What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-15 compared with 2022-02-15 · 562 added, 569 removed, 402 unchanged (74% of the section changed)

5 unchanged sentences

Use of Proceeds

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.

In 2022, we declared and paid four quarterly cash dividends of $0.19 per Class A ordinary share for an aggregate amount of $333.3 million to holders of our Class A ordinary shares.

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

8 unchanged sentences

Recent Sales of Unregistered Securities

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

Issuer Purchases of Equity Securities

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.

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, 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 included in our Annual Report on Form 10-K.

1 unchanged sentence

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 initial public offering (“IPO”) of our Class A ordinary shares that was completed in June 2020.

Royalty Pharma plc is a public limited company incorporated under the laws of England and Wales that was created to facilitate the initial public offering (“IPO”) of our Class A ordinary shares on June 16, 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”).

Business Overview

1 unchanged sentence

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 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 Vertex’s Trikafta, Kalydeco, Orkambi and Symdeko, Biogen’s Tysabri, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, GSK’s Trelegy, Novartis’ Promacta, Pfizer’s Nurtec ODT, Johnson & Johnson’s Tremfya, Roche’s Evrysdi, Gilead’s Trodelvy and 12 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 or milestones, 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 R&D 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.

1 unchanged sentence

• Approved Products – We acquire royalties in approved products that generate predictable cash flows and may offer upside potential from unapproved indications.

Since inception in 1996 through 2021, we have deployed $15.0 billion of cash to acquire royalties on approved products.

From 2012 through 2021, we have acquired $10.2 billion of royalties on approved products.

Since inception in 1996 through 2022, we have deployed $17.0 billion of cash to acquire royalties, milestones and related assets on approved products.

From 2012 through 2022, we have deployed $12.1 billion to acquire royalties, milestones and related assets on approved products.

• Development-Stage Product Candidates – We acquire royalties on development-stage product candidates that have demonstrated strong clinical proof of concept.

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 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 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.

From 2012, when we began acquiring royalties on development-stage product candidates, through 2022, we have deployed $8.3 billion to acquire royalties, milestones and related assets on development-stage product candidates.

While we classify our acquisitions in these two broad categories, several of our approved product transactions are driven by the long-term expanded potential of these existing commercial products in indications that are unapproved at the time of acquisition.

Similarly, some of our development-stage product candidate transactions are specifically related to indications that are unapproved at the time of acquisition, on products that are already approved and commercialized in other indications.

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

• Third-party Royalties – Existing royalties on approved or late-stage development therapies with high commercial potential.

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.

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 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.

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.

• Synthetic Royalties – Newly-created royalties on approved or late-stage development therapies with strong proof of concept and high commercial potential.

A synthetic royalty is the contractual right to a percentage of top-line sales by the developer or marketer of a therapy in exchange for funding.

A synthetic royalty may also include contingent milestone payments.

We also fund ongoing R&D for biopharmaceutical companies in exchange for future royalties and milestones if the product or indication we are funding is approved.

• Launch and Development Capital – Tailored supplemental funding solutions, generally included as a component within a transaction, increasing the scale of our capital.

Launch and development capital is generally provided in exchange for a long-term stream of fixed payments with a predetermined schedule around the launch of a drug.

Launch and development capital may also include a direct investment in the public equity of a company.

• Mergers and Acquisitions (“M&A”) Related – 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.

We may also seek to acquire biopharmaceutical companies that have significant royalties or where we can create royalties in subsequent transactions.

Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities such as our strategic alliance with MSCI Inc.

(“MSCI”) to develop thematic life science indexes.

Background and Format of Presentation

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 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 (the “RP Holdings Class A Interests”) and RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”).

We consummated an exchange offer on February 11, 2020 (the “Exchange Offer”) to facilitate our IPO.

Through the Exchange Offer, investors which represented 82% of the aggregate limited partnership interests in the various partnerships (the “Legacy Investors Partnerships”) that owned Old RPI, 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 together with (i) the concurrent incurrence of indebtedness under senior credit facilities 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 RP Holdings.

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

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”).

RP Holdings is the sole owner of RPI 2019 ICAV, which is an Irish collective asset management entity.

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

We are entitled to 82% of the economics of Old RPI’s wholly-owned subsidiar y RPI Finance Trust, a Delaware statutory trust (“RPIFT”) , and 66% of Royalty Pharma Collection Trust, a Delaware statutory trust (“RPCT”).

The remaining 34% of RPCT is owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), which is wholly owned by Royalty Pharma Select, an Irish unit trust.

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 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 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.

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

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

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

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

In 2022, we became an indirect owner of an 82% economic interest in Royalty Pharma Investments ICAV (“RPI ICAV”), which was previously owned directly by Old RPI.

Understanding Our Financial Reporting

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.

Most of the royalties we acquire are treated as investments in cash flow streams and are classified as financial assets measured under the effective interest method in accordance with GAAP.

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.

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

The preparation of our financial statements in this manner requires the use of estimates, judgments and assumptions that affect both our reported assets and liabilities and our income and revenue and expenses.

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 sales estimates for each of the products in which we own royalties.

The measurement of income from our financial royalty assets requires significant judgments and estimates, 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 updated each reporting period primarily using 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 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.

As a result of the non-cash charges associated with applying the effective interest method accounting methodology to our financial royalty assets, our consolidated income statement activity can be volatile and unpredictable.

Small declines in sell-side equity research analysts’ consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition which generates a corresponding cumulative allowance that reduces the gross asset balance, 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 and 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 expense in our consolidated income statements.

Over the course of 10 quarters, we continued to recognize non-cash provision expense 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.

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 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.

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

This example illustrates the volatility caused by our accounting model in our consolidated income statements.

We believe there is no direct correlation between income from financial royalty assets and royalty receipts due to the nature of the accounting methodology applied for financial royalty assets.

Further, income from financial royalty assets and the provision for changes in expected cash flows related to these financial royalty assets can be volatile and unpredictable.

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 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 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, Proceeds from available for sale debt securities and Distributions from non-consolidated affiliates .

Royalty receipts refer to the summation of the following line items from our GAAP consolidated statements of cash flows:

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

2 unchanged sentences

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.

Both measures are an indication of the strength of the Company and the performance of the business.

Management uses Adjusted Cash Flow to compare its performance against non-GAAP adjusted net income used by companies in the biopharmaceutical industry.

Both measures are an indication of our strength and the performance of the business.

Management uses Adjusted Cash Flow to compare its performance against non-GAAP measures used by our peers in the biopharmaceutical industry.

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

1 unchanged sentence

Portfolio Overview

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

Our portfolio consists of royalties on more than 35 marketed therapies and 12 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.

The table below includes royalty receipts for 2022 and 2021 in order of contributions to royalty receipts for 2022 (in thousands).

Royalty Receipts

(in thousands) Years Ended December 31,

Marketer(s) Therapeutic Area 2021 2020

Years Ended December 31,

Royalties Marketer(s) Therapeutic Area 2022 2021

Cystic fibrosis franchise (1) Vertex Rare disease $ 811,052 $ 702,140

Nurtec ODT/Biohaven payment (2) Pfizer Neurology 559,623 70,188

Tysabri Biogen Neurology 369,793 369,149

Imbruvica AbbVie, Johnson & Johnson Cancer 312,690 352,911

Promacta Novartis Hematology 173,621 143,741

Xtandi Pfizer, Astellas Cancer 186,701 158,103

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

Promacta Novartis Hematology 181,632 173,621

Tremfya Johnson & Johnson Immunology 97,307 35,718

Trelegy GSK Respiratory 89,915 —

Januvia, Janumet, Other DPP-IVs (3) Merck & Co., others Diabetes 72,943 151,158

Cabometyx/Cometriq Exelixis, Ipsen, Takeda Cancer 55,426 33,722

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

Farxiga/Onglyza AstraZeneca Diabetes 43,840 36,378

Evrysdi Roche Rare disease 40,645 16,098

Emgality Lilly Neurology 15,481 9,529

Erleada Johnson & Johnson Cancer 14,227 7,876

Prevymis Merck & Co.

Infectious disease 37,126 37,505

Trodelvy Gilead Cancer 24,809 13,395

IDHIFA Bristol Myers Squibb Cancer 12,404 6,111

Orladeyo BioCryst Rare disease 21,801 6,740

Tazverik Epizyme Cancer 2,794 522

Erleada Johnson & Johnson Cancer 21,378 14,227

Crysvita Ultragenyx, Kyowa Kirin Rare disease 20,402 16,741

Emgality Lilly Neurology 18,832 15,481

Oxlumo Alnylam Rare disease 2,602 1,248

3 unchanged sentences

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

(2) Amounts include quarterly redemption payments of $15.6 million in 2021 and 2022 related to the Series A Biohaven Preferred Shares (presented as Proceeds from available for sale debt securities on the statements of cash flows).

