What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2024-02-15 compared with 2023-02-15 · 373 added, 597 removed, 367 unchanged (73% of the section changed)

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Class A ordinary shares are traded in the Nasdaq Global Select Market under the symbol “RPRX”.

Our Class A ordinary shares are traded under the symbol “RPRX” on the Nasdaq Global Select Market.

Our Class B ordinary shares are not listed on any stock exchange nor traded on any public market.

14 unchanged sentences

Issuer Purchases of Equity Securities

Share repurchase activities of our Class A ordinary shares during the fourth quarter of 2023 are as follows (in thousands, except per share amounts):

Periods Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (1)

October 1, 2023 - October 31, 2023 957 $ 27.32 957 $ 695,241

November 1, 2023 - November 30, 2023 — — — 695,241

December 1, 2023 - December 31, 2023 — — — 695,241

Total 957 27.32 957

(1) On March 27, 2023, we announced our board of directors authorized a share repurchase program under which we may repurchase up to $1.0 billion of our Class A ordinary shares.

The share repurchase program expires on June 23, 2027.

The share repurchase program does not obligate us to acquire a minimum amount of our Class A ordinary shares.

Under the share repurchase program, Class A ordinary shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act.

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, 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 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 plc is a public limited company that was incorporated under the laws of England and Wales to facilitate our initial public offering (“IPO”) in 2020.

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

2 unchanged sentences

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 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 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, GSK’s Trelegy, Roche’s Evrysdi, Johnson & Johnson’s Tremfya, Biogen’s Tysabri and Spinraza, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Novartis’ Promacta, Pfizer’s Nurtec ODT, Gilead’s Trodelvy, among others, and 14 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 industry leading royalty portfolio and capital-efficient business model drives our compounding growth.

We have a focused strategy of actively identifying and tracking the development and commercialization of important new therapies, which allows us to move quickly to make acquisitions when opportunities arise.

With a deep and experienced team of investment professionals, an exhaustive due diligence process and a focus on high-quality therapies that address significant unmet patient need, we sustain attractive returns above our cost of capital, which in turn propels our compounding growth.

Our unique 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.

We classify our royalty acquisitions by the approval status of the therapy at the time of acquisition:

• 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 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.

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

From 2012 through 2023, we deployed $13.8 billion to acquire royalties, milestones and other contractual receipts 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 2022, we have deployed $8.3 billion to acquire royalties, milestones and related assets on development-stage product candidates.

From 2012, when we began acquiring royalties on development-stage product candidates, through 2023, we deployed $8.3 billion to acquire royalties, milestones and other contractual receipts 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.

14 unchanged sentences

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.

Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.

Background and Format of Presentation

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.

Through the Exchange Offer, investors which represented 82% of the aggregate limited partnership interests in the various partnerships (the “Legacy Investors Partnerships”) that owned Royalty Pharma Investments, an Irish unit trust (“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”).

We operate and control the business affairs of Royalty Pharma Holdings Ltd (“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.

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.

RP Holdings is the sole owner of Royalty Pharma Investments 2019 ICAV (“RPI 2019 ICAV”), which is an Irish collective asset management vehicle and is the successor to Old RPI.

Following the Exchange Offer, we became the indirect owner of 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 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.

Prior to December 29, 2023, the remaining 34% of RPCT was owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), which was wholly owned by Royalty Pharma Select, an Irish unit trust.

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.

In December 2023, RPI 2019 ICAV acquired the remaining interest in RPCT owned by RPSFT and as such RPSFT no longer holds a non-controlling interest in RPCT.

Prior to December 2023, we reported non-controlling interest related to a de minimis interest in RPCT held by RPSFT, which also existed prior to our IPO.

Understanding Our Financial Reporting

4 unchanged sentences

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.

We then calculate our expected royalty receipts by applying our royalty terms to these consensus sales forecasts.

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 as non-cash provision expense.

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 reverse the provision expense previously recorded in part or in full by recording a non-cash credit to the provision.

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 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.

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 and shortly after, 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 because of these changes in sales forecasts, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017.

The recognition of the associated non-cash provision income of $1.10 billion in 2019 was not tied to royalty receipts, but rather to the increase in sales forecasts.

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

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.

1 unchanged sentence

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

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 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.

The closest comparable GAAP measure to each of the non-GAAP measures that management review is Net cash provided by operating activities .

The key non-GAAP metrics we focus on are Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow, each of which is further discussed in the section titled “Non-GAAP Financial Results.”

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 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.

Refer to the section titled “Non-GAAP Reconciliations” for additional discussion of management’s use of non-GAAP measures as supplemental financial measures.

Portfolio Overview

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 2022 and 2021 in order of contributions to royalty receipts for 2022 (in thousands).

Royalty Receipts

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

Xtandi Pfizer, Astellas Cancer 186,701 158,103

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

Farxiga/Onglyza AstraZeneca Diabetes 43,840 36,378

Evrysdi Roche Rare disease 40,645 16,098

Prevymis Merck & Co.

Infectious disease 37,126 37,505

Trodelvy Gilead Cancer 24,809 13,395

Orladeyo BioCryst Rare disease 21,801 6,740

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

Other products (4) 262,739 404,019

Total royalty receipts $ 3,231,256 $ 2,608,542

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

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:

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 $2.1 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 $2.8 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.

Given the importance of cash flows and their predictability to management’s operation of the business, management uses Portfolio Receipts (as defined below) as a primary measure of our operating performance.

See “ — Portfolio Overview” for additional discussion regarding Portfolio Receipts.

Understanding Our Results of Operations

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 Legacy Investors Partnerships’ ownership of approximately 18% of Old RPI and 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.

In December 2023, we acquired the remaining interest in RPCT that was held by RPSFT and as such RPSFT no longer holds a non-controlling interest in RPCT.

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

After December 2023, the Legacy Investors’ Partnerships are the only remaining legacy non-controlling interests.

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.

The Continuing Investors Partnerships’ ownership in RP Holdings through their indirect ownership of RP Holdings Class B Interests was approximately 25% as of December 31, 2023.

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.”

As the Continuing Investors Partnerships conduct exchanges, the Continuing Investors Partnerships’ indirect ownership in RP Holdings decreases and the value of this non-controlling interest decreases.

Additionally, RP Holdings began to retire RP Holdings Class A Interests held by us in connection with our repurchase of our Class A ordinary shares.

As RP Holdings retires RP Holdings Class A Interests, our ownership in RP Holdings decreases and the value of this non-controlling interest increases.

The Continuing Investors Partnerships are referred to 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.

EPA Holdings is entitled to receive equity distributions through its RP Holdings Class C Special Interest (“Equity Performance Awards”).

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.

2 unchanged sentences

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 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.

Total income and other revenues is primarily comprised of interest 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 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:

For 2023 and 2022, the royalty payors that accounted 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,

2 unchanged sentences

AbbVie Imbruvica * 14 %

*Represents less than 10%.

