, the royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements. Cystic fibrosis franchise Our cystic fibrosis franchise consists of our right to receive royalty payments on the sale of various products marketed by Vertex for use in the treatment of cystic fibrosis, including Kalydeco (ivacaftor), Orkambi (lumacaftor and ivacaftor), Symdeko/Symkevi (tezacaftor and ivacaftor) and Trikafta/Kaftrio (elexacaftor, tezacaftor and ivacaftor). Vertex’s cystic fibrosis franchise represents the leading treatments for cystic fibrosis, providing treatment options for approximately 90% of cystic fibrosis patients. We added the cystic fibrosis franchise to our portfolio in November 2014 and purchased an additional residual royalty interest in November 2020. Our right to receive royalties is perpetual, but we expect that the 2037 patent expiration for Trikafta may result in potential sales declines based on potential generic entry. Total global end market sales for the cystic fibrosis franchise during 2021 were approximately $7.6 billion and we collected $702 million in related royalty receipts over the same period. Global end market sales of the cystic fibrosis franchise are projected to grow to approximately $10.4 billion in 2026, according to Visible Alpha. Tysabri Tysabri (natalizumab) is a monoclonal antibody marketed by Biogen for the treatment of relapsing forms of multiple sclerosis (RMS), including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease. Tysabri competes in the high efficacy segment of the multiple sclerosis market, often reserved for patients with aggressive disease at onset and patients who have failed front-line therapies. We added Tysabri to our portfolio in February 2017. Our right to receive royalties is perpetual. Total global end market sales for Tysabri during 2021 were approximately $2.1 billion and we collected $369 million in related royalty receipts over the same period. Global end market sales of Tysabri are projected to be approximately $1.7 billion in 2026, according to Visible Alpha. Imbruvica Imbruvica (ibrutinib) is a first-in-class small molecule Bruton’s tyrosine kinase inhibitor that is the leading therapy in chronic lymphocytic leukemia, relapsed/refractory mantle cell lymphoma and other blood cancers. Imbruvica is marketed by AbbVie and Janssen, a subsidiary of Johnson & Johnson. A robust clinical program supports Imbruvica’s use across a wide range of patient populations and cancer types, including 11 FDA approvals in six distinct indications. We added Imbruvica to our portfolio in July 2013. We estimate that our royalties will substantially end between 2027 and 2032. Total global end market sales for Imbruvica during 2021 were approximately $6.9 billion and we collected $353 million in related royalty receipts over the same period. Global end market sales of Imbruvica are projected to grow to approximately $7.9 billion in 2026, according to Visible Alpha. 8 Promacta Promacta (eltrombopag) is an oral, small molecule activator of the thrombopoietin receptor used to increase the number of platelets in the blood, marketed by Novartis for the treatment of chronic immune thrombocytopenia and aplastic anemia. We added Promacta to our portfolio in March 2019. We estimate that our royalties will substantially end between 2025 and 2028. Total global end market sales for Promacta during 2021 were approximately $2.0 billion and we collected $174 million in related royalty receipts over the same period. Global end market sales of Promacta are projected to be approximately $600 million in 2026, according to Visible Alpha. Xtandi Xtandi (enzalutamide) is an oral, small molecule androgen receptor inhibitor marketed by Pfizer and Astellas for the treatment of non-metastatic and metastatic castration-resistant prostate cancer as well as metastatic castration sensitive prostate cancer. We added Xtandi to our portfolio in March 2016. We estimate that our royalties will substantially end between 2027 and 2028. Total global end market sales for Xtandi during 2021 were approximately $4.6 billion and we collected $158 million in related royalty receipts over the same period. Global end market sales of Xtandi are projected to grow to approximately $6.3 billion in 2026, according to Visible Alpha. Januvia, Janumet, other DPP-IVs We hold patents covering the DPP-IV inhibitors which entitle us to royalty payments on the sale of various products, including Januvia (sitagliptin)/Janumet (sitagliptin and metformin) marketed by Merck & Co.; Tradjenta (linagliptin)/Jentadueto (linagliptin and metformin) marketed by Boehringer Ingelheim and Lilly; and Nesina (alogliptin) marketed by Takeda and Teijin Pharma, which have been approved for the treatment of type 2 diabetics in substitution of, or in addition to, insulin therapy. We added the DPP-IV inhibitors to our portfolio in June 2011. Our royalties on Januvia and Janumet will expire in 2022 and royalties on the other DPP-IVs have substantially ended. Total global end market sales for the DPP-IV inhibitors during 2021 were approximately $5.3 billion and we collected $151 million in related royalty receipts over the same period. HIV franchise Our HIV franchise consists of our right to receive royalty payments on the sale of various products, including Atripla, Biktarvy, Complera, Descovy, Emtriva, Genvoya, Odefsey, Stribild, Symtuza and Truvada, which have been approved for the treatment and prevention of HIV and acquired immune deficiency syndrome. Gilead is the primary marketer for the products in our HIV franchise. We added the HIV franchise to our portfolio starting in July 2005. Our royalties substantially ended in 2021. Total global end market sales for the products in the HIV franchise during 2021 were approximately $16.3 billion and we collected $78 million in related royalty receipts over the same period. 