In 2022, amounts also include the accelerated redemption payments of $479.5 million for all outstanding Series A and Series B Biohaven Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.

The remaining amounts are related to royalty receipts from Nurtec ODT.

(3) 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 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).

Onglyza, Kombiglyze, Galvus, Eucreas and Nesina.

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

Our royalty receipts substantially ended in the second quarter of 2022.

(4) Other products primarily include royalty receipts on the following products:

Bosulif (a product co-developed by our joint venture investee, Avillion I, for which receipts are presented as Distributions from equity method investees on the statements of cash flows), Cimzia, Entyvio, Gavreto, HIV franchise, IDHIFA, Letairis, Lexiscan, Mircera, Myozyme, Nesina, Soliqua, Tazverik and distributions from the Legacy SLP Interest.

Other products for 2021 include a one-time milestone payment of $45.0 million that we received on Soliqua.

Financial Overview

Financial Highlights

• Net cash provided by operating activities totaled $2.0 billion, $2.0 billion and $1.7 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

• Net cash provided by operating activities totaled $2.1 billion and $2.0 billion for 2022 and 2021, respectively.

Net cash provided by operating activities is the closest comparable GAAP financial measure to the supplemental non-GAAP liquidity measures that follow.

• Adjusted Cash Receipts (a non-GAAP metric) totaled $2.1 billion, $1.8 billion and $2.1 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

• Adjusted EBITDA (a non-GAAP metric) totaled $1.9 billion, $1.6 billion and $2.0 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

• Adjusted Cash Flow (a non-GAAP metric) totaled $1.8 billion, $1.5 billion and $1.6 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

• Adjusted Cash Receipts (a non-GAAP metric) totaled $2.8 billion and $2.1 billion for 2022 and 2021, respectively.

• Adjusted EBITDA (a non-GAAP metric) totaled $2.6 billion and $1.9 billion for 2022 and 2021, respectively.

• Adjusted Cash Flow (a non-GAAP metric) totaled $2.2 billion and $1.6 billion for 2022 and 2021, respectively.

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 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 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 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 report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us and which are attributable to:

The Legacy Investors Partnerships’ ownership of approximately 18% of Old RPI and Royalty Pharma Investments ICAV (“RPI ICAV”).

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

A de minimis interest in RPCT held by RPSFT.

The value of this non-controlling interest was substantially eliminated as of December 31, 2022.

The Legacy Investors Partnership together with RPSFT are referred as the “legacy non-controlling interests.” The legacy non-controlling interests are the only historical non-controlling interests that existed prior to our IPO.

Additionally, following the consummation of our IPO, we also report non-controlling interests related to:

The Continuing Investors Partnerships’ ownership in RP Holdings through their ownership of RP Holdings Class B Interests which was approximately 27% of RP Holdings as of December 31, 2022.

RP Holdings Class B Interests are exchangeable into Class A ordinary shares.

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

The Continuing Investors Partnerships are referred as the “continuing non-controlling interests.”

RPI EPA Holdings, LP’s (“EPA Holdings”) ownership of RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”).

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

The Equity Performance Awards will be payable in RP Holdings Class B Interests that will be exchanged upon issuance for Class A ordinary shares.

EPA Holdings may also receive a periodic cash advance in respect of the RP Holdings Class C Special Interest to the extent necessary for EPA Holdings or any of its beneficial owners to pay when due any income tax imposed on it or them as a result of holding such RP Holdings Class C Special Interest.

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.

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

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 that are not accounted for as R&D funding expense are classified as financial assets as our ownership rights are generally passive in nature.

Total income and other revenues is primarily comprised of income from our financial royalty assets, royalty income generally arising from successful commercialization of products developed through R&D funding arrangements, and a declining contribution of royalty revenue from our intangible royalty assets for which patent rights have materially expired.

Most of our royalties are classified as financial assets as our ownership rights are generally protective and 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.

Royalty revenue relates solely to revenue from our DPP-IV patent estate for which the patent rights have been licensed to various counterparties.

For the years ended December 31, 2021 and 2020, the royalty payors accounting for greater than 10% of our total income and other revenues in any one year are shown in the table below:

Royalty revenue solely relates to our intangible royalty assets from our DPP-IV products for which the patent rights are licensed to various counterparties.

For 2022 and 2021, the royalty payors accounting for greater than 10% of our total income and other revenues in any one year are shown in the table below:

Years Ended December 31,

Royalty Payor Product(s) 2021 2020

Royalty Payor Royalty 2022 2021

Vertex Cystic fibrosis franchise 36 % 33 %

AbbVie Imbruvica 14 % 17 %

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

Biogen Tysabri * 10 %

(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

4 unchanged sentences

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 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.

Variables affecting the recognition of interest income from financial royalty assets 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 sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (e.g., 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.

2 unchanged sentences

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

Our royalties on Januvia and Janumet expired in the first quarter of 2022.

Our royalties on other DPP-IV products have also substantially ended and we do not expect any material revenue from the other DPP-IV products in the future periods.

Other royalty income

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.

Other royalty income primarily includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones 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 asset was amortized in full.

Similarly, we may continue to collect royalties on a fully amortized financial royalty asset beyond the estimated duration.

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

Other royalty income also includes income from royalties that are recorded at fair value on our consolidated balance sheets.

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:

• the 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.

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.

• non-cash expense or income related to the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows;

• non-cash expense or income related to the provision for current expected credit losses, which reflects the activity for the period, primarily due to new financial royalty assets with limited protective rights and changes to cash flow estimates for financial royalty assets with limited protective rights.

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 cash flows from financial royalty assets .

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 in the income statement through the line item Provision for changes in expected 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 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 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, 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.

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

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.

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.

R&D funding expense consists of payments that we have made to counterparties to acquire royalties or milestones on product candidates.

It includes development-stage funding payments that are made upfront or upon pre-approval milestones, and development-stage funding payments that are made over time as the related product candidates undergo clinical trials with our counterparties.

General and administrative expenses

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

General and administrative (“G&A”) expenses include primarily Operating and Personnel Payments (defined below), 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

Under the Management Agreement, we pay a quarterly operating and personnel payment to the Manager or its affiliates (“Operating and Personnel Payments”) equal to 6.5% of the cash receipts from royalty investments for such quarter and 0.25% of the value of our security investments under GAAP as of the end of such 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 G&A expenses, are 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.

Equity in losses/(earnings) of equity method investees

Equity in losses/(earnings) of equity method investees primarily includes the results of our share of income or loss from the following non-consolidated affiliates:

Legacy SLP Interest

1 unchanged sentence

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 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

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

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 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.

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

Our investments in Avillion Financing I, LP (“Avillion I”) and BAv Financing II, LP (“Avillion II” and, together with Avillion I, the “Avillion Entities”) are accounted for using the equity method.

Other (income)/expenses, net

Other (income)/expenses, net primarily includes the changes in fair market value of our equity securities, derivative instruments and available for sale debt securities, including related forwards and funding commitments, and interest income.

Net income attributable to non-controlling interests

The net income attributable to non-controlling interests includes income attributable to the legacy non-controlling interests and the continuing non-controlling interests.

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

Net income attributable to the continuing non-controlling interests includes RP Holdings Class B Interests held by the Continuing Investors Partnerships and will include net income attributable to the RP Holdings Class C Special Interest held by EPA Holdings once certain performance conditions have been met.

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

Net income attributable to non-controlling interests above can fluctuate significantly from period to period, primarily driven by volatility in the income statement activity of the respective underlying entity as a result of the non-cash charges associated with applying the effective interest accounting methodology to our financial royalty assets as described in section titled “Understanding Our Financial Reporting.”

Results of Operations

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.

In this section, we discuss the results of our operations for 2022 compared to 2021.

For a discussion of 2021 compared to 2020, 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, 2021.

The comparison of our historical results of operations for 2022 and 2021 are as follows (in thousands):

Years Ended December 31, Change

2022 2021 $ %

9 unchanged sentences

General and administrative expenses 227,303 182,826 44,477 24.3 %

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

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

Financial royalty asset impairment 615,827 — 615,827 n/a

Total operating expenses, net 1,930,150 858,748 1,071,402 124.8 %

Operating income 307,065 1,430,715 (1,123,650) (78.5) %

Other expense/(income)

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

Equity in losses of equity method investees 8,973 19,490 (10,517) (54.0) %

Interest expense 187,961 166,142 21,819 13.1 %

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) %

Other (income)/expenses, net (119,933) 3,882 (123,815) *

Total other expenses, net 77,001 189,514 (112,513) (59.4) %

Consolidated net income 230,064 1,241,201 (1,011,137) (81.5) %

Net income attributable to non-controlling interest 621,473 726,914 (105,441) (14.5) %

Net income attributable to controlling interest $ 619,728 $ 975,040 $ (355,312) (36.4) %

Total income and revenues

Net income attributable to non-controlling interests 187,232 621,473 (434,241) (69.9) %

Net income attributable to Royalty Pharma plc $ 42,832 $ 619,728 $ (576,896) (93.1) %

*Percentage change is not meaningful.

