Item 1. Business
Item 1. BUSINESS
Overview
We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. Since our founding in 1996, we have been pioneers in the royalty market, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including 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, 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 (“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.
The success of our business has been the result of a focused strategy of actively identifying and tracking the development and commercialization of key new therapies, allowing us to move quickly to make acquisitions when opportunities arise. We acquire royalties on approved products, often in the early stages of their commercial launches, and development-stage product candidates with strong proof of concept data, mitigating development risk and expanding our opportunity set. From 2012, when we began acquiring royalties on development-stage product candidates, through January 31, 2023, we have entered into transactions to acquire biopharmaceutical royalties, milestones and related assets with an aggregated transaction value of $24 billion, representing approximately 60% of all royalty transactions by value announced during this period.
In 2022, we generated net cash from operating activities of $2.1 billion, Adjusted Cash Receipts (as defined in “Non-GAAP Financial Results”) of $2.8 billion, Adjusted EBITDA (as defined in “Non-GAAP Financial Results”) of $2.6 billion and Adjusted Cash Flow (as defined in “Non-GAAP Financial Results”) of $2.2 billion. We deployed $2.5 billion of cash in 2022 to acquire royalties, milestones and related assets.
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Portfolio Overview
Our portfolio consists of royalties on more than 35 commercial products and 12 development-stage product candidates. We believe that end market sales of the therapies in our portfolio are important drivers of our financial performance as a substantial portion of our royalties are based on end market sales. In addition, end market sales are a strong indicator of the importance of the therapies to both patients and the marketers. The following table provides an overview of our current portfolio of royalties:
Royalties Marketer(s) Product Detail 2022 Royalty Receipts (in millions) 2022 End Market Sales (in millions) (1)
Approved Products
Cystic fibrosis franchise (2) Vertex Cystic fibrosis $811 $8,931
Nurtec ODT/Biohaven payment (3) Pfizer Migraine 560 764
Tysabri Biogen Relapsing forms of multiple sclerosis 370 2,028
Imbruvica AbbVie, Johnson & Johnson Hematological malignancies and chronic graft versus host disease 313 5,820
Xtandi Pfizer, Astellas Prostate cancer 187 4,817
Promacta Novartis Chronic immune thrombocytopenic purpura and aplastic anemia 182 2,088
Tremfya Johnson & Johnson Plaque psoriasis and psoriatic arthritis 97 2,668
Trelegy GSK Chronic obstructive pulmonary disease and asthma 90 2,142
Januvia, Janumet, Other DPP-IVs Merck & Co., others Diabetes 73 4,512
Cabometyx/Cometriq Exelixis, Ipsen, Takeda Kidney, liver and thyroid cancers 55 1,940
Farxiga/Onglyza AstraZeneca Diabetes 44 4,638
Evrysdi Roche Spinal muscular atrophy 41 1,173
Prevymis Merck & Co. Prophylaxis of CMV in adult recipients of stem cell transplant 37 428
Trodelvy Gilead Breast cancer 25 680
Orladeyo BioCryst Hereditary angioedema prophylaxis 22 252
Erleada Johnson & Johnson Prostate cancer 21 1,881
Crysvita Ultragenyx, Kyowa Kirin X-linked hypophoshatemia 20 220
Emgality Lilly Migraine prevention & episodic cluster headache 19 651
Oxlumo Alnylam Primary hyperoxaluria type 1 3 67
Spinraza (4) Biogen Spinal muscular atrophy — 1,762
Airsupra (5) AstraZeneca Asthma — —
Other products (6) 263 —
Total royalty receipts $3,231
Development-Stage Product Candidates
Aficamten Cytokinetics Obstructive hypertrophic cardiomyopathy (Phase 3) — —
Ampreloxetine Theravance Symptomatic nOH with multiple system atrophy (Phase 3) — —
BCX10013 BioCryst Once-daily Factor D Inhibitor (Phase 1) — —
MK-8189 Merck Schizophrenia (Phase 2b) — —
Olpasiran Amgen Cardiovascular disease (Phase 3) — —
Omecamtiv mecarbil (7) Cytokinetics Heart failure (under FDA review) — —
Pelabresib MorphoSys Myelofibrosis (Phase 3) — —
Pelacarsen (4) Novartis Cardiovascular disease (Phase 3) — —
Seltorexant Johnson & Johnson MDD with insomnia symptoms (Phase 3) — —
Trontinemab (8) Roche Alzheimer’s disease (Phase 2a) — —
Tulmimetostat (9) MorphoSys Hematological malignancies and solid tumors (Phase 2) — —
Zavegepant Pfizer Acute migraine (under FDA review) and prevention (Phase 3) — —
CMV is cytomegalovirus, nOH is neurogenic orthostatic hypotension and MDD is major depressive disorder.
Amounts shown in the table may not add due to rounding.
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Notes:
(1) Represents end market sales for 2022 as reported by respective product marketers or, where marketers have not reported end market sales by February 10, 2023, based on Visible Alpha projections as of February 7, 2023. Sales shown for Crysvita represent Europe, the Middle East and Africa only. For the majority of our royalties, royalty receipts lag product performance by one quarter and can generally be estimated by applying our publicly disclosed royalty rate to the preceding quarter’s marketer-announced net revenues on a product-by-product basis.
(2) The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio.
(3) Royalty receipts includes quarterly redemption payments of $15.6 million related to the Series A Biohaven Preferred Shares and the accelerated redemption payments of $479.5 million for all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022. The remaining amounts are related to royalty receipts from Nurtec ODT.
(4) Royalties were acquired in January 2023.
(5) Airsupra, formerly known as PT027, was approved by the U.S. Food and Drug Administration (“FDA”) in January 2023.
(6) Other products primarily include royalties on the following products: Bosulif (a product co-developed by our joint venture investee, Avillion, for which receipts are presented as Distributions from 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.
(7) The financial royalty asset associated with omecamtiv mecarbil was written off in 2020 given the uncertainty around the future of omecamtiv mecarbil at the time.
(8) The financial royalty asset associated with gantenerumab was written off in 2022 as a result of Roche’s statement that it would discontinue clinical trials of gantenerumab. Roche continues to test a different formulation of gantenerumab called trontinemab.
(9) Product formerly known as CPI-0209.
Biopharmaceutical Industry and the Role of Royalties
Our business is supported by significant growth and unprecedented innovation within the biopharmaceutical industry. Global prescription pharmaceutical sales are projected to grow from approximately $1.2 trillion in 2022 to approximately $1.5 trillion in 2027, representing a CAGR of 6% according to EvaluatePharma despite more than $140 billion in cumulative sales being lost to expected patent expiries during the same period. The growth of the biopharmaceutical industry is driven by global secular trends, including population growth, increased life expectancy and growth of the middle classes in emerging markets. In addition, a dramatic acceleration of medical research in recent years has led to a better understanding of the molecular origins of disease and identification of potential targets for therapeutic intervention. This has accelerated R&D opportunities for new drugs. The pace of biopharmaceutical innovation coupled with the proliferation of new biotechnology companies and the increasing cost of drug development has created a significant capital need over recent years that we believe will provide a sustainable tailwind for our business.