9 Nurtec ODT/Biohaven fixed payments Nurtec ODT (rimegepant) is an oral, small molecule calcitonin gene-related peptide receptor antagonist marketed by Biohaven and Pfizer for the acute treatment and prevention of migraine. We added Nurtec ODT to our portfolio in June 2018 and purchased an additional interest in Nurtec ODT as part of our expanded funding agreement with Biohaven in August 2020. We estimate that our royalties will substantially end between 2034 and 2036. Total global end market sales for Nurtec ODT during 2021 were estimated to be approximately $455 million and we collected $8 million in related royalty receipts over the same period. In addition, as a result of the approval of Nurtec ODT in February 2020, we received $63 million in fixed payments from Biohaven during 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. Global end market sales of Nurtec ODT are projected to grow to approximately $2.4 billion in 2026, according to Visible Alpha. Prevymis Prevymis (letermovir) is a first-in-class prophylactic marketed by Merck & Co. for the prophylaxis of cytomegalovirus infection and disease in adults who have received an allogeneic hematopoietic stem cell transplant. We added Prevymis to our portfolio in June 2020. We estimate that our royalties will substantially end in 2029. Total global end market sales for Prevymis during 2021 were approximately $370 million and we collected $38 million in related royalty receipts over the same period. Global end market sales of Prevymis are projected to grow to approximately $450 million in 2026, according to Visible Alpha. Farxiga/Onglyza Farxiga (dapagliflozin) is a first-in-class selective inhibitor of human sodium-glucose co-transporter 2 indicated as both monotherapy and as part of combination therapy with Onglyza, a dipeptidyl peptidase-4 inhibitor, to improve glycemic control as an adjunct to diet and exercise in adults with type 2 diabetes. Farxiga received FDA approval in May 2020 for the treatment of patients with heart failure with reduced ejection fraction in both patients with and without type 2 diabetes. Farxiga and Onglyza are both marketed by AstraZeneca. We added Farxiga/Onglyza to our portfolio in November 2017. We estimate that our royalties will substantially end in 2025. Total global end market sales for Farxiga/Onglyza during 2021 were approximately $3.4 billion and we collected $36 million in related royalty receipts over the same period. Global end market sales of Farxiga/Onglyza are projected to grow to approximately $4.2 billion in 2026, according to Visible Alpha. Tremfya Tremfya (guselkumab) is an anti-interleukin 23 marketed by Johnson & Johnson for the treatment of adults living with moderate to severe plaque psoriasis, and for adults with active psoriatic arthritis. Tremfya is also in clinical development for ulcerative colitis and Crohn’s disease. We added Tremfya to our portfolio in July 2021. We estimate that our royalties will substantially end between 2031 and 2032. Total global end market sales for Tremfya during 2021 were approximately $2.1 billion and we collected $36 million in related royalty receipts for the partial period subsequent to acquisition in July 2021. Global end market sales of Tremfya are projected to grow to approximately $5.4 billion in 2026, according to Visible Alpha. 10 Cabometyx/Cometriq Cabometyx (cabozantinib) is a multi-tyrosine kinase inhibitor approved for the treatment of patients with advanced renal cell carcinoma (RCC) both as monotherapy and in combination with Bristol Myers Squibb’s Opdivo (nivolumab) as a first line treatment. Cabometyx is also approved for hepatocellular carcinoma in patients previously treated with sorafenib. Cometriq is approved for progressive, metastatic medullary thyroid cancer. Cabometyx and Cometriq are marketed by Exelixis in the United States and by Ipsen in regions outside the United States and Japan. Cabometyx is marketed in Japan by Takeda. We added Cabometyx/Cometriq to our portfolio in March 2021. We estimate that our royalties will substantially end between 2026 and 2029. Total global end market sales for Cabometyx/Cometriq during 2021 were estimated to be approximately $1.6 billion and we collected $34 million in related royalty receipts for the partial period subsequent to acquisition in March 2021. Global end market sales of Cabometyx/Cometriq are projected to grow to approximately $3.4 billion in 2026, according to Visible Alpha. Crysvita Crysvita (burosumab) is a monoclonal antibody against fibroblast growth factor 23 marketed by Ultragenyx and Kyowa Kirin that has received European Commission (“EC”) conditional marketing authorization for the treatment of X-linked hypophosphatemia with radiographic evidence of bone disease in children one year of age and older and adolescents with growing skeletons. In October 2020, this authorization was expanded to include older adolescents and adults. We added a royalty on Crysvita sales in Europe to our portfolio in December 2019. Our royalties expire when we receive aggregate royalties equal to $608 million if that happens prior to December 31, 2030, and otherwise when we receive aggregate royalties of $800 million. We estimate that our royalties will substantially end between 2033 and 2038. End market sales for Crysvita in Europe during 2021 were $179 million and we collected approximately $17 million in related royalty receipts over the same period. End market sales of Crysvita in Europe are projected to grow to approximately $400 million in 2026, according to Visible Alpha. Evrysdi Evrysdi (risdiplam) is a survival motor neuron 2 splicing modifier marketed by Roche, and is the first oral treatment approved for infants, children and adults with all types of spinal muscular atrophy. We added Evrysdi to our portfolio in July 2020. Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion. Total global end market sales for Evrysdi during 2021 were approximately $659 million and we collected $16 million in related royalty receipts over the same period. Global end market sales of Evrysdi are projected to grow to approximately $2.9 billion in 2026, according to Visible Alpha. Emgality Emgality (galcanezumab-gnlm) is a monoclonal antibody calcitonin gene-related peptide receptor antagonist indicated for the preventive treatment of migraine and for the treatment of episodic cluster headache marketed by Lilly. We added Emgality to our portfolio in March 2019. We estimate that our royalties will substantially end in 2033. Total global end market sales for Emgality during 2021 were approximately $577 million and we collected $15 million in related royalty receipts over the same period. Global end market sales of Emgality are projected to grow to approximately $1.4 billion in 2026, according to Visible Alpha. 11 Erleada Erleada (apalutamide) is an oral, small molecule androgen receptor inhibitor indicated for the treatment of patients with non-metastatic castration-resistant prostate cancer and for the treatment of patients with metastatic castration sensitive prostate cancer. It is marketed by Johnson & Johnson. We added Erleada to our portfolio in February 2019. We estimate that our royalties will substantially end in 2032. Total global end market sales for Erleada during 2021 were approximately $1.3 billion and we collected $14 million in related royalty receipts over the same period. Global end market sales of Erleada are projected to grow to approximately $4.0 billion in 2026, according to Visible Alpha. Trodelvy Trodelvy (sacituzumab govitecan-hziy) is an antibody-drug conjugate for the treatment of adult patients with metastatic triple-negative breast cancer. Trodelvy was initially developed by Immunomedics and is now marketed by Gilead following the acquisition of Immunomedics in 2020. Gilead is exploring monotherapy and combinations of Trodelvy across numerous cancer indications and lines of therapy. We added Trodelvy to our portfolio in January 2018. Our right to receive royalties is perpetual. Total global end market sales for Trodelvy during 2021 were approximately $380 million and we collected $13 million in related royalty receipts over the same period. Global end market sales of Trodelvy are projected to grow to approximately $2.3 billion in 2026, according to Visible Alpha. IDHIFA IDHIFA (enasidenib) is an oral, targeted therapy approved by the FDA for the treatment of adult patients with relapsed or refractory acute myeloid leukemia with an isocitrate dehydrogenase-2 mutation. It is marketed by Bristol Myers Squibb. We added IDHIFA to our portfolio in June 2020. We estimate that our royalties will substantially end in the U.S. in 2033. End market sales for IDHIFA are not disclosed by Bristol Myers Squibb. We collected $12 million in related royalty receipts in 2021. We also hold rights to receive up to $55 million in outstanding regulatory milestone payments from Bristol Myers Squibb. Visible Alpha does not currently have estimates available for global end market sales of IDHIFA in 2026. Orladeyo Orladeyo (berotralstat) is a first-in-class oral inhibitor of plasma kallikrein marketed by BioCryst for the prevention of hereditary angioedema attacks. We added Orladeyo to our portfolio in December 2020 and purchased an additional interest as part of our expanded funding agreement with BioCryst in November 2021. Our right to receive royalties is perpetual, but we expect that the 2036-2039 patent expirations for Orladeyo may result in potential sales declines based on potential generic entry. Total global end market sales for Orladeyo during 2021 were estimated to be approximately $117 million and we collected $7 million in related royalty receipts over the same period. Global end market sales of Orladeyo are projected to grow to approximately $600 million in 2026, according to Visible Alpha. Tazverik Tazverik (tazemetostat) is a first-in-class, oral EZH2 inhibitor marketed by Epizyme that was granted accelerated approval for the treatment of epithelioid sarcoma and follicular lymphoma. We added Tazverik to our portfolio in November 2019. We estimate that our royalties will substantially end in 2034. Total global end market sales for Tazverik during 2021 were estimated to be approximately $32 million and we collected $3 million in related royalty receipts over the same period. Global end market sales of Tazverik are projected to grow to approximately $400 million in 2026, according to Visible Alpha. 12 Oxlumo Oxlumo (lumasiran) is a small interfering ribonucleic acid therapeutic targeting hydroxyacid oxidase 1 for the treatment of primary hyperoxaluria type 1 marketed by Alnylam. Oxlumo was approved by the FDA in November 2020. We added Oxlumo to our portfolio in April 2021. We estimate that our royalties will substantially end between 2034 and 2035. Total global end market sales for Oxlumo during 2021 were approximately $60 million and we collected $1 million in related royalty receipts over the same period. Global end market sales of Oxlumo are projected to grow to approximately $350 million in 2026, according to Visible Alpha. Development-Stage Product Candidates Our current portfolio includes ten development-stage product candidates. These development-stage product candidates have not yet been approved, and therefore have not generated any royalties (and we have not collected any related royalty receipts) to date. Aficamten Aficamten is a small molecule cardiac myosin inhibitor, in Phase 3 development by Cytokinetics for obstructive hypertrophic cardiomyopathy (oHCM). We