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Item 8. Financial Statements and Supplementary Data

2024-02-15 compared with 2023-02-15 · 352 added, 473 removed, 769 unchanged (52% of the section changed)

36 unchanged sentences

Auditing the valuation of the financial royalty assets and related interest income involved complex auditor judgment, because the assumptions used by management to forecast the expected cash flows from the underlying royalties are forward-looking and are therefore affected by future economic and market conditions, such as the impact of the entry of competing or generic products to the market, among other uncertainties.

The key assumptions used in the valuation of the financial royalty assets and related interest income are product growth rates applied to forecasted sales in the later years in the royalty life and the royalty duration.

The key assumptions used in the valuation of the financial royalty assets and related interest income are product growth rates applied to forecasted sales and the royalty duration.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the valuation of financial royalty assets and related interest income.

49 unchanged sentences

Financial royalty assets, net 14,088,655 13,493,106

Intangible royalty assets, net — 5,670

Equity securities 199,487 112,348

17 unchanged sentences

Class A ordinary shares, $ 0.0001 par value;

443,166 and 432,963 issued and outstanding, respectively

issued and outstanding:

2023– 446,692 and 2022– 443,166

Class B ordinary shares, $ 0.000001 par value;

164,058 and 174,213 issued and outstanding, respectively

issued and outstanding:

2023– 150,743 and 2022– 164,058

Class R redeemable shares, £ 1 par value;

50 and 50 issued and outstanding, respectively

Deferred shares, $ 0.000001 par value, 371,325 and 361,170 issued and outstanding, respectively

issued and outstanding:

2023– 50 and 2022– 50

Deferred shares, $ 0.000001 par value;

issued and outstanding:

2023– 384,640 and 2022– 371,325

Additional paid-in capital 4,011,435 3,666,160

1 unchanged sentence

Non-controlling interests 3,557,792 3,897,223

Accumulated other comprehensive income — 16,491

Treasury interests ( 2,629 ) ( 2,806 )

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Operating income 1,492,150 307,065 1,430,715

Other expense/(income)

Equity in losses/(earnings) of equity method investees 8,973 19,490 ( 44,459 )

Other (income)/expense

Equity in (earnings)/losses of equity method investees ( 28,882 ) 8,973 19,490

Interest expense 187,187 187,961 166,142

(Gains)/losses on derivative financial instruments ( 96,610 ) 21,532 42,076

Losses/(gains) on equity securities 33,442 48,066 ( 247,073 )

Losses/(gains) on available for sale debt securities 6,815 ( 17,859 ) ( 18,600 )

Losses/(gains) on derivative financial instruments 2,290 ( 96,610 ) 21,532

(Gains)/losses on equity securities ( 87,139 ) 33,442 48,066

(Gains)/losses on available for sale debt securities ( 230,840 ) 6,815 ( 17,859 )

Interest income ( 72,291 ) ( 78,335 ) ( 53,535 )

Other non-operating expense, net 21,737 14,755 5,678

Total other expenses/(income), net 77,001 189,514 ( 106,555 )

Total other (income)/expense, net ( 207,938 ) 77,001 189,514

Consolidated net income before tax 1,700,088 230,064 1,241,201

9 unchanged sentences

Diluted 602,900 437,972 414,802

(1) In 2020, amounts represents earnings per Class A ordinary share and weighted average Class A ordinary shares outstanding for the period from June 16, 2020 through December 31, 2020 following our initial public offering (“IPO”).

See Note 13–Earnings per Share.

See accompanying notes to these consolidated financial statements.

5 unchanged sentences

Consolidated net income $ 1,700,088 $ 230,064 $ 1,241,201

Changes in other comprehensive income/(loss):

Reclassification of loss on interest rate swaps — — 4,066

Other comprehensive income/(loss):

Unrealized gains on available for sale debt securities — 24,000 11,600

Reclassification of unrealized gains on available for sale debt securities — ( 53,432 ) ( 50,896 )

Other comprehensive (loss)/income $ ( 29,432 ) $ ( 39,296 ) $ 66,635

Other comprehensive loss:

$ — $ ( 29,432 ) $ ( 39,296 )

Comprehensive income $ 1,700,088 $ 200,632 $ 1,201,905

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

( In thousands, except for share amounts )

( In thousands, except per share amounts )

Ordinary Shares Class B

Ordinary Shares Class R

Redeemable Shares Deferred Shares Additional Paid-In Capital Unitholders’/ Shareholders’ Contributions Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests Treasury Interests Total Equity

Redeemable Shares Deferred Shares Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests Treasury Interests Total Shareholders’ Equity

Shares Amount Shares Amount Shares Amount Shares Amount

1 unchanged sentence

Contributions — — — — — — — — — — — 48,539 — 48,539

Transfer of interests — — — — — — — — — ( 1,037,161 ) — — 1,037,161 — —

Cumulative adjustment for adoption of ASU 2016-13 — — — — — — — — — — ( 192,705 ) — — — ( 192,705 )

Distributions — — — — — — — — — — — ( 614,973 ) — ( 614,973 )

Initial share issuance upon registration of Royalty Pharma plc — — — — 50 63 — — — — — — — — 63

Net income prior to IPO — — — — — — — — — — 479,842 — 145,043 — 624,885

Issuance of Class B ordinary shares to Continuing Investors Partnerships — — 535,383 1 — — — — — — — — — — 1

Effect of exchange by Continuing Investors of Class B ordinary shares for Class A ordinary shares and reallocation of historical equity 294,176 30 ( 294,176 ) ( 1 ) — — 294,176 — 1,402,762 ( 2,553,001 ) ( 1,261,014 ) ( 24,022 ) 2,433,098 2,147 ( 1 )

Issuance of Class A ordinary shares sold in IPO, net of offering costs 71,652 7 — — — — — — 1,150,383 — — — 758,354 — 1,908,744

Share-based compensation and related issuances of Class A ordinary shares 76 — — — — — — — 5,428 — — — — — 5,428

Other exchanges 22,231 2 ( 22,231 ) — — — 22,231 — 307,391 — — 2,562 ( 309,566 ) ( 198 ) 191

Dividends ($ 0.68 per Class A ordinary share)

— — — — — — — — — ( 285,184 ) — — — ( 285,184 )

Net income subsequent to IPO — — — — — — — — — — 495,198 — 581,871 — 1,077,069

Other exchanges 44,763 4 ( 44,763 ) — — — 44,763 — 639,126 — 4,242 ( 642,974 ) ( 398 ) —

Share-based compensation and related issuances of Class A ordinary shares 65 — — — — — — — 2,443 — — — — 2,443

Net income — — — — — — — — — 619,728 — 621,473 — 1,241,201

Other comprehensive income/(loss):

Reclassification of loss on interest rate swaps — — — — — — — — — — — 4,066 — — 4,066

Unrealized gains on available for sale debt securities — — — — — — — — — — 6,335 5,265 — 11,600

1 unchanged sentence

Balance at December 31, 2021 432,963 $ 43 174,213 $ — 50 $ 63 361,170 $ — $ 3,507,533 $ 2,255,179 $ 16,491 $ 4,471,951 $ ( 2,715 ) $ 10,248,545

See accompanying notes to these consolidated financial statements.

ROYALTY PHARMA PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

( In thousands, except for share amounts )

Ordinary Shares Class B

Ordinary Shares Class R

Redeemable Shares Deferred Shares Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Non-Controlling Interests Treasury Interests Total Equity

Shares Amount Shares Amount Shares Amount Shares Amount

Balance at December 31, 2020 388,135 $ 39 218,976 $ — 50 $ 63 316,407 $ — $ 2,865,964 $ 1,920,635 $ 34,395 $ 5,077,036 $ ( 2,317 ) $ 9,895,815

Contributions — — — — — — — — — — — 11,596 — 11,596

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Share-based compensation and related issuances of Class A ordinary shares 57 — — — — — — — 2,357 — — — — 2,357

Repurchases of Class A ordinary shares ( 9,846 ) ( 1 ) — — — — — — ( 85,711 ) ( 219,047 ) — — — ( 304,759 )

Net income — — — — — — — — — 1,134,834 — 565,254 — 1,700,088

Other comprehensive income/(loss):

Unrealized gains on available for sale debt securities — — — — — — — — — — 14,262 9,738 — 24,000

Reclassification of unrealized gains on available for sale debt securities — — — — — — — — — — ( 31,880 ) ( 21,552 ) — ( 53,432 )

Purchase of non-controlling interest in RPCT — — — — — — — — — ( 4,566 ) — ( 11 ) — ( 4,577 )

Balance at December 31, 2023 446,692 $ 45 150,743 $ — 50 $ 63 384,640 $ — $ 4,011,435 $ 2,517,583 $ — $ 3,557,792 $ ( 2,629 ) $ 10,084,289

31 unchanged sentences

Milestone payments ( 12,400 ) — ( 18,600 )

Other ( 2,038 ) — —

Net cash used in investing activities ( 2,072,789 ) ( 1,029,421 ) ( 1,870,280 )

Cash flows from financing activities:

Distributions to shareholders/unitholders — — ( 285,353 )

Distributions to legacy non-controlling interests - royalty receipts ( 441,963 ) ( 479,604 ) ( 543,952 )

Distributions to legacy non-controlling interests - Portfolio Receipts ( 376,987 ) ( 441,963 ) ( 479,604 )

Distributions to legacy non-controlling interests - other — ( 31,301 ) ( 20,367 )

1 unchanged sentence

Dividends to shareholders ( 358,327 ) ( 333,322 ) ( 285,184 )

Repurchases of Class A ordinary shares ( 304,759 ) — —

Contributions from legacy non-controlling interests - R&D 543 1,059 7,339

Contributions from non-controlling interests - other 6,933 6,133 36,874

Scheduled repayments of long-term debt — — ( 94,200 )

Repayments of long-term debt — — ( 11,116,196 )

Cash acquired in connection with purchase of non-controlling interest 4,973 — —

Proceeds from revolving credit facility 350,000 — —

Repayment of revolving credit facility ( 350,000 ) — —

Repayment of long-term debt ( 1,000,000 ) — —

Proceeds from issuance of long-term debt, net of discount — — 1,272,533

Debt issuance costs and other ( 1,596 ) ( 1,347 ) ( 13,046 )

Proceeds from issuance of Class A ordinary shares upon IPO, net of offering costs — — 1,908,744

Net cash (used in)/provided by financing activities ( 944,856 ) 385,112 1,487,172

Net (cash used in)/provided by in financing activities

( 2,148,754 ) ( 944,856 ) 385,112

Net change in cash and cash equivalents ( 1,233,741 ) 169,703 532,368

Cash and cash equivalents, beginning of year 1,541,048 1,008,680 246,199

Cash and cash equivalents, end of year $ 1,710,751 $ 1,541,048 $ 1,008,680

Cash and cash equivalents, beginning of period 1,710,751 1,541,048 1,008,680

Cash and cash equivalents, end of period $ 477,010 $ 1,710,751 $ 1,541,048

See accompanying notes to these consolidated financial statements.

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Organization and Purpose

Royalty Pharma plc is a public limited company incorporated under the laws of England and Wales that was created to facilitate the IPO of our Class A ordinary shares.

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

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

We control Royalty Pharma Holdings Ltd (“RP Holdings”), a private limited company incorporated under the laws of England and Wales and U.K.

tax resident, through our ownership of RP Holdings’ Class A ordinary shares (the “RP Holdings Class A Interests”) and RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”).

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

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

RP Holdings is owned by RPI US Partners 2019, LP, a Delaware limited partnership, RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”), and Royalty Pharma plc.

We conduct our business through RP Holdings and its subsidiaries.

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 Royalty Pharma Investments, an Irish unit trust (“Old RPI”).

RP Holdings is owned by Royalty Pharma plc, and, indirectly, RPI US Partners 2019, LP, a Delaware limited partnership, and RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”).

Prior to the Exchange Offer (defined below), Old RPI was owned by various partnerships (the “Legacy Investors Partnerships”).

RP Management, LLC (the “Manager”), a Delaware limited liability company, is responsible for our management, including our day-to-day operations, pursuant to advisory and management agreements (collectively, the “Management Agreement”) .

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

After the consummation of the Exchange Offer (defined below) and before the consummation of the IPO, “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to RPI 2019 ICAV.

Prior to the Exchange Offer, “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Old RPI.

We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry.

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.

Exchange Offer Transactions

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

Through the Exchange Offer, investors which represented 82 % of the aggregate limited partnership in the Legacy Investors Partnerships exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in 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.”

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

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, an Irish private limited company, 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 date 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 Old RPI and the Legacy Investors Partnerships became legacy entities.

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

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As part of the Exchange Offer, the Legacy Investors Partnerships and RPI Intermediate FT entered into senior credit facilities in the amount of $ 1.3 billion and $ 6.0 billion, respectively, the proceeds of which were used to repay the $ 6.3 billion outstanding debt of RPIFT and, in the case of RPI Intermediate FT, were also available to be used to fund investments.

As part of the senior credit facilities, RPI Intermediate FT repaid $ 5.2 billion, its pro rata portion of RPIFT’s outstanding debt and accrued interest.

