What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-12 compared with 2024-02-15 · 339 added, 293 removed, 828 unchanged (43% of the section changed)

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Cash and cash equivalents $ 929,026 $ 477,010

Marketable securities — 24,421

Financial royalty assets 783,770 738,438

Accrued royalty receivable 14,242 16,830

Available for sale debt securities 58,200 18,300

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Income from financial royalty assets $ 2,149,422 $ 2,197,754 $ 2,125,096

Revenue from intangible royalty assets 835 37,484 171,248

Other royalty income 155,965 74,635 53,132

Other royalty income and revenues 114,154 156,800 112,119

Total income and other revenues 2,263,576 2,354,554 2,237,215

Operating expenses

Operating expense

Provision for changes in expected cash flows from financial royalty assets 732,461 560,656 904,244

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Financial royalty asset impairment — — 615,827

Total operating expenses, net 862,404 1,930,150 858,748

Total operating expense, net 971,132 862,404 1,930,150

Operating income 1,292,444 1,492,150 307,065

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Losses/(gains) on derivative financial instruments

6,000 2,290 ( 96,610 )

(Gains)/losses on equity securities ( 39,549 ) ( 87,139 ) 33,442

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Interest income ( 47,343 ) ( 72,291 ) ( 78,335 )

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

Other non-operating expenses, net 1,528 21,737 14,755

Total other (income)/expense, net ( 38,369 ) ( 207,938 ) 77,001

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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

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Interest received 46,482 71,604 24,982

Derivative collateral received — — 34,660

Derivative collateral posted — — ( 34,660 )

Termination payments on derivative instruments — — ( 16,093 )

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

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Debt issuance costs and other ( 12,616 ) ( 1,596 ) ( 1,347 )

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

Other ( 9,026 ) — —

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

361,145 ( 2,148,754 ) ( 944,856 )

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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”).

RP Holdings is owned by Royalty Pharma plc, and, indirectly, by 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”) .

In January 2025, we agreed to acquire the Manager for approximately $ 1.1 billion in total consideration (the “Internalization”).

Refer to Note 16–Subsequent Events for additional discussion.

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

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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.

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

In December 2023, RPI 2019 ICAV acquired the remaining interest in RPCT owned by Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), at which time RPSFT ceased to hold a non-controlling interest in RPCT.

Prior to December 2023, the remaining 34 % of RPCT was owned by the Legacy Investors Partnerships and RPSFT, which was wholly owned by Royalty Pharma Select, an Irish unit trust.

Following the above transaction in December 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 Vehicle, LLC’s (“EPA Vehicle”) ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”).

Income will not be allocated to EPA Vehicle 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

Financial instruments that subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, available for sale debt securities, financial royalty assets, derivatives and receivables.

Financial instruments that subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, available for sale debt securities, financial royalty assets, derivatives and receivables.

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, 2023 and 2022 were held with Bank of America, State Street, Scotiabank, Citibank, TD Bank, DNB Bank and U.S.

Our cash and cash equivalents balances as of December 31, 2024 and 2023 were held with Bank of America, State Street, TD Bank, Citibank, U.S.

Bank, DNB Bank and Scotiabank.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Recently Adopted and Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board issued a new accounting standard that amends the guidance for required disclosures related to a public entity’s reportable segments (ASU 2023-07).

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss.

It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment’s profit or loss and assets.

Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280.

This update became effective for us in 2024 and our expanded disclosures are included below under “Segment Information.”

Segment Information

Our chief operating decision maker is our Chief Executive Officer who reviews financial information presented on a consolidated basis to allocate resources, evaluate financial performance and make overall operating decisions.

Our CODM is our Chief Executive Officer, who reviews financial information presented on a consolidated basis to allocate resources, evaluate financial performance and make overall operating decisions.

As such, we concluded that we operate as one single reportable segment, which is primarily focused on acquiring biopharmaceutical royalties.

The measure of segment profit or loss that is most consistent with our consolidated financial statements is consolidated net income.

The accounting policies of our single reportable segment are the same as those for the consolidated financial statements.

The level of disaggregation and amounts of significant segment expenses that are regularly provided to the CODM are the same as those presented in the consolidated statements of operations.

Likewise, the measure of segment assets is reported on the consolidated balance sheets as total assets.

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 account for financial royalty assets under Accounting Standards Codification 310 (“ASC”), Receivables.

In limited instances, our royalty assets may be classified as contract assets and recorded as part of financial royalty assets because they are accounted for in the same manner.

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 .

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If the ending balance is greater than the net present value of the expected future cash flows, a provision is recorded to reduce the asset balance to the net present value.

The provision is recorded through the income statement as Provision for changes in expected cash flows from financial royalty assets and the carrying value of Financial royalty assets, net is presented net of the cumulative allowance for changes in expected future cash flows.

The application of the prospective approach to measure our financial royalty assets at amortized cost requires management’s judgment in forecasting the expected future cash flows of the underlying royalties.

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 .

The provision is recorded through the statements of operations as Provision for changes in expected cash flows from financial royalty assets and the carrying value of Financial royalty assets, net is presented net of the cumulative allowance for changes in expected cash flows.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

• Analyst coverage.

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The approval of a product for use in new indications can extend the date through which we are entitled to royalties or milestones on that product.

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.

For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and on future combination products, which create new cash flow streams that were previously not reflected.

We generally do not recognize income from, or forecast sales for, unapproved products unless they are incorporated into analyst consensus forecasts in such a way that we cannot isolate the probability of regulatory success that is built into the analyst’s estimates.

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.

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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 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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Additionally, royalty payments may occasionally continue beyond the estimated royalty expiration date for such reasons we cannot foresee such as excess inventory in the channel or additional scope of patent protection identified after expiry, including royalties we may become entitled to from new indications, new compounds, or for new regulatory jurisdictional approvals .

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 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.

Amounts related to outgoing contingent milestone payments are not considered contractual obligations as they are contingent on the successful completion of the defined milestones.

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

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.

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The adjustment to the accretable yield is treated as a change in estimate and is recognized prospectively over the remaining life of the financial royalty asset by adjusting the effective interest rate used to calculate income .

Movements in the cumulative allowance for changes in expected future cash flows, which forms part of the Financial royalty assets, net line item on the consolidated balance sheets, are accompanied by corresponding provision income or expense.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Movements in the cumulative allowance for changes in expected cash flows, which forms part of the Financial royalty assets, net line item on the consolidated balance sheets, are accompanied by corresponding provision income or expense.

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

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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

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

The credit rating, which is primarily based on publicly available data and updated quarterly, is the primary credit quality indicator used to determine the probability of default of the marketers responsible for paying our royalties and the resulting loss given default.

The credit rating, which is assessed primarily based on publicly available data and updated quarterly, is the primary credit quality indicator used to determine the probability of default of the marketers responsible for paying our royalties and the resulting loss given default.

The allowance for current expected credit losses is presented net within the non-current portion of financial royalty assets on the consolidated balance sheets.

Any subsequent provision for credit losses is recorded as part of the Provision for changes in expected future cash flows from financial royalty assets on the consolidated statements of operations .

Any subsequent provision for credit losses is recorded as part of the Provision for changes in expected cash flows from financial royalty assets on the consolidated statements of operations .

Income from Financial Royalty Assets

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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.

Revenue from Intangible Royalty Assets

We earn royalties on sales by our licensees of Januvia and Janumet (“DPP-IV”) products covered under patents that we own.

We do not have future performance obligations under these license arrangements.

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

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.

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 .

Amounts related to outgoing contingent milestone payments are not considered contractual obligations as they are contingent on the successful completion of the defined milestones.

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

Other Royalty Income and Revenues

Other royalty income and revenues includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of research and development (“R&D”) funding arrangements.

Other royalty income and revenues also includes revenues from intangible royalty assets and income from royalties that are recorded at fair value.

Financial Instruments and Fair Value Measurements

Our financial instruments consist primarily of cash and cash equivalents, marketable securities, equity securities, derivatives, available for sale debt securities, royalty interests and long-term debt.

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 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.

Our financial instruments consist primarily of cash and cash equivalents, equity securities, derivatives, available for sale debt securities, royalty interests and long-term debt.

Cash and cash equivalents, 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 under our senior unsecured notes and non-current financial royalty assets are reported at amortized cost 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 value.

For financial instruments carried at fair value, the level in the fair value hierarchy is based on the lowest level of inputs that is significant to the fair value measurement in its entirety.

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Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

Prices or valuation that require inputs that are both significant to the fair value measurement and unobservable.

Cash and Cash Equivalents and Marketable Securities

Cash and cash equivalents include cash held at banks and all highly liquid financial instruments with original maturities of 90 days or less.

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

Cash and Cash Equivalents

Cash and cash equivalents include cash held at financial institutions and all highly liquid financial instruments with original maturities of 90 days or less.

Equity Securities and Available for Sale Debt Securities

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The equity securities are measured and recorded at fair value with unrealized gains and losses recorded in earnings.

For equity securities without a readily determinable fair value, recorded within Other assets on the consolidated balance sheets, we use the fair value measurement alternative and measure the securities at cost less impairment, if any.

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 when the fair value option better aligns with the economics of the investment.

We 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.

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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.

All derivatives are measured at fair value on the consolidated balance sheets with movements in fair value recognized in earnings.

Derivatives are measured at fair value on the consolidated balance sheets with movements in fair value recognized in earnings.

Investment in Non-Consolidated Affiliates

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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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When we have committed to provide further support to the investee through capital call commitments and the investment has been reduced to zero, we provide for additional losses, resulting in a negative equity method investment, which is presented as a liability on the consolidated balance sheets.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Research and Development Funding Expense

We enter into transactions where we agree to fund a portion of the research and development (“R&D”) performed by our partners for products undergoing late-stage clinical trials in exchange for future royalties or milestones if the products are successfully developed and commercialized.

We enter into transactions where we agree to fund a portion of the R&D performed by our partners for products undergoing late-stage clinical trials in exchange for future royalties or milestones if the products are successfully developed and commercialized.

In accordance with ASC 730 – Research and Development , we account for the funded amounts as R&D expense when we have the ability to obtain the results of the R&D, the transfer of financial risk is genuine and substantive and, at the time of entering into the transaction, it is not yet probable that the product will receive regulatory approval.

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

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.

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

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

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We have funding arrangements in place where our counterparties have drawn on capital or are allowed to draw on capital over a prescribed period of time.

Income from these funding arrangements are subject to U.S.

Income from these funding arrangements is subject to U.S.

taxation and we record a provision for U.S.

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

income taxes within General and administrative expenses in accordance with ASC 740 – Income Taxes, with respect to this income.

We expect the associated income tax provision expense to become more significant in the future as we enter into more funding arrangements.

Additionally, we entered into an arrangement with MSCI Inc.

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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.

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income taxes related to this matter .

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other Taxation Matters

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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 RSUs issued under our 2020 Independent Director Equity Incentive Plan.

Potentially dilutive securities also include Class B ordinary shares contingently issuable to EPA Vehicle 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.

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

Available for Sale Debt Securities

Funding Arrangements with Cytokinetics

In May 2024, we expanded our funding collaboration with Cytokinetics, Incorporated (“Cytokinetics”) to provide up to $ 575 million.

As part of the expanded funding collaboration, we provided funding of $ 100 million (“Cytokinetics Development Funding”) for Cytokinetics’ Phase 3 clinical trial of omecamtiv mecarbil and amended the funding agreement that we entered into with Cytokinetics in 2022 to provide two additional funding tranches (as amended, “Cytokinetics Commercial Launch Funding”).

Following the amendment in May 2024, the Cytokinetics Commercial Launch Funding is comprised of seven tranches with a total funding of up to $ 525 million.

Our return on the Cytokinetics Development Funding depends on the outcome of omecamtiv mecarbil’s Phase 3 clinical trial and approval by the U.S.

Food and Drug Administration (the “FDA”).

If omecamtiv mecarbil’s Phase 3 clinical trial is successful and approval by the FDA is received within a specific timeframe, we will receive a return of $ 100 million and the greater of an incremental 2.0 % royalty on annual net sales of omecamtiv mecarbil or quarterly fixed payments for 18 quarters and an incremental 2.0 % royalty thereafter.

If FDA approval is not received within a specific timeframe, we will receive a return of 2.4 times the Cytokinetics Development Funding over 18 quarters.

If the Phase 3 clinical trial is not successful within a specific timeframe, we will receive a return of 2.3 times the Cytokinetics Development Funding over 22 quarters.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Available for Sale Debt Securities

Out of the seven tranches of the Cytokinetics Commercial Launch Funding, tranches one and six have been funded.

Tranches two and three are no longer available because the related regulatory milestones were not met.

Tranches four , five and seven are available for draw upon the occurrence of certain regulatory and clinical development milestones (“Cytokinetics Funding Commitments”) and have a one-year draw period from the date when such contingency is met.

The contingencies for the fourth and fifth tranches were met in April and December 2024, respectively.

Up to $ 75 million is available to be drawn under tranche 4 until April 2025, and up to $ 100 million is available to be drawn under tranche 5 until December 2025.

A minimum of $ 50 million is required to be drawn under either tranche 4 or tranche 5.

The condition for $ 175 million to become available to be drawn under tranche 7 has not yet been satisfied.

For tranches one, four, five, six and seven, 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 repayments on tranche one.

We elected the fair value option to account for the Cytokinetics Development Funding and the Cytokinetics Commercial Launch Funding (collectively the “Cytokinetics Funding Arrangements”) as it most accurately reflects the nature of the funding arrangements.

The funded Cytokinetics Funding Arrangements are recorded within Available for sale debt securities on the consolidated balance sheets.

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

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

Further, as part of the expanded funding collaboration in May 2024, we purchased Cytokinetics common stock and provided funding for clinical trials of CK-586 in exchange for a royalty, which is further described in Note 4–Derivative Instruments.

Lastly, the funding collaboration also included the restructuring of our royalty on aficamten.

The table below summarizes the components of our funding collaboration with Cytokinetics, including the expanded funding collaboration in May 2024 and related funding status as of December 31, 2024 (in thousands):

Funded Required Future Draw

Potential Future Draw

Cytokinetics Commercial Launch Funding (1)

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”).

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.

$ 100,000 $ 50,000 $ 250,000 $ 400,000

Cytokinetics Development Funding

100,000 — — 100,000

Cytokinetics R&D Funding Derivative (2)

50,000 — 150,000 200,000

Cytokinetics Common Stock

50,000 — — 50,000

Total $ 300,000 $ 50,000 $ 400,000 $ 750,000

(1) Potential future draw of $ 250 million assumes no more than $ 25 million will be drawn under tranche 4.

(2) Related to our funding for the clinical trials of CK-586.

We have the option to fund up to an additional $ 150 million.

See Note 4–Derivative Instruments for additional discussion .

MorphoSys Development Funding Bonds

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 (“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.

In September 2022, we provided MorphoSys funding of $ 300 million (“MorphoSys Development Funding Bonds”).

Our return on the MorphoSys Development Funding Bonds is 2.2 times the amount funded.

We began receiving quarterly repayment in the fourth quarter of 2024.

In 2024, MorphoSys was acquired by Novartis.

In January 2025, the MorphoSys Development Funding Bonds were sold for approximately $ 511 million.

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

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

The changes in the fair value of the MorphoSys 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

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 Gains/(Losses)

The table below summarizes our available for sale debt securities recorded at fair value (in thousands):

Cost Unrealized Gains

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

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Debt securities (1)

$ 516,329 $ 235,371 $ 751,700 $ 58,200 $ 693,500 $ — $ 751,700

Funding commitments (2)

Total available for sale debt securities $ 352,367 $ 102,133 $ 454,500 $ 18,300 $ 437,100 $ ( 900 ) $ 454,500

( 12,300 ) 220 ( 12,080 ) — — ( 12,080 ) ( 12,080 )

$ 504,029 $ 235,591 $ 739,620 $ 58,200 $ 693,500 $ ( 12,080 ) $ 739,620

As of December 31, 2023

Debt securities (1)

$ 359,667 $ 95,733 $ 455,400 $ 18,300 $ 437,100 $ — $ 455,400

Funding commitments (2)

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 which is amortized as we receive quarterly repayments on the first tranche.

( 7,300 ) 6,400 ( 900 ) — — ( 900 ) ( 900 )

Total $ 352,367 $ 102,133 $ 454,500 $ 18,300 $ 437,100 $ ( 900 ) $ 454,500

(1) The cost related to tranches one and six of the Cytokinetics Commercial Launch Funding and the cost for the Cytokinetics Development Funding reflect the fair values on their respective funding dates.

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.

The costs are amortized as quarterly repayments are received.

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

The costs associated with the Cytokinetics Funding Commitments represent the fair values on their respective transaction dates.

Derivative Instruments

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In 2024, 2023 and 2022, we did not hold any derivatives that were designated as hedging instruments.

Cytokinetics R&D Funding Derivative

In May 2024, we funded $ 50 million upfront in exchange for a royalty on CK-586.

We have an option to fund up to an additional $ 150 million for which we would be eligible to receive milestone payments of up to $ 150 million upon regulatory approvals and an incremental royalty on CK-586.

Upon a change of control event, we have the option to cause Cytokinetics to pay us 1.5 times the initial and additional funding amounts in a lump sum to terminate our rights to receive royalties and milestone payments.

Our funding arrangement on CK-586 is accounted for as a derivative instrument and is recorded at fair value (“Cytokinetics R&D Funding Derivative”).

As of December 31, 2024, the fair value of the Cytokinetics R&D Funding Derivative of $ 12.0 million was recorded within Other assets on the consolidated balance sheet.

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.

In August 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.

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.

In March 2023, the FDA approved Zavzpret, the intranasal formulation of zavegepant, and we received a $ 475 million milestone payment which resulted in partial settlement of the derivative instruments.

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).

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

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):

The table below summarizes the changes in fair value by derivative instrument which were recorded within Losses/(Gains) on derivative financial instruments in the consolidated statements of operations (in thousands):

Years Ended December 31,

2024 2023 2022

Cytokinetics R&D Funding Derivative

$ 6,000 $ — $ —

Milestone Acceleration Option

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.

— 2,290 ( 96,610 )

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements and Financial Instruments

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Money market funds (1)

Marketable securities

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

government securities — — — — — 12,920 — 12,920

$ 568,317 $ — $ — $ 568,317 $ 157,420 $ — $ — $ 157,420

Available for sale debt securities (2)

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

— — 58,200 58,200 — — 18,300 18,300

Total current assets $ 568,317 $ — $ 58,200 $ 626,517 $ 157,420 $ — $ 18,300 $ 175,720

Equity securities (3)

184,719 — 2,241 186,960 199,190 — 297 199,487

Available for sale debt securities (2)

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

— — 693,500 693,500 — — 437,100 437,100

Derivative instrument (4)

— — 12,000 12,000 — — — —

Royalty at fair value (3)

— — 5,323 5,323 — — 1,778 1,778

Total non-current assets $ 184,719 $ — $ 713,064 $ 897,783 $ 199,190 $ — $ 439,175 $ 638,365

Funding commitments (5)

— — ( 12,080 ) ( 12,080 ) — — ( 900 ) ( 900 )

Total non-current liabilities $ — $ — $ ( 12,080 ) $ ( 12,080 ) $ — $ — $ ( 900 ) $ ( 900 )

(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 .

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

(2) Related to tranche one of the Cytokinetics Commercial Launch Funding and the MorphoSys Development Funding Bonds.

As of December 31, 2024, amount also included tranche six of the Cytokinetics Commercial Launch Funding, and the Cytokinetics Development Funding.

(3) The amounts reflected within Level 3 are related to equity securities and a revenue participation right acquired from ApiJect Holdings, Inc.

(“ApiJect”), a private company.

We estimated the fair value s related to both instruments using a discounted cash flow with Level 3 inputs, including forecasted cash flows and the weighted average cost of capital.

The revenue participation right was 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 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

(4) Related to the Cytokinetics R&D Funding Derivative recorded within Other assets on the consolidated balance sheet.

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

For 2024, 2023 and 2022, we recognized losses of $ 8.6 million, gains of $ 55.6 million and losses of $ 7.3 million, respectively, on equity securities still held as of December 31, 2024.

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, 2024

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

Equity Securities Debt Securities Funding Commitments Derivative Instrument

Royalty at Fair Value

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

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

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

Gains on available for sale debt securities included in earnings

Purchases 46,500 150,000 — 18,000 —

Gains/(losses) on initial recognition (1)

— 5,000 ( 5,000 ) — —

Other non-operating expense

Gains on equity securities 1,562 — — — —

Losses on derivative financial instruments — — — ( 6,000 ) —

Gains/(losses) on available for sale debt securities — 161,086 ( 6,180 ) — —

Other non-operating income — — — — 3,545

Transfer out of Level 3 (2)

( 46,118 ) — — — —

Settlement (1) — — — ( 94,320 ) —

Redemptions (3)

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Balance at the end of the period $ 2,241 $ 751,700 $ ( 12,080 ) $ 12,000 $ 5,323

(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.

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

(2) Related to the expiration of the transfer restriction on Cytokinetics common stock.

(3) Amount relates to quarterly repayments on tranche one of the Cytokinetics Commercial Launch Funding and the MorphoSys Development Funding Bonds.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2023

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

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

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

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

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

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

Unrealized gains on available for sale debt securities included in other comprehensive losses — 24,000 — — — —

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

Losses on derivative financial instruments

— — — ( 2,290 ) —

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

Settlements (3)

Gains on available for sale debt securities

— 229,240 1,600 — —

Transfer out of Level 3 (4)

Other non-operating expense — — — — ( 12,722 )

— — — ( 94,320 ) —

Redemptions (1)

— ( 1,440 ) — — —

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

(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.

(1) Amount relates to the quarterly repayment on tranche one of the Cytokinetics Commercial Launch Funding.

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 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 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.

Below is a discussion of the valuation inputs used for financial instruments classified as Level 3 measurement as of December 31, 2024 and 2023 in the fair value hierarchy.

As of December 31, 2024 and 2023, we did not have any financial instruments recorded at fair value using Level 2 inputs.

Cytokinetics R&D Funding Derivative

We estimated the fair value of the Cytokinetics R&D Funding Derivative as of December 31, 2024 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including the probabilities of us exercising the additional funding option, regulatory approvals and the occurrence of a change of control event during the duration of the arrangement.

We also assumed a risk-adjusted discount rate of 11.1 % as of December 31, 2024.

Our estimate of expectation of timing and probabilities of us exercising the additional funding option, regulatory approvals and a change of control event, the risk-adjusted discount rate and the interest rate volatility 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.

Cytokinetics Funding Arrangements and Cytokinetics Funding Commitments

We estimated the fair values of the funded Cytokinetics Funding Arrangements as of December 31, 2024 and 2023 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 Funding Arrangements require significant judgement.

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

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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.

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.

As of December 31, 2024 and 2023 this methodology incorporates Level 3 inputs, including the probability of a change of control event occurring during the investment term, an assumed interest rate volatility of 40.0 % and 37.5 %, respectively, and an assumed risk-adjusted discount rate of 11.1 % and 10.9 %, 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 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.

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 value could be significantly higher or lower.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Milestone Acceleration Option

We estimated the fair value of the Milestone Acceleration Option as of December 31, 2022 using the “with-and-without” methodology, which is a variation of the income approach and is based on the difference between cash flows for two different scenarios.

The prospective cash flows for the success-based milestone payments include the Milestone Acceleration Option in the first scenario.

For the second scenario, the prospective cash flows are estimated assuming they remain payable over time.

The difference between the fair value of these two scenarios represents the fair value of the Milestone Acceleration Option.

This methodology includes the use of Level 3 fair value measurements and inputs, including estimated risk-adjusted discount rate which was primarily based on Pfizer’s cost of debt and management’s estimated probabilities of achieving the success-based milestones.

Assessing the likelihood that the success-based milestones are achieved over the duration of the Milestone Acceleration Option and developing a risk-adjusted discount rate require significant judgement.

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.

Other Financial Instruments

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.

MorphoSys Development Funding Bonds

We estimated the fair value of the MorphoSys Development Funding Bonds as of December 31, 2024 and 2023 based on a discounted cash flow calculation using estimated risk-adjusted discount rates, which are Level 3 inputs.

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.

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.

Financial royalty assets do not include our entire portfolio of investments and specifically exclude the following:

development-stage product candidates where the funding was (i) expensed as upfront R&D upon acquisition (e.g., Trodelvy and Nurtec ODT), (ii) expensed as ongoing R&D (e.g., historically, Soliqua from our co-funding agreement with Sanofi) or (iii) treated as a derivative instrument (e.g., CK-586);

contractual funding arrangements ( e.g., the MorphoSys Development Funding Bonds and the Cytokinetics Funding Arrangements), which are accounted for as available for sale debt securities.

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

Fair value of financial royalty assets as of December 31, 2024

In 2024, we refined our methodology to value our financial royalty assets given the growing complexity of the portfolio.

The valuation approach applied in 2024 used a Monte Carlo simulation under the option pricing framework to calculate the fair value of financial royalty assets as of December 31, 2024.

The Monte Carlo model allows us to simulate a range of different outcomes based on various inputs, primarily the underlying projected product sales of each royalty bearing product, to project the cash flows, including royalty receipts and milestone payments, based on each of the simulated sales scenarios.

The Monte Carlo methodology also takes volatility at the sales level into consideration.

As of December 31, 2024, the estimated fair values of the current and non-current portions of financial royalty assets were $ 0.8 billion and $ 21.4 billion, respectively.

As of December 31, 2024, approximately 9 % of the current portion and 8 % of the non-current portion of the financial royalty assets was attributable to the legacy non-controlling interests.

Fair value of financial royalty assets as of December 31, 2023

As of December 31, 2023, we calculated 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):

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

Fair Value Carrying Value, net Fair Value Carrying Value, net

Financial royalty assets, net $ 19,077,706 $ 14,088,655 $ 17,314,094 $ 13,493,106

As of December 31, 2023, the estimated fair values of the current and non-current portions of financial royalty assets were $ 0.7 billion and $ 19.1 billion, respectively.

As of December 31, 2023, approximately 10 % of the current portion and 9 % of the non-current portion of the financial royalty assets was attributable to the legacy non-controlling interests.

Financial Royalty Assets

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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):

As of December 31, 2024

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 2039-2041 (2)

1 unchanged sentence

Evrysdi 2035-2036 2,085,851 ( 378,565 ) 1,707,286

1,793,088 — 1,793,088

Trelegy 2029-2030 1,121,980 ( 66,647 ) 1,055,333

1,319,298 ( 276,134 ) 1,043,164

Voranigo 2038

946,588 — 946,588

Tremfya 2031-2032

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

935,069 ( 77,895 ) 857,174

Other 2025-2042

8,164,902 ( 2,492,565 ) 5,672,337

Total $ 19,700,209 $ ( 3,551,159 ) $ 16,149,050

4 unchanged sentences

(2) Royalty is perpetual.

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.

We estimate royalty duration of 2039-2041 due to expected Alyftrek patent expiration and potential generic entry thereafter leading to sales decline.

(3) Royalty is perpetual.

We have applied an end date of 2035 for purposes of accreting income over the royalty term, which is periodically reviewed based on our estimates of impact from biosimilars.

(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.

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, 2024, the balance of $ 15.9 billion above for total current and non-current financial royalty assets, net included $ 1.2 billion in unapproved financial royalty assets held at cost related to frexalimab for $ 522.6 million and other assets, primarily olpasiran, pelacarsen and olanzapine (TEV-’749).

As of December 31, 2023

4 unchanged sentences

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

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

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

3 unchanged sentences

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 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.

(1) Durations shown represent our estimates as of December 31, 2023 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’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.

We estimate expected Trikafta patent expiration in 2037 and potential generic entry thereafter leading to sales decline.

(3) Royalty is perpetual.

We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed based on our estimates of impact from biosimilars.

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

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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.

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.

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:

• 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 cumulative allowance for changes in expected 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:

• the movement in the cumulative allowance related to changes in forecasted royalty payments to be received based on royalty bearing products’ projected sales which are primarily derived from 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 .

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):

Activity for the Year

Balance at December 31, 2021 (1)

$ ( 1,694,945 )

Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets ( 1,394,679 )

1 unchanged sentence

Write-off of cumulative allowance 5,723

Write-off of credit loss allowance 1,584

Provision for credit losses, net (2)

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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)

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(1) Includes $ 310.8 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.

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

(2) In 2022, the provision income for credit losses was primarily related to a 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.

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

In 2024, the provision expense for credit losses was primarily related to the addition of Niktimvo to our portfolio.

Non-Consolidated Affiliates

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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.

No amounts were due from or to ApiJect related to the revenue participation right as of December 31, 2024 and 2023.

The Legacy SLP Interest

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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.

We recorded income allocations of $ 19.2 million and $ 24.6 million and a loss allocation of $ 12.0 million in 2024, 2023 and 2022, 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 $ 13.6 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.

We received distributions from Avillion I of $ 13.4 million, $ 13.6 million and $ 13.4 million in 2024, 2023 and 2022, respectively.

In May 2018, RPIFT entered into an agreement with Avillion II, which was subsequently amended, to fund a total of $ 155 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.

Avillion II is a party to a co-development agreement with AstraZeneca to develop Airsupra for the treatment of asthma in exchange for royalties, a series of success-based milestones and other potential payments.

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.

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.

In the first quarter of 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 and we received our pro rata portion of the exercise fee of $ 34.8 million from Avillion II.

In 2024, we received distributions of $ 1.0 million from Avillion II related to the Airsupra royalty.

In the fourth quarter of 2024, Airsupra met the primary endpoint in the Phase 3 clinical trial, triggering a milestone payment of $ 55 million from AstraZeneca to Avillion II.

We received our pro rata portion of the milestone of approximately $ 27.4 million from Avillion II in January 2025.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2024 and 2023, we had unfunded commitments related to the Avillion Entities of $ 10.3 million and $ 16.3 million, respectively.

Research and Development Funding Expense

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

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.

R&D funding expense includes development-stage funding payments made to counterparties on an upfront basis or upon pre-approval milestones, and development-stage funding payments that are made to counterparties 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 2024, 2023 or 2022.

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.

We recognized R&D funding expense of $ 200.1 million in 2021, comprised of $ 193.2 million in upfront R&D funding expense and $ 6.9 million in ongoing R&D funding expense, primarily under our co-funding agreement with Sanofi.

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.

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

We recognized R&D funding expense of $ 2.0 million, $ 52.0 million and $ 177.1 million in 2024, 2023 and 2022, respectively.

The R&D expense in 2024 is related to ongoing development-stage funding payments.

The R&D expense in 2023 is primarily related to a $ 50.0 million clinical milestone payment to Cytokinetics for aficamten.

The R&D expenses in 2022 are 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.

Our borrowings consisted of the following (in thousands):

Type of Borrowing Date of Issuance Maturity As of December 31, 2024 As of December 31, 2023

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9/2020 9/2050 1,000,000 1,000,000

$ 700,000 , 3.35 % (issued at 97.565 % of par)

7/2021 9/2051 700,000 700,000

$ 500,000 , 5.90 % (issued at 97.617 % of par)

6/2024 9/2054 500,000 —

Unamortized debt discount and issuance costs ( 187,574 ) ( 164,715 )

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Senior Unsecured Notes

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.

In June 2024, we issued $ 1.5 billion of senior unsecured notes (the “2024 Notes”).

The 2024 Notes were issued at a total discount of $ 28.8 million and we capitalized approximately $ 12.6 million in debt issuance costs primarily composed of underwriting fees.

The 2024 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 5.48 % and 5.92 %, respectively.

We issued $ 1.3 billion and $ 6.0 billion of senior unsecured notes in 2021 (the “2021 Notes”) and 2020 (the “2020 Notes” and, collectively with the “2021 Notes” and “2024 Notes”, the “Notes”), respectively.

The 2021 Notes and 2020 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.

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.

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.

In September 2023, we repaid $ 1.0 billion of the 2020 Notes upon maturity.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

The first interest payment date for the 2024 Notes will be March 2, 2025.

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, 2024 , 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, 2024 and 2023, the fair value of our outstanding Notes using Level 2 inputs was approximately $ 6.5 billion and $ 5.1 billion, respectively.

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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.

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 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 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 as set forth in the Credit Agreement.

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

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Principal Payments on the Notes

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

The future principal payments for our borrowings as of December 31, 2024 over the next five years and thereafter are as follows (in thousands):

Year Principal Payments

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Thereafter 5,300,000

Total (1) $ 6,300,000

(1) Excludes unamortized debt discount and issuance costs of $ 187.6 million as of December 31, 2024, which are amortized through interest expense over the remaining life of the underlying debt obligations.

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As of December 31, 2024, we have 445,985 thousand Class A ordinary shares and 143,128 thousand Class B ordinary shares outstanding.

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.

An exchange agreement entered into by, among others, us, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP, RPI US Feeder 2019, LP, RPI International Feeder 2019, LP and EPA Vehicle (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.

Such deferred shares are non-voting and do not confer a right to participate in the profits of the Company or any right to receive dividends.

As of December 31, 2024, we have 392,255 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.

As required by the U.K.

Companies Act 2006, the Class R redeemable shares were issued to ensure Royalty Pharma Limited had sufficient sterling denominated share capital upon its re-registration in 2020 as Royalty Pharma plc, a public company.

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

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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.

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

In 2024, we repurchased and retired 8.4 million shares at a cost of approximately $ 229.9 million.

In 2023, we repurchased and retired 9.8 million shares at a cost of approximately $ 304.8 million.

As of December 31, 2024, approximately $ 465.3 million remained available under the share repurchase program.

In connection with the Internalization as discussed in Note 16–Subsequent Events, our board of directors authorized a new share repurchase program in January 2025 under which we may repurchase up to $ 3.0 billion of our Class A ordinary shares.

This new share repurchase program replaces the unused capacity under the previous share repurchase program that was authorized in March 2023.

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

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

ROYALTY PHARMA PLC

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Non-Controlling Interests

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

The changes in the balances of our non-controlling interests are as follows (in thousands):

RPSFT Legacy Investors Partnerships Continuing Investors Partnerships EPA Vehicle

December 31, 2021 $ 13,528 $ 1,809,269 $ 2,649,154 $ — $ 4,471,951

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Net income 5,045 167,483 392,726 — 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

3 unchanged sentences

Net income — 194,937 276,893 — 471,830

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

December 31, 2024 $ — $ 1,188,340 $ 2,207,445 $ — $ 3,395,785

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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.

In connection with our repurchase of Class A ordinary shares that began in the second quarter of 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 24 %, 25 % and 27 % of RP Holdings as of December 31, 2024, 2023 and 2022, respectively, with the remaining 76 %, 75 % and 73 % of RP Holding as of December 31, 2024, 2023 and 2022, respectively, owned by Royalty Pharma plc.

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 RPSFT’s right to receive a portion of royalties received by RPCT.

The estimated purchase price, subject to post-closing adjustments, was approximately $ 11.4 million and unpaid as of December 31, 2023.

In 2024, we paid the finalized purchase price of approximately $ 12.5 million.

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

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

EPA Holdings, an affiliate of the Manager, is entitled to Equity Performance Awards (as defined below) through its RP Holdings Class C Special Interest based on our performance, as determined on a portfolio-by-portfolio basis.

RP Holdings Class C Special Interest Held by EPA Vehicle

EPA Vehicle is entitled to Equity Performance Awards (as defined below) through its RP Holdings Class C Special Interest based on our performance, as determined on a portfolio-by-portfolio basis.

Investments made during each two-year period are grouped together as separate portfolios (each, a “Portfolio”).

Subject to certain conditions, at the end of each fiscal quarter, EPA Holdings is entitled to a distribution from RP Holdings in respect of each Portfolio equal to 20 % of the Net Economic Profit (defined as the aggregate cash receipts for all new portfolio investments in such Portfolio less Total Expenses (defined as interest expense, operating expense and recovery of acquisition cost in respect of such Portfolio)) for such Portfolio for the applicable measuring period (the “Equity Performance Awards”).

The Equity Performance Awards will be allocated and paid by RP Holdings to EPA Holdings as the holder of the RP Holdings Class C Special Interest.

Subject to certain conditions, at the end of each fiscal quarter, EPA Vehicle is entitled to a distribution from RP Holdings in respect of each Portfolio equal to 20 % of the Net Economic Profit (defined as the aggregate cash receipts for all new portfolio investments in such Portfolio less Total Expenses (defined as interest expense, operating expense and recovery of acquisition cost in respect of such Portfolio)) for such Portfolio for the applicable measuring period (the “Equity Performance Awards”).

The Equity Performance Awards will be allocated to EPA Vehicle, as the holder of the RP Holdings Class C Special Interest, and recorded as Net income attributable to non-controlling interests in the consolidated statements of operations.

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

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

We do not expect any material Equity Performance Awards to be payable until certain performance conditions discussed above are met.

Similarly, we do not expect any material income to be allocated to EPA Holdings until such performance conditions are met.

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

The Equity Performance Awards will be reflected as a transaction between equity holders in the consolidated statements of shareholders’ equity and related periodic cash distributions will be presented as a financing activity in the consolidated statements of cash flows.

We expect the Equity Performance Awards to be payable in 2025 once certain performance conditions discussed above are met.

Similarly, we expect income to be allocated to EPA Vehicle once such performance conditions are met.

The holders of Class A ordinary shares are entitled to receive dividends subject to approval by our board of directors.

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however, RP Holdings Class B Interests are entitled to dividends and distributions from RP Holdings.

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 .

During 2024, we declared and paid four quarterly cash dividends of $ 0.21 per Class A ordinary share in an aggregate amount of $ 376.5 million to holders of our Class A ordinary shares .

2020 Independent Directors Equity Incentive Plan and Share-based Compensation

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As of December 31, 2024, the total unrecognized share-based compensation expense related to total outstanding RSUs was not material.

Earnings per Share

In 2024, 2023 and 2022, Class B ordinary shares contingently issuable to EPA Vehicle were evaluated and were determined not to have any dilutive impact.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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,

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 2024 and 2023 (in thousands, except per share amounts):

Years Ended December 31,

Consolidated net income $ 1,330,813 $ 1,700,088

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Net income attributable to Royalty Pharma plc - basic 858,983 1,134,834

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

Reallocation of net income attributable to non-controlling interests from the assumed conversion of Class B ordinary shares 276,893 392,726

Net income attributable to Royalty Pharma plc - diluted $ 1,135,876 $ 1,527,560

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Earnings per Class A ordinary share - diluted $ 1.91 $ 2.53

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,

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 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 (in thousands, except per share amounts):

Year Ended December 31,

Consolidated net income $ 230,064

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Losses/(gains) on derivative financial instruments

6,000 2,290 ( 96,610 )

(Gains)/losses on equity securities ( 39,549 ) ( 87,139 ) 33,442

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Financial royalty asset impairment — — 615,827

Termination of derivative financial instruments — — ( 16,093 )

Other 1,105 20,912 11,098

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Cash collected on financial royalty assets 2,983,410 3,201,410 2,507,236

Accrued royalty receivable 2,588 36,456 ( 20,131 )

Other royalty income receivable ( 4,551 ) ( 1,521 ) ( 4,744 )

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2024 2023 2022

Milestone payable - Trelegy (1)

$ 50,000 $ — $ —

Milestone payable - Erleada (1)

18,600 — 12,400

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.

(1) Related to the achievements of the sales-based milestones that were not paid as of December 31, 2024 and 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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

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.

As of December 31, 2024, $ 350 million remained available under the Cytokinetics Funding Commitments and Cytokinetics is required to draw a minimum of $ 50 million.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Other Commitments

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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

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.

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 Investors Partnerships) during the previous twelve calendar months.

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

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 2024, 2023 and 2022, total operating and personnel payments incurred, including the amounts attributable to Old RPI, were $ 188.6 million, $ 204.6 million and $ 188.4 million, respectively.

In January 2025, we agreed to acquire the Manager for approximately $ 1.1 billion in total consideration.

Refer to Note 16–Subsequent Events for additional discussion.

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 include the following (in thousands):

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

Payable to Legacy Investors Partnerships

$ 83,155 $ 87,522

Payable to RPSFT

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

The contractual cash flows required to be distributed based on the Legacy Investors Partnerships’ non-controlling interest in Old RPI and RPI ICAV are presented in the Distributions payable to legacy non-controlling interests on the consolidated balance sheets.

Acquisition from Bristol Myers Squibb

In November 2017, RPI Acquisitions (Ireland), Limited (“RPI Acquisitions”) , a consolidated subsidiary, entered into a purchase agreement with Bristol Myers Squibb (“BMS”) to acquire from BMS a percentage of its future royalties on worldwide sales of Onglyza, Farxiga and related diabetes products marketed by AstraZeneca (the “Purchase Agreement”).

On December 8, 2017, RPI Acquisitions entered into a purchase, sale and assignment agreement (“Assignment Agreement”) with a wholly- owned subsidiary of BioPharma Credit PLC (“BPCR”), an entity related to us.

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, 2024 and 2023, the financial royalty asset of $ 44.7 million and $ 75.6 million, respectively, on the consolidated balance sheets represented only our right to the future payment streams acquired from BMS.

Other Transactions

In January 2024, we acquired a royalty interest in ecopipam which was previously owned by Psyadon Pharmaceuticals, Inc.

Errol De Souza, Ph.D., an independent director on our board of directors, was a shareholder of Psyadon.

In connection with this transaction, Dr.

De Souza received an upfront payment of $ 2.5 million and could receive milestone payments of up to $ 2.22 million in the future.

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

9 unchanged sentences

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 $ 1.6 million were held by non-controlling interests as of December 31, 2024 and 2023.

ROYALTY PHARMA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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.

Each Continuing Investors Partnership pays a pro rata portion based on its 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.

Subsequent Events

In January 2025, we agreed to acquire our Manager for an aggregate consideration of approximately $ 1.1 billion.

The consideration consists of approximately 24.5 million of RP Holdings shares, $ 380 million of existing debt of the Manager and $ 200 million of cash less the amount of the Operating and Personnel Payments made to the Manager from January 1, 2025 through the closing of the transaction.

The closing of the transaction is subject to the shareholders’ approval of the issuance of the share consideration and other customary closing conditions, including required regulatory approvals.

The transaction is estimated to close during the second quarter of 2025.

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