added aficamten to our portfolio in January 2022. If approved, global end market sales of aficamten are projected to grow to approximately $400 million in 2026, according to Visible Alpha. BCX9930 BCX9930 is an oral Factor D inhibitor in Phase 3 clinical development by BioCryst as monotherapy for paroxysmal nocturnal hemoglobinuria and other complement-mediated diseases. We added BCX9930 to our portfolio in December 2020 and purchased an additional interest as part of our expanded funding agreement with BioCryst in November 2021. If approved, global end market sales of BCX9930 are projected to grow to approximately $200 million in 2026, according to Visible Alpha. CPI-0209 CPI-0209 is a second-generation enhancer of zeste homolog 2 inhibitor, in Phase 2 development by MorphoSys for hematological malignancies and solid tumors. We added CPI-0209 to our portfolio in July 2021. Visible Alpha does not currently have estimates available for global end market sales of CPI-0209 in 2026. Gantenerumab Gantenerumab is an anti-amyloid-beta monoclonal antibody, in Phase 3 development by Roche for Alzheimer’s disease. We added gantenerumab to our portfolio in July 2021. If approved, global end market sales of gantenerumab are projected to grow to approximately $1.9 billion in 2026, according to Visible Alpha. Omecamtiv mecarbil Omecamtiv mecarbil is an oral, small molecule cardiac myosin activator in Phase 3 clinical development by Cytokinetics for the treatment of heart failure with reduced ejection fraction. We added omecamtiv mecarbil to our portfolio in 2017. In November 2020, results from the Phase 3 GALACTIC-HF trial of omecamtiv mecarbil in patients with heart failure were presented at the American Hearth Association Scientific Sessions which showed that 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 mecarbil when Amgen and Servier elected to terminate their collaboration agreement. Following the Phase 3 results and termination of the collaboration announced in 2020, given the uncertainty around the future of omecamtiv mecarbil at the time, we recognized an impairment charge of $65 million related to the write-off of the associated financial royalty asset of $90 million and its associated provision of $25 million in the year ended December 31, 2020. If approved, global end market sales of omecamtiv mecarbil are projected to grow to approximately $200 million in 2026, according to Visible Alpha. 13 Otilimab Otilimab is a fully human monoclonal antibody that inhibits granulocyte-macrophage colony-stimulating factor, in Phase 3 development by GlaxoSmithKline for rheumatoid arthritis. We added otilimab to our portfolio in July 2021. We are also entitled to 100% of future regulatory and success-based milestone payments on otilimab. If approved, global end market sales of otilimab are projected to grow to approximately $250 million in 2026, according to Visible Alpha. Pelabresib Pelabresib is a bromodomain and extra-terminal inhibitor, in Phase 3 development by MorphoSys for myelofibrosis. We added pelabresib to our portfolio in July 2021. If approved, global end market sales of pelabresib are projected to grow to approximately $200 million in 2026, according to Visible Alpha. PT027 PT027 is an investigational fixed dose combination of the inhaled corticosteroid, budesonide and albuterol, a short-acting beta-2 agonist for the treatment of asthma in Phase 3 development. In 2018, we entered into an agreement with Avillion II, which was amended in July 2021, to fund up to approximately $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. We estimate that our royalties will substantially end in 2030, but AstraZeneca is entitled to certain buyout rights which, if exercised, would result in earlier expiration. If approved, global end market sales of PT027 are projected to grow to approximately $500 million in 2026, according to Visible Alpha. Seltorexant Seltorexant is a selective orexin 2 receptor antagonist currently in Phase 3 development for the treatment of major depressive disorder with insomnia symptoms by Johnson & Johnson. We added seltorexant to our portfolio in January 2021. Visible Alpha does not currently have estimates available for global end market sales of seltorexant in 2026. Zavegepant Zavegepant is a small molecule calcitonin gene-related peptide receptor antagonist in clinical development by Biohaven for the acute treatment and prevention of migraines in Phase 3 development. In November 2021, Biohaven and Pfizer announced a strategic commercialization arrangement for Pfizer to commercialize zavegepant in markets outside of the United States upon approval. We added zavegepant to our portfolio in June 2018 and purchased an additional interest as part of our expanded funding agreement with Biohaven in August 2020. We estimate that our royalties will substantially end between 2034 and 2036. As a result of an additional transaction in 2020, we are also entitled to success-based milestone payments. If approved, global end market sales of zavegepant are projected to grow to approximately $650 million in 2026, according to Visible Alpha. Royalty Portfolio Summary The table below provides a summary of the estimated royalty expiration and the royalty rates for our portfolio: 14 Product Therapeutic Area Estimated Royalty Expiration (1) Royalty Rate (2) Approved Products Cystic fibrosis franchise Rare disease 2037 (3) For combination therapies, sales are allocated equally to each of the active pharmaceutical ingredients; tiered royalties ranging from single digit to subteen percentages on annual worldwide net sales of ivacaftor, lumacaftor and tezacaftor, and mid-single digit percentages on annual worldwide net sales of elexacaftor Tysabri Neurology Perpetual Contingent payments of 18% on annual worldwide net sales up to $2.0 billion and 25% on annual worldwide net sales above $2.0 billion Imbruvica Cancer 2027-2032 Tiered royalty in the mid-single digits on annual worldwide net sales Promacta Hematology 2025-2028 Tiered royalty ranging from 4.7% to 9.4% on annual worldwide net sales Xtandi Cancer 2027-2028 Royalty slightly less than 4% on annual worldwide net sales Januvia and Janumet Diabetes 2022 Low-single digit royalty on annual worldwide net sales Nurtec ODT Neurology 2034-2036 2.1% royalty on annual combined worldwide net sales of Nurtec ODT and zavegepant up to $1.5 billion and 1.5% on annual combined worldwide net sales above $1.5 billion. 