Royalties play a fundamental and growing role in the biopharmaceutical industry. As a result of the increasing cost and complexity of drug development, the creation of a new drug today typically involves a number of industry participants. Academia and other research institutions conduct basic research and license new technologies to industry for further development. Biotechnology companies typically in-license these new technologies, add value through applied research and early-stage clinical development, and then either out-license the resulting development-stage product candidates to large biopharmaceutical companies for late-stage clinical development and commercialization, or commercialize the products themselves. As new drugs are transferred along this value chain, royalties are created as compensation for the licensing or selling institutions. Biotechnology companies are also increasingly creating royalties on existing products within their portfolios, known as synthetic royalties, in order to provide a source of non-dilutive capital to fund their businesses. As a result of this industry paradigm, the development of a single new drug can lead to the creation of multiple royalties. Given our leadership position within the biopharmaceutical royalty sector, we are able to capitalize on the growing volumes of royalties that are created as new therapies are developed to address unmet medical needs.
Our Business Model
We believe that the following elements of our business and product portfolio provide a unique and compelling proposition to investors seeking exposure to the biopharmaceutical sector.
Our portfolio provides direct exposure to a broad array of blockbuster therapies. As of January 31, 2023, our portfolio included royalties on 15 therapies that each generated end-market sales of more than $1 billion in 2022, including five therapies that each generated end-market sales of more than $3 billion. The therapies within our royalty portfolio are marketed by leading global biopharmaceutical companies for whom these products are important sources of revenue. Given the marketers’ significant focus on and investment in these products, they are motivated to invest substantial resources in driving continued sales growth.
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Our portfolio is highly diversified across products, therapeutic areas and marketers. As of January 31, 2023, our portfolio consists of royalties on more than 35 marketed biopharmaceutical therapies which address a wide range of therapeutic areas, including rare diseases, cancer, neurology, immunology, hematology and diabetes. In 2022, no individual therapy accounted for more than 21% of our royalty receipts, no therapeutic area accounted for more than 29% of our royalty receipts and no marketer represented more than 25% of our royalty receipts. The royalties in our portfolio entitle us to payments based directly on the top-line sales of the associated therapies, rather than the profits of these therapies. As such, the diversification of our profits directly reflects the diversification of our royalty receipts, rather than varying levels of product-level profitability, as would typically be expected within a biopharmaceutical company. The graphic below shows the diversification within our 2022 royalty receipts by product, therapeutic area and marketer.
Note: Royalty receipts for Nurtec ODT includes redemption payments that were accelerated related to Biohaven Preferred Shares following Pfizer’s acquisition of Biohaven in 2022.
The key growth-driving royalties in our portfolio are protected by long patent lives. The estimated weighted average royalty duration of our portfolio is approximately 13 years based on projected cumulative cash royalty receipts. Our largest marketed royalty in 2022 was on Vertex’s cystic fibrosis franchise, and existing patent applications covering Trikafta, the most significant product in that franchise, are expected to provide exclusivity through 2037. Our right to receive royalties is perpetual, but we expect that the 2037 patent expiration for Trikafta may result in potential sales declines based on potential generic entry. Several of our marketed royalties have unlimited durations and could provide cash flows for many years after key patents have expired.
Simple and efficient operating model generates substantial cash flow for reinvestment in new biopharmaceutical royalties . Our capital-efficient operating model requires limited operating expenses and no material capital investment in fixed assets or infrastructure in order to support the ongoing growth of our business. As a result, we generate high Adjusted Cash Flow relative to our Adjusted Cash Receipts. Our high cash flow conversion provides us with significant capital that we can deploy for new royalty acquisitions and also use to grow our dividend to shareholders. In 2022, we generated net cash from operating activities of $2.1 billion, Adjusted Cash Receipts of $2.8 billion, Adjusted EBITDA of $2.6 billion and Adjusted Cash Flow of $2.2 billion. We deployed $2.5 billion of cash in 2022 to acquire royalties, milestones and related assets.
Our business model captures many of the most attractive aspects of the biopharmaceutical industry, but with reduced exposure to many common industry challenges . The biopharmaceutical industry benefits from a number of highly attractive characteristics, including long product life cycles, significant barriers to entry and non-cyclical revenues. We have a highly flexible approach that is agnostic to both therapeutic area and treatment modality, allowing us to acquire royalties on the most attractive therapies from across the biopharmaceutical industry. We focus on the acquisition of royalties on approved products or development-stage product candidates that have generated strong proof of concept data, avoiding the risks associated with early stage R&D. By acquiring royalties, we are able to realize payments based directly on the top-line sales of leading biopharmaceutical therapies, without the costs associated with fixed R&D, manufacturing and commercial infrastructure.
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Our unique role in the biopharmaceutical ecosystem positions us to benefit from multiple compounding growth drivers . As a result of our significant scale and highly flexible business model, we believe that we are uniquely positioned to capitalize on multiple compounding growth drivers: an accelerating understanding of the molecular origins of disease, technological innovation leading to the creation of new treatment modalities, an increasing number of biopharmaceutical industry participants with significant capital needs, competitive industry dynamics which reward companies that can rapidly execute broad clinical development programs, increasing FDA drug approvals which reached an all-time high in 2018 and the potential for multiple royalties to be created from each new drug that reaches the market.
We have the ability to access innovation from across the biopharmaceutical ecosystem. Our approach is to first assess innovative science in areas of significant unmet medical need and then evaluate how to acquire royalties on therapies that we believe are attractive. We closely follow a broad range of therapeutic areas and treatment modalities and are therefore able to move quickly when we identify compelling opportunities to acquire new royalties.
We have deep access to attractively priced investment grade debt that provides a significant cost of capital advantage. We believe that we have an attractive cost of capital that enables us to acquire high-quality biopharmaceutical royalties at competitive prices while still creating value for our shareholders. As of December 31, 2022, we had an aggregate principal amount of $7.3 billion of senior unsecured notes outstanding with a weighted average coupon of 2.24% and a weighted-average maturity of approximately 12 years. In addition, we have an undrawn $1.5 billion senior unsecured revolving credit facility.
We have a talented, long-tenured team with extensive experience and deep industry relationships. Our team has significant experience identifying, evaluating and acquiring royalties on biopharmaceutical therapies. Together they have been responsible for approximately $30 billion of acquisitions of biopharmaceutical royalties, milestones and related assets since 1996 through January 31, 2023. Our acquisitions have included many of the industry’s leading therapies across the past three decades, such as Trikafta, Tremfya, Imbruvica, Tecfidera, Xtandi, Truvada, Lyrica, Humira, Remicade, Rituxan and Neupogen. Our long history of collaboration has resulted in deep relationships with a broad range of participants across the biopharmaceutical industry.
We are the leader in acquiring biopharmaceutical royalties. We are the leader within the space, having executed transactions with an aggregate announced transaction value of more than $24 billion since 2012 through January 31, 2023. We estimate this to represent an estimated market share of approximately 60% of all royalty transactions by value announced during this period. This compares to our next nearest competitor, which we believe has executed $3 billion of transactions, which we estimate to represent market share of 8%. Given the scale of our business relative to our competitors, we have a particularly strong leadership position within large royalty transactions. Since 2012, there have been 13 royalty transactions with an aggregate value of more than $500 million each. We executed 11 of these 13 transactions, for a total aggregate transaction value of approximately $16 billion of cash and estimated market share of 86%, in this transaction size range. The charts below show our market share since 2012 across all transaction sizes and in royalty transactions with an aggregate value of more than $500 million.
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Note: Includes transactions through January 31, 2023; excludes royalty debt transactions from market share calculations.
Our Strategy
We intend to grow our business by continuing to partner with constituents across the biopharmaceutical value chain to fund innovation. Our growth strategy is 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 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 sciences indexes.