Total income and other revenues

Income from financial royalty assets

Income from financial royalty assets by product for our top products for the years ended December 31, 2021 and 2020 is as follows, in order of contribution to income for the year ended December 31, 2021.

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

Income from financial royalty assets by top products for 2022 and 2021 is as follows, in order of contribution to income in 2022 (in thousands):

Years Ended December 31, Change

2022 2021 $ %

2 unchanged sentences

Tysabri 207,164 211,422 (4,258) (2.0) %

Tremfya 109,796 16,706 93,090 557.2 %

Xtandi 95,803 107,833 (12,030) (11.2) %

Promacta 88,395 73,372 15,023 20.5 %

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

Other 504,062 507,515 (3,453) (0.7) %

Total income from financial royalty assets $ 2,125,096 $ 2,065,083 $ 60,013 2.9 %

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.

Income from financial royalty assets increased by $60.0 million, or 2.9%, in 2022 compared to 2021, primarily driven by income from recently acquired assets, including Tremfya and Trelegy, in addition to the strong performance of the cystic fibrosis franchise primarily driven by the strong uptake of Kaftrio in countries outside the United States and the performance of Trikafta in the United States, including its uptake in children 6 through 11 years old.

The increase in income was partially offset by the maturing of our royalties from the HIV franchise and declines in sell-side equity research analysts’ consensus sales forecasts for Imbruvica and Tazverik.

Revenue from intangible royalty assets

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.

Revenue from intangible royalty assets decreased by $133.8 million, or 78.1%, in 2022 compared to 2021, primarily driven by the maturity of our royalties on Januvia and Janumet in the first quarter of 2022 and the recognition of underpaid prior period royalties on Tradjenta in 2021.

Other royalty income

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.

Other royalty inco me increased by $21.5 million, or 40.5%, in 2022 compared to 2021, primarily related to growth in the ongoing product launches of Trodelvy and Nurtec ODT that arose from our R&D funding agreements with Immunomedics and Biohaven, respectively.

Provision for changes in expected cash flows from financial royalty assets

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 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)

Provision activity is a combination of income and expense items.

The provision breakdown by royalty asset (exclusive of the provision for current expected credit losses) based on the largest contributors to each year’s provision income or expense (in thousands) is as follows:

Royalty 2022 Royalty 2021

Imbruvica $ 423,832 Tazverik $ 210,567

Tysabri 195,665 Imbruvica 189,999

Tazverik 177,850 Emgality 68,716

Xtandi 63,524 Cystic fibrosis franchise 48,636

Evrysdi 46,077 Tysabri (96,103)

Other 191,094 Other 43,940

1 unchanged sentence

Provision for current expected credit losses (193,798) Provision for current expected credit losses (12,913)

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.

Total provision $ 904,244 Total provision $ 452,842

In 2022, we recorded provision expense of $904.2 million, comprised of $1,098.0 million and $193.8 million in provision expense for changes in expected cash flows and provision income for current expected credit losses, respectively.

We recorded provision expense for changes in expected cash flows for Imbruvica, Tysabri and Tazverik primarily due to significant declines in sell-side equity research analysts’ consensus sales forecasts.

The provision income for credit losses was primarily driven by a significant decrease in current expected credit losses related to Tazverik as a result of the decline in the financial asset value and changes in payors for certain products with stronger credit profiles, which was partially offset by the addition of Trelegy to our portfolio of financial royalty assets with limited protective rights.

In 2021, we recorded 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 equity 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.

The current expected credit loss activity in 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 that we made to Biohaven upon the start of the oral zavegepant Phase 3 program and a new royalty interest in Cabometyx/Cometriq.

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

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.

R&D funding expense decreased by $23.0 million, or 11.5%, in 2022 compared to 2021.

In 2022, we recognized upfront R&D funding expense of $175.0 million in exchange for royalties and milestones on development-stage products from Cytokinetics, Incorporated (“Cytokinetics”), Theravance Biopharma, Inc (“Theravance”) and MSD International Business GmbH (“Merck”).

In 2021, we recognized upfront R&D funding expense of $193.2 million in exchange for royalties on development-stage products from BioCryst Pharmaceuticals, Inc.

(“BioCryst”) and MorphoSys AG (“MorphoSys”).

G&A expenses increased by $44.5 million, or 24.3%, in 2022 compared to 2021, primarily driven by higher Operating and Personnel Payments due to increased cash receipts from royalty investments.

Financial royalty asset impairment

Financial royalty asset impairment was $615.8 million in 2022 due to the recognition of non-cash impairment charges of $273.6 million, $160.1 million and $182.1 million related to gantenerumab, otilimab and Gavreto, respectively.

In November 2022, Roche stated that it would discontinue clinical trials of gantenerumab.

In October 2022, GSK announced that it has decided not to progress with regulatory submissions for otilimab.

These announcements contributed to our conclusion to impair these two assets.

Additionally, during the fourth quarter of 2022, we impaired our financial royalty asset related to Gavreto due to the uncertainty of Gaverto’s commercial outlook.

There was no comparable activity in 2021.

Equity in losses of equity method investees

Equity in losses of equity method investees decreased by $10.5 million, or 54.0%, in 2022 compared to 2021, primarily driven by lower equity in losses from the Avillion Entities.

Interest expense

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;

Interest expense increased by $21.8 million, or 13.1%, in 2022 compared to 2021, primarily driven by the issuance of $1.3 billion senior unsecured notes in July 2021 (“2021 Notes”).

The weighted average coupon rate was 2.24% and 2.18% in 2022 and 2021, respectively.

Refer to the “Liquidity and Capital Resources” section for additional discussion of the Notes.

Other (income)/expenses, net

Other income, net of $119.9 million in 2022 was primarily comprised of $96.6 million of gains on derivative financial instruments related to our Milestone Acceleration Option that increased in value with the announcement and subsequent completion of Pfizer’s acquisition of Biohaven in October 2022.

In addition, we recorded $78.3 million of interest income, primarily related to the full accelerated redemption of our Series A Biohaven Preferred Shares following Pfizer’s acquisition of Biohaven.

The other income was partially offset by net losses on equity securities of $33.4 million.

Other expense, net of $3.9 million in 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

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.

Net income attributable to non-controlling interests

Net income attributable to the Legacy Investors Partnerships decreased by $113.7 million in 2022 compared to 2021, primarily driven by lower net income attributable to Old RPI and RPI ICAV as a result of increased provision expense recognized in 2022.

Net income attributable to the Continuing Investors Partnerships decreased by $273.5 million in 2022 compared to 2021, primarily driven by lower net income attributable to RP Holdings in 2022 as a result of increased provision expense and impairment charges recorded in 2022.

Exchanges by investors in the Continuing Investors Partnerships who indirectly own RP Holdings Class B Interests for our Class A ordinary shares resulted in a decline in the Continuing Investors Partnerships’ ownership of RP Holdings.

Net income attributable to RPSFT decreased by $47.0 million in 2022 compared to 2021.

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

Key Developments and Upcoming Events Relating to Our Portfolio

2 unchanged sentences

• Cystic fibrosis franchise.

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 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 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 June 2021, Vertex announced that the 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 November 2022, Vertex announced the submission of a New Drug Application (“NDA”) with the FDA for Trikafta in patients ages 2 through 5 years.

Regulatory filings were also submitted with the European Medicines Agency (“EMA”) and the Medicines and Healthcare products Regulatory Agency.

Vertex has indicated it expects an FDA decision on its Trikafta NDA patients ages 2 through 5 years in the second quarter of 2023, with a PDUFA target action date of April 28, 2023.

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.

Biogen also announced that it had received a complete response letter from the FDA for its supplemental biologics license application for subcutaneous Tysabri.

The complete response letter indicated that the FDA was unable to approve Biogen’s filing as submitted.

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 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.

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.

In June 2021, Johnson & Johnson announced Phase 3 GLOW study results for fixed-duration Imbruvica in combination with Venetoclax demonstrated superior progression-free survival versus chlorambucil plus obinutuzumab as a first-line treatment of chronic lymphocytic leukemia.

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.

3 unchanged sentences

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.

In June 2022, Johnson & Johnson announced primary results from the Phase 3 SHINE study, which demonstrated that the combination of once-daily oral Imbruvica plus bendamustine-rituximab (BR) and rituximab maintenance significantly reduced the risk of disease progression or death by 25% compared to patients who received placebo plus BR and rituximab maintenance in patients aged 65 years or older with newly diagnosed mantle cell lymphoma.