Income from financial royalty assets

11 unchanged sentences

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.

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 future periods.

Other royalty income

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.

Other royalty income primarily includes income and milestones 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.

8 unchanged sentences

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).

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.

4 unchanged sentences

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 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.

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

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 (as defined in the Management Agreement), or Portfolio Receipts 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 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

1 unchanged sentence

Legacy SLP Interest.

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

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

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

3 unchanged sentences

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.

Other income, net

Other income, 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.”

Following our acquisition of the remaining non-controlling interest in RPCT held by RPSFT in December 2023 and as the Legacy Investors Partnerships no longer participate in investment opportunities, the related net income attributable to the legacy non-controlling interests is expected to decline over time as the assets held by Old RPI and RPI ICAV mature.

Net income attributable to the continuing non-controlling interests includes RP Holdings Class B Interests indirectly 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 indirectly 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 the section titled “Understanding Our Financial Reporting.”

Results of Operations

1 unchanged sentence

For a discussion of 2022 compared to 2021, 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, 2022.

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

The comparison of our historical results of operations for 2023 and 2022 is as follows (in thousands):

Years Ended December 31, Change

10 unchanged sentences

General and administrative expenses 249,748 227,303 22,445 9.9 %

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

Financial royalty asset impairment — 615,827 (615,827) (100.0) %

Total operating expenses, net 862,404 1,930,150 (1,067,746) (55.3) %

Operating income 1,492,150 307,065 1,185,085 385.9 %

Other expense/(income)

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

Other (income)/expense

Equity in (earnings)/losses of equity method investees (28,882) 8,973 (37,855) *

Interest expense 187,187 187,961 (774) (0.4) %

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

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

Other income, net (366,243) (119,933) (246,310) 205.4 %

Total other (income)/expense, net

(207,938) 77,001 (284,939) *

Consolidated net income 1,700,088 230,064 1,470,024 639.0 %

10 unchanged sentences

Tysabri 167,536 207,164 (39,628) (19.1) %

Zavzpret 153,649 — 153,649 n/a

Tremfya 149,716 109,796 39,920 36.4 %

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

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

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

Trelegy 128,051 57,931 70,120 121.0 %

Other products 573,328 630,329 (57,001) (9.0) %

Total income from financial royalty assets $ 2,197,754 $ 2,125,096 $ 72,658 3.4 %

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.

Income from financial royalty assets increased by $72.7 million, or 3.4%, in 2023 compared to 2022, primarily driven by the FDA approval of Pfizer’s Zavzpret in March 2023.

This FDA approval resulted in our receipt of a $475.0 million milestone payment, of which we recognized $153.6 million as interest income in the first quarter of 2023.

The difference between the milestone payment and interest income is attributable to the derecognition of the related financial royalty asset and the settlement of the related derivative instrument.

Income from recently acquired assets, primarily Trelegy, also contributed to the increase, partially offset by a decline in sell-side equity research analysts’ consensus sales forecasts for Imbruvica.

Revenue from intangible royalty assets

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.

Revenue from intangible royalty assets decreased by $36.6 million, or 97.8%, in 2023 compared to 2022, primarily driven by the maturity of our royalties on Januvia and Janumet in the first quarter of 2022.

Other 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.

Other royalty inco me increased by $81.3 million, or 109.0%, in 2023 compared to 2022, primarily driven by a one-time $50.0 million receipt from Pfizer related to the oral formulation of zavegepant and income from fully amortized financial royalty assets, which were reflected as Income from financial royalty assets in 2022.

Provision for changes in expected cash flows from financial royalty assets

2 unchanged sentences

Royalty 2023 Royalty 2022

Imbruvica $ 423,832 Tazverik $ 210,567

Tysabri $ 222,285 Imbruvica $ 423,832

Tazverik 177,850 Emgality 68,716

Xtandi 63,524 Cystic fibrosis franchise 48,636

Evrysdi 46,077 Tysabri (96,103)

Imbruvica 220,127 Tysabri 195,665

Tremfya 120,733 Tazverik 177,850

Promacta (41,617) Xtandi 63,524

Evrysdi (46,077) Evrysdi 46,077

Other 62,920 Other 191,094

2 unchanged sentences

Total provision $ 560,656 Total provision $ 904,244

In 2023, we recorded provision expense of $560.7 million, comprised of $538.4 million and $22.3 million in provision expense for changes in expected cash flows and provision expense for current expected credit losses, respectively.

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

The provision expense for credit losses was primarily driven by the additions of Skytrofa and Adstiladrin to our portfolio.

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 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 decreased by $125.1 million, or 70.6%, in 2023 compared to 2022.

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.

In 2023, we recognized R&D funding expense of $50.0 million related to a clinical milestone payment that was triggered under the agreement with Cytokinetics, Incorporated (“Cytokinetics”).

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, Theravance Biopharma, Inc.

and MSD International Business GmbH.

G&A expenses increased by $22.4 million, or 9.9%, in 2023 compared to 2022, primarily driven by higher Operating and Personnel Payments following the year-over-year increase in Portfolio Receipts.

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.

We did not recognize any financial royalty impairments in 2023.

We recognized financial royalty asset impairments of $615.8 million in 2022, comprised 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.

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

Equity in (earnings)/losses of equity method investees

Equity in earnings of equity method investees was $28.9 million in 2023 compared to equity in losses of equity method investees of $9.0 million in 2022, primarily driven by income allocation from the Avillion Entities of $24.6 million in 2023 as compared to a loss allocation of $12.0 million in 2022.

The income allocation in 2023 from the Avillion Entities was primarily due to an $80.0 million payment the Avillion Entities received from AstraZeneca’s election to exercise an option to commercialize Airsupra in the United States.

Interest expense

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

Interest expense was relatively unchanged in 2023 as compared to 2022.

In September 2023, we repaid $1.0 billion of senior unsecured notes.

The weighted average coupon rate on our senior unsecured notes outstanding as of December 31, 2023 and 2022 was 2.48% and 2.24%, respectively.

Refer to the “Liquidity and Capital Resources” section for additional discussion of the debt financing instruments.

Other income, net

Other income, net of $366.2 million in 2023 was primarily comprised of $230.8 million of gains on available for sale debt securities, $87.1 million of gains on equity securities and $72.3 million of interest income earned on cash held in banks and money market funds.

The gains on available for sale debt securities were primarily driven by the change in fair value of the funded amount of the Development Funding Bonds that were issued to us by MorphoSys.

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.

1 unchanged sentence

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.

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.

Net income attributable to the Legacy Investors Partnerships increased by $14.6 million in 2023 compared to 2022, primarily driven by higher net income attributable to Old RPI.

Net income attributable to the Continuing Investors Partnerships increased by $369.0 million in 2023 compared to 2022, primarily driven by non-cash impairment charges and higher provision expense recognized in 2022.