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From 2012 through 2022, we deployed $8.3 billion of cash to acquire royalties, milestones and related assets on development-stage product candidates. As of January 31, 2023, products underlying $6.4 billion of these acquisitions have already been approved, representing a success rate to date of 77%, while products underlying $0.8 billion were not approved and products underlying $1.1 billion are still in development.
Notes:
(1) Reflects cash deployed for royalty acquisitions from 2012 through 2022.
(2) Not approved includes investments in vosaroxin, palbociclib, Merck KGaA’s anti-IL17 nanobody M1095, BCX9930, gantenerumab and otilimab.
In recent years, we have increased the scope of our investments beyond royalties to include additional assets such as equity investments and the acquisition of businesses with significant royalty assets. Our broad scope increases our total addressable market and has allowed us to provide a broad range of solutions to our partners across the biopharmaceutical ecosystem.
Our approach is to first assess innovative science in areas of significant unmet medical need and then evaluate how to acquire royalties on therapies that we believe are attractive. We have a strong base of institutional knowledge of important therapeutic areas and key industry trends. Our team of scientific experts actively monitors the evolving treatment landscape across many therapeutic areas and treatment modalities in order to identify new opportunities. We analyze a wide range of scientific data and stay in constant communication with leading physicians, scientists, biopharmaceutical executives and venture capital firms. This allows us to quickly assess and gain conviction in the value of assets when acquisition opportunities arise.
We take a disciplined approach in assessing opportunities and seek to acquire exposure to therapies based on the following key product characteristics:
• Clinically validated: therapies that have received regulatory approval or have strong clinical proof-of-concept data that gives us confidence in the clinical and commercial profile.
• High unmet need: therapies that address areas of significant unmet medical need that also represent large commercial opportunities.
• Significant benefits to patients: therapies that have potential to disrupt or significantly enhance the treatment paradigm for patients and physicians based on compelling clinical data.
• Unique competitive positioning: therapies that are well-positioned to be leaders in their respective categories and are expected to maintain a competitive advantage in the long-term.
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• Growth potential: therapies where we see strong long-term potential, based on our in-depth evaluation and in-house expertise.
• Strong marketer: therapies marketed by biopharmaceutical companies that have the resources, capabilities and commitment to successfully develop them and maximize their commercial potential.
• Intellectual Property: therapies that have strong patent portfolios and offer durable, long-term cash flows.
• Attractive value proposition: therapies that we believe provide value-add to the healthcare system.
Our focus is to create significant long-term value for our shareholders by acquiring both approved and development-stage product candidates through a variety of structures. In evaluating these acquisition opportunities, we focus on the following financial characteristics:
• Long duration cash flows: we prioritize long-duration assets over short-duration assets that may boost near-term financial performance. The durability of our cash flows also allows us to add leverage to our portfolio, enhancing returns and providing capital that we can use to acquire additional assets.
• Attractive risk-adjusted returns: we focus on generating attractive returns on our investments on a risk-adjusted basis. We evaluate opportunities across the risk spectrum and do not target the same return for all assets.
• Growth and scale: we seek assets that are accretive to our long-term growth profile and additive to our overall scale.
We conduct extensive due diligence when evaluating potential new opportunities. We have end-to-end capabilities that span clinical and commercial analysis, valuation and transaction structuring. We have a highly focused and experienced team that conducts proprietary primary market research, forms its own views on the clinical and commercial outlook for the product, and builds its own financial models, allowing us to generate direct insights and allowing us to take significant accountability and ownership for our investments. We invest significant time and resources across all levels of the organization, including senior leadership, in the evaluation of potential opportunities.
Our Portfolio
Commercial Products
The key royalties in our marketed portfolio related to approved products include the ones listed below. Descriptions of estimated royalty expiration dates are based on our estimates of patent expiry dates (which may include estimated patent term extensions) or estimates of the dates on which the royalties otherwise expire and are based on each product’s key geographies; duration may differ in other geographies. Royalty expiration dates can change due to patent, regulatory, commercial or other developments. In addition, the royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements.
Cystic fibrosis franchise
Our cystic fibrosis franchise consists of our right to receive royalty payments on the sale of various products marketed by Vertex for use in the treatment of cystic fibrosis, including Kalydeco (ivacaftor), Orkambi (lumacaftor and ivacaftor), Symdeko/Symkevi (tezacaftor and ivacaftor) and Trikafta/Kaftrio (elexacaftor, tezacaftor and ivacaftor). Vertex’s cystic fibrosis franchise represents the leading treatments for cystic fibrosis, providing treatment options for approximately 90% of cystic fibrosis patients.
We added the cystic fibrosis franchise to our portfolio in November 2014 and purchased an additional residual royalty interest in November 2020. Our right to receive royalties is perpetual, but we expect that the 2037 patent expiration for Trikafta may result in potential sales declines based on potential generic entry. Total global end market sales for the cystic fibrosis franchise during 2022 were approximately $8.9 billion and we collected $811 million in related royalty receipts over the same period. Global end market sales of the cystic fibrosis franchise are projected to grow to approximately $10.5 billion in 2027, according to Visible Alpha.
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Tysabri
Tysabri (natalizumab) is a monoclonal antibody marketed by Biogen for the treatment of relapsing forms of multiple sclerosis (RMS), including clinically isolated syndrome, relapsing-remitting disease and active secondary progressive disease. Tysabri competes in the high efficacy segment of the multiple sclerosis market, often reserved for patients with aggressive disease at onset and patients who have failed front-line therapies.
We added Tysabri to our portfolio in February 2017. Our right to receive royalties is perpetual. Total global end market sales for Tysabri during 2022 are estimated to be approximately $2.0 billion and we collected $370 million in related royalty receipts over the same period. Global end market sales of Tysabri are projected to be approximately $1.4 billion in 2027, according to Visible Alpha.
Imbruvica
Imbruvica (ibrutinib) is a first-in-class small molecule Bruton’s tyrosine kinase inhibitor that is the leading therapy in chronic lymphocytic leukemia, relapsed/refractory mantle cell lymphoma and other blood cancers. Imbruvica is marketed by AbbVie and Janssen, a subsidiary of Johnson & Johnson. A robust clinical program supports Imbruvica’s use across a wide range of patient populations and cancer types, including 12 FDA approvals in seven distinct indications.
We added Imbruvica to our portfolio in July 2013. We estimate that our royalties will substantially end between 2027 and 2032. Total global end market sales for Imbruvica during 2022 were approximately $5.8 billion and we collected $313 million in related royalty receipts over the same period. Global end market sales of Imbruvica are projected to be approximately $3.5 billion in 2027, according to Visible Alpha.
Xtandi
Xtandi (enzalutamide) is an oral, small molecule androgen receptor inhibitor marketed by Pfizer and Astellas for the treatment of non-metastatic and metastatic castration-resistant prostate cancer as well as metastatic castration sensitive prostate cancer.
We added Xtandi to our portfolio in March 2016. We estimate that our royalties will substantially end between 2027 and 2028. Total global end market sales for Xtandi during 2022 were approximately $4.8 billion and we collected $187 million in related royalty receipts over the same period. Global end market sales of Xtandi are projected to grow to approximately $5.2 billion in 2027, according to Visible Alpha.
Promacta
Promacta (eltrombopag) is an oral, small molecule activator of the thrombopoietin receptor used to increase the number of platelets in the blood, marketed by Novartis for the treatment of chronic immune thrombocytopenia and aplastic anemia.
We added Promacta to our portfolio in March 2019. We estimate that our royalties will substantially end between 2025 and 2028. Total global end market sales for Promacta during 2022 were approximately $2.1 billion and we collected $182 million in related royalty receipts over the same period. Global end market sales of Promacta are projected to be approximately $525 million in 2027, according to Visible Alpha.