RPIFT also terminated all outstanding interest rate swaps in connection with the debt refinancing.

On June 18, 2020, we completed our IPO on the Nasdaq Global Select Market under the ticker symbol “RPRX”, in which we issued 89,334 thousand Class A ordinary shares at a price to the public of $ 28.00 per Class A ordinary share, of which 71,652 thousand Class A ordinary shares and 17,682 thousand Class A ordinary shares were offered by the Company and selling shareholders, respectively.

We used the net proceeds from the IPO to acquire 100 % of RP Holdings Class A Interests.

Upon consummation of the IPO, certain of the Continuing Investors agreed to exchange, according to the Exchange Offer Transactions, interests in the Continuing Investors Partnerships represented by their ownership of 294,176 thousand RP Holdings Class B Interests into an aggregate of 294,176 thousand Class A ordinary shares of Royalty Pharma plc.

Upon completion of the exchange, Royalty Pharma plc indirectly owned 294,176 thousand RP Holdings Class B Interests.

The remaining investors in the Continuing Investors Partnerships who did not elect to exchange into Class A ordinary shares held 241,207 thousand newly issued Class B ordinary shares of Royalty Pharma plc.

As a result, the Continuing Investors Partnerships held a number of our Class B ordinary shares equal to the number of RP Holdings Class B Interests indirectly held by them at such time which are exchangeable on a one -for-one basis for Class A ordinary shares of Royalty Pharma plc.

Refer to Note 12–Shareholders’ Equity for additional information.

Summary of Significant Accounting Policies

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Actual results may differ from those estimates.

The COVID-19 pandemic has not had a material impact on our results of operations and liquidity and we do not believe it is reasonably likely to in the future.

Basis of Consolidation

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For consolidated entities where we own or are exposed to less than 100% of the economics, we record Net income attributable to non-controlling interests in our consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties .

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

In 2022, we became an indirect owner of an 82 % economic interest in RPI ICAV, which previously was owned directly by Old RPI.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We report four non-controlling interests:

(1) the Legacy Investors Partnerships’ ownership of approximately 18 % in Old RPI and RPI ICAV and (2) a de minimis interest in RPCT held by RPSFT (together, the “legacy non-controlling interests”).

The legacy non-controlling interests are the only historical non-controlling interests existing prior to our IPO.

Additionally, following the consummation of our IPO, we also report non-controlling interests related to (3) the Continuing Investors Partnerships’ ownership in RP Holdings through their ownership of RP Holdings Class B Interests and (4) RPI EPA Holdings, LP’s (“EPA Holdings”) ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”).

The Continuing Investors Partnerships are referred to as the “continuing non-controlling interests.” Income will not be allocated to EPA Holdings until certain performance conditions are met.

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

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”).

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 previously was 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 (together with the Legacy Investors Partnership’s interest in Old RPI and RPI ICAV, the “legacy non-controlling interests”), which also existed prior to our IPO.

As of December 31, 2023, we report three non-controlling interests:

(1) the Legacy Investors Partnerships’ ownership of approximately 18 % in Old RPI and RPI ICAV, which existed prior to our IPO, and, following the consummation of our IPO, (2) the Continuing Investors Partnerships’ indirect ownership in RP Holdings through their indirect ownership of RP Holdings Class B Interests (the “continuing non-controlling interests”) and (3) RPI EPA Holdings, LP’s (“EPA Holdings”) ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”).

Income will not be allocated to EPA Holdings until certain performance conditions are met.

All intercompany transactions and balances have been eliminated in consolidation.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation.

Concentrations of Credit Risk

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Our cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds are needed for operations.

Our cash and cash equivalents and marketable securities balances as of December 31, 2022 and 2021 were held with State Street , Bank of America, US Bank and Scotiabank .

Our cash and cash equivalents and marketable securities balances as of December 31, 2023 and 2022 were held with Bank of America, State Street, Scotiabank, Citibank, TD Bank, DNB Bank and U.S.

Our primary operating accounts significantly exceed the Federal Deposit Insurance Corporation limits.

The majority of our financial royalty assets and receivables arise from contractual royalty agreements that entitle us to royalties on the sales of underlying biopharmaceutical products in the United States, Europe and the rest of the world, with concentrations of credit risk limited due to the broad range of marketers responsible for paying royalties to us and the variety of geographies from which our royalties on product sales are derived.

The products in which we hold royalties are marketed by leading industry participants, including, among others, Vertex, Biogen, AbbVie, Johnson & Johnson, Merck & Co, Pfizer, Astellas, Novartis, and Gilead.

The products in which we hold royalties are marketed by leading industry participants, including, among others, Vertex, GSK, Roche, Johnson & Johnson, Biogen, AbbVie, Astellas, Novartis, Pfizer and Gilead.

As of December 31, 2023 and 2022, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 32 % and 31 % of our current portion of financial royalty assets, respectively, and represented the largest individual marketer and payor of our royalties.

We monitor the financial performance and creditworthiness of the counterparties to our royalty agreements so that we can properly assess and respond to changes in their credit profile.

To date, we have not experienced any significant losses with respect to the collection of income or revenue on our royalty assets.

To date, we have not experienced any significant credit losses with respect to the collection of income or revenue on our royalty assets.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Segment Information

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Royalty Assets

An acquisition of a royalty asset provides the buyer with contractual rights to cash flows relating to royalties from the sales of patent-protected biopharmaceutical products.

These acquisitions entitle us to receive a portion of income from the sale of patent-protected biopharmaceutical products by unrelated biopharmaceutical companies.

For the majority of our royalties, our rights are protective and passive in nature.

In other words, we do not own the intellectual property and we do not have the right to commercialize the underlying products.

An acquisition of a royalty asset provides the buyer with contractual rights to cash flows from the sale of patent-protected biopharmaceutical products by unrelated biopharmaceutical companies.

The majority of our royalties provide us with rights that are protective and passive in nature.

In other words, we do not own the intellectual property or have the right to commercialize the underlying products.

These contractual cash flow rights have yield components that most closely resemble loans and are classified as financial royalty assets.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In the limited instances where we possess rights to exploit the underlying patents, rights to the intellectual property related to the biopharmaceutical products, or the ability to influence the amount or duration of future royalty payments, these royalties are classified as intangible royalty assets.

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Financial Royalty Assets, Net

Although a financial royalty asset does not have the contractual terms typical of a loan (such as contractual principal and interest), we analogize to the accounting guidance within Accounting Standards Codification 310 (“ASC”), Receivables , as it most closely aligns with the underlying economics of our financial royalty assets.

Therefore, such financial royalty assets are classified similar to loans receivable and are measured at amortized cost using the prospective effective interest method described in ASC 835-30 Imputation of Interest .

Although a financial royalty asset does not have the contractual terms typical of a loan (such as contractual principal and interest), we account for financial royalty assets under Accounting Standards Codification 310 (“ASC”), Receivables.

Our financial royalty assets are classified similar to loans receivable and are measured at amortized cost using the prospective effective interest method described in ASC 835-30 Imputation of Interest .

The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount.

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The amounts and duration of forecasted expected future cash flows used to calculate and measure interest income are largely impacted by sell-side equity research analyst coverage, commercial performance of the product, and royalty duration, each discussed in further detail below .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

• Analyst coverage.

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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 o n 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.

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.

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.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

• Commercial performance.

1 unchanged sentence

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.

Both the new cash flow streams and the cessation of cash flow streams related to a product’s performance in the market over the royalty term can materially affect our forecast of expected future cash flows.

• Royalty duration.

The duration of a 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, where a 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.

Patents may expire earlier than expected at the time of the acquisition due to the loss of patent protection, loss of data exclusivity on intellectual property, contractual licensing terms limiting royalty payments based on time from product launch, due to recent legal developments or litigation.

Macroeconomic factors, such as changes in economies or the competitive landscape, including the unexpected loss of exclusivity to the products underlying our portfolio of royalties, changes in government legislation, product life cycles, industry consolidations and other changes beyond our control could result in a positive or negative impact on our forecast of expected future cash flows.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 timing for 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 sensitive of these assumptions relates to management’s estimate of the royalty duration in the final years of an asset’s life.

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The current portion of financial royalty assets represents an estimation for current quarter royalty receipts which are collected during the subsequent quarter and for which the estimates are derived from the latest external publicly available sell-side equity research analyst reports, reported in arrears.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Cumulative Allowance and Provision for Changes in Expected Cash Flows from Financial Royalty Assets

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If the effective interest rate is lower for the current period than the prior period, and if the gross cash flows have declined (expected and collected), we record provision expense for the change in expected cash flows.

The provision is measured as the difference between the financial royalty asset’s amortized cost basis and the net present value of the expected future cash flows, calculated based on the prior period’s effective interest rate.

The provision is measured as the difference between the financial royalty asset’s amortized cost basis and the net present value of the expected future cash flows, calculated using the prior period’s effective interest rate.

The amount recognized as provision expense increases the financial royalty asset’s cumulative allowance, which reduces the net carrying value of the financial royalty asset .

In a subsequent period, if there is an increase in expected future cash flows, or if actual cash flows are greater than cash flows previously expected, we reduce the previously established cumulative allowance, resulting in non-cash provision income recorded through the Provision for changes in expected cash flows from financial royalty assets on the consolidated statements of operations.

In a subsequent period, if there is an increase in expected future cash flows, or if actual cash flows are greater than cash flows previously expected, we reduce the previously established cumulative allowance in part or in full, resulting in a non-cash credit to the provision recorded through the Provision for changes in expected cash flows from financial royalty assets on the consolidated statements of operations.

We also recalculate the amount of accretable yield to be received based on the revised remaining future cash flows.

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Amounts not expected to be collected are written off against the allowance at the time that such a determination is made.

Recoveries of previously written-off amounts are credited to the allowance.

In some cases, when a financial royalty asset’s contractual cash flows expire, the final royalty payment may differ from the remaining net carrying value.

We account for this non-cash true-up at the end of the royalty term as either Provision for changes in expected cash flows from financial royalty assets or as Income from financial royalty assets on the consolidated statements of operations .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Allowance for Current Expected Credit Losses

On January 1, 2020, we adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which requires earlier recognition of credit losses.

We recognize an allowance for current expected credit losses on our portfolio of financial royalty assets with limited protective rights.

We recognize an allowance for current expected credit losses under ASC 326 – Financial Instruments – Credit Losses on our portfolio of financial royalty assets with limited protective rights.

The credit loss allowance is estimated using the probability of default and loss given default method.

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The accretable yield is recognized as income at the effective rate of return over the expected life of financial royalty assets.

An acquisition of a royalty on a development-stage product classified as a financial royalty asset is generally placed in non-accrual status.

In these cases, the financial royalty asset is held at cost and no income is recognized until we are able to reliably estimate expected cash flows, generally when the product receives regulatory approval.

An acquisition of a royalty on a development-stage product classified as a financial royalty asset is generally placed in non-accrual status where income is not recognized until we are able to reliably estimate expected cash flows, generally when the product receives regulatory approval.

We evaluate such financial royalty assets held at cost for impairment based on, among other factors, a review of development progress and publicly available information around regulatory discussions, clinical trial results and approval status.

An impairment loss is recognized if, based on available information, it is prob able that we will be unable to recover the carrying value of the financial royalty asset held at cost, and the amount of loss can be reasonably estimated.

An impairment loss is recognized if it is probable that we will be unable to recover the carrying value of the financial royalty asset held at cost and the amount of loss can be reasonably estimated.

When royalties are received for financial royalty assets that have been fully amortized, such income is recognized as Other royalty income.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Revenue from Intangible Royalty Assets

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Royalty revenue from sales of DPP-IV products is recognized in the period the product is sold.

Milestone payments

Our royalties on Januvia and Janumet expired in the first quarter of 2022 and as such, we do not expect any material revenue from the other DPP-IV products in the future periods.

Certain acquisition agreements provide for future incoming or outgoing contingent payments based on the commercial, regulatory or clinical performance of the related biopharmaceutical product generally over a multi-year period.

For purposes of measuring income from financial royalty assets, commercial milestones payable or receivable are reflected in the forecast ed expected future cash flows in the period in which the milestone criteria is projected to be satisfied based on sell-side equity research analysts’ consensus sales forecasts.

Milestones based on regulatory approval or clinical criteria are generally not reflected in the expected future cash flows until such approval is achieved.

For purposes of measuring income from financial royalty assets, commercial milestones payable or receivable are reflected in the forecasted expected future cash flows in the period in which the milestone criteria is projected to be satisfied based on sell-side equity research analysts’ consensus sales forecasts.

Milestones based on regulatory approval or clinical criteria are generally not reflected in the expected future cash flows until such approval or criteria is achieved.

We assess all milestone payments to determine whether we must account for these arrangements as derivatives instruments under ASC 815 – Derivatives and Hedging .

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Payments under these agreements generally become due and payable upon achievement of certain commercial milestones, and when the contingency is resolved.

When milestones are received for financial royalty assets that have been fully amortized or where there is no underlying asset recognized on the consolidated balance sheets, such income is recognized as Other royalty income .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments and Fair Value Measurements

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Cash and cash equivalents, marketable securities, equity securities, derivatives, available for sale debt securities and certain royalty interests are reported at their respective fair values on our consolidated balance sheets.