In August 2022, AbbVie and Johnson & Johnson announced that the FDA approved Imbruvica for the treatment of pediatric patients one year and older with chronic graft-versus-host disease.

In August 2022, Johnson & Johnson announced that the EC granted marketing authorization for the expanded use of Imbruvica in an all-oral, fixed-duration treatment combination with venetoclax for adults with previously untreated chronic lymphocytic leukemia.

The approval is based on the pivotal Phase 3 GLOW study and the fixed-duration cohort of the Phase 2 CAPTIVATE study.

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.

In September 2021, Astellas and Pfizer announced that Xtandi plus androgen deprivation therapy reduced the risk of death by 34% compared to placebo plus androgen deprivation therapy 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.

In October 2022, Pfizer announced positive top-line results from the Phase 3 TALAPRO-2 study of Talzenna, an oral poly ADP-ribose polymerase inhibitor, in combination with Xtandi compared to placebo plus Xtandi in men with metastatic castration-resistant prostate cancer.

The study met its primary endpoint with a statistically significant and clinically meaningful improvement in radiographic progression-free survival.

The safety of Talzenna plus Xtandi was generally consistent with the known safety profile of each medicine.

Pfizer intends to share data with global regulatory authorities to potentially support a regulatory filing.

In February 2023, Astellas indicated that there could be a potential readout of the Phase 3 EMBARK trial for high-risk non-metastatic prostate cancer in the first quarter of 2023.

• 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 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.

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 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.

In April 2022, Pfizer and Biohaven announced that the EC has granted marketing authorization for Vydura (rimegepant) for both the acute treatment of migraine with or without aura, and prophylaxis of episodic migraine in adults who have at least four migraine attacks per month.

In October 2022, Pfizer acquired all outstanding shares of Biohaven not already owned by Pfizer for $148.50 per share in cash for a total of approximately $11.6 billion.

Pfizer also made payments at closing to settle Biohaven’s third-party debt and to redeem Biohaven’s outstanding redeemable preferred shares.

In April 2021, Gilead announced the FDA granted full approval to Trodelvy for adult patients with unresectable locally advanced or metastatic triple-negative breast cancer (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.

8 unchanged sentences

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.

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

As part of the collaboration, Merck & Co.

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, Gilead and Merck & Co.

established an agreement where Gilead will sponsor a Phase 2 signal-seeking study evaluating combinations that include pembrolizumab in first-line NSCLC.

In June 2022, Gilead announced results from the primary analysis of the Phase 3 TROPiCS-02 study of Trodelvy versus physicians’ choice of chemotherapy in heavily pre-treated HR+/HER2- metastatic breast cancer patients who received prior endocrine therapy, CDK4/6 inhibitors and two to four lines of chemotherapy.

The study met its primary endpoint of progression-free survival with a statistically significant and clinically meaningful 34% reduction in the risk of disease progression or death.

The first interim analysis of the key secondary endpoint of overall survival demonstrated a trend in improvement.

Patients will be followed for a subsequent overall survival analysis.

The safety profile for Trodelvy was consistent with prior studies.

In September 2022, Gilead announced positive overall survival results from the Phase 3 TROPiCS-02 study evaluating Trodelvy versus comparator physicians’ choice of chemotherapy in patients with HR+/HER2- metastatic breast cancer who received endocrine-based therapies and at least two chemotherapies.

In the study, Trodelvy demonstrated a statistically significant and clinically meaningful improvement of 3.2 months in overall survival compared to chemotherapy.

The TROPiCS-02 study met its primary endpoint of progression-free survival earlier this year, and demonstrated improved median progression-free survival in both HER2-low and IHC0 groups.

In February 2023, Gilead announced the U.S.

FDA approved Trodelvy for the treatment of adult patients with unresectable locally advanced or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.

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.

1 unchanged sentence

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 detailed results from the expanded Cohort 6 of the Phase 1b COSMIC-021 trial of Cabometyx in combination with atezolizumab in patients with metastatic castration-resistant prostate cancer, which included patients with metastatic castration-resistant prostate cancer who had been previously treated with novel hormone therapies enzalutamide or abiraterone acetate used along with prednisone.

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

Exelixis believes that 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 March 2022, Exelixis announced results from the final analysis of the second primary endpoint of overall survival from the Phase 3 COSMIC-312 trial, which evaluated cabozantinib in combination with atezolizumab versus sorafenib in patients with previously untreated advanced hepatocellular carcinoma.

The final analysis showed neither improvement nor detriment in overall survival for cabozantinib in combination with atezolizumab versus sorafenib.

In May 2022, Ipsen announced that it received approval from the EC for Cabometyx as a monotherapy for the treatment of adult patients with locally advanced or metastatic differentiated thyroid carcinoma, refractory or not eligible to radioactive iodine who have progressed during or after prior systemic therapy.

In September 2022, Exelixis announced detailed results from COSMIC-313, an ongoing Phase 3 trial evaluating Cabometyx, nivolumab and ipilimumab versus the combination of nivolumab and ipilimumab in patients with previously untreated advanced intermediate- or poor-risk RCC, which met its primary endpoint, demonstrating significant improvement in progression-free survival at the primary analysis.

At a prespecified interim analysis for the secondary endpoint of overall survival, the combination of Cabometyx, nivolumab and ipilimumab did not demonstrate a significant benefit.

Following discussions with FDA, Exelixis does not intend to submit a supplemental NDA based on currently available data, but will plan to discuss a potential regulatory submission with FDA when results of the next overall survival analysis are available.

In December 2022, Exelixis announced that the Phase 3 CONTACT-01 study of Cabometyx in combination with atezolizumab versus docetaxel in patients with metastatic non-small cell lung cancer without actionable mutations who experienced disease progression on or after treatment with an immune checkpoint inhibitor and platinum-containing chemotherapy, did not meet its primary endpoint of overall survival at the final analysis.

Detailed findings from CONTACT-01 are expected to be submitted for presentation at a future medical meeting.

Exelixis has indicated it expects Phase 3 data in the first half of 2023 from CONTACT-03 in advanced or metastatic RCC and in the second half of 2023 from CONTACT-02 in metastatic castration-resistant prostate cancer.

Additionally, the next overall survival analysis from COSMIC-313, the Phase 3 trial in advanced intermediate- or poor-risk RCC, is expected in 2023.

In March 2021, Roche announced that the EC approved Evrysdi for the treatment of spinal muscular atrophy (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.

In May 2022, Roche announced that the FDA has approved a label extension for Evrysdi to include infants under two months old with SMA.

The approval is based on the interim efficacy and safety data from the RAINBOWFISH study in newborns, which showed that the majority of pre-symptomatic infants treated with Evrysdi achieved key milestones such as sitting and standing with half walking after 12 months of treatment.

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

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

3 unchanged sentences

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.

In March 2022, the FDA accepted Alnylam’s supplemental NDA for lumasiran for the reduction of plasma oxalate in the treatment of patients with advanced primary hyperoxaluria type 1.

The FDA has set an action date for October 6, 2022.

Additionally, a Type II Variation for lumasiran to amend the label in patients with advanced primary hyperoxaluria Type 1 was submitted and validated by the EMA in December 2021.

In October 2022, Alnylam announced that the FDA approved a label expansion for Oxlumo, now indicated for the treatment of primary hyperoxaluria type 1 to lower urinary oxalate and plasma oxalate levels in pediatric and adult patients.

The approval is based on positive efficacy and safety results of the ILLUMINATE-C Phase 3 study of Oxlumo in patients with severe renal impairment, including those on hemodialysis.

In February 2022, Johnson & Johnson announced results from the Phase 2a VEGA proof-of-concept study.

Results showed that the combination of Tremfya and golimumab, a tumor necrosis factor-alpha antagonist, induced higher rates of clinical response, clinical remission, endoscopic improvement and a composite histologic-endoscopic endpoint at 12 weeks than either treatment alone in adults with moderately to severely active ulcerative colitis.

Rates of adverse events were comparable among treatment groups.

In February 2022, Johnson & Johnson announced results from the Phase 2b QUASAR Induction Study 1 in ulcerative colitis.

Results showed that a significantly greater proportion of adults with moderately to severely active ulcerative colitis who previously had an inadequate response or intolerance to conventional therapies or selected advanced therapies and were treated with Tremfya achieved clinical response at week 12 (Tremfya 200 mg:

61.4% and Tremfya 400 mg:

60.7%), the study’s primary endpoint compared with placebo (27.6%).

Safety data at week 12 was consistent with the safety profile for Tremfya in approved indications.

In October 2022, Johnson & Johnson announced new results from the Phase 2b QUASAR Induction Study 1.

Results showed that continued treatment with Tremfya in adults with moderately to severely active ulcerative colitis with inadequate responses to previous treatments allowed a mean of 52.1% of IV Tremfya week 12 clinical nonresponders to achieve clinical response at week 24.