This was partially offset by exchanges by investors in the Continuing Investors Partnerships who indirectly own RP Holdings Class B Interests for our Class A ordinary shares, which resulted in a decline in the Continuing Investors Partnerships’ indirect ownership of RP Holdings.

Net income attributable to RPSFT decreased by $5.5 million in 2023 compared to 2022 as the assets held by RPCT mature.

Portfolio Overview

Our business model is different from that of traditional operating companies in the biopharmaceutical industry.

Our operating performance is a function of our liquidity as our operations have historically been financed primarily with cash flows generated by our royalties.

We use the cash generated by our existing royalties to fund investments in new royalties.

We consider a variety of metrics in assessing the performance of our business.

Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments.

Portfolio Receipts also enables management to better analyze our liquidity and long-term growth prospects by providing a more granular product-by-product presentation of the underlying cash generation of our royalty investments.

Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts.

Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that is attributed to us.

Milestones and other contractual receipts include sales-based or regulatory milestones payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that is attributed to us.

Portfolio Receipts does not include proceeds from equity securities or proceeds from purchases and sales of marketable securities, both of which are not central to our fundamental business strategy.

Portfolio Receipts is calculated as the sum of the following line items from our GAAP consolidated statements 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 equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts , which represent contractual distributions of royalty receipts, milestones and other contractual receipts to the Legacy Investors Partnerships and RPSFT.

Our portfolio consists of royalties on more than 35 marketed therapies and 14 development-stage product candidates.

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

The table below shows Portfolio Receipts, including royalty receipts by product and milestones and other contractual receipts for 2023 and 2022 (in thousands).

Years Ended December 31, Change

Marketer(s) Therapeutic Area 2023 2022 $

Cystic fibrosis franchise (1) Vertex Rare disease $ 771,201 $ 690,007 $ 81,194 11.8 %

Tysabri Biogen Neuroscience 279,431 304,794 (25,363) (8.3) %

Imbruvica AbbVie, Johnson & Johnson Cancer 210,289 257,729 (47,440) (18.4) %

Trelegy GSK Respiratory 203,299 89,915 113,384 126.1 %

Promacta Novartis Hematology 161,163 149,707 11,456 7.7 %

Xtandi Pfizer, Astellas Cancer 146,418 153,884 (7,466) (4.9) %

Tremfya Johnson & Johnson Immunology 116,387 97,307 19,080 19.6 %

Evrysdi Roche Rare disease 66,072 40,645 25,427 62.6 %

Cabometyx/Cometriq Exelixis, Ipsen, Takeda Cancer 65,778 55,426 10,352 18.7 %

Spinraza Biogen Rare disease 44,628 — 44,628 n/a

Trodelvy Gilead Cancer 33,149 20,448 12,701 62.1 %

Orladeyo BioCryst Rare disease 29,337 21,801 7,536 34.6 %

Erleada Johnson & Johnson Cancer 27,377 17,620 9,757 55.4 %

Nurtec ODT/Zavzpret Pfizer Neuroscience 18,376 14,984 3,392 22.6 %

Other products (2) 276,511 354,898 (78,387) (22.1) %

Royalty receipts

$ 2,449,416 $ 2,269,165 $ 180,251 7.9 %

Milestones and other contractual receipts

599,297 520,128 79,169 15.2 %

Portfolio Receipts $ 3,048,713 $ 2,789,293 $ 259,420 9.3 %

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

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

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

Cimzia, Crysvita, Emgality, Entyvio, Farxiga/Onglyza, IDHIFA, Januvia, Janumet, Other DPP-IVs, Lexiscan, Mircera, Nesina, Prevymis, Soliqua and distributions from the Legacy SLP Interest, which are presented as Distributions from equity method investees on the Statements of Cash Flows.

Analysis of Portfolio Receipts

Below we discuss the key drivers of Portfolio 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 $81.2 million in 2023 compared to 2022.

The increase was primarily driven by the continued strong uptake of Kaftrio outside the United States and the continued performance of Trikafta in the United States, including its uptake in younger age groups.

• Tysabri – Royalty receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, decreased by $25.4 million in 2023 compared to 2022, primarily attributable to pricing pressure and competition.

• 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 $47.4 million in 2023 compared to 2022.

The decrease was largely due to increased competition and the cumulative impact of a suppressed chronic lymphocytic leukemia market.

• Trelegy – Royalty receipts from Trelegy, which is marketed by GSK for the maintenance treatment of chronic obstructive pulmonary disease and asthma, increased by $113.4 million in 2023, primarily driven by strong patient demand globally, the growth of the single inhaler triple therapy market and penetration of the class.

We acquired the Trelegy royalty in the third quarter of 2022.

• Promacta – Royalty receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia (ITP) and aplastic anemia, increased by $11.5 million in 2023 compared to 2022.

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

• Xtandi – Royalty receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, decreased by $7.5 million in 2023 compared to 2022, primarily driven by underperformance in the United States and a true-up of royalties received in 2022.

This was partially offset by sales performance in established and international markets.

• Tremfya – Royalty receipts from Tremfya, which is marketed by Johnson & Johnson for the treatment of plaque psoriasis and active psoriatic arthritis, increased by $19.1 million in 2023 compared to 2022, primarily due to market growth and continued market share gains, which were partially offset by unfavorable patient mix and rebates.

• Evrysdi – Royalty receipts from Evrysdi, which is marketed by Roche for the treatment of spinal muscular atrophy, increased by $25.4 million in 2023 compared to 2022, primarily due to strong growth globally, driven by switch and treatment naive patient starts in the United States and share gains in all major markets.

We acquired incremental royalties on Evrysdi in the fourth quarter of 2023, which will benefit Portfolio Receipts beginning in the first quarter of 2024.

• Cabometyx/Cometriq – Royalty receipts from Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and Takeda, increased by $10.4 million in 2023 compared to 2022.

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.

• Spinraza – Royalty receipts from Spinraza, which is marketed by Biogen for the treatment of spinal muscular atrophy, were $44.6 million in 2023, primarily driven by growth in the United States offset by a decline outside the United States.

We acquired the Spinraza royalty in the first quarter of 2023.

• Trodelvy – Royalty receipts from Trodelvy, which is marketed by Gilead 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, increased by $12.7 million in 2023 compared to 2022, primarily driven by growing adoption in metastatic triple-negative breast cancer in the United States and Europe and pretreated HR+/HER2- metastatic breast cancer in the United States.

• Orladeyo – Royalty receipts from Orladeyo, which is marketed by BioCryst for the treatment of hereditary angioedema, increased by $7.5 million in 2023 compared to 2022, primarily driven by patient growth in the United States and higher sales outside of the United States.