Tremfya
Tremfya (guselkumab) is an anti-interleukin 23 marketed by Johnson & Johnson for the treatment of adults living with moderate to severe plaque psoriasis, and for adults with active psoriatic arthritis. Tremfya is also in clinical development for ulcerative colitis and Crohn’s disease.
We added Tremfya to our portfolio in July 2021. We estimate that our royalties will substantially end between 2031 and 2032. Total global end market sales for Tremfya during 2022 were approximately $2.7 billion and we collected $97 million in related royalty receipts over the same period. Global end market sales of Tremfya are projected to grow to approximately $6.0 billion in 2027, according to Visible Alpha.
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Nurtec ODT/Biohaven payment
Nurtec ODT (rimegepant) is an oral, small molecule calcitonin gene-related peptide receptor antagonist marketed by Pfizer for the acute treatment and prevention of migraine.
We added Nurtec ODT to our portfolio in June 2018 and purchased an additional interest in Nurtec ODT as part of our expanded funding agreement with Biohaven in August 2020. We estimate that our royalties will substantially end between 2034 and 2036. Total global end market sales for Nurtec ODT during 2022 are estimated to be approximately $764 million and we collected $18 million in royalty receipts on Nurtec ODT over the same period. Additionally, we received $542 million from the redemption of all outstanding Series A and Series B Biohaven Preferred Shares in 2022. The Series A and Series B Biohaven Preferred Shares were fully redeemed following Pfizer’s acquisition of Biohaven in October 2022. We will only receive royalties from underlying product sales beginning in 2023. Global end market sales of Nurtec ODT are projected to grow to approximately $2.7 billion in 2027, according to Visible Alpha.
Trelegy
Trelegy is a combination of an inhaled corticosteroid and two bronchodilators in a single delivery device administered once-daily for the maintenance treatment of chronic obstructive pulmonary disease and the maintenance treatment of asthma in patients aged 18 years and older. Trelegy is marketed by GSK.
We added Trelegy to our portfolio in July 2022. We estimate that our royalties will substantially end between 2029 and 2030. Total global end market sales for Trelegy during 2022 were approximately $2.1 billion. Subsequent to adding Trelegy to our portfolio in July 2022, we collected $90 million in related royalty receipts. Global end market sales of Trelegy are projected to grow to approximately $3.5 billion in 2027, according to Visible Alpha.
Cabometyx/Cometriq
Cabometyx (cabozantinib) is a multi-tyrosine kinase inhibitor approved for the treatment of patients with advanced renal cell carcinoma (RCC) both as monotherapy and in combination with Bristol Myers Squibb’s Opdivo (nivolumab) as a first line treatment. Cabometyx is also approved for hepatocellular carcinoma in patients previously treated with sorafenib. Cometriq is approved for progressive, metastatic medullary thyroid cancer. Cabometyx and Cometriq are marketed by Exelixis in the United States and by Ipsen in regions outside the United States and Japan. Cabometyx is marketed in Japan by Takeda.
We added Cabometyx/Cometriq to our portfolio in March 2021. We estimate that our royalties will substantially end between 2026 and 2029. Total global end market sales for Cabometyx/Cometriq during 2022 were approximately $1.9 billion and we collected $55 million in related royalty receipts over the same period. Global end market sales of Cabometyx/Cometriq are projected to grow to approximately $2.8 billion in 2027, according to Visible Alpha.
Farxiga/Onglyza
Farxiga (dapagliflozin) is a first-in-class selective inhibitor of human sodium-glucose co-transporter 2 indicated as both monotherapy and as part of combination therapy with Onglyza, a dipeptidyl peptidase-4 inhibitor, to improve glycemic control as an adjunct to diet and exercise in adults with type 2 diabetes. Farxiga received FDA approval in May 2020 for the treatment of patients with heart failure with reduced ejection fraction in both patients with and without type 2 diabetes. Farxiga and Onglyza are both marketed by AstraZeneca.
We added Farxiga/Onglyza to our portfolio in November 2017. We estimate that our royalties will substantially end in 2025. Total global end market sales for Farxiga/Onglyza during 2022 were approximately $4.6 billion and we collected $44 million in related royalty receipts over the same period. Global end market sales of Farxiga/Onglyza are projected to be approximately $4.4 billion in 2027, according to Visible Alpha.
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Evrysdi
Evrysdi (risdiplam) is a survival motor neuron 2 splicing modifier marketed by Roche, and is the first oral treatment approved for infants, children and adults with all types of spinal muscular atrophy.
We added Evrysdi to our portfolio in July 2020. Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion. Total global end market sales for Evrysdi during 2022 were approximately $1.2 billion and we collected $41 million in related royalty receipts over the same period. Global end market sales of Evrysdi are projected to grow to approximately $2.8 billion in 2027, according to Visible Alpha.
Prevymis
Prevymis (letermovir) is a first-in-class prophylactic marketed by Merck & Co. for the prophylaxis of cytomegalovirus infection and disease in adults who have received an allogeneic hematopoietic stem cell transplant.
We added Prevymis to our portfolio in June 2020. We estimate that our royalties will substantially end in 2029. Total global end market sales for Prevymis during 2022 were approximately $428 million and we collected $37 million in related royalty receipts over the same period. Global end market sales of Prevymis are projected to grow to approximately $525 million in 2027, according to Visible Alpha.
Trodelvy
Trodelvy (sacituzumab govitecan-hziy) is an antibody-drug conjugate for the treatment of adult patients with metastatic triple-negative breast cancer and pre-treated hormone receptor (HR)-positive, human epidermal growth factor receptor 2 (HER2)-negative metastatic breast cancer. Trodelvy was initially developed by Immunomedics and is now marketed by Gilead following the acquisition of Immunomedics in 2020. Gilead is exploring monotherapy and combinations of Trodelvy across numerous cancer indications and lines of therapy.
We added Trodelvy to our portfolio in January 2018. Our right to receive royalties is perpetual. Total global end market sales for Trodelvy during 2022 were approximately $680 million and we collected $25 million in related royalty receipts over the same period. Global end market sales of Trodelvy are projected to grow to approximately $2.6 billion in 2027, according to Visible Alpha.
Orladeyo
Orladeyo (berotralstat) is a first-in-class oral inhibitor of plasma kallikrein marketed by BioCryst for the prevention of hereditary angioedema attacks.
We added Orladeyo to our portfolio in December 2020 and purchased an additional interest as part of our expanded funding agreement with BioCryst in November 2021. Our right to receive royalties is perpetual, but we expect that the 2036-2039 patent expirations for Orladeyo may result in potential sales declines based on potential generic entry. Total global end market sales for Orladeyo during 2022 are estimated to be approximately $252 million and we collected $22 million in related royalty receipts over the same period. Global end market sales of Orladeyo are projected to grow to approximately $725 million in 2027, according to Visible Alpha.
Erleada
Erleada (apalutamide) is an oral, small molecule androgen receptor inhibitor indicated for the treatment of patients with non-metastatic castration-resistant prostate cancer and for the treatment of patients with metastatic castration sensitive prostate cancer. It is marketed by Johnson & Johnson.
We added Erleada to our portfolio in February 2019. We estimate that our royalties will substantially end in 2032. Total global end market sales for Erleada during 2022 were approximately $1.9 billion and we collected $21 million in related royalty receipts over the same period. Global end market sales of Erleada are projected to grow to approximately $4.3 billion in 2027, according to Visible Alpha.