Clinical response at weeks 12 or 24 of the study was ultimately achieved by 80.2% of patients who were randomized to IV Tremfya 200mg and by 78.5% of patients who were randomized to IV Tremfya 400mg.

In August 2022, Ipsen completed its acquisition of Epizyme.

Ipsen acquired all the outstanding shares of Epizyme at a price of $1.45 per share plus a contingent value right of $1 per share.

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

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

In MANDALA, Airsupra 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, Airsupra 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 Airsupra in both trials was consistent with the known profiles of the components.

In May 2022, Avillion LLP, a drug development company focused on the co-development and financing of pharmaceutical candidates from proof-of-concept through to regulatory approval, announced that FDA accepted for filing the NDA for AstraZeneca’s Airsupra.

The proposed indication is for the as-needed treatment or prevention of bronchoconstriction and for the prevention of exacerbation of asthma.

The co-development partnership between AstraZeneca and Avillion also recently expanded to include the BATURA study, a randomized Phase 3b decentralized trial to further assess the role of Airsupra in preventing asthma exacerbations.

In November 2022, the FDA Pulmonary-Allergy Drugs Advisory Committee voted 16 to 1 that the data support a favorable benefit risk assessment for the use of Airsupra for the treatment of asthma in people aged 18 years or older.

In January 2023, AstraZeneca announced the U.S.

approval of Airsupra for the as-needed treatment or prevention of bronchoconstriction and to reduce the risk of exacerbations in people with asthma aged 18 years and older.

Development-Stage Product Candidates

In December 2021, Cytokinetics announced the FDA granted breakthrough therapy designation for aficamten for the treatment of symptomatic obstructive hypertrophic cardiomyopathy (“oHCM”) based on results from REDWOOD-HCM.

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.

Results from Cohort 3 showed that substantial reductions in the average resting left ventricular outflow tract pressure gradient (“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 greater than 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.

In January 2023, BioCryst announced that initial data from ongoing Phase 1 single ascending dose and multiple ascending dose trials in healthy volunteers showed rapid and sustained suppression of the alternative pathway of the complement system.

BCX10013 was safe and generally well-tolerated at all doses studied to date.

BioCryst plans to advance BCX10013 into patient studies in mid-2023, including in patients with paroxysmal nocturnal hemoglobinuria, to evaluate once-daily dosing.

BioCryst expects to confirm the optimal dosing for pivotal trials by the end of the year, move directly into a pivotal trial in patients with immunoglobulin A nephropathy, and rapidly expand into pivotal trials in additional indications.

In December 2022, BioCryst announced that it would discontinue the development of BCX9930 based on new competitive data recently presented at the American Society of Hematology annual meeting.

BioCryst will fully focus its complement inhibitor development efforts on BCX10013, a potential once-daily, oral Factor D inhibitor currently in clinical development.

• 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.

In November 2022, Roche stated that it would discontinue clinical trials of gantenerumab after the GRADUATE I and II studies evaluating gantenerumab in people with early Alzheimer’s disease did not meet their primary endpoint of slowing clinical decline.

Roche continues to study trontinemab, its brain shuttle version of gantenerumab, in a Phase 2a study.

• Omecamtiv mecarbil.

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 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.

In February 2022, Cytokinetics announced that the FDA has accepted and filed its NDA for omecamtiv mecarbil.

The FDA assigned the NDA a standard review with a PDUFA 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.

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 (HFrEF) who were receiving standard of care plus omecamtiv mecarbil.

In February 2022, Cytokinetics announced results from METEORIC-HF, a Phase 3 trial evaluating the effect of treatment with omecamtiv mecarbil compared to placebo on exercise capacity in patients with HFrEF.

After 20 weeks of treatment, there was no change in peak oxygen uptake in patients treated with omecamtiv mecarbil versus placebo.

In December 2022, the U.S.

FDA Cardiovascular and Renal Drugs Advisory Committee voted 8 to 3 that the benefits of omecamtiv mecarbil do not outweigh its risks for the treatment of HFrEF.

The NDA for omecamtiv mecarbil is currently under review by the FDA, with a PDUFA target action date of February 28, 2023.

In October 2022, GSK announced that two of the three Phase trials met their primary endpoints, but the limited efficacy demonstrated in the ContRAst Phase 3 program did not support a suitable benefit/risk profile for otilimab as a potential treatment for rheumatoid arthritis.

As a result, GSK decided not to progress with regulatory submissions.

• 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.

In December 2021, MorphoSys presented 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 inhibitor-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 from baseline at week 24 and 60% (n=47) maintained a greater than or equal to 35% reduction in spleen volume 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.

MorphoSys has indicated it expects topline data from the Phase 3 MANIFEST-2 study of pelabresib in myelofibrosis in early 2024.

• Tulmimetostat:

In October 2022, MorphoSys announced preliminary Phase 1/2 results of tulmimetostat, formerly known as CPI-0209, an oral, investigational next-generation selective dual inhibitor of EZH2 and EZH1, in heavily pretreated patients with advanced cancers.

Results showed responses or disease stabilization in five cohorts with evaluable patients.

The safety profile of tulmimetostat was consistent with the mechanism of action of EZH2 inhibition.

• 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.

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

In October 2022, Pfizer acquired Biohaven.

Pfizer expects data from the trial in the third quarter of 2023.

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.

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

In May 2022, Biohaven announced that the FDA accepted for review a NDA for zavegepant nasal spray for the acute treatment of migraine in adults.

The PDUFA date is in the first quarter of 2023.

Non-GAAP Financial Results

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

There is no direct correlation between income from financial royalty assets and royalty receipts due to the nature of the accounting methodology applied for financial royalty assets.

Further, income from financial royalty assets and the provision for changes in expected cash flows related to these financial royalty assets can be volatile and unpredictable.

As a result, management places importance on royalty receipts as they are predictable and we use them as a measure of our operating performance.

Refer to section titled “ Non-GAAP Reconciliations ” for additional discussion of management’s use of non-GAAP measures as supplemental financial measures and reconciliations from the most directly GAAP comparable measures of Net cash provided by operating activities .

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, 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 a measure calculated with inputs directly from the statements of cash flows and includes (1) total royalty receipts:

(i) Cash collections from royalty assets (financial assets and intangible assets), (ii) Other royalty cash collections , (iii) Distributions from equity method investees, plus (2) Proceeds from available for sale debt securities ;

less (1) Distributions to legacy non-controlling interests - royalty receipts , which represent contractual distributions of royalty receipts and proceeds from available for sale debt securities to the Legacy Investors Partnerships and RPSFT.

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

Adjusted EBITDA and Adjusted Cash Flow are similar non-GAAP liquidity measures that are both most closely comparable to the GAAP measure, Net cash provided by operating activities .

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.

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

Payments for operating and professional costs are comprised of Payments for operating and professional costs and Payments for rebates from the statements of cash flows.

Adjusted Cash Flow is defined as Adjusted EBITDA less (1) Development-stage funding payments - ongoing , (2) Development-stage funding payments - upfront and milestone , (3) Interest paid , net of Interest received, (4) Investments in equity method investees and (5) Other (including Derivative collateral posted, net of Derivative collateral received , and Termination payments on derivative instruments ) plus (1) Contributions from legacy non-controlling interests - R&D , all directly reconcilable to the statements 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.

Both measures are an indication of the strength of the Company and the performance of the business.

Management also uses Adjusted Cash Flow to compare its performance against non-GAAP adjusted net income used by companies in the biopharmaceutical industry.

Management also uses Adjusted Cash Flow to compare its performance against non-GAAP measures used by companies in the biopharmaceutical industry.

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

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.

2021 2020 $ %

For a discussion of our cash flow results on a GAAP basis for 2022 and 2021, refer to “Liquidity and Capital Resources.” The following is a discussion of our results on a non-GAAP basis for 2022 and 2021.

For a discussion comparing our results on a non-GAAP basis for 2021 and 2020, 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, 2021.

The table below includes the royalty receipts and non-GAAP financial results for 2022 and 2021 by product in order of contribution to royalty receipts for 2022 (in thousands).

Years Ended December 31, Change

Royalties 2022 2021 $ %

Cystic fibrosis franchise (1) $ 811,052 $ 702,140 $ 108,912 15.5 %

Nurtec ODT/Biohaven payment (2) 559,623 70,188 489,435 *

Tysabri 369,793 369,149 644 0.2 %

Imbruvica 312,690 352,911 (40,221) (11.4) %

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

Xtandi 186,701 158,103 28,598 18.1 %

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

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 %

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

Promacta 181,632 173,621 8,011 4.6 %

Tremfya 97,307 35,718 61,589 172.4 %

Trelegy 89,915 — 89,915 n/a

Januvia, Janumet, Other DPP-IVs (3) 72,943 151,158 (78,215) (51.7) %

Cabometyx/Cometriq 55,426 33,722 21,704 64.4 %

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

Farxiga/Onglyza 43,840 36,378 7,462 20.5 %

Evrysdi 40,645 16,098 24,547 152.5 %

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

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

Prevymis 37,126 37,505 (379) (1.0) %

Trodelvy 24,809 13,395 11,414 85.2 %

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

Orladeyo 21,801 6,740 15,061 223.5 %

Tazverik 2,794 522 2,272 *

Erleada 21,378 14,227 7,151 50.3 %

Crysvita 20,402 16,741 3,661 21.9 %

Emgality 18,832 15,481 3,351 21.6 %

Oxlumo 2,602 1,248 1,354 108.5 %

1 unchanged sentence

Total royalty receipts $ 3,231,256 $ 2,608,542 $ 622,714 23.9 %

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

Distributions to legacy non-controlling interests - royalty receipts (441,963) (479,604) 37,641 (7.8) %

Adjusted Cash Receipts (non-GAAP) $ 2,789,293 $ 2,128,938 $ 660,355 31.0 %

1 unchanged sentence

Adjusted EBITDA (non-GAAP) $ 2,566,324 $ 1,944,427 $ 621,897 32.0 %

Development-stage funding payments - ongoing (2,106) (6,876) 4,770 (69.4) %

Development-stage funding payments - upfront and milestone (175,000) (193,208) 18,208 (9.4) %

Interest paid, net (145,157) (127,295) (17,862) 14.0 %

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) %

Investments in equity method investees (9,896) (34,855) 24,959 (71.6) %

Contributions from legacy non-controlling interests - R&D 1,059 7,339 (6,280) (85.6) %

Other — (16,093) 16,093 (100.0) %

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

Adjusted Cash Flow (non-GAAP) $ 2,235,224 $ 1,573,439 $ 661,785 42.1 %

3 unchanged sentences

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

The remaining amounts are related to royalty receipts from Nurtec ODT.

(3) 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:

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.

Onglyza, Kombiglyze, Galvus, Eucreas and Nesina.

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

Our royalty receipts substantially ended in the second quarter of 2022.

(4) Other products primarily include royalty receipts on the following products:

Other products for 2021 include a one-time milestone payment of $45.0 million that we received on Soliqua.

Adjusted Cash Receipts (non-GAAP)

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.

Adjusted Cash Receipts increased by $660.4 million to $2.8 billion in 2022 compared to 2021, primarily driven by the accelerated redemption of all outstanding Series A and Series B Biohaven Preferred Shares received following Pfizer’s acquisition of Biohaven in October 2022.

We also saw an increase in royalty receipts from the cystic fibrosis franchise and new assets acquired in 2022, primarily Trelegy.

The increase was partially offset by a decline in royalty receipts from maturing royalties, such as the HIV franchise and Januvia, Janumet and other DPP-IVs, as well as unfavorable foreign exchange movements.

The increase in Adjusted Cash Receipts was further driven by a decrease in distributions of royalty receipts to legacy non-controlling interests due to maturing royalties jointly owned by the Legacy Investors Partnerships and RPSFT.

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 $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.

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

• Nurtec ODT/Biohaven payment – Royalty receipts from Nurtec ODT, which is marketed by Pfizer for the acute treatment of migraine, were $17.6 million and the redemption payments on Biohaven Series A and Series B Preferred Shares were $542.0 million in 2022.

The increase of $9.9 million in royalty receipts from Nurtec ODT compared to 2021 was driven by strong volume growth.

The increase of $479.5 million in redemption payments compared to 2021 was driven by the accelerated redemption payments for all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.

• Tysabri – Royalty receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, were relatively consistent in 2022 compared to 2021.

• 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, decreased by $40.2 million in 2022 compared to 2021.

The decrease was largely due to increased competition in the chronic lymphocytic leukemia market and a decrease in new patient starts in the United States relative to pre-COVID levels.

• Xtandi – Royalty receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, increased by $28.6 million in 2022 compared to 2021, primarily driven by demand across various prostate cancer indications and a true-up of royalties from prior periods.

• Promacta – Royalty receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia (ITP) and aplastic anemia, increased by $8.0 million in 2022 compared to 2021.

This growth was largely driven by increased use in chronic ITP and further uptake as first-line treatment for severe aplastic anemia in the United States.

• Tremfya – Royalty receipts from Tremfya, which is marketed by Johnson & Johnson for the treatment of plaque psoriasis and active psoriatic arthritis, increased by $61.6 million in 2022 compared to 2021.

The increase was largely driven by market growth and continued market share gains.

We acquired the Tremfya royalty in July 2021 and we began to record royalty receipts in the third quarter of 2021.

• Trelegy – Royalty receipts from Trelegy, which is marketed by GSK for the maintenance treatment of chronic obstructive pulmonary disease and asthma, were $89.9 million in 2022, primarily due to strong patient demand across all regions and growth of the single inhaler triple therapy market.

We acquired the Trelegy royalty in July 2022 and we began to record royalty receipts in the third quarter of 2022.

• Januvia, Janumet, Other DPP-IVs – Royalty receipts from the DPP-IVs for type 2 diabetes, which include Januvia and Janumet, both marketed by Merck & Co., decreased by $78.2 million in 2022 compared to 2021.

Royalty receipts from Januvia, Janumet and other DPP-IVs substantially ended in the second quarter of 2022.

• Cabometyx/Cometriq – Royalty receipts from Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and Takeda, increased by $21.7 million in 2022 compared to 2021.

The increase was primarily due to the uptake of Cabometyx in combination with Opdivo as a first-line treatment for patients with advanced renal cell carcinoma, including longer duration of therapy.

We acquired the Cabometyx/Cometriq royalty in March 2021 and we began to record royalty receipts in the second quarter of 2021.

Distributions to legacy non-controlling interests - royalty receipts

Distributions of royalty receipts to legacy non-controlling interests decreased by $37.6 million to $442.0 million in 2022 compared to 2021, which positively impacted Adjusted Cash Receipts.

The decrease in distributions of royalty receipts to legacy non-controlling interests is primarily due to maturing royalties jointly owned by the Legacy Investors Partnerships and RPSFT.

Partially offsetting these decreases was a distribution to legacy non-controlling interests related to the accelerated redemption of all outstanding Biohaven Series A Preferred Shares that we received following Pfizer’s acquisition of Biohaven in October 2022.

Adjusted EBITDA (non-GAAP)

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 EBITDA increased by $621.9 million to $2.6 billion in 2022 compared to 2021 as a result of the factors noted above in “Adjusted Cash Receipts (non-GAAP).” The increase was partially offset by payments for operating and professional costs, the only adjustment between Adjusted Cash Receipts and Adjusted EBITDA, which increased in 2022 as our Operating and Personnel Payments are a fixed percentage of 6.5% of cash receipts from our royalties.

Adjusted Cash Flow (non-GAAP)

Years ended December 31, 2021 and 2020

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.

Adjusted Cash Flow increased by $661.8 million to $2.2 billion in 2022 compared to 2021 primarily for the same reasons noted above in “Adjusted Cash Receipts (non-GAAP)” and “Adjusted EBITDA (non-GAAP).”

Non-GAAP Reconciliations

7 unchanged sentences

Management strongly believes that our significant operating cash flow is one of the attributes that attracts potential investors to our business.

In addition, we believe that Adjusted Cash Receipts and Adjusted Cash Flow help identify underlying trends in the business and permit investors to more fully understand how management assesses the performance of the Company, including planning and forecasting for future periods.

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

Both measures are an indication of the strength of the Company and the performance of the business.

In addition, we believe that Adjusted Cash Receipts and Adjusted Cash Flow help identify underlying trends in the business and permit investors to more fully understand how management assesses our performance, including planning and forecasting for future periods.

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

Both measures are an indication of our strength and the performance of the business.

Management uses Adjusted Cash Receipts and Adjusted Cash Flow when considering available cash, including for decision-making purposes related to funding of acquisitions, voluntary debt repayments, dividends and other discretionary investments.

Further, these non-GAAP financial measures help management, the audit committee and investors evaluate our ability to generate liquidity from operating activities.

Management believes that Adjusted EBITDA is an important non-GAAP measure in analyzing our liquidity and is a key component of certain material covenants contained within the Company’s credit agreement.

Noncompliance with the interest coverage ratio and leverage ratio covenants under the credit agreement could result in our lenders requiring the Company to immediately repay all amounts borrowed.

If we cannot satisfy these financial covenants, we would be prohibited under our credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.

Management believes that Adjusted EBITDA is an important non-GAAP measure in analyzing our liquidity and is a key component of certain material covenants contained within our Credit Agreement (defined below).

Noncompliance with the interest coverage ratio and leverage ratio covenants under the Credit Agreement (defined below) could result in our lenders requiring us to immediately repay all amounts borrowed.

If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement (defined below) from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.

Consequently, Adjusted EBITDA is critical to the assessment of our liquidity.

Management uses Adjusted Cash Flow to evaluate its ability to generate cash and performance of the business and to evaluate the Company’s performance as compared to its peer group.

Management also uses Adjusted Cash Flow to compare its performance against non-GAAP adjusted net income measures used by many companies in the biopharmaceutical industry, even though each company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s.

Management uses Adjusted Cash Flow to evaluate its ability to generate cash from operations, the performance of the business and our performance as compared to its peer group.

Management also uses Adjusted Cash Flow to compare its performance against non-GAAP measures used by many companies in the biopharmaceutical industry, even though each company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s.

We believe that non-GAAP financial measures, including Adjusted Cash Flow, are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry.

1 unchanged sentence

We have provided a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, in each case being Net cash provided by operating activities below.

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 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 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 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 .

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 statements of cash flows:

to add back (1) Proceeds from available for sale debt securities (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 equity method investees which are classified as 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 legacy non-controlling interests - royalty receipts , which represents distributions to the Legacy Investors Partnerships and RPSFT 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 statements of cash flows:

to add back (1) Proceeds from available for sale debt securities (redemption of Biohaven Preferred Shares), (2) Distributions from equity method investees which are classified as 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 legacy non-controlling interests - royalty receipts 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 statements of cash flows:

to add back (1) Proceeds from available for sale debt securities (redemption of Biohaven Preferred Shares), (2) Distributions from equity method investees classified as cash inflows from investing activities, and (3) Contributions from legacy non-controlling interests - R&D , and to deduct (1) Distributions to legacy non-controlling interests - royalty receipts and (2) Investments in equity method investees .

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,

Cash flow data (GAAP basis)

Net cash provided by (used in):

Operating activities $ 2,143,980 $ 2,017,536

Investing activities (1,029,421) (1,870,280)

Financing activities (944,856) 385,112

Net cash provided by operating activities (GAAP) $ 2,143,980 $ 2,017,536

Proceeds from available for sale debt securities (1), (2) 542,044 62,500

Distributions from non-consolidated affiliates – investing (2) 523 15,084

Distributions from equity method investees (2) — 523

Interest paid, net (2) 145,157 127,295

Ongoing development-stage funding payments (3) 6,876 20,479

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

Development-stage funding payments - ongoing (3) 2,106 6,876

Development-stage funding payments - upfront and milestone (3) 175,000 193,208

Payments for operating and professional costs 222,969 184,511

Termination payments on derivative instruments — 16,093

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

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

Distributions to legacy non-controlling interests - royalty receipts (2) (441,963) (479,604)

Adjusted Cash Receipts (non-GAAP) $ 2,789,293 $ 2,128,938

1 unchanged sentence

Proceeds from available for sale debt securities (1), (2) 542,044 62,500

Distributions from non-consolidated affiliates – investing (2) 523 15,084

Distributions from equity method investees (2) — 523

Interest paid, net (2) 145,157 127,295

Ongoing development-stage funding payments (3) 6,876 20,479

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

Development-stage funding payments - ongoing (3) 2,106 6,876

Development-stage funding payments - upfront and milestone (3) 175,000 193,208

Termination payments on derivative instruments — 16,093

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

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

Distributions to legacy non-controlling interests - royalty receipts (2) (441,963) (479,604)

Adjusted EBITDA (non-GAAP) $ 2,566,324 $ 1,944,427

1 unchanged sentence

Proceeds from available for sale debt securities (1), (2) 542,044 62,500

Distributions from non-consolidated affiliates – investing (2) 523 15,084

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

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

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

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

Distributions from equity method investees (2) — 523

Distributions to legacy non-controlling interests - royalty receipts (2) (441,963) (479,604)

Investments in equity method investees (2), (4) (9,896) (34,855)

Contributions from legacy non-controlling interests - R&D (2) 1,059 7,339

Adjusted Cash Flow (non-GAAP) $ 2,235,224 $ 1,573,439

(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

(1) Receipts from the quarterly redemption of the Series A Biohaven Preferred Shares in 2021 and 2022 and the accelerated redemption payments of all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022 are presented as Proceeds from available for sale debt securities on the statements of cash flows.

(2) The table below shows the line item for each adjustment and the direct location for such line item on the statements of cash flows.

Reconciling Adjustment Statements of Cash Flows Classification

Proceeds from available for sale debt securities Investing activities

Investments in non-consolidated affiliates Investing activities

Distributions to non-controlling interest Financing activities

Investments in equity method investees Investing activities

Distributions to legacy non-controlling interests - royalty receipts Financing activities

Interest paid, net Operating activities ( Interest paid less Interest received )

Derivative collateral (received)/posted, net Operating activities ( Derivative collateral received less Derivative collateral posted )

Contributions from non-controlling interest- R&D Financing activities

Distributions from non-consolidated affiliates - investing Investing activities

(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 activities to arrive at Adjusted EBITDA.

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.

Contributions from legacy non-controlling interests - R&D Financing activities

Distributions from equity method investees Investing activities

(3) Our lenders consider all payments made to support R&D activities for development-stage product candidates similar to asset acquisitions as these funds are expected to generate operational returns in the future.

All ongoing development-stage funding payments and upfront and milestone development-stage funding payments are reported as R&D funding expense in net income and are added back in aggregate to Net cash provided by operating activities to arrive at Adjusted EBITDA.

As a result, Adjusted EBITDA captures the full add-back for development-stage funding payments.

(4) We consider all payments to fund our operating joint ventures that are performing R&D activities for development-stage product candidates similar to asset acquisitions as these funds are expected to generate operational returns in the future.

As a result, amounts funded through capital calls by our equity method investees, the Avillion Entities, are deducted to arrive at Adjusted Cash Flow, but are not deducted in Adjusted EBITDA.

1 unchanged sentence

Ongoing investment in new royalties is fundamental to the long-term prospects of our business.

New investments provide a source of growth for our royalty receipts, supplementing growth within our existing portfolio and offsetting declines for products in our portfolio that have lost market exclusivity.

New investments provide a source of growth for our royalty receipts, supplementing growth within our existing portfolio and offsetting declines for royalties on products that have lost market exclusivity.

We evaluate an array of royalty acquisition opportunities on a continuous basis and expect to continue to make acquisitions in the ordinary course of our business.

Our team has established a strong track record of identifying, evaluating and investing in royalties tied to leading products across therapeutic areas and treatment modalities.

We have established a strong track record of identifying, evaluating and investing in royalties tied to leading products across therapeutic areas and treatment modalities.

We invest in approved products and development-stage product candidates that have generated robust proof of concept data.

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, 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.

We invest in these therapies through the purchase of royalties, milestones and related assets, by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets.

In 2022, we invested $2.5 billion to acquire royalties, milestones and related assets.

While volatility exists in the total amount 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 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 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012

Included below are tables of investment activities over each of the last three years based on the type of investment at the acquisition date (in thousands).

Announced transactions amounts reflect maximum transaction value for transactions entered into over each of the last three years.

Capital deployed amounts reflect cash paid at the acquisition date and any subsequent associated contractual payments reflected in the period in which cash was paid.

Average 2022 2021 2020

Announced Transactions

Upfront payments $ 2,132,667 $ 2,022,000 $ 2,307,000 $ 2,069,000

Potential payments/milestones 840,833 1,442,500 705,000 375,000

Total announced transaction value $ 2,973,500 $ 3,464,500 $ 3,012,000 $ 2,444,000

Capital Deployed

Approved/marketed royalties $ 1,726,360 $ 1,954,957 $ 1,819,903 $ 1,404,221

Development-stage royalties (1) 762,475 562,244 830,713 894,469

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

Total capital deployed $ 2,488,835 $ 2,517,201 $ 2,650,616 $ 2,298,690

(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 acquisitions of royalties on development-stage products 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.

Summary of Royalty Acquisition Activity

• 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 January 2023, we acquired royalty interests in Spinraza and pelacarsen from Ionis for an upfront payment of $500 million and committed up to $625 million in additional payments contingent upon the achievement of certain pelacarsen milestones.

Spinraza is approved for the treatment of spinal muscular atrophy and pelacarsen is in Phase 3 development by Novartis for the treatment of cardiovascular disease.

• In November 2022, we acquired a royalty interest in olpasiran from Arrowhead Pharmaceuticals for an upfront payment of $250 million and certain contingent clinical, regulatory, and sales-based milestones of up to $160 million.

Olpasiran is currently in Phase 3 development for the treatment of atherosclerotic cardiovascular disease and is licensed to Amgen.

• In October 2022, we entered into a R&D funding agreement with Merck to co-fund the development of MK-8189, an investigational oral PDE10A inhibitor currently being evaluated in a Phase 2b study for the treatment of schizophrenia.

We funded $50 million upon closing, and if Merck decides to proceed with Phase 3, we have the option to fund up to an additional $375 million.

In exchange, we are eligible to receive milestone payments associated with certain regulatory approvals as well as royalties on annual worldwide sales of any approved product.

• In July 2022, we acquired all of the equity interests in Theravance Respiratory Company, LLC from Theravance and Innoviva, Inc.

which entitles us to the right to receive royalties on the annual worldwide sales of Trelegy for an upfront payment of $1.31 billion and up to $300 million in additional payments contingent upon the achievement of certain sales milestones.

Additionally, we agreed to provide Theravance $25 million in upfront funding and a potential $15 million regulatory milestone payment to support the clinical development of ampreloxetine.

• In June 2022, we acquired an ex-U.S.

royalty interest in Gavreto from Blueprint Medicines for an upfront payment of $175 million and contingent sales-based milestones up to $165 million.

During the fourth quarter of 2022, we impaired our financial royalty asset related to Gavreto and recorded a non-cash impairment charge of $182.1 million.

• In April 2022, we acquired common stock and a revenue participation right from ApiJect Holdings, Inc.

for $50 million.

• In January 2022, we acquired a royalty interest in aficamten, a development-stage product for oHCM, for an upfront payment of $50 million and two additional contingent $50 million payments which are triggered upon the initiation of potential pivotal clinical trials for oHCM and nonobstructive hypertrophic cardiomyopathy, respectively.

In February 2022, one of the $50 million contingent milestone payments was triggered following Cytokinetics’ announcement that it initiated the clinical trial for oHCM.

Additionally, we entered into a funding agreement to provide Cytokinetics long-term capital of up to $300 million (“Cytokinetics Commercial Launch Funding”) to support further development of aficamten and potential commercialization of omecamtiv mecarbil, both development-stage products.

The Cytokinetics Commercial Launch Funding is available in five tranches, including an initial tranche of $50 million that was funded upon closing.

In June 2022, we amended the funding agreement to increase the required draw amount and further amended the funding agreement in December 2022 to extend the draw periods and increase the repayments terms of the second and third tranche.

• 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.

Additionally, we paid $50 million to purchase 3,846 thousand shares of BioCryst common stock, which was calculated based on the volume-weighted average price of BioCryst common stock over a period preceding the closing of the transaction.

• In June 2021, we announced a long-term strategic funding partnership with MorphoSys to support its 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.

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”) in exchange for royalties and fixed payments on the Development Funding Bonds, once drawn.

In connection with the closing of its 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 September 2022, we funded $300 million under the Development Funding Bonds.

In the fourth quarter of 2022, we recognized impairment charges of $433.7 million related to otilimab and gantenerumab, two of the development stage products that we acquired royalties on from MorphoSys.

• 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.

Oxlumo, which has been approved by the FDA and EMA for the treatment of primary hyperoxaluria 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.

1 unchanged sentence

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 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 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 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.

in exchange for an upfront payment of $650 million.

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 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 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 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 of $110.0 million, which was paid in November 2021.

• In the fourth quarter of 2019, we made a $100 million investment in Epizyme.

In exchange for an upfront payment of $100 million, we received (1) shares of Epizyme common stock, (2) a warrant to purchase an additional 2.5 million shares of Epizyme common stock at $20 per share over a three-year term and (3) Epizyme’s royalty on sales of Tazverik in Japan payable by Eisai.

We also lowered Epizyme’s royalty on Tazverik above certain sales thresholds and granted Epizyme an 18-month put option to sell an additional $50 million of its common stock to RPIFT at then-prevailing prices, not to exceed $20 per share.

Epizyme exercised its put option on December 30, 2019, which resulted in Epizyme issuing RPIFT 2.5 million shares on settlement in February 2020.

• In the first quarter of 2019, we entered into a preferred share purchase agreement with Biohaven through which we purchased $125 million in Series A Preferred Shares, providing us with a fixed return on redemption of two times our investment on FDA approval of Biohaven’s pipeline product, Nurtec ODT, for migraine treatment.

The FDA approved Nurtec ODT for the acute treatment of migraine in adults in February 2020.

• 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 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.

Seltorexant is currently in Phase 3 development for the treatment of major depressive disorder with insomnia symptoms by Johnson & Johnson.

Additionally, in April 2021, we entered into an agreement with MSCI to develop thematic life sciences 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.

The financial impact associated with this transaction was not material in 2022.

Liquidity and Capital Resources

Our primary source of liquidity is cash provided by operations.

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 R&D funding arrangements, and to meet our debt service obligations for the foreseeable future.

For 2022 and 2021, we generated $2.1 billion and $2.0 billion, respectively, in Net cash provided by operating activities .

We believe that our existing capital resources, cash provided by operating activities and access to our undrawn Revolving Credit Facility (defined below) 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.

1 unchanged sentence

We have access to substantial sources of funds in the capital markets and we may, from time to time, seek additional capital through a combination of additional debt or equity financings.

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 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.

In July 2021, we issued $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, 2022.

As of December 31, 2021 and 2020, we had total long-term debt outstanding of $7.1 billion and $5.8 billion, respectively.

As of December 31, 2022 and 2021, the par value of our total outstanding borrowings was $7.3 billion.

A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 11–Borrowings within the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

We have historically funded our acquisition program through free cash flow, equity contributions and debt.

3 unchanged sentences

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.

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

The following table and analysis of cash flow changes presents a summary of our cash flow activity for 2022 compared to 2021 (in thousands).

For a discussion of cash flow activities for 2021 compared to 2020, 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, 2021.

Years Ended December 31,

2022 2021 Change

5 unchanged sentences

Operating Activities

Years ended December 31, 2021 and 2020

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.

Cash provided by operating activities increased by $126.4 million in 2022 compared to 2021, primarily driven by an increase in cash collections from financial royalty assets of $191.4 million.

The increase in royalty receipts was partially offset by lower cash collections from intangible assets of $78.2 million, as our royalty receipts on Januvia, Janumet and other DPP-IVs substantially ended in the second quarter of 2022, and higher interest paid of $39.7 million, primarily due to the interest payments made on the 2021 Notes commencing in 2022.

Investing Activities

Years ended December 31, 2021 and 2020

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.

Cash used in investing activities decreased by $840.9 million in 2022 compared to 2021, primarily driven by a $449.9 million decrease in cash used for acquisitions of financial royalty assets and the $479.5 million receipt of accelerated redemption payments for all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.

The lower use of cash was further driven by a $156.2 million increase in the overall net cash provided by marketable securities and higher proceeds from equity securities in 2022.

The lower use of cash was partially offset by the funding of $300 million under the Development Funding Bonds with MorphoSys in 2022.

Financing Activities

Years ended December 31, 2021 and 2020

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.

Cash used in financing activities in 2022 was $944.9 million compared to cash provided by financing activities of $385.1 million in 2021, driven by $1.3 billion in net proceeds received from the 2021 Notes issuance in July 2021.

Sources of Capital

4 unchanged sentences

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

Our borrowings as of December 31, 2022 and 2021 consisted of the following (in thousands):

Date of Issuance Maturity As of December 31, 2022 As of December 31, 2021

Senior Unsecured Notes:

9 unchanged sentences

Unamortized debt discount and issuance costs (183,678) (203,930)

Total long-term debt, including current portion 7,116,322 7,096,070

Current portion of long-term debt (997,512) —

Total long-term debt $ 6,118,810 $ 7,096,070

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.

Indentures governing the Notes contain certain covenants, which w e were in compliance with as of December 31, 2021.

On July 26, 2021, we issued 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 senior unsecured notes (the “2020 Notes”) with a weighted average coupon rate of 2.13% 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 outstanding principal amounts of term loans under our prior senior secured credit facilities.

We refer to the 2020 Notes and 2021 Notes, collectively, as the “Notes.” Indentures governing the Notes contain certain covenants with which we were in compliance as of December 31, 2022.

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.

On September 15, 2021, we entered into an amended and restated revolving credit agreement, which was further amended on October 31, 2022 (the “Credit Agreement”).

The Credit Agreement amended and restated the prior 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 (the “Revolving Credit Facility”) with borrowing capacity of up to $1.5 billion for general corporate purposes.

The Revolving Credit Facility has a maturity date of October 31, 2027.

The Credit Agreement contains certain customary covenants, which we were in compliance with as of December 31, 2022.

The Revolving Credit Facility remains undrawn and available to us as of December 31, 2022.

Senior Secured Credit Facilities

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 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 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

Acquisitions of Royalties

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:

• 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.

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

• Third-party Royalties – Existing royalties on approved or late-stage development therapies with high commercial potential.

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.

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 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.

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 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.