• Erleada – Royalty receipts from Erleada, which is marketed by Johnson & Johnson for the treatment of patients with prostate cancer, increased by $9.8 million in 2023 compared to 2022, primarily driven by market share gains, market growth and increased penetration from new launches for Erleada.

We acquired incremental royalties on Erleada in the second quarter of 2023.

• Nurtec ODT/Zavzpret – Royalty receipts from Nurtec ODT, which is marketed by Pfizer for the acute treatment of migraine, increased by $3.4 million in 2023 compared to 2022, primarily driven by demand growth partially offset by higher rebates.

• Other products – Royalty receipts from other products decreased by $78.4 million in 2023 compared to 2022, driven by a decline in royalty receipts from maturing royalties, primarily Januvia, Janumet and other DPP-IVs, and from Lexiscan due to generic competition.

• Milestones and other contractual receipts increased by $79.2 million in 2023 compared to 2022.

Milestones and other contractual receipts of $599.3 million in 2023 was primarily comprised of a $475.0 million milestone payment received following the FDA’s approval of Zavzpret in March 2023, a one-time $50.0 million payment from Pfizer related to the oral formulation of zavegepant, a $33.0 million commercial milestone payment related to Soliqua and a $28.7 million payment from our joint venture investee, Avillion II, for our pro rata portion of the $80 million fee paid by AstraZeneca to exercise the option to commercialize Airsupra in the United States.

Milestones and other contractual receipts of $520.1 million in 2022 was primarily comprised of redemption payments of $51.5 million related to the Series A Biohaven Preferred Shares and the accelerated redemption payments of $457.6 million for all outstanding Series A and Series B Biohaven Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.

Key Developments and Upcoming Events Relating to Our Portfolio

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

Recent key developments related to products in our portfolio are discussed below:

Commercial Products

• Cystic fibrosis franchise.

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 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 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 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.

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

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

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

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

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

In 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 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.

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 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 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.

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

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

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

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

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

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

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

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

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

to evaluate the combination of Trodelvy and Merck & 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 April 2023, Vertex announced the FDA approved the expanded use of Trikafta to include children with cystic fibrosis ages two through five years.

In May 2023, Vertex announced the FDA approved Kalydeco for use in children with cystic fibrosis ages one month to less than four months old.

In July 2023, Vertex announced the European Commission approved the label extension of Orkambi for the treatment of children with cystic fibrosis ages one to less than two years old.

In November 2023, Vertex announced that the European Commission granted approval for the label expansion of Kaftrio in in a combination regimen with ivacaftor for the treatment of children with cystic fibrosis ages two through five years old.

In February 2024, Vertex announced positive Phase 3 results from its new triple combination therapy for the treatment of cystic fibrosis.

Vertex plans to file for approval with global regulators for people with cystic fibrosis ages 6 years and older by mid-2024.

In September 2023, Sandoz announced that the European Commission granted marketing authorization for biosimilar Tyruko for relapsing forms of multiple sclerosis.

This follows FDA approval of biosimilar Tyruko in August 2023.

In March 2023, Pfizer and Astellas announced positive topline results from the Phase 3 EMBARK trial evaluating Xtandi in men with non-metastatic hormone-sensitive prostate cancer (nmCSPC) with high-risk biochemical recurrence.

The study met its primary endpoint with a statistically significant and clinically meaningful improvement in metastasis-free survival for patients treated with Xtandi plus leuprolide versus placebo plus leuprolide.

At the time of the analysis, a positive trend in the key secondary endpoint of overall survival was also observed, but these data were not yet mature.

Patients in the trial will be followed for a subsequent final overall survival analysis.

In June 2023, Pfizer announced the FDA approved Talzenna in combination with Xtandi for the treatment of adult patients with homologous recombination repair gene-mutated metastatic castration-resistant prostate cancer.

In November 2023, Astellas and Pfizer announced that the companies received an approval by the U.S.

FDA of a supplemental NDA for Xtandi for the treatment of patients with nmCSPC with biochemical recurrence at high risk for metastasis.

In May 2023, Johnson & Johnson announced positive results from the Phase 3 QUASAR Induction Study evaluating the investigational use of Tremfya in adults with moderately to severely active ulcerative colitis who had an inadequate response or intolerance to conventional and/or advanced therapies.

The data showed statistically significant and clinically meaningful improvements across symptomatic and histo-endoscopic outcome measures, as well as a greater proportion of patients treated with Tremfya compared to placebo achieved clinical remission at week 12, the study’s primary endpoint.

In August 2023, Roche announced that the European Commission approved Evrysdi for babies under two months old with spinal muscular atrophy.

In March 2023, Exelixis announced that the Phase 3 CONTACT-03 study, evaluating Cabometyx in combination with atezolizumab versus Cabometyx alone in patients with locally advanced or metastatic clear cell or non-clear cell renal cell carcinoma who progressed during or after immune checkpoint inhibitor therapy did not meet its primary endpoint of progression-free survival.

In August 2023, Exelixis and Ipsen announced that Cabometyx in combination with atezolizumab compared with a second novel hormonal therapy in patients with metastatic castration-resistant prostate cancer in the Phase 3 CONTACT-02 trial demonstrated a statistically significant improvement in progression-free survival (PFS) at the primary analysis.

At a prespecified interim analysis for the primary endpoint of overall survival (OS) that occurred at the same time as the primary analysis of PFS, a trend toward improvement of OS was observed.

The trial will continue to the next analysis of OS.

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.

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

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

In 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.

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.

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 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.

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

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

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

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

In 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 July 2023, Gilead announced the European Commission approved Trodelvy as a monotherapy for the treatment of adult patients with unresectable or metastatic hormone receptor (HR)-positive, HER2-negative breast cancer.

In January 2024, Gilead announced that the Phase 3 EVOKE-01 study evaluating Trodelvy compared to docetaxel did not meet its primary endpoint of overall survival in patients with previously treated metastatic non-small cell lung cancer.

In March 2023, Pfizer announced that the FDA approved Zavzpret (zavegepant), a calcitonin gene-related peptide receptor antagonist nasal spray for the acute treatment of migraine with or without aura in adults.

Zavzpret is anticipated to be available in July 2023.

Following approval of Zavzpret, we received a $475 million milestone payment from Pfizer in the first quarter of 2023.

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.

We invested in Airsupra through an approximate 44% ownership in Avillion II and its affiliated entities.

Following U.S.

approval, AstraZeneca notified Avillion II that it elected to pay a fee of $80 million to Avillion II to exercise the option to commercialize Airsupra in the United States.

In March 2023, we received our pro rata portion of the exercise fee of $34.8 million.

In June 2023, Merck announced the FDA approved a new indication for Prevymis for prophylaxis of cytomegalovirus disease in adult kidney transplant recipients at high risk following a priority review.

In December 2023, Ascendis Pharma announced positive topline results from foresiGHt, its Phase 3 trial to compare TransCon hGH with placebo and daily hGH in adults with growth hormone deficiency.