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Crysvita
Crysvita (burosumab) is a monoclonal antibody that is approved in the European Union for the treatment of fibroblast growth factor-23 related hypophosphataemia in tumor-induced osteomalacia associated with phosphaturic mesenchymal tumors that cannot be curatively resected or localised in children and adolescents aged 1 to 17 years and in adults. Crysvita is also approved in the European Union for X-linked in children and adolescents aged 1 to 17 years with radiographic evidence of bone disease, and in adults. Crysvita is marketed by Kyowa Kirin and Ultragenyx.
We added a royalty on Crysvita sales in Europe to our portfolio in December 2019. Our royalties expire when we receive aggregate royalties equal to $608 million if that happens prior to December 31, 2030, and otherwise when we receive aggregate royalties of $800 million. We estimate that our royalties will substantially end between 2033 and 2038. Total end market sales for Crysvita during 2022 are estimated to be approximately $220 million and we collected approximately $20 million in related royalty receipts over the same period. End market sales of Crysvita are projected to grow to approximately $575 million in 2027, according to Visible Alpha.
Emgality
Emgality (galcanezumab-gnlm) is a monoclonal antibody calcitonin gene-related peptide receptor antagonist indicated for the preventive treatment of migraine and for the treatment of episodic cluster headache marketed by Lilly.
We added Emgality to our portfolio in March 2019. We estimate that our royalties will substantially end in 2033. Total global end market sales for Emgality during 2022 were approximately $651 million and we collected $19 million in related royalty receipts over the same period. Global end market sales of Emgality are projected to grow to approximately $1.0 billion in 2027, according to Visible Alpha.
Oxlumo
Oxlumo (lumasiran) is a small interfering ribonucleic acid therapeutic targeting hydroxyacid oxidase 1 for the treatment of primary hyperoxaluria type 1 marketed by Alnylam. Oxlumo was approved by the FDA in November 2020.
We added Oxlumo to our portfolio in April 2021. We estimate that our royalties will substantially end between 2034 and 2035. Total global end market sales for Oxlumo during 2022 are estimated to be approximately $67 million and we collected $3 million in related royalty receipts over the same period. Global end market sales of Oxlumo are projected to grow to approximately $325 million in 2027, according to Visible Alpha.
Spinraza
Spinraza is for the treatment for spinal muscular atrophy marketed by Biogen. We added Spinraza to our portfolio in January 2023. We estimate that our royalties will substantially end between 2030 and 2035. Total global end market sales for Spinraza during 2022 are estimated to be approximately $1.8 billion. Global end market sales of Spinraza are projected to be approximately $1.4 billion in 2027, according to Visible Alpha.
Airsupra
Airsupra, formerly known as PT027, is a fixed dose combination of the inhaled corticosteroid, budesonide and albuterol, a short-acting beta-2 agonist for the treatment of asthma. Airsupra was approved by the FDA in January 2023.
We have an equity investment in the Avillion entities, one of which is a party to a co-development agreement with AstraZeneca to advance Airsupra through a global clinical development program for the treatment of asthma in exchange for royalties, a series of success-based milestones and other potential payments. We estimate that distributions from Avillion II for our portion of royalties will substantially end in 2030, but AstraZeneca is entitled to certain buyout rights which, if exercised, would result in earlier expiration. In January 2023, AstraZeneca notified Avillion II that it elected to pay a fee of $80 million to Avillion II to exercise an option to commercialize Airsupra in the United States. We expect to receive our pro rata portion of the exercise fee of approximately $35 million, subject to any holdback for expenses, in 2023. Global end market sales of Airsupra are projected to grow to approximately $550 million in 2027, according to Visible Alpha.
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Development-Stage Product Candidates
Our current portfolio includes 12 development-stage product candidates. These development-stage product candidates have not yet been approved, and therefore have not generated any royalties (and we have not collected any related royalty receipts) to date.
Aficamten
Aficamten is a small molecule cardiac myosin inhibitor in Phase 3 development by Cytokinetics for obstructive hypertrophic cardiomyopathy (oHCM). We added aficamten to our portfolio in January 2022. If approved, global end market sales of aficamten are projected to grow to approximately $1.5 billion in 2030, according to Visible Alpha.
Ampreloxetine
Ampreloxetine is an investigational once-daily norepinephrine reuptake inhibitor in Phase 3 development by Theravance for the treatment of symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy. We added ampreloxetine to our portfolio in July 2022. If approved, global end market sales of ampreloxetine are projected to grow to approximately $150 million in 2030, according to Visible Alpha.
BCX10013
BCX10013 is an oral, once-daily Factor D inhibitor for the treatment of complement-mediated diseases. We added BCX10013 to our portfolio as part of our expanded funding agreement with BioCryst in November 2021. In December 2022, BioCryst decided to focus its complement inhibitor development efforts on BCX10013 after discontinuing the development of BCX9930. Visible Alpha does not currently have estimates available for global end market sales of BCX10013 in 2030.
MK-8189
MK-8189 is an oral PDE10A inhibitor in Phase 2B development by Merck for the treatment of schizophrenia. We added MK-8189 to our portfolio in October 2022. If approved, global end market sales of MK-8189 are projected to grow to approximately $150 million in 2030, according to Visible Alpha.
Olpasiran
Olpasiran is a small interfering RNA (siRNA) in Phase 3 development by Amgen designed to lower levels of lipoprotein(a), a genetically-determined independent risk factor for cardiovascular disease. We added olpasiran to our portfolio in November 2022. If approved, global end market sales of olpasiran are projected to grow to approximately $875 million in 2030, according to Visible Alpha.
Omecamtiv mecarbil
Omecamtiv mecarbil is an oral, small molecule cardiac myosin activator developed by Cytokinetics and under FDA regulatory review for the treatment of heart failure with reduced ejection fraction.
We added omecamtiv mecarbil to our portfolio in 2017. In November 2020, results from the Phase 3 GALACTIC-HF trial of omecamtiv mecarbil in patients with heart failure were presented at the American Hearth Association Scientific Sessions which showed that the trial met the primary composite endpoint of reduction in cardiovascular death or heart failure events, but did not meet the secondary endpoint of reduction in cardiovascular death. Cytokinetics subsequently regained global rights to develop and commercialize omecamtiv mecarbil when Amgen and Servier elected to terminate their collaboration agreement. Following the Phase 3 results and termination of the collaboration announced in 2020, given the uncertainty around the future of omecamtiv mecarbil at the time, we recognized an impairment charge of $65 million related to the write-off of the associated financial royalty asset of $90 million and its associated provision of $25 million in 2020. If approved, global end market sales of omecamtiv mecarbil are projected to grow to approximately $300 million in 2030, according to Visible Alpha.
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Pelabresib
Pelabresib is a bromodomain and extra-terminal inhibitor in Phase 3 development by MorphoSys for myelofibrosis. We added pelabresib to our portfolio in July 2021. If approved, global end market sales of pelabresib are projected to grow to approximately $375 million in 2030, according to Visible Alpha.
Pelacarsen
Pelacarsen is in Phase 3 development by Novartis for the treatment specifically targeting elevated lipoprotein(a), and independent, inherited and causal risk factor for cardiovascular disease. We added pelacarsen to our portfolio in January 2023. If approved, global end market sales of pelacarsen are projected to grow to approximately $825 million in 2030, according to Visible Alpha.
Seltorexant
Seltorexant is a selective orexin 2 receptor antagonist in Phase 3 development for the treatment of major depressive disorder with insomnia symptoms by Johnson & Johnson. We added seltorexant to our portfolio in January 2021. If approved, global end market sales of seltorexant are projected to grow to approximately $225 million in 2030, according to Visible Alpha.