Outstanding borrowings and non-current financial royalty assets are reported at their amortized costs on our consolidated balance sheets, for which fair values are disclosed.

Outstanding borrowings under our senior unsecured notes and non-current financial royalty assets are reported at their amortized costs on our consolidated balance sheets, for which fair values are disclosed.

The remaining financial instruments are reported on our consolidated balance sheets at amounts that approximate fair values.

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We invest excess cash in marketable debt securities that are classified as trading securities and reported at fair value.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Equity Securities and Available for Sale Debt Securities

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Investments classified as available for sale debt securities are recorded at fair value.

We may elect to apply the fair value option for available for sale debt securities where the fair value option better aligns with the economics of the investment.

We may elect to apply the fair value option for available for sale debt securities when the fair value option better aligns with the economics of the investment.

Upon such election, the entire investment is measured at fair value on a recurring basis, with movements in fair value recognized in earnings.

For available for sale debt securities for which we did not elect the fair value option, the unrealized change in fair value is recorded within in Accumulated other comprehensive income (“AOCI”) and is reclassified to earnings as interest income is recognized when we can reliably estimate forecasted cash flows.

For available for sale debt securities for which we did not elect the fair value option, the unrealized change in fair value is recorded within in Accumulated other comprehensive income and is reclassified to earnings as interest income is recognized when we can reliably estimate forecasted cash flows.

A decline in the market value of any available for sale debt security below its cost that is deemed to have resulted from a credit loss results in a reduction in carrying amount to fair value and is recognized in earnings.

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Investment in Non-Consolidated Affiliates

Investments in entities that provide us with the ability to exercise significant influence, but not a controlling financial interest, and where we are not the primary beneficiary are accounted for under the equity method or as equity securities for which we have elected the fair value option with the movements in fair value of the equity securities recognized within Losses/(gains) on equity securities in the consolidated statements of operations.

Investments accounted for under the equity method are initially recorded at fair value.

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Subsequently, we recognize through earnings our proportionate share of the investee’s net income or loss, net of any adjustment to reflect the amortization of basis differences.

We generally record our share of the results of our investees one quarter in arrears within Equity in losses/(earnings) of equity method investees in the consolidated statements of operations.

We generally record our share of the results of our investees one quarter in arrears within Equity in (earnings)/losses of equity method investees in the consolidated statements of operations.

The investment is reflected as Equity method investments on the consolidated balance sheets.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We have variable interests in entities formed for the purposes of entering into co-development arrangements for potential biopharmaceutical products (the “Avillion entities”).

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We may fund R&D upfront or over time as the underlying products undergo clinical trials.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Royalty payments owed to the Company on successfully commercialized products generated from R&D arrangements are recognized as Other royalty income in the same period in which the sale of the product occurs.

Fixed or milestone payments receivable based on the achievement o f contractual criteria for pr oducts arising out of our R&D arrangements are also recognized as Other royalty income in the period that the milestone threshold is met.

Royalties earned on successfully commercialized products generated from R&D arrangements are recognized as Other royalty income in the same period in which the sale of the product occurs.

Fixed or milestone payments receivable based on the achievement of contractual criteria for products arising out of our R&D arrangements are also recognized as Other royalty income in the period that the milestone threshold is met.

Milestone thresholds are typically not triggered until after all funding obligations have been completed.

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income taxes in accordance with ASC 740 – Income Taxes, with respect to this income.

Additionally, we entered into an arrangement with MSCI during 2021 as discussed in Note 16–Related Party Transactions that will be subject to U.S.

Additionally, we entered into an arrangement with MSCI Inc.

(“MSCI”) during 2021 as discussed in Note 15–Related Party Transactions that will be subject to U.S.

taxation when we begin to recognize revenue .

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As such, we do not record a provision for U.K.

income taxes with respect to the dividends received from RP Holdings or with respect to the dividends received by RP Holdings from RPI .

income taxes with respect to the dividends received from RP Holdings or with respect to the dividends received by RP Holdings from RPI 2019 ICAV .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We are also subject to the U.K.’s “controlled foreign companies” rules (the “U.K.

CFC Rules, broadly, applies to U.K.

CFC Rules, broadly, apply to U.K.

tax resident companies that have, alone or together with certain other persons, interests in a non-U.K.

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We believe our subsidiaries are eligible for benefits under the U.S.-Ireland income tax treaty, and, under that treaty, are not subject to any U.S.

withholding taxes on U.S.-source royalty payments.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

withholding taxes on U.S.-source royalty, interest or other income payments.

Earnings per Share

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Our outstanding Class B ordinary shares are, however, considered potentially dilutive shares of Class A ordinary shares because Class B ordinary shares, together with the related RP Holdings Class B Interests, are exchangeable into Class A ordinary shares on a one -for-one basis.

Potentially dilutive securities also include Class B ordinary shares contingently issuable to EPA Holdings related to Equity Performance Awards and unvested RSUs issued under our 2020 Independent Director Equity Incentive Plan.

Potentially dilutive securities also include Class B ordinary shares contingently issuable to EPA Holdings related to Equity Performance Awards and RSUs issued under our 2020 Independent Director Equity Incentive Plan.

We include potentially dilutive shares in the denominator to compute diluted EPS if (i) the inclusion of the ordinary shares is dilutive for the respective reporting periods, and (ii) contingencies are satisfied as of the end of the reporting period for ordinary shares that are contingently issuable.

We use the “if-converted” method to determine the potentially dilutive effect of our outstanding Class B ordinary shares, and the treasury stock method to determine the potentially dilutive effect of the unvested RSUs.

There were no Class A ordinary shares or Class B ordinary shares outstanding prior to June 16, 2020;

therefore, no earnings per share information have been presented for any period prior to that date.

Shares Repurchases

Amounts paid to repurchase shares in excess of the par value are allocated between Additional paid-in capital and Retained earnings .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Available for Sale Debt Securities

Cytokinetics Commercial Launch Funding

On January 7, 2022, we entered into a long-term funding agreement with Cytokinetics, Incorporated (“Cytokinetics”) to support further development of aficamten and potential commercialization of omecamtiv mecarbil, both development-stage products.

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.

As part of the funding agreement, we agreed to provide capital (“Cytokinetics Commercial Launch Funding”) of up to $ 300 million, which is comprised of five tranches, including an initial tranche of $ 50 million that was funded upon closing.

On January 7, 2022, we entered into a long-term funding agreement, which was later amended in 2022, with Cytokinetics, Incorporated (“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.

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 (“Cytokinetics Funding Commitments”).

Each tranche has an interest-free and payment-free period of six calendar quarters, followed by 34 calendar quarters of installment re-payments totaling 1.9 times the amount drawn, except for the second and third tranches, which each total 2.0 times the amount drawn.

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.

We elected the fair value option to account for the Cytokinetics Commercial Launch Funding, recorded within Available for sale debt securities on the consolidated balance sheets, as it most accurately reflects the nature of the funding arrangement.

The Cytokinetics Funding Commitments, which include options and forwards over the subsequent tranches, are recognized at fair value within Other liabilities as of December 31, 2022 on the consolidated balance sheets.

The changes in the fair value of the funded Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments are recorded within Losses/(gains) on available for sale debt securities in the consolidated statements of operations.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

For tranches one, four and five, we expect to receive a return of 1.9 times the amount drawn over 34 consecutive quarterly payments beginning on the last business day of the seventh quarter following the quarter of the funding date of each tranche.

In the fourth quarter of 2023, we began receiving quarterly payments on the return of the first tranche.

As of December 31, 2023, $ 175 million remained available under the Cytokinetics Funding Commitments.

We elected the fair value option to account for the Cytokinetics Commercial Launch Funding due to the nature of the funding arrangement.

The funded Cytokinetics Commercial Launch Funding is recorded within Available for sale debt securities on the consolidated balance sheets.

The Cytokinetics Funding Commitments, which include options and forwards over the subsequent tranches, are recognized at fair value within Other liabilities on the consolidated balance sheets.

The changes in the fair value of the funded Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments are recorded within (Gains)/losses on available for sale debt securities in the consolidated statements of operations.

MorphoSys Development Funding Bonds

On June 2, 2021, we announced a long-term strategic funding partnership with MorphoSys AG (“MorphoSys”) to support its acquisition of Constellation Pharmaceuticals, Inc.

On June 2, 2021, we announced a long-term strategic funding agreement with MorphoSys AG (“MorphoSys”) to support its acquisition of Constellation Pharmaceuticals, Inc.

which closed on July 15, 2021.

As part of the funding agreement, we agreed to provide MorphoSys up to $ 350 million of capital (the “Development Funding Bonds”), of which MorphoSys was required to draw a minimum of $ 150 million.

Our commitment to fund at least $ 150 million of the Development Funding Bonds was recognized as the Development Funding Bond Forward as of December 31, 2021.

In September 2022, we funded $ 300 million of the Development Funding Bonds, which represents additional funding of $ 150 million above the minimum funding commitment (“Additional Funding”) and the Development Funding Bond Forward was settled at the same time.

We expect to receive a return of 2.2 times the amount funded on the Development Funding Bonds payable on a quarterly basis over nine years , with the first payment beginning in the fourth quarter of 2024.

As of December 31, 2022, we have no remaining funding commitment under the Development Funding Bonds.

We elected the fair value option to account for the funded amount of the Development Funding Bonds and the Development Funding Bond Forward as it most accurately reflects the nature of the instruments.

The funded amount of the Development Funding Bonds and the Development Funding Bond Forward are recorded within Available for sale debt securities on the consolidated balance sheets.

The changes in the fair values of the funded amount of the Development Funding Bonds and the Development Funding Bond Forward are recorded within Losses/(gains) on available for sale debt securities in the consolidated statements of operations.

Biohaven Preferred Shares

Series A Biohaven Preferred Shares

On April 5, 2019, RPIFT purchased 2,495 Series A Biohaven Preferred Shares from Biohaven Pharmaceutical Holding Company Ltd (“Biohaven”) at a price of $ 50,100 per preferred share, for a total of $ 125 million.

The approval of Nurtec ODT by the U.S.

Food and Drug Administration (“FDA”) in February 2020 resulted in a payment due to us of two times the original purchase price of the Series A Biohaven Preferred Shares beginning in the first quarter of 2021 through the fourth quarter of 2024.

In the first quarter of 2021, we began receiving payments of $ 15.6 million from the quarterly redemption of the Series A Biohaven Preferred Shares.

The Series A Biohaven Preferred Shares were classified as Available for sale debt securities on the consolidated balance sheet as of December 31, 2021.

The unrealized changes in the fair value of the Series A Biohaven Preferred Shares were recorded within Unrealized gains on available for sale debt securities in the consolidated statements of comprehensive income.

In 2022, 2021 and 2020, $ 53.4 million, $ 50.9 million and $ 20.6 million of unrealized gains were reclassified from other comprehensive income to Interest income on the consolidated statements of operations, respectively.

Series B Biohaven Preferred Shares

On August 7, 2020, we entered into the Series B Biohaven Preferred Share Purchase Agreement (“Series B Biohaven Preferred Share Agreement”) with Biohaven where we committed to acquire 3,992 shares of Series B Biohaven Preferred Shares at a price of $ 50,100 per preferred share (the “Commercial Launch Preferred Equity”), for a total of $ 200 million payable on a quarterly basis between the first quarter of 2021 and the fourth quarter of 2024.

Our commitment to purchase the Series B Biohaven Preferred Shares was recognized as the Series B Forwards.

We elected the fair value option to account for the Series B Biohaven Preferred Shares and the Series B Forwards, which were recorded within Available for sale debt securities on the consolidated balance sheet as of December 31, 2021.

We believe the fair value option most accurately reflects the nature of these instruments.

The changes in fair value of the Series B Biohaven Preferred Shares and Series B Forwards were recorded within Losses/(gains) on available for sale debt securities in the consolidated statements of operations.

In 2022, 2021 and 2020, we recognized gains of $ 122.5 million, $ 13.5 million and $ 18.6 million, respectively, related to Series B Biohaven Preferred Shares within Losses/(gains) on available for sale debt securities in the consolidated statements of operations.

As part of the funding agreement, we agreed to provide MorphoSys up to $ 350 million of capital (“Development Funding Bonds”), of which MorphoSys was required to draw a minimum of $ 150 million.

In September 2022, we funded $ 300 million of the Development Funding Bonds, which represented $ 150 million in additional funding above the minimum funding commitment (“Additional Funding”), and settled our forward commitment.

We expect to receive a return of 2.2 times the funded amount of the Development Funding Bonds, payable on a quarterly basis over nine years , with the first payment beginning in the fourth quarter of 2024.

We elected the fair value option to account for the funded amount of the Development Funding Bonds as it most accurately reflects the nature of the instruments.

The funded amount of the Development Funding Bonds are recorded within Available for sale debt securities on the consolidated balance sheets.

The changes in the fair value of the funded amount of the Development Funding Bonds are recorded within (Gains)/losses on available for sale debt securities in the consolidated statements of operations.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On October 3, 2022, Pfizer Inc.

(“Pfizer”) acquired Biohaven, which was a change of control event that accelerated the issuance of all unissued Series B Biohaven Preferred Shares and the redemption of all outstanding Series A Biohaven Preferred Shares and Series B Biohaven Preferred Shares.

We purchased all remaining unissued Series B Biohaven Preferred Shares simultaneously with the redemption of all outstanding Series B Biohaven Preferred Shares at a price equal to approximately 1.8 times the original purchase price.

The Series A Biohaven Preferred Shares were redeemed at a price equal to two times the original purchase price.

As of December 31, 2022, we no longer hold any Series A Biohaven Preferred Shares or Series B Biohaven Preferred Shares.

The table below summarizes our available for sale debt securities recorded at fair value as of December 31, 2023 and 2022 (in thousands):

Cost Unrealized (Losses)/Gains Fair Value Current Assets Non-Current Assets Current Liabilities Non-Current Liabilities Total

Cost Unrealized Gains/(Losses)

Fair Value Current Assets Non-Current Assets Non-Current Liabilities Total

As of December 31, 2023

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Debt securities (1) $ 359,400 $ ( 131,800 ) $ 227,600 $ 1,300 $ 226,300 $ — $ 227,600

Forwards (4) — 16,700 16,700 — 16,700 — — 16,700

Funding commitments (2) ( 9,400 ) 6,900 ( 2,500 ) — — ( 2,500 ) ( 2,500 )

Total available for sale debt securities $ 350,000 $ ( 124,900 ) $ 225,100 $ 1,300 $ 226,300 $ ( 2,500 ) $ 225,100

(1) The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date.

The cost of the Development Funding Bonds represents the amounts funded.

(1) The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date which is amortized as we receive quarterly repayments on the first tranche.

The cost of the Development Funding Bonds represents the amount funded.

(2) Related to Cytokinetics Funding Commitments for which related tranches remain available as of the respective balance sheet dates.

The cost associated with the Cytokinetics Funding Commitments represents the fair value on the purchase date.

(3) The cost for the Series A Biohaven Preferred Shares represents amortized cost.

The cost for the Series B Biohaven Preferred Shares represents the

amounts paid to purchase the instruments.

These instruments were fully redeemed during 2022.

(4) There are no costs associated with the forwards.

Derivative Instruments

We have historically managed the impact of foreign currency exchange rate and interest rate risk through various financial instruments, including derivative instruments such as treasury rate lock contracts, interest rate swap contracts and foreign currency forward contracts.

Our policy is to use derivatives strategically to hedge existing and future interest rate exposure and to minimize volatility in cash flow arising from our exposure to interest rate risk and foreign currency risk.

We have historically managed the impact of interest rate risk through various financial instruments, including derivative instruments such as treasury rate lock contracts.

Our policy is to use derivatives strategically to hedge existing and future interest rate exposure and to minimize volatility in cash flow arising from our exposure to interest rate risk.

We may also acquire other financial instruments that are classified as derivatives.

We do not enter into derivative instruments for trading or speculative purposes.

In 2023, 2022 and 2021, we did not hold any derivatives that were designated as hedging instruments.

Milestone Acceleration Option

On August 7, 2020, we entered into an expanded funding agreement with Biohaven, which included the Series B Biohaven Preferred Share Agreement, to fund the development of zavegepant and the commercialization of Nurtec ODT in exchange for royalties and success-based milestones payable over time.

Upon a change of control event, we have the option to cause Biohaven to accelerate the payment of zavegepant milestone payments, if triggered, in a lump sum amount (“Milestone Acceleration Option”).

On August 7, 2020, we entered into an expanded funding agreement with Biohaven to fund the development of zavegepant and the commercialization of Nurtec ODT in exchange for royalties and success-based milestones payable over time.

Following Pfizer Inc.’s (“Pfizer”) acquisition of Biohaven on October 3, 2022, which was a change of control event, we elected to accelerate the payment of the zavegepant milestone payments into a lump sum amount (“Milestone Acceleration Option”).

The Milestone Acceleration Option is an embedded derivative instrument for which the associated fair value was not material prior to the second quarter of 2022, when Pfizer announced its intended acquisition of Biohaven.

On October 3, 2022, Pfizer acquired Biohaven and we elected to accelerate the zavegepant success-based milestone payments, if triggered, in a lump sum amount.

As of December 31, 2022, the fair value of the Milestone Acceleration Option was $ 96.6 million, of which $ 86.2 million was recorded within Other current assets and $ 10.5 million was recorded within Other assets on the consolidated balance sheets.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In March 2023, the U.S.

Food and Drug Administration (“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, which triggered a milestone payment of $ 475 million that we received in the same month and resulted in a partial settlement of the derivative instrument attributable to Zavzpret.

In November 2023, we received a one-time $ 50 million payment from Pfizer in relation to the oral formulation of zavegepant which was recorded within Other royalty income in the consolidated statements of operations.

The Milestone Acceleration Option had no remaining fair value as of December 31, 2023.

As of December 31, 2022, the fair value of the Milestone Acceleration Option was $ 96.6 million, of which $ 86.2 million related to Zavzpret was recorded within Other current assets and $ 10.5 million related to the oral formulation of zavegepant was recorded within Other assets on the consolidated balance sheet.

Treasury Rate Lock Contracts

In June 2021, we entered into treasury rate lock contracts with notional amounts totaling $ 600 million to manage the impact of fluctuations in the underlying benchmark interest rate associated with the 2021 Notes (as further discussed and defined in Note 10–Borrowings).

The treasury rate lock contracts had collateral requirements and were not designated as hedge instruments.

We paid $ 16.1 million in July 2021 to terminate our treasury rate lock contracts in connection with the issuance of the 2021 Notes.

Interest rate swaps

In February 2020, RPIFT terminated all outstanding interest rate swaps in connection with the Exchange Offer Transactions.

We paid $ 35.4 million to terminate these swaps and reclaimed $ 45.3 million of collateral that was held by the respective counterparties.

We did not enter into any interest rate swaps subsequent to the February 2020 termination discussed above.

Epizyme put option and warrant

In November 2019, RPIFT made an equity investment in Epizyme, Inc.

(“Epizyme”) of $ 100.0 million.

Under the terms of the agreement with Epizyme, we made an upfront payment of $ 100.0 million in exchange for (1) shares of Epizyme common stock, (2) a warrant to purchase an additional 2.5 million shares of Epizyme common stock at $ 20 per share over a three-year term and (3) Epizyme’s royalty on sales of Tazverik in Japan payable by Eisai Co., Ltd (“Eisai”).

In addition, Epizyme had an 18 month put option to sell an additional $ 50.0 million of its common stock to RPIFT at then prevailing prices, not to exceed $ 20 per share.

We recorded the put option as a forward purchase contract as of December 31, 2019.

The exercise of the put option was settled in February 2020.

As of December 31, 2021, the fair value of the warrant was immaterial.

The warrant remained unexercised and was terminated upon Ipsen’s acquisition of Epizyme in 2022.

Summary of derivatives and reclassifications

The tables below summarize the changes in fair value of the derivatives for 2022, 2021 and 2020 and the line items within the consolidated statements of operations where the gains or losses on these derivatives were recorded (in thousands):

Years Ended December 31, Location on Consolidated Statements of Operations

2022 2021 2020

Derivatives in hedging relationships (1)

Interest rate swaps:

Amount of loss reclassified from accumulated other comprehensive income into net income $ — $ — $ 4,066 (Gains)/losses on derivative financial instruments

Change in fair value of interest rate swaps — — ( 73 ) (Gains)/losses on derivative financial instruments

Interest expense — — 114 Interest expense

Derivatives not designated as hedging instruments

Interest rate swaps:

Change in fair value of interest rate swaps — — 6,908 (Gains)/losses on derivative financial instruments

Interest expense — — 408 Interest expense

Changes in fair value of other instruments:

Warrant — 5,439 25,375 (Gains)/losses on derivative financial instruments

Forward purchase contract — — 5,800 (Gains)/losses on derivative financial instruments

Treasury rate lock contracts — 16,093 — (Gains)/losses on derivative financial instruments

Milestone Acceleration Option ( 96,610 ) — — (Gains)/losses on derivative financial instruments

(1) Certain interest rate swaps were previously designated as cash flow hedges.

These swaps became ineffective as debt refinancings occurred between 2013 and 2016.

As a result of the termination of interest rate swaps in February 2020, all amounts associated with interest rate swaps previously designated as cash flow hedges and recorded in Accumulated other comprehensive income were released into earnings.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The table below summarizes the changes in fair value by derivative instrument for 2023, 2022 and 2021 which were recorded within Losses/(gains) on derivative financial instruments in the consolidated statements of operations (in thousands):

Years Ended December 31,

2023 2022 2021

Milestone Acceleration Option $ 2,290 $ ( 96,610 ) $ —

Treasury rate lock contracts

Warrant (1) — — 5,439

(1) Related to a warrant to purchase 2.5 million shares of Epizyme, Inc.

(“Epizyme”) common stock at $ 20 per share over a three-year term.

The warrant was not exercised and was terminated in 2022 with de minims value upon Ipsen’s acquisition of Epizyme.

Fair Value Measurements and Financial Instruments

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Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Cash equivalents

Money market funds (1) $ 157,420 $ — $ — $ 157,420 $ 5,068 $ — $ — $ 5,068

Commercial paper — — — — — 13,997 — 13,997

Certificates of deposit — — — — — 40,954 — 40,954

Marketable securities

Commercial paper — — — — — 207,457 — 207,457

Certificates of deposit — — — — — 11,501 — 11,501

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Available for sale debt securities (2) — — 18,300 18,300 — — 1,300 1,300

Debt securities (1) — — 1,300 1,300 — — 66,000 66,000

Derivative instruments (3) — — — — — — 86,150 86,150

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Available for sale debt securities (2) — — 437,100 437,100 — — 226,300 226,300

Debt securities (1) — — 226,300 226,300 — — 187,700 187,700

Forwards (3) — — — — — — 16,700 16,700

Derivative instruments (3) — — — — — — 10,460 10,460

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Total non-current assets $ 199,190 $ — $ 439,175 $ 638,365 $ 103,876 $ — $ 259,732 $ 363,608

Available for sale debt securities

Funding commitments (5) — — ( 900 ) ( 900 ) — — ( 2,500 ) ( 2,500 )

Total non-current liabilities $ — $ — $ ( 900 ) $ ( 900 ) $ — $ — $ ( 2,500 ) $ ( 2,500 )

(1) As of December 31, 2022, amounts reflect the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the funded portion of the Development Funding Bonds.

As of December 31, 2021, amounts reflect the fair value of the Series A Biohaven Preferred Shares and Series B Biohaven Preferred Shares.

(1) Recorded within Cash and cash equivalents on the consolidated balance sheets.

(2) Reflects the fair value of the funded portions of the Development Funding Bonds and the Cytokinetics Commercial Launch Funding.

(3) Reflects the fair value of the Milestone Acceleration Option .

(3) Reflects the fair value of our obligations to fund the acquisitions of the Series B Biohaven Preferred Shares and our obligations to fund the Development Funding Bonds.

(4) Recorded within Other assets on the consolidated balance sheet.

(4) Recorded within Other assets on the consolidated balance sheets.

See Note 8–Non-Consolidated Affiliates for additional discussion.

(5) Related to the fair value of the Cytokinetics Funding Commitments.

For 2022 and 2021, we recognized losses of $ 39.1 million and $ 41.4 million, respectively, on equity securities still held as of December 31, 2022.

There were no gains or losses in 2020 associated with the equity securities still held as of December 31, 2022.

(5) Related to the fair value of the Cytokinetics Funding Commitments recorded within Other liabilities on the consolidated balance sheets.

For 2023, 2022 and 2021, we recognized gains of $ 87.1 million, losses of $ 39.1 million and $ 41.4 million, respectively, on equity securities still held as of December 31, 2023.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The table presented below summarizes the change in the combined fair value (current and non-current) of Level 3 financial instruments (in thousands):

Year Ended December 31, 2022 Year Ended December 31, 2021

Equity Securities Debt Securities Forwards Funding Commitments Derivative Instruments Royalty at Fair Value Equity Securities Debt Securities Forwards

Balance at the beginning of the year $ 43,013 $ 253,700 $ 16,700 $ — $ — $ — $ — $ 214,400 $ 18,600

The tables presented below summarize the change in the combined fair value (current and non-current) of Level 3 financial instruments (in thousands):

Year Ended December 31, 2023

Equity Securities Debt Securities Funding Commitments Derivative Instruments Royalty at Fair Value

Balance at the beginning of the period $ 8,472 $ 227,600 $ ( 2,500 ) $ 96,610 $ 14,500

Losses on equity securities ( 8,175 ) — — — —

Losses on derivative financial instruments — — — ( 2,290 ) —

Gains on available for sale debt securities included in earnings

— 229,240 1,600 — —

Other non-operating expense

— — — — ( 12,722 )

Settlement (1) — — — ( 94,320 ) —

Redemptions (2)

— ( 1,440 ) — — —

Balance at the end of the period $ 297 $ 455,400 $ ( 900 ) $ — $ 1,778

(1) Represents the fair value of the Milestone Acceleration Option attributable to the intranasal formulation of zavegepant which was settled when the FDA approved Zavzpret in March 2023.

(2) Amount relates to the first quarterly repayment we received in the fourth quarter of 2023 on the first tranche of the Cytokinetics Commercial Launch Funding.

Year Ended December 31, 2022

Equity Securities Debt Securities Forwards Funding Commitments Derivative Instruments Royalty at Fair Value

Balance at the beginning of the period $ 43,013 $ 253,700 $ 16,700 $ — $ — $ —

Purchases (1) 28,785 479,559 — — — 21,215

Gains/(losses) on initial recognition (2) — 600 — ( 9,400 ) — —

(Losses)/gains on equity securities ( 22,634 ) — — — — — 7,893 — —

Losses on equity securities ( 22,634 ) — — — — —

Gains on derivative financial instruments — — — — 96,610 —

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(Losses)/gains on available for sale debt securities included in earnings

— ( 67,800 ) 62,885 6,900 — —

Other non-operating expense — — — — — ( 6,715 )

Settlement of forwards (4) — 79,585 ( 79,585 ) — — — — 18,459 ( 18,459 )

Settlements (3)

— 79,585 ( 79,585 ) — — —

Transfer out of Level 3 (4)

( 40,692 ) — — — — —

Redemptions (1) — ( 542,044 ) — — — —

Balance at the end of the year $ 8,472 $ 227,600 $ — $ ( 2,500 ) $ 96,610 $ 14,500 $ 43,013 $ 253,700 $ 16,700

(1) Following Pfizer’s acquisition of Biohaven in October 2022, we purchased all remaining unissued Series B Biohaven Preferred Shares and we received accelerated redemption payments for all outstanding Series A Biohaven Preferred Shares and Series B Biohaven Preferred Shares.

(2) Reflects the purchase price allocation for the long-term funding agreement entered into with Cytokinetics to arrive at the appropriate fair value of the Cytokinetics Funding Commitments on initial recognition.

Amounts also reflect the losses on initial recognition of debt securities related to the difference in (a) the fair value of the Additional Funding of the Development Funding Bonds and (b) the actual additional funded amount of $ 150 million.

(3) Amounts reflect changes in the fair values of the Series B Biohaven Preferred Shares, Series B Forwards and the Development Funding Bond Forward.

For 2022, amounts also reflect the change in the fair value of the funded portion of the Cytokinetics Commercial Launch Funding, the funded portion of the Development Funding Bonds and the Cytokinetics Funding Commitments.

(4) Amounts reflect the fair value attributed to the Series B Forwards that were settled as we acquired the Series B Biohaven Preferred Shares.

Amounts in 2022 also reflect the fair value attributed to the Development Funding Bond Forward that was settled upon funding the Development Funding Bonds.

Balance at the end of the period $ 8,472 $ 227,600 $ — $ ( 2,500 ) $ 96,610 $ 14,500

(1) We purchased all remaining unissued Series B Biohaven Preferred Share debt securities and received accelerated redemption payments for all outstanding Series A Biohaven Preferred Shares and Series B Biohaven Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.

(2) Represents purchase price allocation to arrive at the appropriate fair value on initial recognition.

Amounts also reflect the initial recognition of debt securities related to the difference in (a) the fair value of the Additional Funding of the Development Funding Bonds and (b) the actual additional funded amount of $ 150 million.

(3) Reflects the fair value attributed to our commitment to purchase Series B Biohaven Preferred Shares that were settled simultaneously with the acquisition of the Series B Biohaven Preferred Shares.

Amounts also reflect the fair value attributed to our forward commitment of the Development Funding Bonds which was settled upon funding the Development Funding Bonds in September 2022.

Following Pfizer’s acquisition of Biohaven in October 2022, we purchased all remaining unissued Series B Biohaven Preferred Shares and we received accelerated redemption payments for all outstanding Series B Biohaven Preferred Shares.

(4) Related to the expiration of the transfer restriction on BioCryst common stock.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Valuation Inputs for Recurring Fair Value Measurements

Below is a discussion of the valuation inputs used for financial instruments classified as Level 2 and Level 3 measurements in the fair value hierarchy.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

ApiJect Investment

We utilized the discounted cash flow method using Level 3 inputs, including forecasted cash flows and the weighted average cost of capital, to estimate the fair value as of December 31, 2022 of the equity securities and revenue participation right that we acquired from ApiJect Holdings, Inc.

(“ApiJect”), a private company, in April 2022.

We estimated the fair value of the equity securities and revenue participation right that we acquired from ApiJect Holdings, Inc.

(“ApiJect”), a private company, as of December 31, 2023 and 2022 by utilizing a discounted cash flow calculation using Level 3 inputs, including forecasted cash flows and the weighted average cost of capital.

Our estimate of the forecasted cash flows and the weighted average cost of capital could reasonably be different than those selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

Refer to Note 8–Non-Consolidated Affiliates for additional discussion.

Cytokinetics Commercial Launch Funding & Funding Commitments

We estimated the fair value of the funded Cytokinetics Commercial Launch Funding as of December 31, 2022 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including an estimated risk-adjusted discount rate and the probability that there will be a change of control event, which would result in accelerated payments.

Cytokinetics Commercial Launch Funding and Cytokinetics Funding Commitments

We estimated the fair value of the funded Cytokinetics Commercial Launch Funding as of December 31, 2023 and 2022 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including an estimated risk-adjusted discount rate and the probability that there will be a change of control event, which would result in accelerated payments.

Developing a risk-adjusted discount rate and assessing the probability that there will be a change of control event over the duration of the Cytokinetics Commercial Launch Funding require significant judgement.

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Our expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than the timing of an actual change of control event, and if so, would mean that the estimated fair value could be significantly higher or lower than the fair value determined by management at any particular date.

We estimated the fair value of the Cytokinetics Funding Commitments as of December 31, 2022 using a Monte Carlo simulation methodology that includes simulating the interest rate movements using a Geometric Brownian Motion-based pricing model.

We estimated the fair value of the Cytokinetics Funding Commitments as of December 31, 2023 and 2022 using a Monte Carlo simulation methodology that includes simulating the interest rate movements using a Geometric Brownian Motion-based pricing model.

This methodology simulates the likelihood of future discount rates exceeding the counterparty’s assumed cost of debt, which would impact Cytokinetics’ decision to exercise its option to draw on each respective tranche.

This methodology incorporates Level 3 fair value measurements and inputs, including an assumed interest rate volatility of 30 % and an assumed risk-adjusted discount rate of 13.5 %.

As of December 31, 2023 and 2022 this methodology incorporates Level 3 fair value measurements and inputs, including the probability of a change of control event occurring during the investment term, an assumed risk-adjusted discount rate of 10.9 % and 13.5 %, respectively, and an assumed interest rate volatility of 37.5 % and 30.0 %, respectively.

We also assumed probabilities for the occurrence of each regulatory or clinical milestone, which impacts the availability of each future tranche of funding.

Our estimate of the risk-adjusted discount rate, the interest rate volatility and the probabilities of each underlying milestone could reasonably be different than the assumptions selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

BioCryst Common Stock

In November 2021, we purchased 3,846 thousand shares of common stock of BioCryst Pharmaceuticals, Inc.

(“BioCryst”).

As part of the transaction, we were restricted from selling the BioCryst common stock for six months following the close of the transaction.

We determined the fair value of the BioCryst common stock as of December 31, 2021 based on the closing stock price and adjusted for the transfer restriction, which was determined by calculating the value of a put option over the common stock to match the duration of the transfer restriction.

This methodology incorporated Level 3 inputs, including the estimated volatility of the BioCryst common stock, which required significant judgement.

Our estimated volatility could be reasonably different than the actual volatility of BioCryst’s common stock, which would mean that the estimated fair value for the common stock could be significantly higher or lower than the fair value determined by management at any particular date.

During the second quarter of 2022, the transfer restriction expired and the BioCryst common stock was transferred from a Level 3 to a Level 1 asset.

MorphoSys Development Funding Bonds & Forward

The fair values of the Development Funding Bonds and the Development Funding Bond Forward as of December 31, 2022 and 2021 were based on a discounted cash flow calculation using estimated risk-adjusted discount rates, which are Level 3 fair value inputs.

Our estimate of the risk adjusted discount rates could reasonably be different than the discount rates selected by a market participant, which would mean that the estimated fair values could be significantly higher or lower.

Our estimate of expectation of the probability and timing of the occurrence of a change of control event, the risk-adjusted discount rate, the interest rate volatility and the probabilities of each underlying milestone could reasonably be different than the assumptions selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

MorphoSys Development Funding Bonds

We estimated the fair value of the Development Funding Bonds as of December 31, 2023 and 2022 based on a discounted cash flow calculation using estimated risk-adjusted discount rates, which are Level 3 fair value inputs.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Series A Biohaven Preferred Shares

The Series A Biohaven Preferred Shares were redeemed following Pfizer’s acquisition of Biohaven in October 2022.

The fair value of the Series A Biohaven Preferred Shares as of December 31, 2021 was calculated using probability-adjusted discounted cash flow calculations incorporating Level 3 fair value measurements and inputs, including estimated risk-adjusted discount rates and the probability of a change of control event occurring during the investment term, which results in accelerated payments and redemptions.

Assessing the probability that there will be a change of control event over a four-year time period and developing a risk-adjusted discount rate require significant judgement.

Our estimate of a risk adjusted discount rate of 9.5 % as of December 31, 2021 could reasonably be different than the discount rate selected by a market participant in the event of a sale of the Series A Biohaven Preferred Shares, which would mean that the estimated fair value could be significantly higher or lower.

Series B Biohaven Preferred Shares & Forwards

All remaining unissued Series B Biohaven Preferred Shares were purchased simultaneously with the redemption of all outstanding Series B Biohaven Preferred Shares following Pfizer’s acquisition of Biohaven in October 2022.

The fair value of each of the Series B Biohaven Preferred Shares and Series B Forwards as of December 31, 2021 was based on probability-adjusted discounted cash flow calculations using Level 3 fair value measurements and inputs, including estimated risk-adjusted discount rates and the probability that there will be a change of control event in different periods of time, which would result in accelerated payments and redemptions.

Assessing the probability that there will be a change of control event over the duration of the Series B Biohaven Preferred Shares and developing a risk-adjusted discount rate require significant judgement.

Our estimate of a risk adjusted discount rate, expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than those determined by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

Milestone Acceleration Option

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Our estimate of a risk adjusted discount rate and the probabilities of achieving marketing approval could reasonably be different than those determined by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

The fair value associated with this instrument was not material prior to the second quarter of 2022, when Pfizer announced its intended acquisition of Biohaven.

Other Financial Instruments

Financial instruments whose fair values are measured on a recurring basis using Level 2 inputs primarily consist of commercial paper, certificates of deposit and U.S.

As of December 31, 2023, we did not have any financial instruments recorded at fair value using Level 2 inputs.

As of December 31, 2022, financial instruments whose fair values are measured on a recurring basis using Level 2 inputs primarily consisted of certificates of deposit and U.S.

government securities.

We measure the fair value of these financial instruments with the help of third-party pricing services that provide quoted market prices in active markets for similar securities or observable inputs for their pricing without applying significant adjustments.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Financial Assets Not Measured at Fair Value

Financial royalty assets are measured and carried on the consolidated balance sheets at amortized cost using the effective interest method.

The current portion of financial royalty assets approximates fair value.

Management calculates the fair value of financial royalty assets using the forecasted royalty payments that are expected to be received based on the projected product sales for all royalty bearing products which are estimated using sell-side equity research analysts’ consensus sales forecasts.

These projected future royalty payments by asset, along with any projected incoming or outgoing milestone payments, are then discounted to a present value using appropriate individual discount rates.

Management calculates the fair value of financial royalty assets using forecasted royalty receipts based on the projected product sales for all royalty bearing products which are estimated using sell-side equity research analysts’ consensus sales forecasts.

These projected future royalty receipts by asset along with any projected incoming or outgoing milestone payments, are then discounted to a present value using appropriate individual discount rates.

The fair value of financial royalty assets is classified as Level 3 within the fair value hierarchy since it is determined based upon inputs that are both significant and unobservable.

The estimated fair value of the current portion of financial royalty assets approximates the related carrying value at the end of each reporting period.

The estimated fair values and related carrying values of the non-current portion of financial royalty assets as of December 31, 2023 and 2022 are presented below (in thousands):

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Financial Royalty Assets

Financial royalty assets consist of contractual rights to cash flows relating to royalty payments derived from the expected sales of patent-protected biopharmaceutical products that entitle us and our subsidiaries to receive a portion of income from the sale of such products by third parties.

Financial royalty assets consist of contractual rights to cash flows relating to royalties derived from the expected sales of patent-protected biopharmaceutical products that entitle us and our subsidiaries to receive a portion of income from the sale of such products by third parties.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The gross carrying value, cumulative allowance for changes in expected cash flows, exclusive of the allowance for credit losses, and net carrying value for the current and non-current portion of financial royalty assets as of December 31, 2023 and 2022 are as follows (in thousands):

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Estimated Royalty Duration (1)

Gross Carrying Value Cumulative Allowance for Changes in Expected Cash Flows (Note 7) Net Carrying Value (4)

Gross Carrying Value Cumulative Allowance for Changes in Expected Cash Flows (Note 7)

Net Carrying Value (4)

Cystic fibrosis franchise 2037 (2)

$ 5,288,833 $ ( 2,539 ) $ 5,286,294

Evrysdi 2035-2036

1,793,088 — 1,793,088

Trelegy 2029-2030 1,208,807 — 1,208,807

1,511,957 ( 434,568 ) 1,077,389

Tremfya 2031-2032 927,488 ( 120,733 ) 806,755

Imbruvica 2027-2032 1,436,969 ( 660,703 ) 776,266

Xtandi 2027-2028 911,045 ( 268,701 ) 642,344

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Total current and non-current financial royalty assets, net $ 14,827,093

(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.

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Refer to Note 7–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2022, we recorded $ 160.1 million and $ 273.6 million of non-cash impairment charges for otilimab and gantenerumab, respectively, both unapproved financial royalty assets held at cost.

The impairment charges were recorded as a result of GSK plc’s announcement that it has decided not to progress with regulatory submissions for otilimab and Roche’s statement that it would discontinue clinical trials of gantenerumab.

Included in the total financial royalty assets balance of $ 14.2 billion as of December 31, 2022, is $ 533.8 million related to unapproved financial assets held at cost:

zavegepant, seltorexant and olpasiran.

Additionally, 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 due to the uncertainty of Gavreto’s commercial outlook.

These impairment charges were recorded within Financial royalty asset impairment in the consolidated statements of operations.

As of December 31, 2023, the balance of $ 14.8 billion above for total current and non-current financial royalty assets, net included $ 562.3 million in unapproved financial royalty assets held at cost primarily related to olpasiran, pelacarsen, KarXT, and seltorexant.

As of December 31, 2022

Estimated Royalty Duration (1)

Gross Carrying Value Cumulative Allowance for Changes in Expected Cash Flows (Note 7) Net Carrying Value (5)

Gross Carrying Value Cumulative Allowance for Changes in Expected Cash Flows (Note 7)

Net Carrying Value (4)

Cystic fibrosis franchise 2037 (2)

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1,683,441 ( 212,283 ) 1,471,158

Trelegy 2029-2030 1,284,054 ( 24,126 ) 1,259,928

Tremfya 2031-2032 894,160 — 894,160

Imbruvica 2027-2032 1,436,969 ( 660,703 ) 776,266

Xtandi 2027-2028 1,009,168 ( 235,625 ) 773,543

Tremfya 2031-2032 881,671 — 881,671

Evrysdi 2030-2035 (4)

727,774 — 727,774

Other 2024-2041 5,134,980 ( 1,332,815 ) 3,802,165

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Total current and non-current financial royalty assets, net $ 14,184,425

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) Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $ 1.3 billion.

(4) The net carrying value by asset is presented before the allowance for credit losses.

Refer to Note 7–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In 2022, we recorded $ 160.1 million and $ 273.6 million of non-cash impairment charges for otilimab and gantenerumab, respectively, both unapproved financial royalty assets held at cost.

Additionally, in 2022, we impaired our financial royalty asset related to Gavreto and recorded a non-cash impairment charge of $ 182.1 million due to the uncertainty of Gavreto’s commercial outlook.

These impairment charges were recorded within Financial royalty asset impairment in the consolidated statement of operations.

Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets

The cumulative allowance for changes in expected future cash flows from financial royalty assets is presented net within the non-current portion of financial royalty assets on the consolidated balance sheets and includes the following activities:

• the movement in the cumulative allowance related to changes in forecasted royalty payments expected to be received based on projected product sales for royalty bearing products which are estimated using sell-side equity research analysts’ consensus sales forecasts,

• the movement in the cumulative allowance related to changes in forecasted royalty payments expected to be received based on projected product sales for royalty bearing products which are estimated by sell-side equity research analysts’ consensus sales forecasts,

• the write-off of cumulative allowance at the end of a royalty asset’s life which only impacts the consolidated balance sheets, and

• the movement in the cumulative allowance for current expected credit losses, primarily associated with new financial royalty assets with limited protective rights and changes in the underlying cash flow forecasts of financial royalty assets with limited protective rights .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the activity in the cumulative allowance for changes in expected cash flows from financial royalty assets, inclusive of the cumulative allowance for credit losses, as of the dates indicated (in thousands):

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Balance at December 31, 2020 (1) $ ( 1,263,824 )

Cumulative adjustment for adoption of ASU 2016-13 ( 192,705 )

Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets ( 912,710 )

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Write-off of cumulative allowance 21,721

Write-off of credit loss allowance (1) 25,174

Provision for credit losses, net (2) 12,913

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Write-off of cumulative allowance 5,723

Write-off of credit loss allowance 1,584

Provision for credit losses, net (2) 193,798

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Write-off of cumulative allowance 87,393

Write-off of credit loss allowance 1,584

Provision for credit losses, net (2) ( 22,285 )

Balance at December 31, 2023 $ ( 3,065,145 )

(1) Relates to amounts reversed out of the credit loss allowance associated with omecamtiv mecarbil as a result of the gross write-off of the related financial royalty asset balance of $ 90.2 million.

(2) For 2020, the provision for credit losses was primarily related to certain additions to our portfolio of financial royalty assets with limited protective rights, mainly the final tranche of Tazverik.

(1) Includes $ 323.7 million related to cumulative allowance for credit losses.

(2) For 2021, the provision income for credit losses was primarily related to a significant decline in value of Tazverik, which was offset by increases in the value of zavegepant.

For 2022, the provision income for credit losses was primarily related to further declines in the value of Tazverik and changes in the payors for certain products with stronger credit profiles, which were partially offset by the addition of Trelegy to our portfolio of financial royalty assets with limited protective rights.

Intangible Royalty Assets, Net

As of December 31, 2022, the intangible royalty assets were fully amortized as our royalties on Januvia and Janumet expired in the first quarter of 2022.

Our royalties on the other DPP-IV products have also substantially ended.

As of December 31, 2021, the cost, accumulated amortization and net carrying value of our intangible royalty assets are summarized as below (in thousands):

As of December 31, 2021 Cost Accumulated Amortization Net Carrying Value

DPP-IV patents $ 606,216 $ 600,546 $ 5,670

Total intangible royalty assets $ 606,216 $ 600,546 $ 5,670

Revenue from intangible assets is tied to underlying patent protected sales of DPP-IV products of various licensees.

Such revenue is earned from sales occurring primarily in the United States and Europe;

however, we do not have the ability to disaggregate such revenue from licensees based on the geography of the underlying sales as this information may not be provided to us by marketers.

Individual licensees exceeding 10% or more of revenue from intangible royalty assets accounted for 90 %, 86 % and 97 % of revenues from intangible royalty assets in 2022, 2021 and 2020, respectively.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For 2023, the provision expense for credit losses was primarily related to the additions of Adstiladrin and Skytrofa to our portfolio.

Non-Consolidated Affiliates

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We account for such investments as equity method investments or as equity securities over which we have elected the fair value option.

In 2022, we acquired common stock and a revenue participation right from ApiJect.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

We elected the fair value option to account for our investments in ApiJect because it is more reflective of current values for such investments.

We are also required to purchase additional common stock from ApiJect if certain milestones are achieved.

The fair value of our equity investment in ApiJect was recorded within Equity securities as of December 31, 2022 and the change in fair value was recorded within (Gains)/losses on equity securities for 2022.

The fair value of the revenue participation right was recorded within Other assets as of December 31, 2022 and the change in fair value was recorded within Other non-operating expense, net for 2022.

No amounts were due from ApiJect as of December 31, 2022.

The fair value of our equity investment in ApiJect is recorded within Equity securities and the change in fair value is recorded within (Gains)/losses on equity securities .

The fair value of the revenue participation right is recorded within Other assets and the change in fair value is recorded within Other non-operating expense, net .

No amounts were due from ApiJect related to the revenue participation right as of December 31, 2023 and 2022.

The Legacy SLP Interest

In connection with the Exchange Offer Transactions, we acquired a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) from the Continuing Investors Partnerships for $ 303.7 million in exchange for issuing shares in our subsidiary.

In connection with the Exchange Offer, we acquired a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) from the Continuing Investors Partnerships for $ 303.7 million in exchange for issuing shares in our subsidiary.

As a result, we became a special limited partner in the Legacy Investors Partnerships.

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The Legacy Investors Partnerships also indirectly own a non-controlling interest in Old RPI and RPI ICAV.

The income allocation from the Legacy SLP Interest is based on an estimate as the Legacy Investors Partnerships are private partnerships that are expected to report on a lag subsequent to the date of this annual report.

The income allocation from the Legacy SLP Interest is based on an estimate as the Legacy Investors Partnerships are private partnerships that report on a lag.

Management’s estimate of equity in earnings from the Legacy SLP Interest for the current period will be updated for historical results in the subsequent period.

We recorded income allocations of $ 3.0 million, $ 8.9 million and $ 62.0 million within Equity in losses/(earnings) of equity method investees in 2022, 2021 and 2020, respectively.

Equity in earnings from the Legacy SLP Interest is recorded within Equity in (earnings)/losses of equity method investees.

We recorded income allocations of $ 4.3 million, $ 3.0 million and $ 8.9 million in 2023, 2022 and 2021, respectively.

We collected cash receipts from the Legacy SLP Interest of $ 14.3 million, $ 25.7 million and $ 21.0 million during 2023, 2022 and 2021, respectively.

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We account for our partnership interests in Avillion Financing I, LP and its related entities (“Avillion I”) and BAv Financing II, LP and its related entities (“Avillion II” and, together with Avillion I, the “Avillion Entities”) as equity method investments because RPIFT has the ability to exercise significant influence over the Avillion Entities.

We recorded loss allocations from the Avillion Entities of $ 12.0 million, $ 28.4 million and $ 17.6 million within Equity in losses/(earnings) of equity method investees in 2022, 2021 and 2020, respectively.

Equity in earnings from the Avillion Entities is recorded within Equity in (earnings)/losses of equity method investees.

We recorded an income allocation of $ 24.6 million, and loss allocations of $ 12.0 million and $ 28.4 million in 2023, 2022 and 2021, respectively.

On December 19, 2017, the FDA approved a supplemental New Drug Application for Pfizer’s Bosulif.

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The only operations of Avillion I are the collection of cash and unwinding of the discount on the series of fixed annual payments due from Pfizer.

We received distributions from Avillion I of $ 13.4 million in each of 2022, 2021 and 2020.

We received distributions from Avillion I of $ 13.6 million in 2023 and $ 13.4 million in each of 2022 and 2021.

In May 2018, RPIFT entered into an agreement with Avillion II, which was amended in July 2021 and June 2022, to fund a total of $ 150 million over multiple years for a portion of the costs of Phase 2 and 3 clinical trials to advance Airsupra, formerly known as PT027, which was approved by the FDA in January 2023.

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In January 2023, AstraZeneca notified Avillion II that it elected to pay a fee of $ 80 million to Avillion II to exercise an option to commercialize Airsupra in the United States.

We expect to receive our pro rata portion of the exercise fee of approximately $ 35 million, subject to any holdback for expenses, in 2023.

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

Our maximum exposure to loss at any particular reporting date is limited to the carrying value of our equity method investments plus the unfunded commitments.

As of December 31, 2023 and 2022, we had unfunded commitments related to the Avillion Entities of $ 16.3 million and $ 28.8 million, respectively.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Our maximum exposure to loss at any particular reporting date is limited to the carrying value of our equity method investments plus the unfunded commitments.

As of December 31, 2022 and 2021, RPIFT had unfunded commitments related to the Avillion Entities of $ 28.8 million and $ 11.2 million, respectively.

Research & Development (“R&D”) Funding Expense

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

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

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

We did not enter into any new ongoing R&D funding arrangements in 2023, 2022 or 2021.

We recognized R&D funding expense of $ 52.0 million in 2023, primarily related to a $ 50.0 million clinical milestone payment that was triggered under the agreement with Cytokinetics .

We recognized R&D funding expense of $ 177.1 million in 2022 , primarily related to upfront and milestone development-stage funding payments of $ 100.0 million, $ 25.0 million and $ 50.0 million to acquire royalties on development-stage products from Cytokinetics, Theravance Biopharma, Inc., and MSD International Business GmbH, respectively.

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The upfront R&D funding expense included $ 103.2 million and $ 90.0 million in exchange for an incremental royalty on a development-stage product from BioCryst and future royalties on two development-stage products from MorphoSys, respectively.

We recognized R&D funding expense of $ 26.3 million in 2020, comprised of $ 20.5 million in ongoing R&D funding expense, primarily under our co-funding agreement with Sanofi, and $ 5.8 million in upfront R&D funding expense for a royalty on a development-stage product that we acquired from BioCryst.

Our borrowings as of December 31, 2023 and 2022 consisted of the following (in thousands):

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Senior Unsecured Notes

On July 26, 2021, we issued $ 1.3 billion of senior unsecured notes (the “2021 Notes”) comprised of $ 600.0 million principal amount of notes due September 2031 and $ 700.0 million principal amount of notes due September 2051.

Interest on each series of the 2021 Notes accrues at the respective rate per annum and is payable semi-annually in arrears on March 2 and September 2 of each year, which began on March 2, 2022.

The 2021 Notes were issued at a total discount of $ 27.5 million and we capitalized approximately $ 12.3 million in debt issuance costs primarily composed of underwriting fees.

We issued $ 1.3 billion and $ 6.0 billion of senior unsecured notes in 2021 (the “2021 Notes”) and 2020 (the “2020 Notes”), respectively.

The 2021 Notes and 2020 Notes (the “Notes”) were issued at a total discount of $ 176.4 million and we capitalized approximately $ 52.7 million in debt issuance costs primarily composed of underwriting fees.

The 2021 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 2.80 % and 3.06 %, respectively.

The 2020 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 2.13 % and 2.50 %, respectively.

Interest on each series of the Notes accrues at the respective rate per annum and is payable semi-annually in arrears on March 2 and September 2 of each year.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On September 2, 2020, we issued $ 6.0 billion of senior unsecured notes (the “2020 Notes” and, together with the 2021 Notes, the “Notes”).

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.

Interest on each series of the 2020 Notes accrues at the respective rate per annum and is payable semi-annually in arrears on March 2 and September 2 of each year.

The 2020 Notes were issued at a total discount of $ 149.0 million and we capitalized approximately $ 40.4 million in debt issuance costs primarily comprised of underwriting fees.

The 2020 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 2.13 % and 2.50 %, respectively.

On August 3, 2021, we completed an exchange offer for the 2020 Notes where certain holders elected to tender their unregistered outstanding notes for freely tradable exchange notes that were registered under the Securities Act of 1933.

The Notes may be redeemed at our option at a redemption price equal to the greater of (i) 100 % of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis at the treasury rate, plus a make-whole premium as defined in the indenture.

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We are required to comply with certain covenants under our Notes and as of December 31, 2023 , we were in compliance with all applicable covenants.

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

As of December 31, 2023 and 2022, the fair value of our outstanding Notes using Level 2 inputs was approximately $ 5.1 billion and $ 5.7 billion, respectively.

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.

Our subsidiary, RP Holdings, as borrower, initially entered into to the Amended and Restated Revolving 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 and 2022, there were no outstanding borrowings under the Revolving Credit Facility.

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The applicable margin for the Revolving Credit Facility varies based on our public debt rating.

Accordingly, the interest rates for the Revolving Credit Facility fluctuates during the term of the facility based on changes in the applicable interest rate and future changes in our public debt rating.

Accordingly, the interest rates for the Revolving Credit Facility fluctuate during the term of the facility based on changes in the applicable interest rate and future changes in our public debt rating.

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.

All obligations under the Revolving Credit Facility are unconditionally guaranteed by us.

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

Noncompliance with the leverage ratio, portfolio cash flow ratio and interest coverage ratio covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed.

The Credit Agreement includes customary covenants for credit facilities of this type that limit our ability to engage in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Senior Secured Credit Facilities

On February 11, 2020, in connection with the Exchange Offer Transactions (as discussed in Note 1–Organization and Purpose) and using funds contributed by RPI Intermediate FT and the Legacy Investors Partnerships, RPIFT repaid its outstanding debt and accrued interest, and terminated all outstanding interest rate swaps.

RPI Intermediate FT, as borrower, entered into a term loan credit agreement with Bank of America, N.A., as administrative agent, the lenders party thereto from time to time and the other parties thereto.

The senior secured credit facilities consisted of a term loan A and term loan B in the amounts of $ 3.20 billion and $ 2.84 billion, respectively.

In September 2020, we repaid in full the outstanding principal amounts of term loans under the senior secured credit facilities with net proceeds from the 2020 Notes and available cash on hand.

Upon refinancing our senior secured credit facilities in September 2020, we recorded a loss on debt extinguishment of $ 25.1 million as part of Other non-operating expense, net, which primarily consisted of unamortized loan issuance costs and original issue discount related to our senior secured credit facilities.

RPIFT Senior Secured Credit Facilities

The RPIFT Senior Secured Credit Facilities were repaid in full in February 2020 in connection with the Exchange Offer Transactions.

We recorded a loss on debt extinguishment of $ 5.4 million as part of Other non-operating expense, net in 2020.

Principal Payments on the Notes

The future principal payments for our borrowings as of December 31, 2022 over the next five years and thereafter are as follows (in thousands):

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

Year Principal Payments

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2027 1,000,000

Thereafter 4,300,000

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Capital Structure

Following the completion of our IPO as discussed in Note 1–Organization and Purpose, we have two classes of voting shares:

We have two classes of voting shares:

Class A ordinary shares and Class B ordinary shares, each of which has one vote per ordinary share.

The Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of shareholders, except as otherwise required by applicable law.

Our Class B ordinary shares are not publicly traded and holders of Class B ordinary shares only have limited rights to receive a distribution equal to their nominal value upon a liquidation, dissolution or winding up of the Company.

As of December 31, 2023, we have 446,692 thousand Class A ordinary shares and 150,743 thousand Class B ordinary shares outstanding.

An exchange agreement entered into in connection with the IPO by us, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP and EPA Holdings (the “Exchange Agreement”) governs the exchange of RP Holdings Class B Interests held by the Continuing Investors Partnerships for Class A ordinary shares.

Pursuant to the Exchange Agreement, RP Holdings Class B interests are exchangeable on a one -for-one basis for Class A ordinary shares on a quarterly basis.

An exchange agreement entered into by us, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP, RPI US Feeder 2019, LP, RPI International Feeder 2019, LP and EPA Holdings (as amended from time to time, the “Exchange Agreement”) governs the exchange of RP Holdings Class B Interests indirectly held by the Continuing Investors Partnerships for our Class A ordinary shares.

Pursuant to the Exchange Agreement, RP Holdings Class B interests are exchangeable on a one -for-one basis for our Class A ordinary shares on a quarterly basis.

Each such exchange also results in the re-designation of the same number of our Class B ordinary shares as deferred shares.

As of December 31, 2023, we have 384,640 thousand deferred shares outstanding.

In addition, we have in issue 50 thousand Class R redeemable shares, which do not entitle the holder to voting or dividend rights.The Class R redeemable shares may be redeemed at our option in the future.

In addition, we have in issue 50 thousand Class R redeemable shares, which do not entitle the holder to voting or dividend rights.

The Class R redeemable shares may be redeemed at our option in the future.

Any such redemption would be at the nominal value of £ 1 each.

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

We began repurchasing our Class A ordinary shares in April 2023.

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

ROYALTY PHARMA PLC

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Non-Controlling Interests

The changes in the balance of our four non-controlling interests for 2022, 2021 and 2020 are as follows (in thousands):

RPSFT Legacy Investors Partnerships Continuing Investors Partnerships (1) EPA Holdings Total

The changes in the balances of our non-controlling interests for 2023, 2022 and 2021 are as follows (in thousands):

Legacy Investors Partnerships RPSFT Continuing Investors Partnerships EPA Holdings Total

December 31, 2020 $ 1,939,509 $ 12,436 $ 3,125,091 $ — $ 5,077,036

Contributions 35,148 — 13,391 — 48,539

Transfer of interests — 1,037,161 — — 1,037,161

Distributions ( 425,050 ) ( 56,490 ) ( 133,433 ) — ( 614,973 )

Net income prior to IPO 42,151 102,892 — — 145,043

Effect of exchange by Continuing Investors of Class B ordinary shares for Class A ordinary shares and reallocation of historical equity — ( 750 ) 2,433,848 — 2,433,098

Issuance of Class A ordinary shares sold in IPO, net of offering costs — — 758,354 — 758,354

Other exchanges — — ( 642,974 ) — ( 642,974 )

Net income subsequent to IPO 46,741 218,137 316,993 — 581,871

Net income 266,570 57,582 297,321 — 621,473

Other comprehensive income/(loss):

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Net income 167,483 5,045 392,726 — 565,254

Other comprehensive income/(loss):

Unrealized gains on available for sale debt securities — 4,218 5,520 — 9,738

Reclassification of unrealized gains on available for sale debt securities — ( 9,392 ) ( 12,160 ) — ( 21,552 )

Purchase of non-controlling interest in RPCT — ( 11 ) — — ( 11 )

December 31, 2023 $ 1,339,716 $ — $ 2,218,076 $ — $ 3,557,792

(1) Related to the Continuing Investors Partnerships’ ownership of approximately 27 %, 29 % and 36 % in RP Holdings through their ownership of RP Holdings Class B Interests as of December 31, 2022, 2021 and 2020, respectively.

Royalty Pharma plc owns the remaining and 73 %, 71 % and 64 % of RP Holdings through its ownership of RP Holdings Class A Interests and RP Holdings Class B Interests as of December 31, 2022, 2021 and 2020, respectively.

Continuing Investors Partnerships

The Continuing Investors Partnerships hold the number of our Class B ordinary shares equal to the number of RP Holdings Class B Interests indirectly held by them.

As the Continuing Investors Partnerships exchange RP Holdings Class B Interests indirectly held by them for Class A ordinary shares, the Continuing Investors Partnerships’ indirect ownership in RP Holdings decreases.

We operate and control the business affairs of RP Holdings through our ownership of RP Holdings Class A Interests and RP Holdings Class B Interests.

In connection with our repurchase of Class A ordinary shares in 2023, RP Holdings also began to retire RP Holdings Class A Interests held by us which reduces our ownership in RP Holdings.

The change in RP Holdings ownership between the Continuing Investors Partnerships and us as a result of (1) the exchanges of RP Holding Class B Interests for Class A ordinary shares and (2) retirement of RP Holdings Class A Interests is reflected through Other exchanges in the above tables and in our consolidated statements of shareholders’ equity.

The Continuing Investors Partnerships indirectly owned approximately 25 %, 27 % and 29 % of RP Holdings as of December 31, 2023, 2022 and 2021, respectively, with the remaining 75 %, 73 % and 71 % of RP Holding as of December 31, 2023, 2022 and 2021, respectively, owned by Royalty Pharma plc.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We historically reported a non-controlling interest related to a de minimis interest in RPCT held by RPSFT.

In December 2023, we acquired the remaining interest in RPCT held by RPSFT by effectively purchasing the net assets of RPSFT and its parent entities, which primarily consisted of cash and its right to receive a portion of royalties received by RPCT.

The purchase price of approximately $ 11.4 million was recorded within Other current liabilities on the consolidated balance sheet as of December 31, 2023.

The purchase price is subject to post-closing adjustments, which primarily relate to the final determination of net asset values and liquidation costs which is expected to occur in 2024.

Following this transaction in December 2023, RPSFT no longer holds a non-controlling interest in RPCT.

RP Holdings Class C Special Interest Held by EPA Holdings

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During 2023, we declared and paid four quarterly cash dividends of $ 0.20 per Class A ordinary share for an aggregate amount of $ 358.3 million to holders of our Class A ordinary shares .

2020 Independent Directors Equity Incentive Plan

On June 15, 2020, our 2020 Independent Director Equity Incentive Plan was approved and became effective, whereby 800 thousand Class A ordinary shares have been reserved for future issuance to our independent directors.

As of December 31, 2022, approximately 565 thousand shares remain reserved for future issuance under the Equity Incentive Plan.

RSU Activity and Share-based Compensation

We grant RSUs to our independent directors under the 2020 Independent Director Equity Incentive Plan.

Share-based compensation expense is recognized based on estimated fair value of the award on the grant date and amortized on a straight-line basis over the requisite service period of generally one year as part of General and administrative expenses in the consolidated statements of operations.

2020 Independent Directors Equity Incentive Plan and Share-based Compensation

On June 15, 2020, our 2020 Independent Director Equity Incentive Plan was approved and became effective, whereby 800 thousand Class A ordinary shares were authorized for issuance in the form of RSUs to our independent directors.

As of December 31, 2023, approximately 485 thousand shares remain available for future issuance under the plan.

RSUs granted under the plan generally vest over one year with the associated share-based compensation expense recorded as part of General and administrative expenses in the consolidated statements of operations.

In 2023, 2022 and 2021, respectively, we did not recognize material share-based compensation expense.

As of December 31, 2022, the total unrecognized share-based compensation expense related to total outstanding RSUs was less than $ 1.0 million, which we expect to recognize in the next six months .

Earnings per Share

For 2022, 2021 and 2020, Class B ordinary shares contingently issuable to EPA Holdings were evaluated and were determined not to have any dilutive impact.

Additionally, Class B ordinary shares in issue were evaluated under the if-converted method for potential dilutive effects and were determined to be anti-dilutive for 2022, 2021 and 2020, and therefore were excluded from the computation of diluted earnings per shares of Class A ordinary share.

As of December 31, 2023, the total unrecognized share-based compensation expense related to total outstanding RSUs was not material.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following tables set forth reconciliations of the numerators and denominators used to calculate basic and diluted earnings per Class A ordinary share for 2022, 2021 and 2020 (in thousands, except per share amounts):

Years Ended December 31,

Earnings per Share

For the 2023, 2022 and 2021, Class B ordinary shares contingently issuable to EPA Holdings were evaluated and were determined not to have any dilutive impact.

The following table sets forth the reconciliation of the numerator and denominator used to calculate basic and diluted earnings per Class A ordinary share for 2023 (in thousands, except per share amounts):

Year Ended December 31,

Consolidated net income $ 1,700,088

Net income attributable to Continuing Investors Partnerships 23,775 297,321

Net income attributable to Legacy Investors Partnerships and RPSFT 163,457 324,152

Net income attributable to Royalty Pharma plc - basic and diluted $ 42,832 $ 619,728

Net income attributable to continuing non-controlling interests 392,726

Net income attributable to legacy non-controlling interests 172,528

Net income attributable to Royalty Pharma plc - basic 1,134,834

Reallocation of net income attributable to non-controlling interest from the assumed conversion of Class B ordinary shares 392,726

Net income attributable to Royalty Pharma plc - diluted $ 1,527,560

Weighted average Class A ordinary shares outstanding - basic 447,601

Dilutive effect of unvested RSUs 9 8

Dilutive effects as shown separately below

Class B ordinary shares exchangeable for Class A ordinary shares 155,292

Unvested RSUs 7

Weighted average Class A ordinary shares outstanding - diluted 602,900

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Earnings per Class A ordinary share - diluted $ 2.53

Prior to the IPO, our capital structure mainly included unitholder interests.

We analyzed the calculation of earnings per interest for periods prior to the IPO and determined that the resultant values would not be meaningful to the users of these consolidated financial statements.

Therefore, the basic and diluted earnings per share for 2020 are only applicable for the period from June 16, 2020 to December 31, 2020, which represents the period in which we had outstanding Class A ordinary shares.

Year Ended December 31,

Class B ordinary shares in issue were evaluated under the if-converted method for potential dilutive effects and were determined to be anti-dilutive for 2022 and 2021, and therefore were excluded from the computation of diluted earnings per shares of Class A ordinary share.

The following table sets forth reconciliations of the numerators and denominators used to calculate basic and diluted earnings per Class A ordinary share for 2022 and 2021 (in thousands, except per share amounts):

Years Ended December 31,

Consolidated net income $ 230,064 $ 1,241,201

Net income attributable to Continuing Investors Partnerships prior to the IPO (1) 479,842

Net income attributable to Continuing Investors Partnerships subsequent to the IPO 316,993

Net income attributable to Legacy Investors Partnerships and RPSFT 409,921

Net income attributable to continuing non-controlling interests 23,775 297,321

Net income attributable to legacy non-controlling interests 163,457 324,152

Net income attributable to Royalty Pharma plc - basic and diluted $ 42,832 $ 619,728

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Earnings per Class A ordinary share - diluted $ 0.10 $ 1.49

(1) Reflected as Net income attributable to Royalty Pharma plc on the consolidated statements of operations.

ROYALTY PHARMA PLC

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Amortization of debt discount and issuance costs 20,499 21,356 20,162

(Gains)/losses on derivative financial instruments ( 96,610 ) 21,532 42,076

Losses/(gains) on equity securities 33,442 48,066 ( 247,073 )

Equity in losses/(earnings) of equity method investees 8,973 19,490 ( 44,459 )

Losses/(gains) on derivative financial instruments 2,290 ( 96,610 ) 21,532

(Gains)/losses on equity securities ( 87,139 ) 33,442 48,066

Equity in (earnings)/losses of equity method investees ( 28,882 ) 8,973 19,490

Distributions from equity method investees 18,823 39,142 34,384

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Interest income accretion — ( 53,432 ) ( 50,896 )

Losses/(gains) on available for sale debt securities 6,815 ( 17,859 ) ( 18,600 )

(Gains)/losses on available for sale debt securities ( 230,840 ) 6,815 ( 17,859 )

Financial royalty asset impairment — 615,827 —

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Other 20,912 11,098 4,461

Decrease/(increase) in operating assets:

Changes in operating assets and liabilities:

Cash collected on financial royalty assets 3,201,410 2,507,236 2,315,854

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Other current assets 559 2,198 1,857

Increase/(decrease) in operating liabilities:

Accounts payable and accrued expenses 6,236 2,286 ( 4,586 )

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Years Ended December 31,

Supplemental Schedule of Non-cash Investing/Financing Activities:

2023 2022 2021

Receipt of contribution of investment in Legacy Investors Partnerships (Note 9) $ — $ — $ 303,679

Settlement of Epizyme forward purchase contract (Note 4) — — 5,700

Accrued purchase obligation - Tazverik (1) — — 110,000

Repayments of long-term debt by contributions from non-controlling interests (2) — — 1,103,774

Milestone payable - Erleada (1) $ — $ 12,400 $ —

(1) Related to our obligation under our agreement with Eisai to fund the final tranche of the Tazverik royalty for $ 110.0 million following the June 2020 FDA approval of additional indications of Tazverik.

(2) Related to the pro rata portion of RPIFT’s outstanding debt repaid by the Legacy Investors Partnerships.

(3) Related to the achievement of sales-based milestones that were not paid as of December 31, 2022 and 2020.

Purchase of non-controlling interest in RPCT (2)

(1) Related to the achievement of a sales-based milestone that was not paid as of December 31, 2022.

(2) Related to the purchase of the remaining interest in RPCT held by RPSFT that was not paid as of December 31, 2023.

Refer to Note 11–Shareholders’ Equity for additional discussion.

ROYALTY PHARMA PLC

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Commitments and Contingencies

Funding Commitments

We have various funding commitments as of December 31, 2022 and 2021.

See Note 3–Available for Sale Debt Securities for discussion of the respective arrangements.

Cytokinetics Commercial Launch Funding

As of December 31, 2022, $ 250 million of the Cytokinetics Commercial Launch Funding remained unfunded.

Cytokinetics Funding Commitments

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

Teva Development Funding Commitments

In November 2023, we entered into a funding agreement with Teva Pharmaceuticals International GmbH, a subsidiary of Teva Pharmaceutical Industries Ltd.

Under the agreement, we agreed to provide Teva up to $ 100 million to fund the ongoing development of Teva’s olanzapine LAI (TEV-’749).

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

No funding has been provided as of December 31, 2023.

Other Commitments

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Please refer to Note 8–Non-Consolidated Affiliates for details of these arrangements.

We also have requirements to make Operating and Personnel Payments over the life of the Management Agreement as described in Note 16–Related Party Transactions.

We also have requirements to make Operating and Personnel Payments (defined below) over the life of the Management Agreement as described in Note 15–Related Party Transactions.

Indemnifications

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The Manager is the investment manager of Royalty Pharma plc and its subsidiaries.

The sole member of the Manager, Pablo Legorreta, holds an interest in us and serves as our Chief Executive Officer and Chairman of our board of directors.

In connection with the Exchange Offer Transactions (discussed in Note 1–Organization and Purpose), the Manager entered into the Management Agreement with us and our subsidiaries, the Continuing Investors Partnerships, and with the Legacy Investors Partnerships.

Pursuant to 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 payment 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 on our consolidated net income, is 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 Investor Partnerships) during the previous twelve calendar months.

Additionally, we also pay certain costs and expenses of the Manager.

The managing member of the Manager, Pablo Legorreta, holds an interest in us and serves as our Chief Executive Officer and Chairman of our board of directors.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Prior to the date of the Exchange Offer, the Manager received operating and personnel payments payable in equal quarterly installments that increased by 5 % annually on a compounded basis under the terms of its management agreement with Old RPI and the Legacy Investors Partnerships.

The Manager or its affiliates receive an annual management fee payable in advance by Old RPI in equal quarterly installments under terms of the limited partnership agreements of the Legacy Investors Partnerships.

During 2022, 2021 and 2020, total operating and personnel payments incurred were $ 188.4 million, $ 145.2 million and $ 112.5 million, respectively, including the amounts attributable to Old RPI, and were recognized within General and administrative expenses in the consolidated statements of operations.

In connection with the Exchange Offer, the Manager entered into the Management Agreement with us and our subsidiaries, the Continuing Investors Partnerships, and with the Legacy Investors Partnerships.

Pursuant to 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) 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 payment for Old RPI, an obligation of the Legacy Investors Partnerships and for which the expense is reflected on our consolidated net income, is 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 Investor Partnerships) during the previous twelve calendar months.

Additionally, we also pay certain costs and expenses of the Manager.

Total operating and personnel payments incurred, including the amounts attributable to Old RPI, are recognized within General and administrative expenses in the consolidated statements of operations.

During 2023, 2022 and 2021, total operating and personnel payments incurred, including the amounts attributable to Old RPI, were $ 204.6 million, $ 188.4 million and $ 145.2 million, respectively.

Distributions Payable to Legacy Non-Controlling Interests

The distributions payable to legacy non-controlling interests represent the contractual cash flows required to be distributed based on the Legacy Investors Partnerships’ non-controlling interest in Old RPI and RPI ICAV and RPSFT’s non-controlling interest in RPCT.

The distributions payable to legacy non-controlling interests as of December 31, 2022 and 2021 include the following (in thousands):

The distributions payable to legacy non-controlling interests include the following (in thousands):

As of December 31, 2023 As of December 31, 2022

Due to Legacy Investors Partnerships $ 87,522 $ 92,608

Due to RPSFT 7,281 15,326

Payable to Legacy Investors Partnerships

$ 83,155 $ 87,522

Payable to RPSFT

Total distributions payable to legacy non-controlling interests $ 83,155 $ 94,803

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Under the terms of the Assignment Agreement, RPI Acquisitions assigned the benefit of 50 % of the payment stream acquired from BMS to BPCR in consideration for BPCR meeting 50 % of the funding obligations owed to BMS under the Purchase Agreement.

As of December 31, 2022 and 2021, the financial royalty asset of $ 103.4 million and $ 130.9 million, respectively, on the consolidated balance sheets represents only our right to the future payment streams acquired from BMS.

As of December 31, 2023 and 2022, the financial royalty asset of $ 75.6 million and $ 103.4 million, respectively, on the consolidated balance sheets represented only our right to the future payment streams acquired from BMS.

Other Transactions

Henry Fernandez, the lead independent director of our board of directors, serves as the chairman and chief executive officer of MSCI, Inc (“MSCI”).

In December 2023, RPI 2019 ICAV acquired the remaining interest in RPCT held by RPSFT.

Refer to Note 11–Shareholders’ Equity for additional discussion.

Henry Fernandez, the lead independent director of our board of directors, serves as the chairman and chief executive officer of MSCI.

On April 16, 2021, we entered into an agreement with MSCI with an initial term of seven years to develop thematic life sciences indexes.

In return, we will receive a percentage of MSCI’s revenues from those indexes.

No amounts were due from MSCI as of December 31, 2022 and 2021.

No amounts were due from MSCI as of both December 31, 2023 and 2022.

The financial impact associated with this transaction has not been material to date.

During 2020, we reimbursed Pablo Legorreta approximately $ 1.0 million for the cost of purchasing and donating ventilators to hospitals on behalf of Royalty Pharma.

In connection with the Exchange Offer, we acquired the Legacy SLP Interest from the Continuing Investors Partnerships in exchange for issuing shares in our subsidiary.

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Refer to Note 8–Non-Consolidated Affiliates for additional discussion of the Legacy SLP Interest and our investments in other non-consolidated entities.

RPIFT owns 27,210 limited partnership interests in the Continuing Investors Partnerships, whose only substantive operations are their investment in our subsidiaries.

The total investment of $ 4.3 million was recorded as treasury interests, of which $ 1.5 million and $ 1.6 million were held by non-controlling interests as of December 31, 2022 and 2021, respectively.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Based on its ownership percentage of RP Holdings relative to the Company, each Continuing Investor Partnership pays a pro rata portion of any costs and expenses in connection with the contemplation of, formation of, listing and ongoing operation of us and any of our subsidiaries, including any third-party expenses of managing us and any of our subsidiaries, such as accounting, audit, legal, reporting, compliance, administration (including directors’ fees), financial advisory, consulting, investor relations and insurance expenses relating to our affairs and those of any subsidiary.

Subsequent Events

In January 2023, we acquired an interest in Ionis Pharmaceuticals, Inc.’s royalty in Biogen’s Spinraza (nusinersen) and Novartis’ pelacarsen, a development-stage product, for up to $ 1.125 billion, including an upfront payment of $ 500 million and up to $ 625 million in additional pelacarsen milestone payments.

RPIFT owns 27,210 limited partnership interests in the Continuing Investors Partnerships, whose only substantive operations are their investment in our subsidiaries.

The total investment of $ 4.3 million was recorded as treasury interests, of which $ 1.6 million and $ 1.5 million were held by non-controlling interests as of December 31, 2023 and 2022, respectively.

Each Continuing Investors Partnership pays a pro rata portion based on its indirect ownership percentage of RP Holdings of any costs and expenses in connection with the contemplation of, formation of, listing and ongoing operation of us and any of our subsidiaries, including any third-party expenses of managing us and any of our subsidiaries, such as accounting, audit, legal, reporting, compliance, administration (including directors’ fees), financial advisory, consulting, investor relations and insurance expenses relating to our affairs and those of any subsidiary.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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What changed 10-K

Item 8. Financial Statements and Supplementary Data