Ascendis plans to submit a supplemental Biologics License Application to the FDA in 2024.

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 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 March 2023, Cytokinetics presented positive results from Cohort 4 of REDWOOD-HCM in patients with non-obstructive HCM.

At 10 weeks, patients in Cohort 4 experienced significant improvements in NT-proBNP and high-sensitivity troponin I levels also improved significantly proportional to baseline at each study visit.

Aficamten was also well tolerated overall, with modest on-target reductions in LVEF in response to aficamten over 10 weeks.

In September 2023, Cytokinetics announced the start of ACACIA-HCM, a Phase 3 clinical trial of aficamten in patients with symptomatic non-obstructive hypertrophic cardiomyopathy (nHCM).

The initiation of ACACIA-HCM triggered our payment of a $50 million milestone to Cytokinetics in September 2023.

In December 2023, Cytokinetics announced positive topline results from SEQUOIA-HCM, the pivotal Phase 3 clinical trial of aficamten in patients with symptomatic obstructive hypertrophic cardiomyopathy.

The full results will be presented at an upcoming medical conference.

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 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 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 (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.

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

In September 2023, Karuna Therapeutics announced the submission of its New Drug Application (NDA) to the FDA for KarXT for the treatment of schizophrenia.

In November 2023, Karuna announced that the FDA accepted its NDA for KarXT for the treatment of schizophrenia.

The application has been granted a Prescription Drug User Fee Act date of September 26, 2024.

In December 2023, Bristol Myers Squibb announced it has agreed to acquire Karuna Therapeutics for $330 per share in cash, for a total equity value of $14.0 billion, or $12.7 billion net of estimated cash acquired.

The transaction is expected to close in the first half of 2024.

• Pelabresib .

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.

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 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, 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 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.

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 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 (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 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.

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) %

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

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 %

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

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

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

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

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

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 %

Other products (4) 262,739 404,019 (141,280) (35.0) %

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

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 %

Payments for operating and professional costs (222,969) (184,511) (38,458) 20.8 %

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 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) %

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

Fully diluted Class A ordinary shares outstanding 607,224 607,176

*Percentage change is not meaningful.

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

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:

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 $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

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.

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 $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)

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

Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow are non-GAAP measures presented as supplemental measures to our GAAP financial performance.

These non-GAAP financial measures exclude the impact of certain items and therefore have not been calculated in accordance with GAAP.

In each case, because our operating performance is a function of our liquidity, the non-GAAP measures used by management are presented and defined as supplemental liquidity measures.

We caution readers that amounts presented in accordance with our definitions of Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow may not be the same as similar measures used by other companies.

Not all companies and analysts calculate the non-GAAP measures we use in the same manner.

We compensate for these limitations by using non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures, in each case being Net cash provided by operating activities.

We believe that Adjusted Cash Receipts and Adjusted Cash Flow provide meaningful information about our operating performance because the business is heavily reliant on its ability to generate consistent cash flows and these measures reflect the core cash collections and cash charges comprising our operating results.

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 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 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 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.

The non-GAAP financial measures used in this Annual Report on Form 10-K have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of our results as reported under GAAP.

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 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 equity method investees (2) — 523

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

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

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

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 equity method investees (2) — 523

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

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

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

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 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 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 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 )

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.

In November 2023, MorphoSys announced positive topline results from the Phase 3 MANIFEST-2 study investigating pelabresib in combination with ruxolitinib compared with placebo plus ruxolitinib in JAK inhibitor-naive patients with myelofibrosis.

MorphoSys intends to submit an NDA to the FDA and Marketing Authorization Application to the European Medicines Agency in the middle of 2024.

In February 2024, Novartis announced that it has entered into an agreement to make a voluntary public takeover offer to acquire MorphoSys at an offer price of €68.00 per share in cash, for a total equity value of €2.7 billion.

The closing is expected to take place in the first half of 2024.

• Trontinemab.

In October 2023, Roche presented interim results of a Phase 1b/2a study for trontinemab, a novel Brainshuttle Aβ antibody for the treatment of Alzheimer’s disease.

This study demonstrated that trontinemab rapidly reduces amlyoid plaque reduction in patients with Alzheimer’s disease.

Investments Overview

4 unchanged sentences

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, 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.

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

In 2023, we invested $2.2 billion in royalties, milestones and other contractual receipts.

While volatility exists in the funding of 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 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.

Included below are tables of investment activities over each of the last five years (in thousands).

Announced transactions amounts reflect maximum transaction value for transactions entered into over each of the periods presented.

Capital Deployment represents the total outflows that will drive future Portfolio Receipts and reflects cash paid at the acquisition date and any subsequent associated milestone investments reflected in the period in which cash was paid.

Capital Deployment in approved/marketed royalties versus development-stage royalties is based upon the approval status of the therapy at the time of our upfront investment.

Average 2023 2022 2021 2020 2019

3 unchanged sentences

Total announced transaction value

Capital Deployed

$ 2,944,800 $ 3,959,000 $ 3,406,000 $ 2,866,000 $ 2,444,000 $ 2,049,000

Capital Deployment

Approved/marketed royalties $ 1,746,738 $ 1,875,232 $ 1,920,958 $ 1,684,769 $ 1,404,222 $ 1,848,509

Development-stage royalties (1)

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

568,286 316,689 507,399 823,374 835,986 357,981

Total Capital Deployment (2)

$ 2,315,024 $ 2,191,921 $ 2,428,357 $ 2,508,143 $ 2,240,208 $ 2,206,490

(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.

Summary of Royalty Acquisition Activity

• 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.

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 debt securities primarily made in connection with acquisitions of royalties on development-stage products from the seller.

(2) Capital Deployment is calculated as the summation of the following line items from our GAAP consolidated statements of cash flows:

Investments in equity method investees, Purchases of available for sale debt securities, Acquisitions of financial royalty assets, Acquisitions of other financial assets, Milestone payments, Development-stage funding payments - ongoing, Development-stage funding payments - upfront and milestone less Contributions from legacy non-controlling interests - R&D.

Summary of Royalty Acquisition Activities

• In January 2024, we acquired a royalty interest in ecopipam for an upfront payment of $49 million and up to $44 million in milestone payments contingent on the achievement of certain regulatory milestones.

Ecopipam is in Phase 3 development by Emalex Biosciences for the treatment of Tourette Syndrome.

• In November 2023, we acquired a royalty interest in long-acting injectable olanzapine (TEV-’749) from Teva Pharmaceuticals International GmbH, a subsidiary of Teva Pharmaceutical Industries Ltd.

(“Teva”) for up to $125 million to support the development of TEV-’749, a Phase 3 development-staged product for the treatment of schizophrenia.