Trontinemab
Trontinemab is a fully human monoclonal antibody that targets and binds to aggregated forms of beta-amyloid and activates immune cells in the brain to clear amyloid plaque and prevent further accumulation. Trontinemab is in Phase 2a development and uses Roche’s brain shuttle technology, which is designed to transfer the drug across the blood brain barrier and increase the antibody concentration in the brain. We added trontinemab to our portfolio in July 2021. Visible Alpha does not currently have estimates available for global end market sales of trontinemab in 2030.
Tulmimetostat
Tulmimetostat, formerly known as CPI-0209, is a second-generation enhancer of zeste homolog 2 inhibitor, in Phase 2 development by MorphoSys for hematological malignancies and solid tumors. We added tulmimetostat to our portfolio in July 2021. If approved, global end market sales of tulmimetostat are projected to grow to approximately $25 million in 2030, according to Visible Alpha.
Zavegepant
Zavegepant is a small molecule calcitonin gene-related peptide receptor antagonist under FDA regulatory review for the acute treatment of migraine and in Phase 3 development for the prevention of migraine. If approved, zavegepant will be marketed by Pfizer following its acquisition of Biohaven in October 2022.
We added zavegepant to our portfolio in June 2018 and purchased an additional interest as part of our expanded funding agreement with Biohaven in August 2020. We estimate that our royalties will substantially end between 2034 and 2036. As a result of an additional transaction in 2020, we are also entitled to success-based milestone payments, the first of which would be paid upon initial FDA approval of zavegepant. If approved, global end market sales of zavegepant are projected to grow to approximately $850 million in 2030, according to Visible Alpha.
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Royalty Portfolio Summary
The table below provides a summary of the estimated royalty expiration and the royalty rates for our portfolio:
Product Therapeutic Area Estimated Royalty Duration (1)
Royalty Rate (2)
Approved Products
Cystic fibrosis franchise Rare disease 2037 (3)
For combination therapies, sales are allocated equally to each of the active pharmaceutical ingredients; tiered royalties ranging from single digit to subteen percentages on annual worldwide net sales of ivacaftor, lumacaftor and tezacaftor, and mid-single digit percentages on annual worldwide net sales of elexacaftor
Nurtec ODT Neurology 2034-2036 2.1% royalty on annual combined worldwide net sales of Nurtec ODT and zavegepant up to $1.5 billion and 1.5% on annual combined worldwide net sales above $1.5 billion. 0.4% incremental royalty on all Nurtec ODT worldwide net sales
Tysabri Neurology Perpetual Contingent payments of 18% on annual worldwide net sales up to $2.0 billion and 25% on annual worldwide net sales above $2.0 billion
Imbruvica Cancer 2027-2032 Tiered royalties in the mid-single digits on annual worldwide net sales
Xtandi Cancer 2027-2028 Royalty of slightly less than 4% on worldwide net sales
Promacta Hematology 2025-2028 Tiered royalty ranging from 4.7% to 9.4% on annual worldwide net sales
Tremfya Immunology 2031-2032 Mid-single digit, tiered royalty on annual worldwide net sales
Trelegy Respiratory 2029-2030 (4)
Royalties are tiered based on annual net sales at 6.5% up to $750 million, 8.0% on sales between $750 million and $1.25 billion, 9.0% on sales between $1.25 billion and $2.25 billion, 10.0% over $2.25 billion
Cabometyx/Cometriq Cancer 2026-2029 (5)
3% royalty on worldwide net sales
Farxiga/Onglyza Diabetes 2025 Payments equivalent to low-single digit downward tiered royalty on annual worldwide net sales
Evrysdi Rare disease 2030-2035 (6)
Tiered royalties of 3.4% on worldwide net sales up to $500 million, 4.7% on net sales between $500 million and $1 billion, 6.0% on net sales between $1 billion and $2 billion 6.9% on net sales over $2 billion (7)
Prevymis Infectious disease 2029 Low-double digit royalty on annual worldwide net sales up to $300 million
Trodelvy Cancer Perpetual 4.15% royalty on annual worldwide net sales up to $2 billion, declining stepwise based on sales tiers to 1.75% on net sales above $6 billion
Orladeyo Rare disease 2036-2039 (8)
9.50% royalty on direct annual net sales of up to $350 million, 4.50% on sales between $350 million and $550 million, and no royalties on sales over $550 million; tiered percentage of sublicense revenue in certain territories
Erleada Cancer 2032 Low-single digit royalties on worldwide net sales
Crysvita Rare disease 2033-2038 (9)
10% royalty on EU, U.K. and Switzerland net sales
Emgality Neurology 2033 Low-single digit royalty on annual worldwide net sales
Oxlumo Rare disease 2034-2035 Royalties in the mid- to high-single digits based on annual worldwide net sales
Spinraza (10)
Rare disease 2030-2035 (11)
Tiered royalties on up to $1.5 billion of annual worldwide net sales at rates ranging from 2.8% to 3.8% through 2027 and increasing to 5.0% to 6.8% in 2028 (12)
Airsupra (13)
Respiratory 2030 (14)
Tiered royalties in the low-single digits on annual U.S. net sales (15)
Development-Stage Product Candidates
Aficamten Cardiology — 4.5% royalty on annual worldwide net sales up to $1 billion and 3.5% on net sales above $1 billion, subject to certain potential step-downs
Ampreloxetine Neurology — Low- to mid-single digit royalty on worldwide net sales
BCX10013 Rare disease — 3.0% royalty on annual worldwide net sales up to $1.5 billion and 2.0% royalty on annual worldwide net sales between $1.5 billion and $3.0 billion
MK-8189 Neurology — Royalty on worldwide net sales
Olpasiran Cardiology — Up to low-double digit tiered royalties on worldwide net sales
Omecamtiv mecarbil Cardiology 2032-2034 Mid-single digit royalty on worldwide net sales
Pelabresib Cancer — 3.0% royalty on annual worldwide net sales
Pelacarsen (16)
Cardiology — Upward-tiered mid-single digit royalties on worldwide net sales (17)
Seltorexant Neurology — Mid-single digit royalty on worldwide net sales
Trontinemab
Neurology — Tiered royalties ranging between 3.3% and 4.2% on annual worldwide net sales (18)
Tulmimetostat (19)
Cancer — 3.0% royalty on worldwide net sales
Zavegepant Neurology 2034-2036 2.1% royalty on annual combined worldwide net sales of Nurtec ODT and zavegepant up to $1.5 billion and 1.5% on annual combined worldwide net sales above $1.5 billion. Up to a 3.0% incremental royalty on zavegepant worldwide net sales up to $1.5 billion and up to 2.0% incremental royalty on zavegepant worldwide net sales above $1.5 billion
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Notes:
(1) Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography. There can be no assurances that our royalties will expire when expected.
(2) The royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements.
(3) Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry.
(4) We will pay Theravance Biopharma, Inc. 85% of the royalties in respect of ex-U.S. net sales after June 30, 2029 and 85% of the royalties in respect of U.S. net sales after December 31, 2030.
(5) Royalties on net sales of cabozantinib products in the United States through September 2026 and non-U.S. markets through the full term of the royalty.
(6) Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion.
(7) We are entitled to approximately 43% of the tiered royalties ranging from 8% to 16% for Evrysdi.
(8) Royalty is perpetual; years shown represent estimated United States patent expiration for Orladeyo and potential sales decline based on timing of generic entry.