0.4% incremental royalty on all Nurtec ODT worldwide net sales. Prevymis Infectious disease 2029 Low-double digit royalty on annual worldwide net sales up to $300 million Farxiga/Onglyza Diabetes 2025 Payments to Royalty Pharma equivalent to low-single digit downward tiered royalty on annual worldwide net sales Tremfya Immunology 2031-2032 Mid-single digit, tiered royalty on annual worldwide net sales Cabometyx/Cometriq Cancer 2026-2029 (4) 3% royalty on annual worldwide net sales Crysvita Rare disease 2033-2038 (5) 10% royalty on annual EU, U.K. and Switzerland net sales Evrysdi Rare disease 2030-2035 (6) Total royalties are tiered at 8% on worldwide annual net sales up to $500 million, 11% on net sales between $500 million and $1 billion, 14% on net sales between $1 billion and $2 billion, 16% on net sales over $2 billion; Royalty Pharma is entitled to approximately 43% of total royalties Emgality Neurology 2033 Low-single digit royalties on annual worldwide net sales Erleada Cancer 2032 Low-single digit royalties on annual worldwide net sales Trodelvy Cancer Perpetual 4.15% royalty on annual worldwide net sales up to $2 billion, declining stepwise based on sales tiers to 1.75% on annual worldwide net sales above $6 billion IDHIFA Cancer 2033 Tiered royalty in the low-double digits to mid-teens based on annual worldwide net sales Orladeyo Rare disease 2036-2039 (7) 9.50% royalty on direct annual net sales of up to $350 million, 4.50% on sales between $350 million and $550 million, no royalty on sales over $550 million; tiered percentage of sublicense revenue in certain territories Tazverik Cancer 2034 (8) Royalties in the mid-teens percentages on annual worldwide net sales, stepping down on annual worldwide net sales above certain sales thresholds Oxlumo Rare disease 2034-2035 Royalties in the mid- to high-single digits based on annual worldwide net sales Development Stage Product Candidates Aficamten (9) Cardiology — 4.5% royalty on annual worldwide net sales up to $1 billion and 3.5% on net sales above $1 billion, subject to certain potential step-downs BCX9930 Rare disease — 4.0% royalty on annual worldwide net sales up to $1.5 billion, 3.0% royalty on annual worldwide net sales between $1.5 billion and $3.0 billion, and 1.0% royalty on annual worldwide net sales above $3.0 billion CPI-0209 Cancer — 3.0% royalty on annual worldwide net sales Gantenerumab Neurology — Total royalties tiered between 5.5% and 7.0% on annual worldwide net sales; Royalty Pharma is entitled to 60% of total royalties Omecamtiv mecarbil Cardiology 2032-2033 Mid-single digit royalty on worldwide net sales Otilimab Immunology — Tiered double-digit total royalties on annual worldwide net sales; Royalty Pharma is entitled to 80% of total royalties Pelabresib Cancer — 3.0% royalty on annual worldwide net sales PT027 Respiratory 2030 (10) Tiered royalties in the low-single digits on annual worldwide net sales (11) Seltorexant Neurology — Mid-single digit royalty on worldwide net sales Zavegepant Neurology 2034-2036 2.1% royalty on annual combined worldwide net sales of Nurtec ODT and zavegepant up to $1.5 billion and 1.5% on annual combined worldwide net sales above $1.5 billion. Up to a 3.0% incremental royalty on zavegepant worldwide net sales up to $1.5 billion and up to 2.0% incremental royalty on zavegepant worldwide net sales above $1.5 billion. Notes: (1) Dates shown represent our estimates as of current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, 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. 15 (2) The royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements. (3) Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (4) Royalties on net sales of cabozantinib products in the United States through September 2026 and non-U.S. markets through the full term of the royalty. (5) Royalties expire when we receive aggregate royalties equal to $608 million if that happens prior to December 31, 2030, and otherwise when we receive aggregate royalties of $800 million. (6) Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion. (7) Royalty is perpetual; years shown represent estimated United States patent expiration for Orladeyo and potential sales decline based on timing of potential generic entry. (8) Represents the estimated patent expiration date in the United States. (9) Royalty was acquired in January 2022. (10) AstraZeneca is entitled to certain buyout rights which, if exercised, would result in earlier expiration. (11) Represents the portion of the royalties owed to Avillion II attributable to our minority ownership stake in Avillion II. There can be no assurance that our royalties will expire when expected. Any reductions in the durations of royalties relative to our estimates may adversely affect our financial condition and results of operations. See “Risk Factors” in Item 1A, Risk Factors for further information. Fixed Payment Arrangements The table below provides a summary of our fixed payment arrangements: Funding Arrangement Therapeutic Area Key Terms (1) Biohaven Series A Preferred Shares Neurology 16 consecutive quarterly payments of $15.6 million to Royalty Pharma from the three months ended March 31, 2021 through the three months ended December 31, 2024 totaling $250.0 million (2.0 times the $125.0 million total purchase price of Series A Biohaven Preferred Shares that Royalty Pharma acquired in 2019). Biohaven Series B Preferred Shares Neurology 24 consecutive quarterly payments of $14.8 million to Royalty Pharma from the three months ended March 31, 2025 through the three months ended December 31, 2030 totaling $354.5 million (approximately 1.8 times the $200.0 million total purchase price of Series B Biohaven Preferred Shares that Royalty Pharma has agreed to acquire between the three months ended March 31, 2021 and the three months ended December 31, 2024). Zavegepant Success-Based Milestones Neurology Success-based milestone payments to Royalty Pharma ranging from 1.9 to 2.95 times the funded amount of $250.0 million, depending on achievement of specific regulatory approvals for zavegepant. 40 consecutive quarterly payments commencing on the first day of the second calendar quarter following a milestone event. If zavegepant’s first regulatory approval in migraine is achieved, Royalty Pharma will receive total success-based milestone payments of $475.0 million, or 1.9 times the funded amount, related to this specific approval. Incremental payments of up to 1.05 times the funded amount could be triggered by certain additional regulatory approvals. MorphoSys Development Funding Bonds Not applicable Payments to Royalty Pharma totaling approximately 2.2 times the amount drawn by MorphoSys. Up to $350.0 million in potential funding is available to be drawn through July 15, 2022, with a minimum draw of $150.0 million. 36 consecutive quarterly payments to Royalty Pharma commencing in the ninth quarter following the quarter of the applicable funding date. As of February 15, 2022, the Development Funding Bonds remain undrawn. Cytokinetics Commercial Launch Funding Cardiology Payments to Royalty Pharma totaling 1.9 times the amount drawn for up to five tranches totaling $300.0 million in potential funding to Cytokinetics, including an initial $50.0 million tranche that was funded in the three months ended March 31, 2022. Each subsequent tranche has a 12-month draw period following achievement of certain clinical and regulatory milestones. 34 consecutive quarterly payments to Royalty Pharma commencing on the last business day of the seventh quarter following the quarter of the applicable funding date for each tranche. (1) Our fixed payment arrangements are subject to the underlying contractual agreements and legal instruments from which they arise and may be subject to reduction, accelerations, and other adjustments in accordance with the respective terms of such agreements and instruments. 16 Competition We face competition from other entities that acquire biopharmaceutical royalties, including competitors to the Manager that are in the similar business of acquiring biopharmaceutical royalties. There are a limited number of suitable and attractive acquisition opportunities available in the market. Therefore, competition to acquire such assets is intense. The Manager is subject to competition from other potential royalty buyers, including from the companies that market the products on which royalties are paid, financial institutions and other entities. These potential royalty buyers may be larger and better capitalized than us. The Manager may not be able to identify and obtain a sufficient number of asset acquisition opportunities to invest the full amount of capital that may be available to us. There can be no assurance that we will continue to acquire biopharmaceutical products and companies that hold biopharmaceutical royalties that are acceptable to us. The products that provide the basis for the cash flows of the biopharmaceutical products in which we invest are also subject to intense competition. The biopharmaceutical industry is a highly competitive and rapidly evolving industry. The length of any product’s commercial life cannot be predicted. There can be no assurance that one or more products will not be rendered obsolete or non-competitive by new products or improvements made to existing products, either by the current marketer of such products or by another marketer. Adverse competition, obsolescence or governmental and regulatory action or healthcare policy changes could significantly affect the revenues, including royalty-related revenues, of the products which serve as the security or other support for the payments due under the biopharmaceutical products that we hold. Competitive factors affecting the market position and success of each product include: • effectiveness; • safety and side effect profile; • price, including third-party insurance reimbursement policies; • timing and introduction of the product; • efficacy of marketing strategy; • governmental regulation; • availability of lower-cost generics and/or biosimilars; • treatment innovations that eliminate or minimize the need for a product; and • product liability claims. If a product for which we have a royalty receivable or other interest is rendered obsolete or non-competitive by new products, including generics and/or biosimilars, or improvements on existing therapies or governmental or regulatory action, such developments could have a material adverse effect on the ability of the payor with respect to a biopharmaceutical asset to make payments to us, and consequently could materially adversely affect our business, financial condition and results of operations. If additional side effects or complications are discovered with respect to a product, and such product’s market acceptance is impaired or it is withdrawn from the market, continuing payments with respect to biopharmaceutical products, including royalty payments and payments of interest on and repayment of the principal, relating to such product may not be made on time or at all. Corporate Responsibility We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharma industry. We play an important role in providing capital to the biopharma ecosystem and thereby positively impact human health. Our responsibility to stakeholders is based around three key areas: integrity (maintaining the highest ethical standards), culture (promoting an inclusive and diverse workforce) and taking responsibility (being a responsible citizen). We do not directly conduct biopharmaceutical research and development or manufacture or market the biopharmaceutical assets in which we participate. We strive to invest in novel therapies that address unmet patient needs and to support ethical business practices that drive innovation, competition and patient choice. 17 Integrity We maintain the highest standards of integrity and trust in our role as investors and partners to the biopharma industry. This is recognized in our market-leading position and the high esteem with which we believe we are held in the industry. We conduct thorough diligence and monitoring with all of our investment positions. The biopharmaceutical companies and academic and non-profit institutions with which we work typically have well-developed and transparent environmental, social and governance (ESG) policies, which seek to benefit wider society through sustainable and ethical business practices. Culture A diverse, talented and motivated workforce is essential to maintain our competitive advantages and to successfully execute our business strategy. We consider it highly important to strive for an appropriate gender balance: currently approximately 50% of the workforce of our Manager are women. Responsibility We are committed to good corporate citizenship and actively support the work of a number of patient advocacy groups and medical research foundations, including the American Heart Association, the Alliance for Lupus Research, Children of Bellevue, the Melanoma Research Alliance, the National Multiple Sclerosis Society and the Prostate Cancer Foundation. Over one-third (by value) of the transactions we have completed since our founding have been with leading academic and non-profit institutions. By partnering with these institutions, we have provided capital which has been used to further scientific research (for example, the Cystic Fibrosis Foundation) or to help fund capital projects. These diverse organizations are united in their quest to advance science, the careers of scientists and human health around the globe. Employees Our directors and executive officers manage our operations and activities. However, we do not currently have any employees or any officers other than our executive officers. Pursuant to the management agreement entered into in connection with our initial public offering (the “Management Agreement”) with the Manager, the Manager performs corporate and administration services for us. As of December 31, 2021, the Manager had 66 employees. None of these employees are represented by labor unions or covered by any collective bargaining agreement. We believe that the Manager’s relations with its employees are satisfactory. Human Capital Resources Because we are “externally managed,” we do not employ our own personnel, but instead depend upon the Manager and its executive officers and employees for all of the services we require. Under the Management Agreement, the Manager manages the assets of our business and sources and evaluates royalty acquisitions. Accordingly, our success is dependent upon the expertise and services of the executive officers and other personnel provided to us through the Manager. The Manager is responsible for the selection of these executive officers and other personnel, and our Board of Directors reviews personnel with the Manager with the objective of evaluating the Manager’s internal capabilities. The Management Agreement requires the Manager’s executives to devote substantially all of their time to managing us, Royalty Pharma Investments 2019 ICAV (“RPI” or “RPI 2019 ICAV”) and any legacy vehicles related to Royalty Pharma Investments, an Irish unit trust (“Old RPI”) unless otherwise approved by our Board of Directors. The Management Agreement also provides for the development of succession plans for the senior management of the Manager by the Management Development and Compensation Committee of our Board of Directors in consultation with the Manager. 18 Governmental Regulation and Environmental Matters Our business has been and will continue to be subject to numerous laws and regulations. Failure to comply with these laws and regulations could subject us to administrative and legal proceedings and actions by various governmental bodies. See “Risk Factors” in Item 1A, Risk Factors for further information. Our compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, financial condition or competitive position in excess of those affecting others in our industry. We believe that there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we do not currently anticipate material capital expenditures arising from environmental regulation. We believe that climate change could present risks to our business. Some of the potential impacts of climate change to our business include increased operating costs due to additional regulatory requirements and the risk of disruptions to our business. We do not believe these risks are material to our business at this time. U.S. Investment Company Act Status We intend to conduct our business so as not to become regulated as an investment company under the U.S. Investment Company Act. An entity generally will be determined to be an investment company for purposes of the U.S. Investment Company Act if, absent an applicable exemption, (i) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the ICA 40% Test. We do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities, and believe that we are not engaged primarily in the business of investing, reinvesting or trading in securities. We believe that, for U.S. Investment Company Act purposes, we are engaged primarily, through one or more of our subsidiaries, in the business of purchasing or otherwise acquiring certain obligations that represent part or all of the sales price of merchandise. Our subsidiaries that are so engaged rely on Section 3(c)(5)(A) of the U.S. Investment Company Act, which, according to certain SEC staff interpretations, generally may be available to an issuer that invests at least 55% of its assets in “notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services,” which we refer to as ICA Exception Qualifying Assets and that does not issue any redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates. In a no-action letter, dated August 13, 2010, to our predecessor, the SEC staff promulgated an interpretation that royalties that entitle an issuer to collect royalty receivables that are directly based on the sales price of specific biopharmaceutical assets that use intellectual property covered by specific license agreements are ICA Exception Qualifying Assets under Section 3(c)(5)(A). We rely on this no-action letter for the position that royalty receivables relating to biopharmaceutical assets that we hold are ICA Exception Qualifying Assets under Section 3(c)(5)(A) and Section 3(c)(6), which is described below. As the parent of one or more subsidiaries that rely on Section 3(c)(5)(A), we currently are excepted from registration as an investment company based on Section 3(a)(1)(C) and/or Section 3(c)(6) of the U.S. Investment Company Act. To ensure that we are not obligated to register as an investment company, we must not exceed the thresholds provided by the ICA 40% Test. For purposes of the ICA 40% Test, the term “investment securities” does not include U.S. government securities or securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on Section 3(c)(1) or Section 3(c)(7) of the U.S. Investment Company Act, such as majority-owned subsidiaries that rely on Section 3(c)(5)(A). We also may rely on Section 3(c)(6), which, based on SEC staff interpretations, requires us to invest, either directly or through majority-owned subsidiaries, at least 55% of our assets in, as relevant here, businesses relying on Section 3(c)(5)(A). For a subsidiary to be “majority-owned,” a parent entity must own a majority of the voting securities of the applicable security. Therefore, the assets that we and our subsidiaries hold and acquire are limited by the provisions of the U.S. Investment Company Act and the rules and regulations promulgated thereunder. 19 If the SEC or its staff in the future adopts a contrary interpretation to that provided in the no-action letter to Royalty Pharma or otherwise restricts the conclusions in the SEC staff’s no-action letter such that royalties are no longer treated as ICA Exception Qualifying Assets for purposes of Section 3(c)(5)(A) and Section 3(c)(6), or the SEC or its staff in the future determines that the no-action letter does not apply to some or all types of royalty receivables relating to biopharmaceutical assets, our business will be materially and adversely affected. In particular, we would be required either to convert to a corporation formed under the laws of the United States or a state thereof (which would likely result in our being subject to U.S. federal corporate income taxation) and to register as an investment company, or to stop all business activities in the United States until such time as the SEC grants an application to register us as an investment company formed under non-U.S. law. It is unlikely that such an application would be granted and, even if it were, requirements imposed by the Investment Company Act, including limitations on our capital structure, our ability to transact business with affiliates and our ability to compensate key employees, could make it impractical for us to continue our business as currently conducted. Our no longer qualifying for an exemption from registration as an investment company would materially and adversely affect the value of your Class A ordinary shares and our ability to pay dividends in respect of our Class A ordinary shares. Corporate Information Our predecessor was founded in 1996 and we were incorporated under the laws of England and Wales on February 6, 2020. We are a holding company, and our principal asset is a controlling equity interest in Royalty Pharma Holdings Ltd. (“RP Holdings”). Our principal executive offices are located at 110 East 59 th Street, New York, NY 10022, and our telephone number is (212) 883-0200. Our Internet site is www.royaltypharma.com. Our website and the information contained therein or connected thereto is not incorporated into this Annual Report on Form 10-K. Our agent for service in the United States is CSC North America located at 251 Little Falls Drive, Wilmington, Delaware, 19808. Available Information Our reports filed with or furnished to the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available, free of charge, on the Investors section of our website at https://royaltypharma.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website at http://www.sec.gov that contains reports, and other information regarding us and other companies that file materials with the SEC electronically. We use the Investor section of our website as a means of disclosing material information. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings, and public conference calls and webcasts.