• In October 2023, we acquired additional royalties on Roche’s Evrysdi, an approved product for the treatment of spinal muscular atrophy, from PTC Therapeutics, Inc.

(“PTC”) for an upfront payment of $1 billion.

Until December 31, 2025, PTC has an option to sell its remaining royalties for $500 million less royalties received in respect of its retained royalties in five equal tranches.

If PTC exercises its options for fewer than three tranches, we have an option to acquire half of PTC’s remaining royalties as of the date of our transaction for $250 million less royalties received in respect of its retained royalties until March 31, 2026.

• In September 2023, we acquired a royalty interest in Skytrofa from Ascendis Pharma A/S for an upfront payment of $150 million.

Skytrofa is approved for the treatment of pediatric patients with growth failure due to inadequate secretion of endogenous growth hormone.

• In August 2023, we acquired a royalty interest in Adstiladrin from Ferring Pharmaceuticals for an upfront payment of $300 million and a $200 million additional milestone payment contingent on certain manufacturing goals.

Adstiladrin is approved for the treatment of adult patients with high-risk Bacillus Calmette-Guérin unresponsive non-muscle invasive bladder cancer with carcinoma in situ with or without papillary tumors.

• In June 2023, we acquired an incremental royalty interest in Erleada from the Regents of the University of California for an upfront payment of $59 million.

Erleada is approved for the treatment of prostate cancer and is marketed by Johnson & Johnson.

• In March 2023, we acquired a royalty interest in KarXT from PureTech Health plc for an upfront payment of $100 million and up to $400 million in milestone payments contingent on the achievement of certain regulatory and commercial milestones.

KarXT is in Phase 3 development by Karuna Therapeutics for the treatment of psychiatric and neurological conditions, including schizophrenia as a monotherapy and adjunctive therapy and psychosis in Alzheimer’s disease.

• In January 2023, we acquired royalty interests in Spinraza and pelacarsen from Ionis Pharmaceuticals, Inc.

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 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”) 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 type 1, is marketed by Alnylam.

• In March 2021, we acquired a royalty interest in the cabozantinib products Cabometyx and Cometriq from GSK for an upfront payment of $342 million and up to $50 million in additional payments contingent on the achievement of regulatory approvals of cabozantinib for prostate cancer and lung cancer in the United States and Europe.

• In January 2021, we acquired a royalty interest in seltorexant from Minerva Neurosciences, Inc.

for an upfront payment of $60 million and up to $95 million in additional milestone payments, contingent on the achievement of certain clinical, regulatory and commercialization milestones.

Seltorexant is currently in Phase 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 impact associated with this transaction was not material in 2022.

Liquidity and Capital Resources

1 unchanged sentence

For 2023 and 2022, we generated $3.0 billion and $2.1 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 believe that our existing capital resources, cash provided by operating activities and access to our 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 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, 2022 and 2021, the par value of our total outstanding borrowings was $7.3 billion.

In September 2023, we repaid $1.0 billion of our senior unsecured notes upon maturity.

As of December 31, 2023, the par value of our total outstanding senior unsecured notes was $6.3 billion.

Additionally, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility.

A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 10–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.

Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high conversion of our Adjusted Cash Receipts to Adjusted Cash Flow.

We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and our acquisition program through cash flow and issuances of equity and debt.

In the past, we have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.

We have historically funded our investments through operating cash flows, equity contributions and debt.

Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high cash flow conversion.

We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and investments through cash flow and issuances of equity and debt.

We have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.

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 2022 compared to 2021 (in thousands).

The following table and analysis of cash flow changes present a summary of our cash flow activities for 2023 compared to 2022 (in thousands).

For a discussion of cash flow activities for 2022 compared to 2021, 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, 2022.

7 unchanged sentences

Operating Activities

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.

Cash provided by operating activities increased by $843.8 million in 2023 compared to 2022, primarily driven by an increase in cash collections from financial royalty assets of $694.2 million, including a $475.0 million milestone related to Zavzpret, and lower development-stage funding payments in 2023.

The increase was partially offset by lower cash collections from intangible assets of $71.6 million, as our royalty receipts on Januvia, Janumet and other DPP-IVs substantially ended in the second quarter of 2022.

Investing Activities

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.

Cash used in investing activities increased by $1.0 billion in 2023 compared to 2022, primarily driven by a $373.9 million increase in cash used for acquisitions of financial royalty assets and lower net cash provided by proceeds from marketable securities of $533.1 million.

Financing Activities

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.

Cash used in financing activities increased by $1.2 billion in 2023 compared to 2022, primarily driven by $1.0 billion in debt repayments and $304.8 million in repurchases of our Class A ordinary shares.

The increase was partially offset by lower distributions of Portfolio Receipts to legacy non-controlling interests as royalties jointly owned by the Legacy Investors Partnerships and RPSFT are maturing.

Sources of Capital

As of December 31, 2022, our cash and cash equivalents and marketable securities totaled $1.7 billion and $24.4 million, respectively.

As of December 31, 2023, our cash and cash equivalents totaled $477.0 million.

We did not hold any marketable securities as of December 31, 2023.

As of December 31, 2022, our cash and cash equivalents and marketable securities totaled $1.7 billion and $24.4 million, respectively.

19 unchanged sentences

Senior Unsecured Notes

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.

On July 26, 2021, we issued $1.3 billion of senior unsecured notes (the “2021 Notes”) with a weighted average coupon rate of 2.80%.

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%.

We refer to the 2020 Notes and 2021 Notes, collectively, as the “Notes.” The Notes require semi-annual interest payments.

Indentures governing the Notes contain certain covenants with which we were in compliance as of December 31, 2023 .

Senior Unsecured Revolving Credit Facility

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.

Our subsidiary, RP Holdings, as borrower, initially entered into the Amended and Restated Credit Agreement (the “Credit Agreement”) on September 15, 2021, which provides for an unsecured revolving credit facility (the “Revolving Credit Facility”).

Amendment No.

3 to the Credit Agreement, which was entered into on December 22, 2023, increased the borrowing capacity to $1.8 billion for general corporate purposes with $1.69 billion of the revolving commitments maturing on December 22, 2028 and the remaining $110.0 million of revolving commitments maturing on October 31, 2027.

On January 24, 2024, we entered into Amendment No.

4 to the Credit Agreement to make certain technical modifications.

As of December 31, 2023, we have a borrowing capacity of $1.8 billion under the Revolving Credit Facility.

The Credit Agreement that governs the Revolving Credit Facility contains certain customary covenants, that among other things, require us to maintain (i) a consolidated leverage ratio at or below 4.00 to 1.00 (or at or below 4.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Adjusted EBITDA, each as defined and calculated with the ratio level calculated with further adjustments as set forth in the Credit Agreement, (ii) a consolidated coverage ratio at or above 2.50 to 1.00 of Adjusted EBITDA to consolidated interest expense, each as defined and calculated with further adjustments as set forth in the Credit Agreement and (iii) a consolidated Portfolio Cash Flow Ratio at or below 5.00 to 1.00 (or at or below 5.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Portfolio Cash Flow, each as defined and calculated with the ratio level calculated with further adjustments as set forth in the Credit Agreement.