(9) Royalties expire when we receive aggregate royalties equal to $608 million if that happens prior to December 31, 2030, and otherwise when we receive aggregate royalties of $800 million.
(10) We acquired an interest in Ionis Pharmaceuticals, Inc.’s (“Ionis”) royalty in Biogen's Spinraza in January 2023.
(11) Our royalty interest in Spinraza will revert to Ionis after we receive aggregate Spinraza royalties equal to $475 million or $550 million, depending on the timing and occurrence of certain events.
(12) We are entitled to 25% of Ionis’ Spinraza royalty payments of 11% to 15% on annual worldwide net sales through 2027, increasing to 45% of royalty payments in 2028.
(13) Product formerly known as PT027.
(14) AstraZeneca is entitled to certain buyout rights which, if exercised, would result in earlier expiration.
(15) Represents the portion of the royalties on Airsupra that we are entitled to based on our minority ownership stake in Avillion II.
(16) We acquired an interest in Ionis’ royalty in Novartis' pelacarsen in January 2023.
(17) We are entitled to 25% of Ionis’ pelacarsen royalty payments of mid-teens to low-20% on annual worldwide net sales.
(18) We are entitled to 60% of MorphoSys’ trontinemab royalty payments ranging from 5.5% to 7% of worldwide net sales.
(19) Product formerly known as CPI-0209.
There can be no assurance that our royalties will expire when expected. Any reductions in the durations of royalties relative to our estimates may adversely affect our financial condition and results of operations. See “Risk Factors” in Item 1A, Risk Factors for further information.
Fixed Payment Arrangements
The table below provides a summary of our fixed payment arrangements:
Funding Arrangement Therapeutic Area Key Terms (1)
Zavegepant Success-Based Milestones
Neurology • Success-based milestone payments from 1.9 to 2.95 times the funded amount of $250.0 million, depending on specific zavegepant regulatory approvals.
• Success-based milestone payment of $475.0 million, or 1.9 times the funded amount, if zavegepant’s first regulatory approval in migraine is achieved.
• Incremental payments of up to 1.05 times the funded amount may be triggered by certain additional regulatory approvals.
• Each milestone event achieved will result in an accelerated lump sum payment.
MorphoSys Development Funding Bonds
Not applicable
• Payments to us of approximately 2.2 times the $300.0 million funded amount.
• Expected payments in 36 consecutive quarterly payments from the fourth quarter of 2024.
Cytokinetics Commercial Launch Funding
Cardiology • Up to five tranches totaling $300.0 million, including first $50.0 million tranche funded in the first quarter of 2022.
• Payments to us of 1.9 times the amount drawn, except for the second and third tranches, which each total 2.0 times the amount drawn.
• Required draw of $50.0 million if a certain contingency is met and optional draw of the remaining $200.0 million if certain regulatory and clinical development milestones are met.
• Each subsequent tranche has a 12-month draw period once certain clinical and regulatory milestones are met.
• 34 consecutive quarterly payments to us on the last business day of the seventh quarter following the quarter of the funding date for each tranche.
(1) Our fixed payment arrangements are subject to the underlying contractual agreements and legal instruments from which they arise and may be subject to reduction, accelerations, and other adjustments in accordance with the respective terms of such agreements and instruments.
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Competition
We face competition from other entities that acquire biopharmaceutical royalties, including competitors to the Manager that are in the similar business of acquiring biopharmaceutical royalties. There are a limited number of suitable and attractive acquisition opportunities available in the market. Therefore, competition to acquire such assets is intense. The Manager is subject to competition from other potential royalty buyers, including from the companies that market the products on which royalties are paid, financial institutions and other entities. These other potential royalty buyers may be larger and better capitalized than us. The Manager may not be able to identify and obtain a sufficient number of asset acquisition opportunities to invest the full amount of capital that may be available to us. We also compete with other forms of financing available to biopharmaceutical companies, such as equity, debt or convertible debt financing and licensing opportunities. If biopharmaceutical companies opt to finance through such other means, we may not be able to acquire additional assets or grow our business. There can be no assurance that we will continue to acquire biopharmaceutical products and companies that hold biopharmaceutical royalties that are acceptable to us.
The products that provide the basis for the cash flows of the biopharmaceutical products in which we invest are also subject to intense competition. The biopharmaceutical industry is a highly competitive and rapidly evolving industry. The length of any product’s commercial life cannot be predicted. There can be no assurance that one or more products will not be rendered obsolete or non-competitive by new or alternate products or improvements made to existing products, either by the current marketer of such products or by another marketer. Adverse competition, obsolescence, governmental and regulatory action, or healthcare policy changes could significantly affect the revenues, including royalty-related revenues, of the products which serve as the security or other support for the payments due under the biopharmaceutical products that we hold.
Competitive factors affecting the market position and success of each product include:
• effectiveness;
• safety and side effect profile;
• price, including third-party insurance reimbursement policies;
• timing, introduction and marketer support of the product;
• efficacy and execution of marketing and commercialization strategy;
• market acceptance;
• manufacturing, supply and distribution;
• governmental regulation, including price caps;
• availability of lower-cost generics or biosimilars;
• intellectual property protection and exclusivity;
• treatment innovations that eliminate or minimize the need for a product; and
• product liability claims.
Products for which we have a royalty receivable or other interest may be rendered obsolete or non-competitive by new or alternate products, including generics or biosimilars, improvements on existing products or governmental or regulatory action. In addition, as biopharmaceutical companies increasingly devote significant resources to innovate next-generation products and therapies, products on which we have a royalty may become unattractive to commercialize or obsolete. If a product’s market acceptance is diminished or it is withdrawn from the market, continuing payments with respect to biopharmaceutical products, including royalty payments and payments of interest on and repayment of the principal, may not be made on time or at all, which may affect our ability to realize the benefits of the royalty receivable or other interest in such product and may result in us incurring asset impairment charges. Further, any product for which we have a royalty receivable or other interest that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Many approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. Any of these developments could adversely affect products for which we have a royalty, and consequently could adversely affect our business, financial condition and results of operations.
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Corporate Responsibility
We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharma industry, collaborating with innovators from academic institutions, research hospitals and non-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. Our sustainability efforts reflect the uniqueness of our business model. We believe that our environmental, social and governance (ESG) strategy, policies and practices will create sustainable long-term value for our company, our employees, our shareholders and other stakeholders while also helping us reduce risk and identify new opportunities.
Governance
Risk management, compliance and high ethical standards are foundational to our culture. One of our most valuable assets is our reputation for integrity, professionalism, fairness and good stewardship. Our strong corporate governance program, from board oversight to robust management practices, aligns the interests of our stakeholders and underpins our market-leading position and the high esteem with which we are held in the life sciences industry.
Culture
We believe our people are the key to our success and are what sets us apart. We seek to have a well-rounded, diverse workplace, which reflects our shareholders and other stakeholders with whom we collaborate, and the communities in which we live and work. We value diverse teams and backgrounds: as of December 31, 2022, 52% of the workforce of our Manager are women and approximately 33% of the workforce of our Manager are ethnically diverse.
Social
We collaborate with organizations seeking to address health needs, improve health outcomes, spur innovation and expand patient care opportunities. Approximately one-fourth (by value) of the royalty transactions we have completed since 2012 have been with leading academic and non-profit institutions. By partnering with these institutions, we have provided capital which has been used to further scientific research (for example, the Cystic Fibrosis Foundation). Our philanthropy seeks to address the challenges of a complex and evolving world by providing funds and resources to support programs that enable innovation in the life sciences, reduce the risk of disease, strengthen access to healthcare and ensure equal access to quality healthcare. We are committed to good corporate citizenship and actively support the work of a number of patient advocacy groups and medical research foundations, including the Leukemia & Lymphoma Society, National Multiple Sclerosis Society, Lupus Research Alliance, Melanoma Research Alliance and Prostate Cancer Foundation.
Employees
Our directors and executive officers manage our operations and activities. However, we do not currently have any employees or any officers other than our executive officers. Pursuant to the management agreements entered into in connection with our initial public offering (collectively, the “Management Agreement”) with the Manager, the Manager performs corporate and administration services for us.
As of December 31, 2022, the Manager had 75 employees. None of these employees are represented by labor unions or covered by any collective bargaining agreement. We believe that the Manager’s relations with its employees are satisfactory.
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Human Capital
Because we are “externally managed,” we do not employ our own personnel, but instead depend upon the Manager and its executive officers and employees for all of the services we require. Under the Management Agreement, the Manager manages the assets of our business and sources and evaluates royalty acquisitions. Accordingly, our success is dependent upon the expertise and services of the executive officers and other personnel provided to us through the Manager. The Manager is responsible for the selection of these executive officers and other personnel, and our Board of Directors reviews personnel with the Manager with the objective of evaluating the Manager’s internal capabilities. The Management Development and Compensation Committee of our Board of Directors in consultation with the Manager also plans for the succession of senior management of the Manager. The Management Agreement requires the Manager’s executives to devote substantially all of their time to managing us, Royalty Pharma Investments 2019 ICAV (“RPI” or “RPI 2019 ICAV”) and any legacy vehicles related to Royalty Pharma Investments, an Irish unit trust (“Old RPI”) unless otherwise approved by our Board of Directors.
Governmental Regulation and Environmental Matters
Our business has been and will continue to be subject to numerous laws and regulations. Failure to comply with these laws and regulations could subject us to administrative and legal proceedings and actions by various governmental bodies. See “Risk Factors” in Item 1A, Risk Factors for further information. Our compliance with these laws and regulations has not had a material impact on our capital expenditures, earnings, financial condition or competitive position in excess of those affecting
others in our industry.
We believe that there are no compliance issues with laws and regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have adversely affected, or are reasonably expected to adversely affect, our business, financial condition and results of operations, and we do not currently anticipate material capital expenditures arising from environmental regulation. We believe that climate change could present risks to our business. Some of the potential impacts of climate change to our business include increased operating costs due to additional regulatory requirements and the risk of disruptions to our business. We do not believe these risks are material to our business at this time.
U.S. Investment Company Act Status
We intend to conduct our business so as not to become regulated as an investment company under the U.S. Investment Company Act. An entity generally will be determined to be an investment company for purposes of the U.S. Investment Company Act if, absent an applicable exemption, (i) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the ICA 40% Test.
We do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities, and believe that we are not engaged primarily in the business of investing, reinvesting or trading in securities. We believe that, for U.S. Investment Company Act purposes, we are engaged primarily, through one or more of our subsidiaries, in the business of purchasing or otherwise acquiring certain obligations that represent part or all of the sales price of merchandise. Our subsidiaries that are so engaged rely on Section 3(c)(5)(A) of the U.S. Investment Company Act, which, according to certain SEC staff interpretations, generally may be available to an issuer that invests at least 55% of its assets in “notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services,” which we refer to as ICA Exception Qualifying Assets, and that does not issue any redeemable securities, face-amount certificates of the installment type or periodic payment plan certificates.
In a no-action letter, dated August 13, 2010, to our predecessor, the SEC staff promulgated an interpretation that royalties that entitle an issuer to collect royalty receivables that are directly based on the sales price of specific biopharmaceutical assets that use intellectual property covered by specific license agreements are ICA Exception Qualifying Assets under Section 3(c)(5)(A). We rely on this no-action letter for the position that royalty receivables relating to biopharmaceutical assets that we hold are ICA Exception Qualifying Assets under Section 3(c)(5)(A) and Section 3(c)(6), which is described below.
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As the parent of one or more subsidiaries that rely on Section 3(c)(5)(A), we currently are exempted from registration as an investment company based on Section 3(a)(1)(C) and/or Section 3(c)(6) of the U.S. Investment Company Act. To ensure that we are not obligated to register as an investment company, we must not exceed the thresholds provided by the ICA 40% Test. For purposes of the ICA 40% Test, the term “investment securities” does not include U.S. government securities or securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on Section 3(c)(1) or Section 3(c)(7) of the U.S. Investment Company Act, such as majority-owned subsidiaries that rely on Section 3(c)(5)(A). We also may rely on Section 3(c)(6), which, based on SEC staff interpretations, requires us to invest, either directly or through majority-owned subsidiaries, at least 55% of our assets in, as relevant here, businesses relying on Section 3(c)(5)(A). For a subsidiary to be “majority-owned,” a parent entity must own a majority of the voting securities of the applicable security. Therefore, the assets that we and our subsidiaries hold and acquire are limited by the provisions of the U.S. Investment Company Act and the rules and regulations promulgated thereunder.
If the SEC or its staff in the future adopts a contrary interpretation to that provided in the no-action letter to Royalty Pharma or otherwise restricts the conclusions in the SEC staff’s no-action letter such that royalties are no longer treated as ICA Exception Qualifying Assets for purposes of Section 3(c)(5)(A) and Section 3(c)(6), or the SEC or its staff in the future determines that the no-action letter does not apply to some or all types of royalty receivables relating to biopharmaceutical assets, our business will be materially and adversely affected. In particular, we would be required either to convert to a corporation formed under the laws of the United States or a state thereof (which would likely result in our being subject to U.S. federal corporate income taxation) and to register as an investment company, or to stop all business activities in the United States until such time as the SEC grants an application to register us as an investment company formed under non-U.S. law. It is unlikely that such an application would be granted and, even if it were, requirements imposed by the Investment Company Act, including limitations on our capital structure, our ability to transact business with affiliates and our ability to compensate key employees, could make it impractical for us to continue our business as currently conducted. Our no longer qualifying for an exemption from registration as an investment company would materially and adversely affect the value of your Class A ordinary shares and our ability to pay dividends in respect of our Class A ordinary shares.
Corporate Information
Our predecessor was founded in 1996 and we were incorporated under the laws of England and Wales on February 6, 2020. We are a holding company, and our principal asset is a controlling equity interest in Royalty Pharma Holdings Ltd (“RP Holdings”). Our principal executive offices are located at 110 East 59 th Street, New York, NY 10022, and our telephone number is (212) 883-0200. Our Internet site is www.royaltypharma.com. Our website and the information contained therein or connected thereto is not incorporated into this Annual Report on Form 10-K. Our agent for service in the United States is CSC North America located at 251 Little Falls Drive, Wilmington, Delaware, 19808.
Available Information
Our reports filed with or furnished to the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available, free of charge, on the Investors section of our website at https://royaltypharma.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website at http://www.sec.gov that contains reports, and other information regarding us and other companies that file materials with the SEC electronically. We use the Investor section of our website as a means of disclosing material information. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings, and public conference calls and webcasts. Statements and information concerning our status as a Passive Foreign Investment Company (“PFIC”) for U.S. taxpayers are also available, free of charge, on the Investors section of our website under “Tax Information.” The information contained on or connected to the websites referenced in this Annual Report on Form 10-K is not incorporated by reference into this filing. Further, references to website URLs are intended to be inactive textual references only.
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