NEW YORK, Aug. 04, 2022 (GLOBE NEWSWIRE) -- Royalty Pharma plc (Nasdaq: RPRX) today reported financial results for the second quarter of 2022 and raised full-year 2022 guidance for Adjusted Cash Receipts(1) (a non-GAAP financial measure).

“We continue to make excellent progress against our strategic and financial objectives,” said Pablo Legorreta, Royalty Pharma’s founder and Chief Executive Officer. “Our diverse portfolio of royalties delivered strong growth in the second quarter. In addition, we further cemented our leading position in the royalty funding market with $2.5 billion in announced transactions year-to-date, including the addition of Trelegy, a rapidly growing blockbuster therapy. Looking forward, the tailwinds behind our business remain strong, fueled by the significant capital requirements of the biopharma industry and our ability to create “win-win” funding solutions. By executing against our mission to accelerate innovation and transform patient lives, we are confident in the power of our unique business model to drive long-term, compounding growth.”

Second quarter 2022 GAAP financial results demonstrate robust operating cash flow growth

Second quarter 2022 non-GAAP financial results show strong performance

Significant deal activity expands portfolio with two attractive, approved therapies

Positive updates across royalty portfolio

Raising financial guidance for 2022

Financial SummaryThree Months Ended June 30,
 (unaudited)
($ and shares in millions)20222021Change
Net cash provided by operating activities (GAAP)5755328%
Net cash (used in)/provided by investing activities (GAAP)(30)126(124)%
Net cash used in financing activities (GAAP)(228)(224)2%
Total income and other revenues (GAAP)536555(3)%
Adjusted Cash Receipts(1)(non-GAAP)52447510%
Adjusted EBITDA(4)(non-GAAP)48043610%
Adjusted Cash Flow(2)(non-GAAP)48242912%
Weighted average Class A ordinary shares outstanding - diluted6076070%


Second Quarter 2022 Financial Results
 
 Three Months Ended June 30,
 (unaudited)
($ in millions)
20222021Change
Net cash provided by operating activities (GAAP)5755328%
      
Royalty Receipts     
Royalties:Marketers:Therapeutic Area:   
Cystic fibrosis franchiseVertexRare disease18215617%
TysabriBiogenNeurology93921%
ImbruvicaAbbVie, J&JCancer8087(8)%
XtandiPfizer, AstellasCancer523645%
Januvia, Janumet, Other DPP-IVsMerck & Co., othersDiabetes3639(9)%
PromactaNovartisHematology35327%
Nurtec ODT/Biohaven payment*Biohaven, PfizerNeurology191712%
TremfyaJohnson & JohnsonImmunology18—n/a
Cabometyx/CometriqExelixis, Ipsen, TakedaCancer131029%
Farxiga/OnglyzaAstraZenecaDiabetes11925%
PrevymisMerck & Co.Infectious disease10914%
EvrysdiRocheRare disease83nm
TrodelvyGileadCancer63102%
CrysvitaUltragenyx, Kyowa KirinRare disease5426%
ErleadaJohnson & JohnsonCancer5355%
OrladeyoBioCrystRare disease51nm
EmgalityLillyNeurology4425%
OxlumoAlnylamRare disease1—n/a
Other products(3)5083(39)%
Total royalty receipts6335888%
Distributions to non-controlling interests(109)(112)(3)%
Adjusted Cash Receipts(1)(non-GAAP)52447510%
Amounts shown in the table may not add due to rounding.
*Quarterly redemption payments of $16 million have been received beginning in the first quarter of 2021 related to the Series A Biohaven Preferred Shares (presented as Proceeds from available for sale debt securities on the statements of cash flows). The remaining cash receipts related to royalty receipts from Nurtec ODT.


Net cash provided by operating activities (GAAP) was $575 million in the second quarter of 2022, an increase of 8% compared to $532 million in the same period of 2021. The increase was primarily driven by higher cash collections from financial royalty assets and offset by slightly higher payments for operating and professional costs.

Total royalty receipts were $633 million in the second quarter of 2022, an increase of 8% compared to $588 million in the same period of 2021. The increase was largely attributable to the performance of the cystic fibrosis franchise and Xtandi, as well as the addition of the royalty on Tremfya. The increase was partially offset by a decline in royalties from the HIV franchise, which reached the end of its royalty term in 2021, as well as an unfavorable foreign exchange impact.

Drivers of royalty receipts in the second quarter of 2022 are discussed below, based on commentary from the marketers of the products underlying the royalties in the preceding quarter (as royalty receipts generally lag product performance by one calendar quarter).

Distributions to non-controlling interests, which reduce royalty receipts to arrive at Adjusted Cash Receipts(1), were $109 million in the second quarter of 2022, a decrease of 3% compared to the same period of 2021. As a percent of total royalty receipts, distributions to non-controlling interests decreased to 17% in the second quarter of 2022, compared to 19% in the prior year period. The decrease was largely due to reduced royalties from maturing or expired products, such as the HIV franchise, where the percentage of royalties attributed to non-controlling interests is higher.

Adjusted Cash Receipts(1) (non-GAAP) were $524 million in the second quarter of 2022, an increase of 10% compared to the same period of 2021, reflecting higher royalty receipts from existing products, including the cystic fibrosis franchise, the addition of new royalties and the decrease in distributions to non-controlling interests. The increase was partially offset by a decline in royalty receipts from expired products, primarily the HIV franchise, as well as an unfavorable foreign exchange impact.

Adjusted EBITDA(4) (non-GAAP) is comprised of Adjusted Cash Receipts(1) less payments for operating and professional costs. Adjusted EBITDA was $480 million in the second quarter of 2022, an increase of 10% compared to Adjusted EBITDA of $436 million in the second quarter of 2021, and was largely attributable to growth in Adjusted Cash Receipts(1). The increase was partially offset by higher payments for operating and professional costs of $44 million (representing 8% of Adjusted Cash Receipts(1)) in the second quarter of 2022, an increase of 11% compared to the $40 million reported in the same period of 2021 (representing 8% of Adjusted Cash Receipts(1)).

Adjusted Cash Flow(2) (non-GAAP) is comprised of Adjusted EBITDA(4) less Development-stage funding payments - ongoing, Development-stage funding payments - upfront and milestone, net interest received and miscellaneous other items. In the second quarter of 2022, Adjusted Cash Flow was $482 million, a 12% increase compared to Adjusted Cash Flow of $429 million for the same period of 2021, primarily due to growth in Adjusted Cash Receipts(1) and no funding requirements by the Avillion entities in the second quarter of 2022.

A more comprehensive discussion of the non-GAAP measures utilized by Royalty Pharma to manage its business can be found in the section of this press release entitled ‘Use of Non-GAAP Measures.’

Key Developments Relating to the Portfolio

The key developments related to Royalty Pharma’s royalty interests are discussed below based on disclosures from the marketers of the products.

Summary of Recent Royalty Acquisition Activity

Liquidity and Capital Resources

2022 Financial Outlook

Royalty Pharma has provided its guidance for full-year 2022 as follows:

 Provided August 4, 2022
Adjusted Cash Receipts(1)(non-GAAP) excluding transactions
announced after the date of this release		$2,275 million to $2,350 million
(+7% to 10% year/year)

This guidance reflects an estimated foreign exchange impact of approximately -3% to -4% (-$65 million to -$85 million)(9) for full-year 2022 year/year Adjusted Cash Receipts(1) growth, assuming current exchange rates prevail for the balance of 2022.

Royalty Pharma expects payments for operating and professional costs to be approximately 8% to 9% of Adjusted Cash Receipts(1) in 2022.

Total interest paid is expected to be approximately $170 million for full-year 2022. Based on the semi-annual interest payment schedule of Royalty Pharma’s existing notes, interest paid is anticipated to be $83 million in the third quarter of 2022 and a de minimis amount in the fourth quarter of 2022. The projection assumes no additional debt financing in 2022.

Royalty Pharma today provides this guidance based on its most up-to-date view on its prospects. This guidance assumes no major unforeseen adverse events and excludes the contributions from transactions announced subsequent to the date of this press release. Furthermore, Royalty Pharma may amend its guidance in the event it engages in new royalty transactions which have a material near-term financial impact on the company.

Royalty Pharma has not reconciled its non-GAAP 2022 guidance to the most directly comparable GAAP measure, net cash provided by operating activities, at this time due to the inherent difficulty in accurately forecasting and quantifying certain amounts that are necessary for such reconciliation, including, primarily, payments for operating and professional costs, distributions from equity method investees and interest received. Royalty Pharma is not able to forecast on a GAAP basis with reasonable certainty all adjustments needed in order to project net cash provided by operating activities at this time.

Financial Results Call

Royalty Pharma will host a conference call and simultaneous webcast to discuss its second quarter 2022 results today at 8:00 a.m., Eastern Time. Please visit the “Investors” page of the company’s website at https://www.royaltypharma.com/investors/news-and-events/events to obtain conference call information and to view the live webcast. A replay of the conference call and webcast will be archived on the company's website for at least 30 days.

About Royalty Pharma plc

Founded in 1996, Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry, collaborating with innovators from academic institutions, research hospitals and non-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. Royalty Pharma has assembled a portfolio of royalties which entitles it to payments based directly on the top-line sales of many of the industry’s leading therapies. Royalty Pharma funds innovation in the biopharmaceutical industry both directly and indirectly - directly when it partners with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators. Royalty Pharma’s current portfolio includes royalties on more than 35 commercial products, including Vertex’s Trikafta, Kalydeco, Orkambi and Symdeko, Biogen’s Tysabri, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, GSK’s Trelegy, Novartis’ Promacta, Biohaven and Pfizer’s Nurtec ODT, Johnson & Johnson’s Tremfya, Roche’s Evrysdi, Gilead’s Trodelvy, and 11 development-stage product candidates.

Forward-Looking Statements

The information set forth herein does not purport to be complete or to contain all of the information you may desire. Statements contained herein are made as of the date of this document unless stated otherwise, and neither the delivery of this document at any time, nor any sale of securities, shall under any circumstances create an implication that the information contained herein is correct as of any time after such date or that information will be updated or revised to reflect information that subsequently becomes available or changes occurring after the date hereof.

This document contains statements that constitute “forward-looking statements” as that term is defined in the United States Private Securities Litigation Reform Act of 1995, including statements that express the company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results, in contrast with statements that reflect historical facts. Examples include discussion of Royalty Pharma’s strategies, financing plans, growth opportunities and market growth. In some cases, you can identify such forward-looking statements by terminology such as “anticipate,” “intend,” “believe,” “estimate,” “plan,” “seek,” “project,” “expect,” “may,” “will,” “would,” “could” or “should,” the negative of these terms or similar expressions. Forward-looking statements are based on management’s current beliefs and assumptions and on information currently available to the company. However, these forward-looking statements are not a guarantee of Royalty Pharma’s performance, and you should not place undue reliance on such statements. Forward-looking statements are subject to many risks, uncertainties and other variable circumstances, and other factors. Such risks and uncertainties may cause the statements to be inaccurate and readers are cautioned not to place undue reliance on such statements. Many of these risks are outside of the company’s control and could cause its actual results to differ materially from those it thought would occur. The forward-looking statements included in this document are made only as of the date hereof. The company does not undertake, and specifically declines, any obligation to update any such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments, except as required by law.

Certain information contained in this document relates to or is based on studies, publications, surveys and other data obtained from third-party sources and the company’s own internal estimates and research. While the company believes these third-party sources to be reliable as of the date of this document, it has not independently verified, and makes no representation as to the adequacy, fairness, accuracy or completeness of, any information obtained from third-party sources. In addition, all of the market data included in this document involves a number of assumptions and limitations, and there can be no guarantee as to the accuracy or reliability of such assumptions. Finally, while the company believes its own internal research is reliable, such research has not been verified by any independent source.

For further information, please reference Royalty Pharma’s reports and documents filed with the U.S. Securities and Exchange Commission ("SEC") by visiting EDGAR on the SEC's website at www.sec.gov.

Use of Non-GAAP Measures

Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow are non-GAAP measures presented as supplemental measures to Royalty Pharma’s GAAP financial performance. These non-GAAP financial measures exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. In each case, because operating performance is a function of liquidity, the non-GAAP measures used by management are presented and defined as supplemental liquidity measures. Royalty Pharma cautions readers that amounts presented in accordance with the definitions of Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate the non-GAAP measures Royalty Pharma uses in the same manner. Royalty Pharma compensates for these limitations by using non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures, in each case being net cash provided by operating activities.

Royalty Pharma believes that Adjusted Cash Receipts and Adjusted Cash Flow provide meaningful information about its operating performance because the business is heavily reliant on its ability to generate consistent cash flows and these measures reflect the core cash collections and cash charges comprising its operating results. Management strongly believes that Royalty Pharma’s significant operating cash flow is one of the attributes that attracts potential investors to its business.

In addition, Royalty Pharma believes that Adjusted Cash Receipts and Adjusted Cash Flow help identify underlying trends in the business and permit investors to more fully understand how management assesses the performance of the company, including planning and forecasting for future periods. Adjusted Cash Receipts and Adjusted Cash Flow are used by management as key liquidity measures in the evaluation of the company’s ability to generate cash from operations. Both measures are an indication of the strength of the company and the performance of the business. Management uses Adjusted Cash Receipts and Adjusted Cash Flow when considering available cash, including for decision-making purposes related to funding of acquisitions, voluntary debt repayments, dividends and other discretionary investments. Further, these non-GAAP financial measures help management, the audit committee and investors evaluate the company’s ability to generate liquidity from operating activities.

Management believes that Adjusted EBITDA is an important non-GAAP measure in analyzing liquidity and is a key component of certain material covenants contained within the company’s credit agreement. Noncompliance with the interest coverage ratio and leverage ratio covenants under the credit agreement could result in lenders requiring the company to immediately repay all amounts borrowed. If Royalty Pharma cannot satisfy these financial covenants, it would be prohibited under the credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the assessment of Royalty Pharma’s liquidity.

Management uses Adjusted Cash Flow to evaluate its ability to generate cash from operations, the performance of the business and the company’s performance as compared to its peer group. Management also uses Adjusted Cash Flow to compare its performance against non-GAAP adjusted net income measures used by many companies in the biopharmaceutical industry, even though each company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s. Royalty Pharma believes that non-GAAP financial measures, including Adjusted Cash Flow, are frequently used by securities analysts, investors and other interested parties to evaluate companies in Royalty Pharma’s industry.

The non-GAAP financial measures used in this press release have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of Royalty Pharma’s results as reported under GAAP. The company has provided a reconciliation of each non-GAAP financial measure, except for its non-GAAP outlook to the most directly comparable GAAP financial measure, in each case being net cash provided by operating activities at Table 5.

Royalty Pharma Investor Relations and Communications

+1 (212) 883-6772
ir@royaltypharma.com


Royalty Pharma plc
Condensed Consolidated Income Statement (unaudited)
Table 1
 
 Three Months Ended June 30,
($ in millions)20222021
Income and other revenues:  
Income from financial royalty assets515503
Revenue from intangible royalty assets340
Other royalty income1811
Total income and other revenues536555
Operating expenses:  
Provision for changes in expected cash flows from financial royalty assets106(244)
Research and development funding expense13
Amortization of intangible assets—6
General and administrative expenses5245
Total operating expenses/(income), net158(190)
Operating income378745
Other (income)/expense:  
Equity in earnings of equity method investees(1)(18)
Interest expense4737
Other income, net(160)(82)
Total other income, net(114)(62)
Consolidated net income before tax492807
Income tax expense——
Consolidated net income492807
Net income attributable to non-controlling interests187366
Net income attributable to Royalty Pharma plc305441

Amounts may not add due to rounding.


Royalty Pharma plc
Selected Balance Sheet Data (unaudited)
Table 2
 
($ in millions)As of June 30, 2022As of December 31, 2021
Cash and cash equivalents2,1081,541
Marketable securities290582
Total financial royalty assets, net14,06314,333
Total assets17,74017,516
Long-term debt7,1067,096
Total liabilities7,3327,267
Total shareholders’ equity10,40810,249


Royalty Pharma plc
Condensed Consolidated Statements of Cash Flows (unaudited)
Table 3
 
 Three Months Ended June 30,Six Months Ended June 30,
($ in millions)2022202120222021
Cash flows from operating activities:    
Cash collections from financial royalty assets5605201,1811,094
Cash collections from intangible royalty assets36397175
Other royalty cash collections1573314
Distributions from equity method investees752822
Interest received3132
Derivative collateral received—11—11
Derivative collateral posted—(9)—(9)
Development-stage funding payments - ongoing(1)(3)(1)(6)
Development-stage funding payments - upfront and milestone——(100)—
Payments for operating and professional costs(44)(40)(93)(82)
Interest paid(1)—(87)(65)
Net cash provided by operating activities5755321,0351,058
Cash flows from investing activities:    
Distributions from equity method investees—1—1
Investments in equity method investees—(9)(3)(17)
Purchases of equity securities(29)—(63)—
Proceeds from equity securities—109—109
Purchases of available for sale debt securities(15)(18)(79)(35)
Proceeds from available for sale debt securities16163131
Purchases of marketable securities(58)(223)(235)(728)
Proceeds from sales and maturities of marketable securities251449526869
Acquisitions of financial royalty assets(175)(181)(175)(684)
Acquisitions of other financial assets(21)—(21)—
Milestone payments—(19)—(19)
Net cash (used in)/provided by investing activities(30)126(19)(473)
Cash flows from financing activities:    
Distributions to non-controlling interests(109)(112)(216)(238)
Distributions to non-controlling interests- other(38)(50)(72)(87)
Dividends to shareholders(83)(73)(165)(139)
Contributions from non-controlling interests- R&D0214
Contributions from non-controlling interests- other2839
Net cash used in financing activities(228)(224)(449)(451)
Net change in cash and cash equivalents317433567134
Cash and cash equivalents, beginning of period1,7927091,5411,009
Cash and cash equivalents, end of period2,1081,1422,1081,142

Amounts may not add due to rounding.


Royalty Pharma plc
Non-GAAP Financial Measures (unaudited)
Table 4
 
 Three Months Ended June 30,
($ in millions)20222021Change
Net cash provided by operating activities (GAAP)5755328%
    
Royalties:   
Cystic fibrosis franchise18215617%
Tysabri93921%
Imbruvica8087(8)%
Xtandi523645%
Januvia, Janumet, Other DPP-IVs3639(9)%
Promacta35327%
Nurtec ODT/Biohaven payment*191712%
Tremfya18—n/a
Cabometyx/Cometriq131029%
Farxiga/Onglyza11925%
Prevymis10914%
Evrysdi83nm
Trodelvy63102%
Crysvita5426%
Erleada5355%
Orladeyo51nm
Emgality4425%
Oxlumo1—n/a
Other products(3)5083(39)%
Total royalty receipts6335888%
Distributions to non-controlling interests(109)(112)(3)%
Adjusted Cash Receipts (non-GAAP)(1)52447510%
Payments for operating and professional costs(44)(40)11%
Adjusted EBITDA (non-GAAP)(4)48043610%
Development-stage funding payments - ongoing(1)(3)(81)%
Interest received, net21170%
Investments in equity method investees—(9)(100)%
Contributions from non-controlling interests- R&D02(95)%
Other—2(100)%
Adjusted Cash Flow (non-GAAP)(2)48242912%

Amounts may not add due to rounding.
*Quarterly redemption payments of $16 million have been received beginning in the first quarter of 2021 related to the Series A Biohaven Preferred Shares (presented as Proceeds from available for sale debt securities on the statements of cash flows). The remaining cash receipts related to royalty receipts from Nurtec ODT.


Royalty Pharma plc
GAAP to Non-GAAP Reconciliation (unaudited)
Table 5
 
 Three Months Ended June 30,
($ in millions)20222021
Net cash provided by operating activities (GAAP)575532
Adjustments:  
Proceeds from available for sale debt securities(5)(6)1616
Distributions from equity method investees - investing(6)—1
Interest received, net(6)(2)(1)
Development-stage funding payments - ongoing(7)13
Payments for operating and professional costs4440
Distributions to non-controlling interests(6)(109)(112)
Derivative collateral received, net(6)—(2)
Adjusted Cash Receipts (non-GAAP)(1)524475
Net cash provided by operating activities (GAAP)575532
Adjustments:  
Proceeds from available for sale debt securities(5)(6)1616
Distributions from equity method investees - investing(6)—1
Interest received, net(6)(2)(1)
Development-stage funding payments - ongoing(7)13
Distributions to non-controlling interests(6)(109)(112)
Derivative collateral received, net(6)—(2)
Adjusted EBITDA (non-GAAP)(4)480436
Net cash provided by operating activities (GAAP)575532
Adjustments:  
Proceeds from available for sale debt securities(5)(6)1616
Distributions from equity method investees - investing(6)—1
Contributions from non-controlling interests- R&D(6)02
Distributions to non-controlling interests(6)(109)(112)
Investments in equity method investees(6)(8)—(9)
Adjusted Cash Flow (non-GAAP)(2)482429

Amounts may not add due to rounding.

Notes

(1)   Adjusted Cash Receipts is a measure calculated with inputs directly from the statements of cash flows and includes (1) royalty receipts by product: (i) cash collections from royalty assets (financial assets and intangible assets), (ii) Other royalty cash collections, (iii) Distributions from equity method investees, plus (2) Proceeds from available for sale debt securities, and less (1) Distributions to non-controlling interests, which represent contractual distributions of royalty receipts and proceeds from available for sale debt securities to the Company’s historical non-controlling interests related to the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust (RPSFT). See Royalty Pharma’s Annual Report on Form 10-K filed with the SEC on February 15, 2022 for additional discussion. See GAAP to Non-GAAP reconciliation at Table 5.

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

(3)   Other products primarily include royalty receipts on the following products: Cimzia, HIV franchise, IDHIFA, Letairis, Lexiscan, Mircera, Myozyme, Nesina, Soliqua, Tazverik and contributions from the Legacy SLP Interest.

(4)   Adjusted EBITDA is important to lenders and is defined under the credit agreement as Adjusted Cash Receipts less payments for operating and professional costs. Operating and professional costs reflect Payments for operating and professional costs from the statements of cash flows. See GAAP to Non-GAAP reconciliation at Table 5.

(5)   Receipts from the quarterly redemption of Royalty Pharma’s Series A Biohaven Preferred Shares are presented as Proceeds from available for sale debt securities on the condensed consolidated statements of cash flows.

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

Reconciling AdjustmentStatements of Cash Flows Classification
Proceeds from available for sale debt securitiesInvesting activities
Investments in equity method investeesInvesting activities
Distributions to non-controlling interestsFinancing activities
Interest received, netOperating activities (Interest paid less Interest received)
Derivative collateral received, netOperating activities (Derivative collateral received less Derivative collateral posted)
Contributions from non-controlling interest- R&DFinancing activities
Distributions from equity method investees - investingInvesting activities

(7)   Royalty Pharma’s lenders consider all payments made to support R&D activities for development-stage product candidates similar to asset acquisitions as these funds are expected to generate operational returns in the future. All ongoing development-stage funding payments and upfront and milestone development-stage funding payments are reported in R&D funding expense in net income and are added back in aggregate to Net cash provided by operating activities to arrive at Adjusted EBITDA. As a result, Adjusted EBITDA captures the full add-back for R&D funding payments.

(8)   Royalty Pharma considers all payments to fund its operating joint ventures that are performing R&D activities for development-stage product candidates similar to asset acquisitions as these funds are expected to generate operational returns in the future. As a result, amounts funded through capital calls by Royalty Pharma’s equity method investees, the Avillion Entities, are deducted to arrive at Adjusted Cash Flow, but are not deducted in Adjusted EBITDA.

(9)   Foreign exchange impact represents an estimate of the difference in results that are attributable to fluctuations in currency exchange rates as of the current reporting date based on certain assumptions of prevailing exchange rates, contractual terms, geographies from which royalties are derived, timing of payments and other factors. The marketers paying royalties may not provide or may not be required to provide the breakdown of product sales by geography. Actual foreign exchange impact may be different than estimates.