We were in compliance with the financial covenants as of December 31, 2023.

Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that are key components of certain material covenants contained within the Credit Agreement.

Noncompliance with the financial covenants under the Credit Agreement 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 from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.

The table below presents Adjusted EBITDA and Portfolio Cash Flow for 2023 and 2022, each as calculated according to their respective definition in our Credit Agreement (in thousands):

Years Ended December 31,

Portfolio Receipts $ 3,048,713 $ 2,789,293

Payments for operating and professional costs (243,012) (222,969)

Adjusted EBITDA (non-GAAP) $ 2,805,701 $ 2,566,324

Interest paid, net (97,564) (145,157)

Portfolio Cash Flow (non-GAAP)

$ 2,708,137 $ 2,421,167

Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP.

We caution readers that amounts presented in accordance with our definitions of Adjusted EBITDA and Portfolio Cash Flow may not be the same as similar measures used by other companies or analysts.

A reconciliation of Adjusted EBITDA and Portfolio Cash Flow to Net cash provided by operating activities , the closest GAAP measure, is presented below (in thousands):

Years Ended December 31,

Net cash provided by operating activities (GAAP) $ 2,987,802 $ 2,143,980

Proceeds from available for sale debt securities (1), (2) 1,440 542,044

Distributions from equity method investees (2) 43,882 —

Interest paid, net (2) 97,564 145,157

Development-stage funding payments - ongoing 2,000 2,106

Development-stage funding payments - upfront and milestone 50,000 175,000

Distributions to legacy non-controlling interests - Portfolio Receipts (2) (376,987) (441,963)

Adjusted EBITDA (non-GAAP) $ 2,805,701 $ 2,566,324

Interest paid, net (2) (97,564) (145,157)

Portfolio Cash Flow (non-GAAP)

$ 2,708,137 $ 2,421,167

(1) In the fourth quarter of 2023, we began receiving quarterly payments on the return of the first tranche of the Cytokinetics Commercial Launch Funding (presented as Proceeds from available for sale debt securities on the statement of cash flows).

In 2022, amount relates to the quarterly redemptions of the Series A Biohaven Preferred Shares and the accelerated redemption payments of all outstanding Series A and Series B Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022 (presented as Proceeds from available for sale debt securities on the statement 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

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

Distributions from equity method investees Investing activities

Proceeds from available for sale debt securities Investing activities

Distributions to legacy non-controlling interests - Portfolio Receipts

Financing activities

Uses of Capital

11 unchanged sentences

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

• 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.

• 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 to develop thematic life sciences indexes.

Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.

Distributions to Shareholders

1 unchanged sentence

We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.

Class A Ordinary Share Repurchases

In March 2023, our board of directors authorized a share repurchase program under which we may repurchase up to $1.0 billion of our Class A ordinary shares.

The authorization for the share repurchase program expires on June 23, 2027.

Share repurchases may be made in the open market or in privately negotiated transactions.

In 2023, we repurchased 9,846 thousand shares at a cost of approximately $304.8 million.

Other Funding Arrangements

In January 2022, we entered into a long-term funding agreement with Cytokinetics to provide up to $300 million of capital (“Cytokinetics Commercial Launch Funding”) available in five tranches to support Cytokinetics for further development of aficamten and potential commercialization of omecamtiv mecarbil.

We funded the initial tranche of $50 million of the Cytokinetics Commercial Launch Funding upon closing.

During 2022, we amended the funding agreement to increase the required draw amount, extend the draw period and modify the return for the second and third tranches.

Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones.

As of December 31, 2022, we expect $125 million of the optional $200 million to remain available under the Cytokinetics Commercial Launch Funding due to the likelihood that certain regulatory milestones will not be met by March 31, 2023.

In January 2022, we entered into a long-term funding agreement, which was amended later in the same year, with Cytokinetics.

We agreed to provide funding of up to $300 million (“Cytokinetics Commercial Launch Funding”) in five tranches.

The initial tranche of $50 million was funded upon closing.

Because the regulatory milestones for the second and third tranches were not met, $75 million of the optional funding is no longer available.

As of December 31, 2023, $125 million of the optional $200 million remains available under the Cytokinetics Funding Commitments and Cytokinetics is required to draw $50 million if a certain contingency is met.

In November 2023, we entered into a funding agreement with Teva to provide up to $100 million to fund the ongoing development of olanzapine LAI (TEV-’749).

We have an option with Teva upon mutual agreement to increase the total funding amount to $125 million.

Funding is expected to begin in the first quarter of 2024.

We may have other funding arrangements where we are contractually obligated to fund R&D activities performed by our development partners.

1 unchanged sentence

As our committed capital requirements are based on phases of development, the completion of which is highly uncertain, only the capital required to fund the current stage of development under such funding arrangements is considered committed capital, which approximates $27.3 million as of December 31, 2023.

We also have certain milestone payments that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones.

We also have certain milestone payable to our counterparties that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones.

These contingent milestone payments are not considered contractual obligations.

In 2022, we made a $50 million milestone payment to Cytokinetics which was triggered following Cytokinetics’ announcement that it initiated the first pivotal clinical trial in oHCM.

In 2021 , we made a $100 million payment to Biohaven related to a development milestone that was achieved upon the start of the oral zavegepant Phase 3 program.

In 2023, we paid a $12.4 million sales-based milestone related to Erleada and a $50.0 million milestone payment to Cytokinetics which was triggered following the initiation of the first pivotal clinical trial in nHCM.

In 2022 , we made a $50 million milestone payment to Cytokinetics which was triggered following the initiation of the first pivotal clinical trial in oHCM.

In September 2023, we repaid $1.0 billion of senior unsecured notes upon maturity.

As of December 31, 2023, the future principal and interest payments under our Notes over the next five years and thereafter are as follows (in thousands):

9 unchanged sentences

Operating and Personnel Payments

Under the Management Agreement, we pay quarterly Operating and Personnel Payments equal to 6.5% of the cash receipts from royalty investments for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter.

Because the Operating and Personnel Payments are determined based on cash receipts, the amounts are variable.

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 quarterly Operating and Personnel Payments equal to 6.5% of the cash receipts from Royalty Investments, or Portfolio Receipts, for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter.

Because the Operating and Personnel Payments are determined based on Portfolio Receipts, the amounts are variable.

The payment for our Operating and Personnel Payment is the most significant component of Payments for operating and professional costs presented on the statements of cash flows.

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

Guarantor Financial Information

9 unchanged sentences

There are no material restrictions on distributions from the operating subsidiaries.

Amounts presented below do not represent our total consolidated amounts as of December 31, 2022 or for the year ended 2022 (in thousands):

Amounts presented below do not represent our total consolidated amounts as of or for the year ended December 31, 2023 (in thousands):

Summarized Combined Balance Sheet

2 unchanged sentences

Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries 13,086

Current intercompany notes receivable due from Non-Guarantor Subsidiaries 269,617

Non-current assets 4,107

2 unchanged sentences

Current interest payable on intercompany notes due to Non-Guarantor Subsidiaries 13,086

Current intercompany notes payable due to Non-Guarantor Subsidiaries 269,617

Non-current liabilities 6,134,383

27 unchanged sentences

These forecasts are based on market research that analyzes factors such as growth in global economies, industry trends and product life cycles.

For the majority of the portfolio of financial royalty assets, management utilizes statistical curves to project future sales for a portion of the royalty duration when sell-side equity research coverage ends or when estimates are not available for the duration of the royalty.

We generally utilize statistical curves to project future sales for a portion of the royalty duration when sell-side equity research coverage ends or when estimates are not available for the duration of the royalty.

The statistical curves are modelled from a combination of historical trends and available sell-side equity research analyst consensus sales estimates.

In limited cases when the statistical curve is not used, management may develop and apply growth rate estimates from existing sell-side equity research analysts’ consensus sales forecasts to project future sales for products.

Based on the level of detail in sell-side equity research analyst models, management can also be required to apply assumptions to the sales forecasts to estimate the quarterly and geographical allocation from annual sales projections and, for franchised products, to estimate the product mix and pricing mix, or to exclude from projections sales forecasts for unapproved products or indications.

Our contractual royalty terms, rates, and any milestones are then applied to the adjusted sales projections to calculate the expected royalty or milestone payments over the term of the financial royalty asset’s life, forming the basis for our forecast of expected future cash flows used to calculate and measure interest income.

2 unchanged sentences

For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and may be entitled to royalties on future combination products, which, once approved, create new cash flow streams which were not initially contemplated and for which sales were previously not reflected in expected future cash flows.

We generally do not recognize income from, or forecast sales for, unapproved products or indications.

We generally do not recognize income from, or forecast sales for, unapproved products.

If a product is removed from all or a portion of a market, subsequent sell-side equity research analysts’ consensus sales forecasts will reflect the expected drop in sales.

2 unchanged sentences

The duration of a royalty can be based on a variety of factors, such as regulatory and marketing approval dates, patent expiration dates, the number of years from first commercial sale, the first date of manufacture of the patent-protected product, the entry of generics or a contractual date arising from litigation, which are all impacted by the point in time in the product’s life cycle at which we acquire the royalty.

Royalty duration varies by geography as the United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms.

Products may be covered by a number of patents and, for products whose royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest patent protection to align the period over which management forecasts expected future cash flows to the royalty term.

Royalty durations vary by geography as the United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms.

Products may be covered by a number of patents and, for products whose royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest protection to align the period over which management forecasts expected future cash flows to the royalty term.

It is common for the latest expiring patent in effect at the date we acquire a financial royalty asset to be extended, adjusted or replaced with newer dated patents subsequent to our acquisition of a royalty due to new information, resulting in changes to the royalty duration in later periods.

3 unchanged sentences

As part of the preparation of the forecasted expected future cash flows, which relies on the sources and variables discussed above, management is required to make assumptions around the following forecast inputs:

(1) estimates of the duration of the royalty, which includes consideration of the strength of patent protection and anticipated entry of generics, (2) product growth rates and sales trends in outer years, generally projected through statistical curves, (3) the product and pricing mix for franchised products, and (4) the geographical allocation of annual sales data from sell-side equity research analysts’ models.

(1) estimates of the duration of the royalty, which includes consideration of the strength of patent protection and anticipated entry of generics, (2) product growth rates and sales trends in outer years, generally projected through statistical curves, (3) the product and pricing mix for franchised products, (4) the geographical allocation of annual sales data from sell-side equity research analysts’ models, and (5) the portion of sales that are subject to royalty which is referred to as royalty bearing sales.

The most significant assumptions used in forecasting the expected future cash flows for our royalties and requiring management’s judgement include (1) estimates of the duration of the royalty and (2) sales trends and product growth rates in outer years of the royalty term, which are primarily derived from statistical models.

7 unchanged sentences

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.

Below is a summary of the sensitivity of our current year results in relation to the royalty duration for our top three financial royalty assets based on net carrying value as of December 31, 2022.

Below is a summary of the sensitivity of our current year results in relation to the royalty duration for our top three financial royalty assets for which we did not increase our investment during 2023 based on net carrying value as of December 31, 2023.

Because these are long-dated financial royalty assets, we have assumed a change of two years in the estimated duration to sensitize the financial statement impact.

2 unchanged sentences

If the duration of these financial royalty assets were extended two years by assuming the statistically projected growth trends continue and all other royalty terms and assumptions remain unchanged, any impact to interest income would be recognized prospectively over the remaining expected life of the financial asset.

Therefore, the impact to interest income is not disclosed below.

As there would be no current impact to interest income, the sensitivity is not disclosed below.

However, an extended duration for a financial royalty asset could result in the reduction of any existing cumulative allowance for changes in expected future cash flows, which would be recognized in the current period as provision income and is reflected in the table below for these top three financial royalty assets.

If the duration for these financial royalty assets were reduced by two years by eliminating the corresponding forecasted expected future cash flows in that two year period while keeping all other royalty terms and assumptions unchanged, we would recognize immediate incremental provision expense in the current period as a result of applying the prospective method of the effective interest rate methodology.

The extension and reduction in royalty terms are modelled in isolation for purposes of the sensitivity disclosures below and does not include any consideration of the related allowance for current expected credit losses.

The extension and reduction in royalty terms are modelled in isolation for purposes of the sensitivity disclosures below and do not include any consideration of the related allowance for current expected credit losses.

The measurement of interest income from our financial royalty assets is recalculated each reporting period, which requires updates to various inputs and assumptions, including estimated royalty duration.

6 unchanged sentences

+ 2 years $ (2,539) - 2 years $ 295,974

+ 2 years (4)

+ 2 years $ (60,312) - 2 years $ 97,797

Trelegy 2029-2030 + 2 years $ (24,126) - 2 years

(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.

(1) Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may vary by geography and may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors.

There can be no assurances that our royalties will expire when expected.

(2) Royalty is perpetual;

year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry.

year shown represents Trikafta’s expected patent expiration and potential sales decline based on timing of potential generic entry.

(3) RPIFT acquired a perpetual royalty on net sales of Tysabri.

We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed.

(4) No provision income resulted from the extended duration as there was no existing cumulative allowance for changes in expected future cash flows as of December 31, 2023.

Recent Accounting Pronouncements

1 unchanged sentence

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity