QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
PART I. | FINANCIAL INFORMATION | ||||||||||
Item 1. | Condensed Consolidated Financial Statements | ||||||||||
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited) | |||||||||||
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | |||||||||||
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | |||||||||||
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited) | |||||||||||
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited) | |||||||||||
Notes to Condensed Consolidated Financial Statements (unaudited) | |||||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||||||||||
Item 4. | Controls and Procedures | ||||||||||
PART II. | OTHER INFORMATION | ||||||||||
Item 1. | Legal Proceedings | ||||||||||
Item 1A. | Risk Factors | ||||||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||||||||||
Item 3. | Defaults Upon Senior Securities | ||||||||||
Item 4. | Mine Safety Disclosures | ||||||||||
Item 5. | Other Information | ||||||||||
Item 6. | Exhibits |
As of September 30, | As of December 31, | ||||||||||
2022 | 2021 | ||||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Marketable securities | |||||||||||
Financial royalty assets | |||||||||||
Accrued royalty receivable | |||||||||||
Available for sale debt securities | |||||||||||
Other royalty income receivable | |||||||||||
Other current assets | |||||||||||
Total current assets | |||||||||||
Financial royalty assets, net | |||||||||||
Intangible royalty assets, net | |||||||||||
Equity securities | |||||||||||
Available for sale debt securities | |||||||||||
Equity method investments | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and shareholders’ equity | |||||||||||
Current liabilities | |||||||||||
Distributions payable to non-controlling interests | $ | $ | |||||||||
Accounts payable and accrued expenses | |||||||||||
Interest payable | |||||||||||
Current portion of long-term debt | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Shareholders’ equity | |||||||||||
Class A ordinary shares, $ | |||||||||||
Class B ordinary shares, $ | |||||||||||
Class R redeemable shares, £ | |||||||||||
Deferred shares, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Non-controlling interests | |||||||||||
Accumulated other comprehensive income | |||||||||||
Treasury interests | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Total liabilities and shareholders’ equity | $ | $ |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Income and other revenues: | |||||||||||||||||||||||
Income from financial royalty assets | $ | $ | $ | $ | |||||||||||||||||||
Revenue from intangible royalty assets | |||||||||||||||||||||||
Other royalty income | |||||||||||||||||||||||
Total income and other revenues | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Provision for changes in expected cash flows from financial royalty assets | |||||||||||||||||||||||
Research and development funding expense | |||||||||||||||||||||||
Amortization of intangible assets | |||||||||||||||||||||||
General and administrative expenses | |||||||||||||||||||||||
Total operating expenses, net | |||||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Other expense/(income) | |||||||||||||||||||||||
Equity in losses/(earnings) of equity method investees | ( | ( | |||||||||||||||||||||
Interest expense | |||||||||||||||||||||||
(Gains)/losses on derivative financial instruments | ( | ( | |||||||||||||||||||||
(Gains)/losses on equity securities | ( | ||||||||||||||||||||||
(Gains)/losses on available for sale debt securities | ( | ( | ( | ||||||||||||||||||||
Interest income | ( | ( | ( | ( | |||||||||||||||||||
Other non-operating expense, net | |||||||||||||||||||||||
Total other (income)/expenses, net | ( | ( | |||||||||||||||||||||
Consolidated net income before tax | |||||||||||||||||||||||
Income tax expense | |||||||||||||||||||||||
Consolidated net income | |||||||||||||||||||||||
Net income attributable to non-controlling interests | |||||||||||||||||||||||
Net income attributable to Royalty Pharma plc | $ | $ | $ | $ | |||||||||||||||||||
Earnings per Class A ordinary share: | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted average Class A ordinary shares outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Consolidated net income | $ | $ | $ | $ | |||||||||||||||||||
Changes in other comprehensive income/(loss): | |||||||||||||||||||||||
Unrealized gains/(losses) on available for sale debt securities | ( | ||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | ( | ( | ( | ( | |||||||||||||||||||
Other comprehensive income/(loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
Comprehensive income attributable to non-controlling interests | |||||||||||||||||||||||
Comprehensive income attributable to Royalty Pharma plc | $ | $ | $ | $ |
Class A Ordinary Shares | Class B Ordinary Shares | Class R Redeemable Shares | Deferred Shares | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-Controlling Interests | Treasury Interests | Total Equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | — | — | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||
Other exchanges | — | ( | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
Share-based compensation and related issuances of Class A ordinary shares | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ |
Class A Ordinary Shares | Class B Ordinary Shares | Class R Redeemable Shares | Deferred Shares | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-Controlling Interests | Treasury Interests | Total Equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | — | — | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||
Other exchanges | ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||
Share-based compensation and related issuances of Class A ordinary shares | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Other comprehensive loss: | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized losses on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ |
Class A Ordinary Shares | Class B Ordinary Shares | Class R Redeemable Shares | Deferred Shares | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-Controlling Interests | Treasury Interests | Total Equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | — | — | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||
Other exchanges | ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||
Share based compensation and related issuances of Class A ordinary shares | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ |
Class A Ordinary Shares | Class B Ordinary Shares | Class R Redeemable Shares | Deferred Shares | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Non-Controlling Interests | Treasury Interests | Total Equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||
Dividends ($ | — | — | — | — | — | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||
Other exchanges | ( | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||
Share-based compensation and related issuances of Class A ordinary shares | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Other comprehensive income/(loss): | ||||||||||||||||||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | $ |
For the Nine Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Cash collections from financial royalty assets | $ | $ | |||||||||
Cash collections from intangible royalty assets | |||||||||||
Other royalty cash collections | |||||||||||
Distributions from equity method investees | |||||||||||
Interest received | |||||||||||
Derivative collateral received | |||||||||||
Derivative collateral posted | ( | ||||||||||
Termination payments on derivative instruments | ( | ||||||||||
Development-stage funding payments - ongoing | ( | ( | |||||||||
Development-stage funding payments - upfront and milestone | ( | ( | |||||||||
Payments for operating and professional costs | ( | ( | |||||||||
Interest paid | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
Distributions from equity method investees | |||||||||||
Investments in equity method investees | ( | ( | |||||||||
Purchases of equity securities | ( | ( | |||||||||
Proceeds from equity securities | |||||||||||
Purchases of available for sale debt securities | ( | ( | |||||||||
Proceeds from available for sale debt securities | |||||||||||
Purchases of marketable securities | ( | ( | |||||||||
Proceeds from sales and maturities of marketable securities | |||||||||||
Acquisitions of financial royalty assets | ( | ( | |||||||||
Acquisitions of other financial assets | ( | ||||||||||
Milestone payments | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Distributions to non-controlling interests | ( | ( | |||||||||
Distributions to non-controlling interests- other | ( | ( | |||||||||
Dividends to shareholders | ( | ( | |||||||||
Contributions from non-controlling interests- R&D | |||||||||||
Contributions from non-controlling interests- other | |||||||||||
Proceeds from issuance of long-term debt, net of discount | |||||||||||
Debt issuance costs and other | ( | ||||||||||
Net cash (used in)/provided by financing activities | ( | ||||||||||
Net change in cash and cash equivalents | ( | ||||||||||
Cash and cash equivalents, beginning of period | |||||||||||
Cash and cash equivalents, end of period | $ | $ |
Cost | Unrealized Gains/(Losses) | Fair Value | Current Assets | Non-Current Assets | Current Liabilities | Non-Current Liabilities (3) | Total | |||||||||||||||||||||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Debt securities (1) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Forwards (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Funding commitments (2) | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Total available for sale debt securities | $ | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||
As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Debt securities (1) | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Forwards (2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total available for sale debt securities | $ | $ | $ | $ | $ | $ | $ | $ |
As of September 30, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||||||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Commercial paper | |||||||||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | |||||||||||||||||||||||||||||||||||||||||||||||
Marketable securities | |||||||||||||||||||||||||||||||||||||||||||||||
Commercial paper | |||||||||||||||||||||||||||||||||||||||||||||||
Certificates of deposit | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. government securities | |||||||||||||||||||||||||||||||||||||||||||||||
Available for sale debt securities | |||||||||||||||||||||||||||||||||||||||||||||||
Debt securities (1) | |||||||||||||||||||||||||||||||||||||||||||||||
Forwards (2) | |||||||||||||||||||||||||||||||||||||||||||||||
Derivative instruments (3) | |||||||||||||||||||||||||||||||||||||||||||||||
Total current assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||||||||||||||||||||||||
Available for sale debt securities | |||||||||||||||||||||||||||||||||||||||||||||||
Debt securities (1) | |||||||||||||||||||||||||||||||||||||||||||||||
Forwards (2) | |||||||||||||||||||||||||||||||||||||||||||||||
Derivative instruments (3) | |||||||||||||||||||||||||||||||||||||||||||||||
Royalty at fair value (4) | |||||||||||||||||||||||||||||||||||||||||||||||
Total non-current assets | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||
Available for sale debt securities | |||||||||||||||||||||||||||||||||||||||||||||||
Funding commitments (5) | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Total non-current liabilities | $ | $ | $ | ( | $ | ( | $ | $ | $ | $ |
For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Equity Securities | Debt Securities | Forwards | Funding Commitments | Derivative Instruments | Royalty at Fair Value | Debt Securities | Forwards | ||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the period | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Purchases | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Losses on initial recognition (1) | — | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Losses on equity securities | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Gains on derivative financial instruments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Unrealized gains/(losses) on available for sale debt securities included in other comprehensive income/(losses) (2) | — | — | — | — | — | ( | — | ||||||||||||||||||||||||||||||||||||||||
Gains/(losses) on available for sale debt securities included in earnings (3) | — | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
Other non-operating expense | — | — | — | — | — | ( | — | — | |||||||||||||||||||||||||||||||||||||||
Settlement of forwards (4) | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Redemption of debt securities | — | ( | — | — | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||
Balance at the end of the period | $ | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Equity Securities | Debt Securities | Forwards | Funding Commitments | Derivative Instruments | Royalty at Fair Value | Debt Securities | Forwards | ||||||||||||||||||||||||||||||||||||||||
Balance at the beginning of the period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Purchases | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Gains/(losses) on initial recognition (1) | — | — | ( | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Losses on equity securities | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Gains on derivative financial instruments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities included in other comprehensive losses (2) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Gains/(losses) on available for sale debt securities included in earnings (3) | — | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||
Other non-operating expense | — | — | — | — | — | ( | — | — | |||||||||||||||||||||||||||||||||||||||
Settlement of forwards (4) | — | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Transfer out of Level 3 (5) | ( | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Redemption of debt securities | — | ( | — | — | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||
Balance at the end of the period | $ | $ | $ | $ | ( | $ | $ | $ | $ |
As of September 30, 2022 | As of December 31, 2021 | ||||||||||||||||||||||
Fair Value | Carrying Value, net | Fair Value | Carrying Value, net | ||||||||||||||||||||
Financial royalty assets, net | $ | $ | $ | $ |
As of September 30, 2022 | ||||||||||||||||||||||||||
Estimated Royalty Duration (1) | Gross Carrying Value | Cumulative Allowance for Changes in Expected Cash Flows (Note 6) | Net Carrying Value (4) | |||||||||||||||||||||||
Cystic fibrosis franchise | 2037 (2) | $ | $ | $ | ||||||||||||||||||||||
Tysabri | (3) | ( | ||||||||||||||||||||||||
Trelegy | 2029-2030 | |||||||||||||||||||||||||
Imbruvica | 2027-2032 | ( | ||||||||||||||||||||||||
Tremfya | 2031-2032 | |||||||||||||||||||||||||
Xtandi | 2027-2028 | ( | ||||||||||||||||||||||||
Other | 2023-2040 | ( | ||||||||||||||||||||||||
Total | $ | $ | ( | $ | ||||||||||||||||||||||
Less: Cumulative allowance for credit losses (Note 6) | ( | |||||||||||||||||||||||||
Total financial royalty assets, net | $ |
As of December 31, 2021 | ||||||||||||||||||||||||||
Estimated Royalty Duration (1) | Gross Carrying Value | Cumulative Allowance for Changes in Expected Cash Flows (Note 6) | Net Carrying Value (5) | |||||||||||||||||||||||
Cystic fibrosis franchise | 2037 (2) | $ | $ | ( | $ | |||||||||||||||||||||
Tysabri | (3) | ( | ||||||||||||||||||||||||
Imbruvica | 2027-2032 | ( | ||||||||||||||||||||||||
Xtandi | 2027-2028 | ( | ||||||||||||||||||||||||
Tremfya | 2031-2032 | |||||||||||||||||||||||||
Evrysdi | 2030-2035 (4) | |||||||||||||||||||||||||
Other | 2023-2040 | ( | ||||||||||||||||||||||||
Total | $ | $ | ( | $ | ||||||||||||||||||||||
Less: Cumulative allowance for credit losses (Note 6) | ( | |||||||||||||||||||||||||
Total financial royalty assets, net | $ |
Activity for the Period | |||||
Balance at December 31, 2021 (1) | $ | ( | |||
Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets | ( | ||||
Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets | |||||
Write-off of cumulative allowance | |||||
Current period provision for credit losses, net (2) | |||||
Balance at September 30, 2022 | $ | ( |
As of September 30, 2022 | Cost | Accumulated Amortization | Net Carrying Value | ||||||||||||||
DPP-IV patents | $ | $ | $ | ||||||||||||||
Total intangible royalty assets | $ | $ | $ |
As of December 31, 2021 | Cost | Accumulated Amortization | Net Carrying Value | ||||||||||||||
DPP-IV patents | $ | $ | $ | ||||||||||||||
Total intangible royalty assets | $ | $ | $ |
Type of Borrowing | Date of Issuance | Maturity | As of September 30, 2022 | As of December 31, 2021 | ||||||||||||||||||||||
Senior Unsecured Notes: | ||||||||||||||||||||||||||
$ | 9/2020 | 9/2023 | $ | $ | ||||||||||||||||||||||
$ | 9/2020 | 9/2025 | ||||||||||||||||||||||||
$ | 9/2020 | 9/2027 | ||||||||||||||||||||||||
$ | 9/2020 | 9/2030 | ||||||||||||||||||||||||
$ | 7/2021 | 9/2031 | ||||||||||||||||||||||||
$ | 9/2020 | 9/2040 | ||||||||||||||||||||||||
$ | 9/2020 | 9/2050 | ||||||||||||||||||||||||
$ | 7/2021 | 9/2051 | ||||||||||||||||||||||||
Unamortized debt discount and issuance costs | ( | ( | ||||||||||||||||||||||||
Total debt carrying value | ||||||||||||||||||||||||||
Less: Current portion of long-term debt | ( | |||||||||||||||||||||||||
Total long-term debt | $ | $ |
Year | Principal Payments | |||||||
Remainder of 2022 | $ | |||||||
2023 | ||||||||
2024 | ||||||||
2025 | ||||||||
2026 | ||||||||
Thereafter | ||||||||
Total (1) | $ |
RPSFT | Legacy Investors Partnerships | Continuing Investors Partnerships | EPA Holdings | Total | |||||||||||||||||||||||||
June 30, 2022 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Contributions | |||||||||||||||||||||||||||||
Distributions | ( | ( | ( | ( | |||||||||||||||||||||||||
Other exchanges | ( | ( | |||||||||||||||||||||||||||
Net Income | |||||||||||||||||||||||||||||
Other comprehensive income/(loss): | |||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities | |||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | ( | ( | ( | ||||||||||||||||||||||||||
September 30, 2022 | $ | $ | $ | $ | $ |
RPSFT | Legacy Investors Partnerships | Continuing Investors Partnerships | EPA Holdings | Total | |||||||||||||||||||||||||
December 31, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Contributions | |||||||||||||||||||||||||||||
Distributions | ( | ( | ( | ( | |||||||||||||||||||||||||
Other exchanges | ( | ( | |||||||||||||||||||||||||||
Net Income | |||||||||||||||||||||||||||||
Other comprehensive income/(loss): | |||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities | |||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | ( | ( | ( | ||||||||||||||||||||||||||
September 30, 2022 | $ | $ | $ | $ | $ |
RPSFT | Legacy Investors Partnerships | Continuing Investors Partnerships | EPA Holdings | Total | |||||||||||||||||||||||||
June 30, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Contributions | |||||||||||||||||||||||||||||
Distributions | ( | ( | ( | ( | |||||||||||||||||||||||||
Other exchanges | ( | ( | |||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||
Other comprehensive loss: | — | ||||||||||||||||||||||||||||
Unrealized losses on available for sale debt securities | ( | ( | ( | ||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | ( | ( | ( | ||||||||||||||||||||||||||
September 30, 2021 | $ | $ | $ | $ | $ |
RPSFT | Legacy Investors Partnerships | Continuing Investors Partnerships | EPA Holdings | Total | |||||||||||||||||||||||||
December 31, 2020 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Contributions | |||||||||||||||||||||||||||||
Distributions | ( | ( | ( | ( | |||||||||||||||||||||||||
Other exchanges | ( | ( | |||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||
Other comprehensive income/(loss): | |||||||||||||||||||||||||||||
Unrealized gains on available for sale debt securities | |||||||||||||||||||||||||||||
Reclassification of unrealized gains on available for sale debt securities | ( | ( | ( | ||||||||||||||||||||||||||
September 30, 2021 | $ | $ | $ | $ | $ |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Numerator | |||||||||||||||||||||||
Consolidated net income | $ | $ | $ | $ | |||||||||||||||||||
Less: Net income attributable to Continuing Investors Partnerships | |||||||||||||||||||||||
Less: Net income attributable to Legacy Investors Partnerships and RPSFT | |||||||||||||||||||||||
Net income attributable to Royalty Pharma plc - basic | |||||||||||||||||||||||
Add: Reallocation of net income attributable to non-controlling interest from the assumed conversion of Class B ordinary shares | |||||||||||||||||||||||
Net income attributable to Royalty Pharma plc - diluted | $ | $ | $ | $ | |||||||||||||||||||
Denominator | |||||||||||||||||||||||
Weighted average Class A ordinary shares outstanding - basic | |||||||||||||||||||||||
Add: Dilutive effects as shown separately below | |||||||||||||||||||||||
Class B ordinary shares exchangeable for Class A ordinary shares | |||||||||||||||||||||||
Unvested RSUs | |||||||||||||||||||||||
Weighted average Class A ordinary shares outstanding - diluted | |||||||||||||||||||||||
Earnings per Class A ordinary share - basic | $ | $ | $ | $ | |||||||||||||||||||
Earnings per Class A ordinary share - diluted | $ | $ | $ | $ | |||||||||||||||||||
For the Nine Months Ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Cash flow from operating activities: | |||||||||||
Consolidated net income | $ | $ | |||||||||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | |||||||||||
Income from financial royalty assets | ( | ( | |||||||||
Provision for changes in expected cash flows from financial royalty assets | |||||||||||
Amortization of intangible assets | |||||||||||
Amortization of debt discount and issuance costs | |||||||||||
(Gains)/losses on derivative financial instruments | ( | ||||||||||
Losses on equity securities | |||||||||||
Equity in losses/(earnings) of equity method investees | ( | ||||||||||
Distributions from equity method investees | |||||||||||
Loss on extinguishment of debt | |||||||||||
Share-based compensation | |||||||||||
Interest income accretion | ( | ( | |||||||||
Gains on available for sale debt securities | ( | ( | |||||||||
Termination of derivative financial instruments | ( | ||||||||||
Other | |||||||||||
Decrease/(increase) in operating assets: | |||||||||||
Cash collected on financial royalty assets | |||||||||||
Accrued royalty receivable | ( | ||||||||||
Other royalty income receivable | ( | ( | |||||||||
Other current assets and other assets | ( | ||||||||||
Increase/(decrease) in operating liabilities: | |||||||||||
Accounts payable and accrued expenses | ( | ||||||||||
Interest payable | ( | ( | |||||||||
Net cash provided by operating activities | $ | $ | |||||||||
As of September 30, 2022 | As of December 31, 2021 | ||||||||||
Due to Legacy Investors Partnerships | $ | $ | |||||||||
Due to RPSFT | |||||||||||
Total distributions payable to non-controlling interests | $ | $ |
Royalties | Marketer(s) | Therapeutic Area | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||
Cystic fibrosis franchise (1) | Vertex | Rare disease | $ | 207,882 | $ | 182,876 | $ | 591,733 | $ | 505,708 | ||||||||||||||||||||||||||||
Tysabri | Biogen | Neurology | 91,252 | 95,805 | 281,819 | 274,796 | ||||||||||||||||||||||||||||||||
Imbruvica | AbbVie, Johnson & Johnson | Cancer | 74,391 | 87,924 | 241,943 | 264,348 | ||||||||||||||||||||||||||||||||
Xtandi | Pfizer, Astellas | Cancer | 45,717 | 40,237 | 141,100 | 117,049 | ||||||||||||||||||||||||||||||||
Promacta | Novartis | Hematology | 50,067 | 48,151 | 132,679 | 124,617 | ||||||||||||||||||||||||||||||||
Januvia, Janumet, Other DPP-IVs (2) | Merck & Co., others | Diabetes | 1,029 | 37,934 | 72,406 | 113,133 | ||||||||||||||||||||||||||||||||
Tremfya | Johnson & Johnson | Immunology | 21,409 | 16,610 | 68,062 | 16,610 | ||||||||||||||||||||||||||||||||
Nurtec ODT/Biohaven payment (3) | Pfizer (5) | Neurology | 20,459 | 17,948 | 59,549 | 51,170 | ||||||||||||||||||||||||||||||||
Trelegy | GSK | Respiratory | 42,720 | — | 42,720 | — | ||||||||||||||||||||||||||||||||
Cabometyx/Cometriq | Exelixis, Ipsen, Takeda | Cancer | 14,612 | 12,038 | 40,523 | 22,167 | ||||||||||||||||||||||||||||||||
Farxiga/Onglyza | AstraZeneca | Diabetes | 11,522 | 9,321 | 32,336 | 26,996 | ||||||||||||||||||||||||||||||||
Evrysdi | Roche | Rare disease | 9,602 | 5,897 | 26,933 | 10,546 | ||||||||||||||||||||||||||||||||
Prevymis | Merck & Co. | Infectious disease | 11,052 | 9,929 | 25,174 | 27,331 | ||||||||||||||||||||||||||||||||
Trodelvy | Gilead | Cancer | 6,496 | 2,521 | 17,428 | 8,118 | ||||||||||||||||||||||||||||||||
Orladeyo | BioCryst | Rare disease | 6,265 | 2,502 | 15,456 | 3,471 | ||||||||||||||||||||||||||||||||
Erleada | Johnson & Johnson | Cancer | 5,586 | 3,736 | 15,305 | 9,957 | ||||||||||||||||||||||||||||||||
Crysvita | Ultragenyx, Kyowa Kirin | Rare disease | 5,241 | 4,576 | 14,887 | 12,092 | ||||||||||||||||||||||||||||||||
Emgality | Lilly | Neurology | 4,657 | 4,542 | 13,845 | 11,356 | ||||||||||||||||||||||||||||||||
Oxlumo | Alnylam | Rare disease | 596 | 653 | 1,945 | 653 | ||||||||||||||||||||||||||||||||
Other products (4) | 73,349 | 129,003 | 212,260 | 349,242 | ||||||||||||||||||||||||||||||||||
Total royalty receipts | $ | 703,904 | $ | 712,203 | $ | 2,048,103 | $ | 1,949,360 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
Royalty Payor | Royalties | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||
Vertex | Cystic fibrosis franchise | 35 | % | 33 | % | 36 | % | 33 | % | |||||||||||||||||||||||
AbbVie | Imbruvica | 13 | % | 16 | % | 15 | % | 17 | % | |||||||||||||||||||||||
(in thousands) | For the Three Months Ended September 30, | Change | For the Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||
Income and other revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
Income from financial royalty assets | $ | 551,682 | $ | 505,832 | $ | 45,850 | 9.1 | % | $ | 1,578,555 | $ | 1,538,871 | $ | 39,684 | 2.6 | % | |||||||||||||||||||||||||||||||
Revenue from intangible royalty assets | 1,073 | 63,406 | (62,333) | (98.3) | % | 37,196 | 139,594 | (102,398) | (73.4) | % | |||||||||||||||||||||||||||||||||||||
Other royalty income | 20,708 | 16,535 | 4,173 | 25.2 | % | 55,716 | 35,298 | 20,418 | 57.8 | % | |||||||||||||||||||||||||||||||||||||
Total income and other revenues | 573,463 | 585,773 | (12,310) | (2.1) | % | 1,671,467 | 1,713,763 | (42,296) | (2.5) | % | |||||||||||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
Provision for changes in expected cash flows from financial royalty assets | 305,061 | 137,837 | 167,224 | 121.3 | % | 595,396 | 186,337 | 409,059 | 219.5 | % | |||||||||||||||||||||||||||||||||||||
Research and development funding expense | 25,500 | 90,500 | (65,000) | (71.8) | % | 126,606 | 96,263 | 30,343 | 31.5 | % | |||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | — | 5,796 | (5,796) | (100.0) | % | 5,670 | 17,200 | (11,530) | (67.0) | % | |||||||||||||||||||||||||||||||||||||
General and administrative expenses | 50,692 | 48,588 | 2,104 | 4.3 | % | 154,075 | 136,665 | 17,410 | 12.7 | % | |||||||||||||||||||||||||||||||||||||
Total operating expenses, net | 381,253 | 282,721 | 98,532 | 34.9 | % | 881,747 | 436,465 | 445,282 | 102.0 | % | |||||||||||||||||||||||||||||||||||||
Operating income | 192,210 | 303,052 | (110,842) | (36.6) | % | 789,720 | 1,277,298 | (487,578) | (38.2) | % | |||||||||||||||||||||||||||||||||||||
Other expense/(income): | |||||||||||||||||||||||||||||||||||||||||||||||
Equity in losses/(earnings) of equity method investees | 3,251 | (2,749) | 6,000 | (218.3) | % | 2,117 | (18,532) | 20,649 | (111.4) | % | |||||||||||||||||||||||||||||||||||||
Interest expense | 46,977 | 44,327 | 2,650 | 6.0 | % | 141,006 | 119,168 | 21,838 | 18.3 | % | |||||||||||||||||||||||||||||||||||||
Other (income)/expenses, net | (78,432) | 39,678 | (118,110) | (297.7) | % | (193,497) | (10,868) | (182,629) | * | ||||||||||||||||||||||||||||||||||||||
Total other (income)/expenses, net | (28,204) | 81,256 | (109,460) | (134.7) | % | (50,374) | 89,768 | (140,142) | (156.1) | % | |||||||||||||||||||||||||||||||||||||
Consolidated net income | 220,414 | 221,796 | (1,382) | (0.6) | % | 840,094 | 1,187,530 | (347,436) | (29.3) | % | |||||||||||||||||||||||||||||||||||||
Net income attributable to non-controlling interests | 77,763 | 119,867 | (42,104) | (35.1) | % | 341,178 | 575,706 | (234,528) | (40.7) | % | |||||||||||||||||||||||||||||||||||||
Net income attributable to Royalty Pharma plc | $ | 142,651 | $ | 101,929 | $ | 40,722 | 40.0 | % | $ | 498,916 | $ | 611,824 | $ | (112,908) | (18.5) | % |
(in thousands) | For the Three Months Ended September 30, | Change | For the Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||||||||||||||||||||||||||
Cystic fibrosis franchise | $ | 203,383 | $ | 192,832 | $ | 10,551 | 5.5 | % | $ | 599,504 | $ | 563,245 | $ | 36,259 | 6.4 | % | |||||||||||||||||||||||||||||||
Imbruvica | 76,251 | 94,626 | (18,375) | (19.4) | % | 244,515 | 290,056 | (45,541) | (15.7) | % | |||||||||||||||||||||||||||||||||||||
Tysabri | 54,029 | 54,335 | (306) | (0.6) | % | 157,953 | 156,083 | 1,870 | 1.2 | % | |||||||||||||||||||||||||||||||||||||
Xtandi | 24,724 | 28,527 | (3,803) | (13.3) | % | 73,662 | 81,245 | (7,583) | (9.3) | % | |||||||||||||||||||||||||||||||||||||
Tremfya | 30,493 | 6,765 | 23,728 | * | 72,309 | 6,765 | 65,544 | * | |||||||||||||||||||||||||||||||||||||||
Promacta | 22,321 | 19,287 | 3,034 | 15.7 | % | 66,911 | 55,250 | 11,661 | 21.1 | % | |||||||||||||||||||||||||||||||||||||
Other | 140,481 | 109,460 | 31,021 | 28.3 | % | 363,701 | 386,227 | (22,526) | (5.8) | % | |||||||||||||||||||||||||||||||||||||
Total income from financial royalty assets | $ | 551,682 | $ | 505,832 | $ | 45,850 | 9.1 | % | $ | 1,578,555 | $ | 1,538,871 | $ | 39,684 | 2.6 | % |
(in thousands) | For the Three Months Ended September 30, 2022 | For the Three Months Ended September 30, 2021 | ||||||||||||||||||
Royalty | Royalty | |||||||||||||||||||
Imbruvica | $ | 133,750 | Tazverik | $ | (98,381) | $ | 115,546 | |||||||||||||
Tysabri | 119,691 | Xtandi | (53,142) | 58,917 | ||||||||||||||||
Xtandi | 73,063 | Cabometyx/Cometriq | (44,263) | 12,022 | ||||||||||||||||
Tazverik | 46,804 | Promacta | (19,900) | 9,682 | ||||||||||||||||
Cystic fibrosis franchise | (54,609) | Nesina | 127,241 | 2,506 | ||||||||||||||||
Other | 41,976 | Other | 24,589 | (2,261) | ||||||||||||||||
Total provision, exclusive of provision for credit losses | 360,675 | Total provision, exclusive of provision for credit losses | 196,412 | |||||||||||||||||
Provision for current expected credit losses | (55,614) | Provision for current expected credit losses | (58,575) | |||||||||||||||||
Total provision | $ | 305,061 | Total provision | $ | 137,837 |
(in thousands) | For the Nine Months Ended September 30, 2022 | For the Nine Months Ended September 30, 2021 | ||||||||||||||||||
Royalty | Royalty | |||||||||||||||||||
Imbruvica | $ | 314,044 | Tazverik | $ | 176,937 | |||||||||||||||
Tazverik | 124,975 | Imbruvica | 107,542 | |||||||||||||||||
Tysabri | 103,073 | Emgality | 54,902 | |||||||||||||||||
Xtandi | 54,116 | Cabometyx/Cometriq | 40,499 | |||||||||||||||||
Cystic fibrosis franchise | (48,636) | Tysabri | (112,720) | |||||||||||||||||
Other | 166,397 | Other | (57,480) | |||||||||||||||||
Total provision, exclusive of provision for credit losses | 713,969 | Total provision, exclusive of provision for credit losses | 209,680 | |||||||||||||||||
Provision for current expected credit losses | (118,573) | Provision for current expected credit losses | (23,343) | |||||||||||||||||
Total provision | $ | 595,396 | Total provision | $ | 186,337 |
Royalties | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | Nine Months Year-to-Date Change | |||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||
Cystic fibrosis franchise (1) | $ | 207,882 | $ | 182,876 | $ | 591,733 | $ | 505,708 | $ | 86,025 | 17.0 | % | ||||||||||||||||||||||||||
Tysabri | 91,252 | 95,805 | 281,819 | 274,796 | 7,023 | 2.6 | % | |||||||||||||||||||||||||||||||
Imbruvica | 74,391 | 87,924 | 241,943 | 264,348 | (22,405) | (8.5) | % | |||||||||||||||||||||||||||||||
Xtandi | 45,717 | 40,237 | 141,100 | 117,049 | 24,051 | 20.5 | % | |||||||||||||||||||||||||||||||
Promacta | 50,067 | 48,151 | 132,679 | 124,617 | 8,062 | 6.5 | % | |||||||||||||||||||||||||||||||
Januvia, Janumet, Other DPP-IVs (2) | 1,029 | 37,934 | 72,406 | 113,133 | (40,727) | (36.0) | % | |||||||||||||||||||||||||||||||
Tremfya | 21,409 | 16,610 | 68,062 | 16,610 | 51,452 | * | ||||||||||||||||||||||||||||||||
Nurtec ODT/Biohaven payment (3) | 20,459 | 17,948 | 59,549 | 51,170 | 8,379 | 16.4 | % | |||||||||||||||||||||||||||||||
Trelegy | 42,720 | — | 42,720 | — | 42,720 | — | % | |||||||||||||||||||||||||||||||
Cabometyx/Cometriq | 14,612 | 12,038 | 40,523 | 22,167 | 18,356 | 82.8 | % | |||||||||||||||||||||||||||||||
Farxiga/Onglyza | 11,522 | 9,321 | 32,336 | 26,996 | 5,340 | 19.8 | % | |||||||||||||||||||||||||||||||
Evrysdi | 9,602 | 5,897 | 26,933 | 10,546 | 16,387 | 155.4 | % | |||||||||||||||||||||||||||||||
Prevymis | 11,052 | 9,929 | 25,174 | 27,331 | (2,157) | (7.9) | % | |||||||||||||||||||||||||||||||
Trodelvy | 6,496 | 2,521 | 17,428 | 8,118 | 9,310 | 114.7 | % | |||||||||||||||||||||||||||||||
Orladeyo | 6,265 | 2,502 | 15,456 | 3,471 | 11,985 | * | ||||||||||||||||||||||||||||||||
Erleada | 5,586 | 3,736 | 15,305 | 9,957 | 5,348 | 53.7 | % | |||||||||||||||||||||||||||||||
Crysvita | 5,241 | 4,576 | 14,887 | 12,092 | 2,795 | 23.1 | % | |||||||||||||||||||||||||||||||
Emgality | 4,657 | 4,542 | 13,845 | 11,356 | 2,489 | 21.9 | % | |||||||||||||||||||||||||||||||
Oxlumo | 596 | 653 | 1,945 | 653 | 1,292 | 197.9 | % | |||||||||||||||||||||||||||||||
Other products (4) | 73,349 | 129,003 | 212,260 | 349,242 | (136,982) | (39.2) | % | |||||||||||||||||||||||||||||||
Total royalty receipts | $ | 703,904 | $ | 712,203 | $ | 2,048,103 | $ | 1,949,360 | $ | 98,743 | 5.1 | % | ||||||||||||||||||||||||||
Distributions to non-controlling interests | (107,183) | (125,427) | (322,726) | (363,624) | 40,898 | (11.2) | % | |||||||||||||||||||||||||||||||
Adjusted Cash Receipts (non-GAAP) | $ | 596,721 | $ | 586,776 | $ | 1,725,377 | $ | 1,585,736 | $ | 139,641 | 8.8 | % | ||||||||||||||||||||||||||
Payments for operating and professional costs | (48,650) | (53,509) | (141,653) | (135,272) | (6,381) | 4.7 | % | |||||||||||||||||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 548,071 | $ | 533,267 | $ | 1,583,724 | $ | 1,450,464 | $ | 133,260 | 9.2 | % | ||||||||||||||||||||||||||
Development-stage funding payments - ongoing | (500) | (500) | (1,606) | (6,263) | 4,657 | (74.4) | % | |||||||||||||||||||||||||||||||
Development-stage funding payments - upfront and milestone | (25,000) | (90,000) | (125,000) | (90,000) | (35,000) | 38.9 | % | |||||||||||||||||||||||||||||||
Interest paid, net | (75,302) | (64,587) | (158,920) | (126,755) | (32,165) | 25.4 | % | |||||||||||||||||||||||||||||||
Investments in equity method investees | (6,846) | (10,893) | (9,896) | (28,320) | 18,424 | (65.1) | % | |||||||||||||||||||||||||||||||
Contributions from non-controlling interests- R&D | 240 | 2,003 | 971 | 6,083 | (5,112) | (84.0) | % | |||||||||||||||||||||||||||||||
Other | — | (18,223) | — | (16,093) | 16,093 | (100.0) | % | |||||||||||||||||||||||||||||||
Adjusted Cash Flow (non-GAAP) | $ | 440,663 | $ | 351,067 | $ | 1,289,273 | $ | 1,189,116 | $ | 100,157 | 8.4 | % | ||||||||||||||||||||||||||
Weighted average Class A ordinary shares outstanding - diluted | 607,226 | 607,174 | 607,209 | 607,152 |
(in thousands) | For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net cash provided by operating activities (GAAP) | $ | 538,827 | $ | 469,759 | $ | 1,574,049 | $ | 1,527,579 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Proceeds from available for sale debt securities (1), (2) | 15,625 | 15,625 | 46,875 | 46,875 | |||||||||||||||||||
Distributions from equity method investees – investing (2) | — | — | — | 523 | |||||||||||||||||||
Interest paid, net (2) | 75,302 | 64,587 | 158,920 | 126,755 | |||||||||||||||||||
Development-stage funding payments - ongoing (3) | 500 | 500 | 1,606 | 6,263 | |||||||||||||||||||
Development-stage funding payments - upfront and milestone (3) | 25,000 | 90,000 | 125,000 | 90,000 | |||||||||||||||||||
Payments for operating and professional costs | 48,650 | 53,509 | 141,653 | 135,272 | |||||||||||||||||||
Termination payments on derivative instruments | — | 16,093 | — | 16,093 | |||||||||||||||||||
Distributions to non-controlling interests (2) | (107,183) | (125,427) | (322,726) | (363,624) | |||||||||||||||||||
Derivative collateral received, net (2) | — | 2,130 | — | — | |||||||||||||||||||
Adjusted Cash Receipts (non-GAAP) | $ | 596,721 | $ | 586,776 | $ | 1,725,377 | $ | 1,585,736 | |||||||||||||||
Net cash provided by operating activities (GAAP) | $ | 538,827 | $ | 469,759 | $ | 1,574,049 | $ | 1,527,579 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Proceeds from available for sale debt securities (1), (2) | 15,625 | 15,625 | 46,875 | 46,875 | |||||||||||||||||||
Distributions from equity method investees – investing (2) | — | — | — | 523 | |||||||||||||||||||
Interest paid, net (2) | 75,302 | 64,587 | 158,920 | 126,755 | |||||||||||||||||||
Development-stage funding payments - ongoing (3) | 500 | 500 | 1,606 | 6,263 | |||||||||||||||||||
Development-stage funding payments - upfront and milestone (3) | 25,000 | 90,000 | 125,000 | 90,000 | |||||||||||||||||||
Termination payments on derivative instruments | — | 16,093 | — | 16,093 | |||||||||||||||||||
Distributions to non-controlling interests (2) | (107,183) | (125,427) | (322,726) | (363,624) | |||||||||||||||||||
Derivative collateral received, net (2) | — | 2,130 | — | — | |||||||||||||||||||
Adjusted EBITDA (non-GAAP) | $ | 548,071 | $ | 533,267 | $ | 1,583,724 | $ | 1,450,464 | |||||||||||||||
Net cash provided by operating activities (GAAP) | $ | 538,827 | $ | 469,759 | $ | 1,574,049 | $ | 1,527,579 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
Proceeds from available for sale debt securities (1), (2) | 15,625 | 15,625 | 46,875 | 46,875 | |||||||||||||||||||
Distributions from equity method investees – investing (2) | — | — | — | 523 | |||||||||||||||||||
Contributions from non-controlling interests-R&D (2) | 240 | 2,003 | 971 | 6,083 | |||||||||||||||||||
Distributions to non-controlling interests (2) | (107,183) | (125,427) | (322,726) | (363,624) | |||||||||||||||||||
Investments in equity method investees (2), (4) | (6,846) | (10,893) | (9,896) | (28,320) | |||||||||||||||||||
Adjusted Cash Flow (non-GAAP) | $ | 440,663 | $ | 351,067 | $ | 1,289,273 | $ | 1,189,116 | |||||||||||||||
Reconciling Adjustment | Statements of Cash Flows Classification | ||||
Proceeds from available for sale debt securities | Investing activities | ||||
Investments in equity method investees | Investing activities | ||||
Distributions to non-controlling interests | Financing activities | ||||
Interest paid, net | Operating activities (Interest paid less Interest received) | ||||
Derivative collateral received, net | Operating activities (Derivative collateral received less Derivative collateral posted) | ||||
Contributions from non-controlling interests- R&D | Financing activities | ||||
Distributions from equity method investees - investing | Investing activities |
(in thousands) | For the Nine Months Ended September 30, | ||||||||||||||||
2022 | 2021 | Change | |||||||||||||||
Cash provided by (used in): | |||||||||||||||||
Operating activities | $ | 1,574,049 | $ | 1,527,579 | $ | 46,470 | |||||||||||
Investing activities | (1,444,163) | (1,318,634) | (125,529) | ||||||||||||||
Financing activities | (679,306) | 583,183 | (1,262,489) |
Date of Issuance | Maturity | As of September 30, 2022 | As of December 31, 2021 | ||||||||||||||||||||
Senior Unsecured Notes: | |||||||||||||||||||||||
$1,000,000, 0.75% (issued at 99.322% of par) | 9/2020 | 9/2023 | $ | 1,000,000 | $ | 1,000,000 | |||||||||||||||||
$1,000,000, 1.20% (issued at 98.875% of par) | 9/2020 | 9/2025 | 1,000,000 | 1,000,000 | |||||||||||||||||||
$1,000,000, 1.75% (issued at 98.284% of par) | 9/2020 | 9/2027 | 1,000,000 | 1,000,000 | |||||||||||||||||||
$1,000,000, 2.20% (issued at 97.760% of par) | 9/2020 | 9/2030 | 1,000,000 | 1,000,000 | |||||||||||||||||||
$600,000, 2.15% (issued at 98.263% of par) | 7/2021 | 9/2031 | 600,000 | 600,000 | |||||||||||||||||||
$1,000,000, 3.30% (issued at 95.556% of par) | 9/2020 | 9/2040 | 1,000,000 | 1,000,000 | |||||||||||||||||||
$1,000,000, 3.55% (issued at 95.306% of par) | 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 | |||||||||||||||||||
Total senior unsecured debt | 7,300,000 | 7,300,000 | |||||||||||||||||||||
Unamortized debt discount and issuance costs | (188,740) | (203,930) | |||||||||||||||||||||
Total long-term debt, including current portion | 7,111,260 | 7,096,070 | |||||||||||||||||||||
Less: Current portion of long-term debt | (996,583) | — | |||||||||||||||||||||
Total long-term debt | $ | 6,114,677 | $ | 7,096,070 |
(in thousands) | Principal Payments | Interest Payments | ||||||||||||
Year | ||||||||||||||
Remainder of 2022 | $ | — | $ | — | ||||||||||
2023 | 1,000,000 | 163,850 | ||||||||||||
2024 | — | 156,350 | ||||||||||||
2025 | 1,000,000 | 156,350 | ||||||||||||
2026 | — | 144,350 | ||||||||||||
Thereafter | 5,300,000 | 2,070,250 | ||||||||||||
Total (1) | $ | 7,300,000 | $ | 2,691,150 |
Summarized Combined Balance Sheets | ||||||||||||||
(in thousands) | As of September 30, 2022 | As of December 31, 2021 | ||||||||||||
Current assets | $ | 73,356 | $ | 95,946 | ||||||||||
Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries | 8,859 | 16,974 | ||||||||||||
Current intercompany notes receivable due from Non-Guarantor Subsidiaries | 272,792 | — | ||||||||||||
Non-current assets | 3,309 | 4,145 | ||||||||||||
Non-current intercompany notes receivable due from Non-Guarantor Subsidiaries | 1,990,604 | 2,039,576 | ||||||||||||
Current liabilities | 1,012,209 | 59,030 | ||||||||||||
Current interest payable on intercompany notes due to Non-Guarantor Subsidiaries | 3,611 | 16,974 | ||||||||||||
Current intercompany notes payable due to Non-Guarantor Subsidiaries | 272,792 | — | ||||||||||||
Non-current liabilities | 6,113,932 | 7,095,450 | ||||||||||||
Non-current intercompany notes payable due to Non-Guarantor Subsidiaries | 1,675,604 | 2,039,576 | ||||||||||||
Summarized Combined Statement of Operations | For the Nine Months Ended September 30, 2022 | ||||
(in thousands) | |||||
Interest income on intercompany notes receivable from Non-Guarantor Subsidiaries | $ | 43,658 | |||
Other income | 723 | ||||
Operating expenses | 155,585 | ||||
Interest expense on intercompany notes payable with Non-Guarantor Subsidiaries | 38,410 | ||||
Net loss | 149,614 | ||||
Exhibit No. | Description of Exhibit | ||||
10.1* | |||||
10.2* | |||||
10.3* | |||||
31.1* | |||||
31.2* | |||||
32* | |||||
101.INS | XBRL Instance Document | ||||
101.SCH | XBRL Schema Document | ||||
101.CAL | XBRL Calculation Linkbase Document | ||||
101.DEF | XBRL Definition Linkbase Document | ||||
101.LAB | XBRL Label Linkbase Document | ||||
101.PRE | XBRL Presentation Linkbase |
ROYALTY PHARMA PLC | ||
(Registrant) | ||
/s/ Pablo Legorreta | ||
Pablo Legorreta | ||
Chief Executive Officer | ||
Date: November 8, 2022 | ||
/s/ Terrance Coyne | ||
Terrance Coyne | ||
Chief Financial Officer | ||
Date: November 8, 2022 |
“Advisers Act” | means the U.S. Investment Advisers Act of 1940, as amended. |
“Affiliate” | with respect to any specified Person, any Person directly or indirectly Controlling, Controlled by or under common Control with such Person; provided that for purposes of this Agreement, each of the Company and Pharmakon shall not be deemed to be an Affiliate of the Manager. | ||||
“Agreement” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Applicable Party” | means EPA Holdings, the Manager or an executive of the Manager or EPA Holdings (including Mr. Legorreta). | ||||
“Board of Directors” | means the board of directors of the Company. | ||||
“Business Day” | means a day which is not a Saturday, Sunday or a day on which banks in New York City, Dublin and London are authorized or required by law to close. | ||||
“Cash Receipts” | with respect to each investment that is indirectly held by the Company through a Subsidiary, all cash proceeds received in respect of such investment during the applicable period. | ||||
“Cause” | will exist where (i) an Applicable Party has committed (or in the case of Applicable Parties who are executives, caused EPA Holdings or the Manager to commit) a material breach of the governing documents of the Company, the limited partnership agreement of a Continuing Investors Partnership, or this Agreement; (ii) an Applicable Party has committed (or in the case of Applicable Parties who are executives, caused EPA Holdings or the Manager to commit) willful misconduct in connection with the performance of its duties under the terms of the governing documents of the Company, the limited partnership agreement of a Continuing Investors Partnership, or this Agreement, (iii) there is a declaration of bankruptcy by the Applicable Party or (iv) there is a determination by any court with proper jurisdiction that an Applicable Party has committed an intentional felony or engaged in any fraudulent conduct, in each such case of clauses (ii) and (iv) which has a material adverse effect on the business, assets or condition (financial or otherwise) or prospects of the RPI Group and its Affiliates (taken as a whole). |
“Code” | means the U.S. Internal Revenue Code of 1986, as amended and as hereafter amended, or any successor law. | ||||
“Company” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Competing Fund” | means a limited partnership or pooled investment vehicle, other than the Company or any direct or indirect Subsidiary of the Company and any of the Legacy Vehicles for which the Manager or any of its Affiliates acts as the general partner or investment manager, that are formed for the purpose of investing in Royalty Investments, other than any vehicle managed by Pharmakon or its successor, or any vehicle approved by the independent members of the Board of Directors. | ||||
“Confidential Information” | any proprietary information relating to the organization, finances, business, transactions or affairs of the Company or the Manager or any of their Affiliates as the case may be. | ||||
“Continuing International Investors Partnership” | RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership. | ||||
“Continuing Investors Partnership” | means each of the Continuing International Investors Partnership and the Continuing US Investors Partnership. | ||||
“Continuing US Investors Partnership” | RPI US Partners 2019, LP, a Delaware limited partnership. | ||||
“Control” | with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of such Person; provided, however, that customary approval and veto rights granted to minority equity holders of a Person shall not be deemed to constitute “Control” of such Person. | ||||
“Effective Date” | means the date as of which the Manager ceases to furnish services to the Company. | ||||
“EPA Holdings” | RPI EPA Holdings, LP, a Delaware limited partnership. |
“FATCA” | means the legislation known as the U.S. Foreign Account Tax Compliance Act, Sections 1471 through 1474 of the Code, and any regulations (whether proposed, temporary or final), including any subsequent amendments, and administrative guidance promulgated thereunder (or which may be promulgated in the future), any intergovernmental agreements and related statutes, regulations or rules and other guidance thereunder, any governmental authority pursuant to the foregoing, and any agreement entered into with respect thereto. | ||||
“Initial Term” | shall have the meaning set forth in Section 18 (Term). | ||||
“Indemnittee” | shall have the meaning set forth in Section 15(a) (Indemnification). | ||||
“Legacy Vehicle” | means any limited partnership, pooled investment vehicle or entity that is under common Control with or is managed by the Manager or its Affiliates; provided that Legacy Vehicle shall not include the Company and any of its Subsidiaries that invests, directly or indirectly, in RPI or Old RPI. | ||||
“Manager” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Old RPI” | means Royalty Pharma Investments, an Irish Unit Trust. | ||||
“Operating and Personnel Payment” | shall have the meaning set forth in Section 12 (Operating and Personnel Payment). | ||||
“Organizational Documents” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Original MSA” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Other Accounts” | means other funds, investment vehicles or accounts to which the Manager provides investment services. | ||||
“Person” | means a natural person, partnership, limited liability company, corporation, unincorporated association, joint venture, trust, state or any other entity or any governmental agency or political subdivision thereof. | ||||
“Pharmakon” | means Pharmakon Advisors LP, a Delaware limited partnership. | ||||
“Renewal Term” | shall have the meaning set forth in Section 18 (Term). | ||||
“Royalties” | means intellectual property (including patents) or other contractual rights to income derived from the sales of, or revenues generated by, pharmaceutical, biopharmaceutical, medical and/or healthcare products, processes, devices, or enabling and delivery technologies that are protected by patents, trademarks or copyrights, governmental or other regulations or otherwise by contract. | ||||
“Royalty Investment” | means (i) Royalties; (ii) ownership interests in any entities formed for the purpose of holding Royalties or substantially all of the assets of which consist of Royalties; (iii) any securities, investments or contracts that may provide a hedge for Royalties; (iv) fixed payment arrangements that have economic characteristics similar to Royalties or debt, including bonds, preferred stock and the debt component of any convertible or other hybrid security; and (v) other assets and investments considered by the Manager to be related to the foregoing. | ||||
“RP Holdings” | means Royalty Pharma Holdings Limited, a company established under the laws of England and Wales. | ||||
“RPI” | means Royalty Pharma Investments 2019 ICAV, a Irish Collective Asset-management Vehicle. | ||||
“RPI Group” | means RPI and its Subsidiaries. | ||||
“Shareholder” | means a shareholder of the Company. |
“Subsidiary” | means any Other Account, Control of which is held directly or indirectly by the Company. | ||||
“VAT” | means any value added tax or any similar sales, use or turnover tax. |
ROYALTY PHARMA PLC By: /s/ Pablo Legorreta Name: Pablo Legorreta Title: Director | RP MANAGEMENT, LLC By: /s/ George Lloyd Name: George Lloyd Title: Executive Vice President, Investments & General Counsel |
“Advisers Act” | means the U.S. Investment Advisers Act of 1940, as amended. | ||||
“Affiliate” | with respect to any specified Person, any Person directly or indirectly Controlling, Controlled by or under common Control with such Person; provided that for purposes of this Agreement, each of the Company and Pharmakon shall not be deemed to be an Affiliate of the Manager. |
“Agreement” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Applicable Party” | means EPA Holdings, the Manager or an executive of the Manager or EPA Holdings (including Mr. Legorreta). | ||||
“Board of Directors” | means the board of directors of the Company. | ||||
“Business Day” | means a day which is not a Saturday, Sunday or a day on which banks in New York City, Dublin and London are authorized or required by law to close. | ||||
“Cash Receipts” | with respect to each investment that is indirectly held by the Company through a Subsidiary, all cash proceeds received in respect of such investment during the applicable period. | ||||
“Cause” | will exist where (i) an Applicable Party has committed (or in the case of Applicable Parties who are executives, caused EPA Holdings or the Manager to commit) a material breach of the governing documents of the Company, the limited partnership agreement of a Continuing Investors Partnership, or this Agreement; (ii) an Applicable Party has committed (or in the case of Applicable Parties who are executives, caused EPA Holdings or the Manager to commit) willful misconduct in connection with the performance of its duties under the terms of the governing documents of the Company, the limited partnership agreement of a Continuing Investors Partnership, or this Agreement, (iii) there is a declaration of bankruptcy by the Applicable Party or (iv) there is a determination by any court with proper jurisdiction that an Applicable Party has committed an intentional felony or engaged in any fraudulent conduct, in each such case of clauses (ii) and (iv) which has a material adverse effect on the business, assets or condition (financial or otherwise) or prospects of the RPI Group and its Affiliates (taken as a whole). | ||||
“Code” | means the U.S. Internal Revenue Code of 1986, as amended and as hereafter amended, or any successor law. | ||||
“Company” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Competing Fund” | means a limited partnership or pooled investment vehicle, other than RP PLC or any direct or indirect subsidiary of RP PLC, the Company or any direct or indirect Subsidiary of the Company and any of the Legacy Vehicles for which the Manager or any of its Affiliates acts as the general partner or investment manager, that are formed for the purpose of investing in Royalty Investments, other than any vehicle managed by Pharmakon or its successor, or any vehicle approved by the independent members of the Board of Directors of RP PLC. |
“Confidential Information” | any proprietary information relating to the organization, finances, business, transactions or affairs of the Company or the Manager or any of their Affiliates as the case may be. | ||||
“Continuing International Investors Partnership” | RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership. | ||||
“Continuing Investors Partnership” | means each of the Continuing International Investors Partnership and the Continuing US Investors Partnership. | ||||
“Continuing US Investors Partnership” | RPI US Partners 2019, LP, a Delaware limited partnership. | ||||
“Control” | with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of such Person; provided, however, that customary approval and veto rights granted to minority equity holders of a Person shall not be deemed to constitute “Control” of such Person. | ||||
“Effective Date” | means the date as of which the Manager ceases to furnish services to the Company. | ||||
“EPA Holdings” | RPI EPA Holdings, LP, a Delaware limited partnership. | ||||
“FATCA” | means the legislation known as the U.S. Foreign Account Tax Compliance Act, Sections 1471 through 1474 of the Code, and any regulations (whether proposed, temporary or final), including any subsequent amendments, and administrative guidance promulgated thereunder (or which may be promulgated in the future), any intergovernmental agreements and related statutes, regulations or rules and other guidance thereunder, any governmental authority pursuant to the foregoing, and any agreement entered into with respect thereto. | ||||
“Initial Term” | shall have the meaning set forth in Section 17 (Term). | ||||
“Indemnittee” | shall have the meaning set forth in Section 14(a) (Indemnification). | ||||
“Legacy Vehicle” | means any limited partnership, pooled investment vehicle or entity that is under common Control with or is managed by the Manager or its Affiliates; provided that Legacy Vehicle shall not include RP PLC and any of its subsidiaries that invests, directly or indirectly, in RPI or Old RPI. | ||||
“Manager” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Old RPI” | means Royalty Pharma Investments, an Irish Unit Trust. |
“Operating and Personnel Payment” | shall have the meaning set forth in Section 11 (Operating and Personnel Payment). | ||||
“Organizational Documents” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Original MSA” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Other Accounts” | means other funds, investment vehicles or accounts to which the Manager provides investment services. | ||||
“Person” | means a natural person, partnership, limited liability company, corporation, unincorporated association, joint venture, trust, state or any other entity or any governmental agency or political subdivision thereof. | ||||
“Pharmakon” | means Pharmakon Advisors LP, a Delaware limited partnership. | ||||
“Renewal Term” | shall have the meaning set forth in Section 17 (Term). | ||||
“Royalties” | means intellectual property (including patents) or other contractual rights to income derived from the sales of, or revenues generated by, pharmaceutical, biopharmaceutical, medical and/or healthcare products, processes, devices, or enabling and delivery technologies that are protected by patents, trademarks or copyrights, governmental or other regulations or otherwise by contract. | ||||
“Royalty Investment” | means (i) Royalties; (ii) ownership interests in any entities formed for the purpose of holding Royalties or substantially all of the assets of which consist of Royalties; (iii) any securities, investments or contracts that may provide a hedge for Royalties; (iv) fixed payment arrangements that have economic characteristics similar to Royalties or debt, including bonds, preferred stock and the debt component of any convertible or other hybrid security; and (v) other assets and investments considered by the Manager to be related to the foregoing. | ||||
“RP PLC” | means Royalty Pharma PLC, a public limited company established under the laws of England and Wales. | ||||
“RPI” | means Royalty Pharma Investments 2019 ICAV, a Irish Collective Asset-management Vehicle. | ||||
“RPI Group” | means RPI and its subsidiaries. | ||||
“Shareholder” | means a shareholder of the Company. |
“Subsidiary” | means any Other Account, Control of which is held directly or indirectly by the Company. | ||||
“VAT” | means any value added tax or any similar sales, use or turnover tax. |
ROYALTY PHARMA HOLDINGS LIMITED By: /s/ Pablo Legorreta Name: Pablo Legorreta Title: Director | RP MANAGEMENT, LLC By: /s/ George Lloyd Name: George Lloyd Title: Executive Vice President, Investments & General Counsel |
“Administrator” | State Street Fund Services (Ireland) Limited, or such other person from time to time providing administration services to the ICAV. | ||||
“Advisers Act” | means the U.S. Investment Advisers Act of 1940, as amended. | ||||
“Affiliate” | with respect to any specified Person, any Person directly or indirectly Controlling, Controlled by or under common Control with such Person; provided that for purposes of this Agreement, each of the ICAV and Pharmakon shall not be deemed to be an Affiliate of the Manager. | ||||
“Agreement” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“AIF” | means alternative investment fund as defined in the AIFMD and, by reference to this Agreement, means the ICAV. | ||||
“AIFM” | means alternative investment fund manager as defined in the AIFMD and, by reference to this Agreement, means the Manager. | ||||
“AIFMD” | Directive 2011/69/EU on Alternative Investment Fund Managers and any subordinate legislation enacted thereunder, as each may be amended, extended or re-enacted from time, and as implemented in any relevant member state of the European Economic Area. | ||||
“AIF Rulebook” | the rulebook and any guidelines issued by the Central Bank from time to time setting out the conditions imposed on AIFMs and AIFs. | ||||
“Amended and Restated Management Agreement” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Applicable Party” | means EPA Holdings, the Manager or an executive of the Manager or EPA Holdings (including Mr. Legorreta). |
“Board of Directors” | means the board of directors of the ICAV. | ||||
“Broken Deal Expenses” | means any expenses listed in Section 18(i) and (j) (Other Expenses) to the extent they relate to unconsummated Portfolio Investment transactions and are not reimbursed to the ICAV by another Person. | ||||
“Business Day” | means a day which is not a Saturday, Sunday or a day on which banks in New York City, Dublin and London are authorized or required by law to close. | ||||
“Cash Receipts” | with respect to each Portfolio Investment, all cash proceeds received in respect of such Portfolio Investment during the applicable period. | ||||
“Cause” | will exist where (i) an Applicable Party has committed (or in the case of Applicable Parties who are executives, caused EPA Holdings or the Manager to commit) a material breach of the governing documents of the ICAV, the limited partnership agreement of a Continuing Investors Partnership, or this Agreement; (ii) an Applicable Party has committed (or in the case of Applicable Parties who are executives, caused EPA Holdings or the Manager to commit) willful misconduct in connection with the performance of its duties under the terms of the governing documents of the ICAV, the limited partnership agreement of a Continuing Investors Partnership, or this Agreement, (iii) there is a declaration of bankruptcy by the Applicable Party or (iv) there is a determination by any court with proper jurisdiction that an Applicable Party has committed an intentional felony or engaged in any fraudulent conduct, in each such case of clauses (ii) and (iv) which has a material adverse effect on the business, assets or condition (financial or otherwise) or prospects of the RPI Group and its Affiliates (taken as a whole). | ||||
“Clauses” | shall mean the standard contractual clauses approved by the European Commission for the transfer of personal data as set out in Exhibit C to this Agreement (and incorporating the appendices to that schedule). |
“Central Bank” | the Central Bank of Ireland or such successor Irish regulatory authority as may from time to time be responsible for the regulation of the ICAV. | ||||
“Code” | means the U.S. Internal Revenue Code of 1986, as amended and as hereafter amended, or any successor law. | ||||
“Competing Fund” | means a limited partnership or pooled investment vehicle, other than RP PLC or any direct or indirect subsidiary of RP PLC, the ICAV or any direct or indirect Subsidiary of the ICAV and any of the Legacy Vehicles for which the Manager or any of its Affiliates acts as the general partner or investment manager, that are formed for the purpose of investing in Royalty Investments, other than any vehicle managed by Pharmakon or its successor, or any vehicle approved by the independent members of the Board of Directors of RP PLC. | ||||
“Confidential Information” | any proprietary information relating to the organization, finances, business, transactions or affairs of the ICAV or the Manager or any of their Affiliates as the case may be. | ||||
“Continuing International Investors Partnership” | RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership. | ||||
“Continuing Investors Partnership” | means each of the Continuing International Investors Partnership and the Continuing US Investors Partnership. | ||||
“Continuing US Investors Partnership” | RPI US Partners 2019, LP, a Delaware limited partnership. |
“Control” | with respect to any Person, the possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of such Person; provided, however, that customary approval and veto rights granted to minority equity holders of a Person shall not be deemed to constitute “Control” of such Person. | ||||
“Data Protection Legislation” | means any applicable laws concerning the protection of personal data or privacy to which the applicable Party is subject, including the GDPR, the Data Protection Act 2018, and any other legislation which implements or is consequential upon the GDPR, the European Communities (Electronic Communications Networks and Services)(Privacy and Electronic Communications) Regulations, 2011, any other applicable legislation which implements the Electronic Communications Data Protection Directive (2002/58/EC), and all applicable laws and regulations relating to the processing of personal data and privacy in force from time to time, including any binding guidance and / or codes of practice issued by the Irish Data Protection Commission or the European Data Protection Board. | ||||
“Depositary” | State Street Custodial Services (Ireland) Limited or such other company in Ireland as may from time to time be appointed as depositary of all the assets of the ICAV with the approval of the Central Bank. | ||||
“Effective Date” | means the date as of which the Manager ceases to furnish services to the ICAV. | ||||
“EPA Holdings” | RPI EPA Holdings, LP, a Delaware limited partnership. |
“FATCA” | means the legislation known as the U.S. Foreign Account Tax Compliance Act, Sections 1471 through 1474 of the Code, and any regulations (whether proposed, temporary or final), including any subsequent amendments, and administrative guidance promulgated thereunder (or which may be promulgated in the future), any intergovernmental agreements and related statutes, regulations or rules and other guidance thereunder, any governmental authority pursuant to the foregoing, and any agreement entered into with respect thereto. | ||||
“GAAP” | U.S. generally accepted accounting principles. | ||||
“GDPR” | means the General Data Protection Regulation (EU) 2016/679. | ||||
“ICAV” | shall have the meaning set forth in the preamble of this Agreement. | ||||
“Initial Term” | shall have the meaning set forth in Section 22 (Term). | ||||
“Indemnittee” | shall have the meaning set forth in Section 19(a) (Indemnification). | ||||
“Instrument of Incorporation” | the instrument of incorporation of the ICAV for the time being in force and as may be modified from time to time, subject to the approval of the Central Bank. | ||||
“Interested Party” | shall have the meaning set forth in Section 25(a) (Conflict of Interest). | ||||
“Legacy Vehicle” | means any limited partnership, pooled investment vehicle or entity that is under common Control with or is managed by the Manager or its Affiliates; provided that Legacy Vehicle shall not include RP PLC or any of its subsidiaries that invests, directly or indirectly, in the ICAV or Old RPI. | ||||
“Manager” | shall have the meaning set forth in the preamble of this Agreement. |
“Old RPI” | means Royalty Pharma Investments, an Irish Unit Trust. | ||||
“Operating and Personnel Payment” | shall have the meaning set forth in Section 16 (Management Fee). | ||||
“Organizational Documents” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Original Investment Management Agreement” | shall have the meaning set forth in the recitals of this Agreement. | ||||
“Other Accounts” | means other funds, investment vehicles or accounts to which the Manager provides investment services. | ||||
“Person” | means a natural person, partnership, limited liability company, corporation, unincorporated association, joint venture, trust, state or any other entity or any governmental agency or political subdivision thereof. | ||||
“Personal Data” | has the meaning given to that term in Data Protection Legislation. | ||||
“Personal Data Breach” | means a breach of security leading to the accidental or unlawful destruction, loss, alteration, unauthorized disclosure of, or access to, the Relevant Data transmitted, stored or otherwise processed. | ||||
“Pharmakon” | means Pharmakon Advisors LP, a Delaware limited partnership. | ||||
“Portfolio Investment” | means all Royalty Investments and Security Investments held by the ICAV (including through its indirect investment in Old RPI) or any Subsidiary. |
“Prospectus” | the Prospectus for the ICAV to be issued in relation to the offer for sale of Shares as same may be amended and/or supplemented from time to time. | ||||
“Relevant Data” | shall have the meaning set forth in Section 27(b) (Data Protection). | ||||
“Renewal Term” | shall have the meaning set forth in Section 22 (Term). | ||||
“Royalties” | means intellectual property (including patents) or other contractual rights to income derived from the sales of, or revenues generated by, pharmaceutical, biopharmaceutical, medical and/or healthcare products, processes, devices, or enabling and delivery technologies that are protected by patents, trademarks or copyrights, governmental or other regulations or otherwise by contract. | ||||
“Royalty Investment” | means (i) Royalties; (ii) ownership interests in any entities formed for the purpose of holding Royalties or substantially all of the assets of which consist of Royalties; (iii) any securities, investments or contracts that may provide a hedge for Royalties; (iv) fixed payment arrangements that have economic characteristics similar to Royalties or debt, including bonds, preferred stock and the debt component of any convertible or other hybrid security, and (v) other assets and investments considered by the Manager to be related to the foregoing. For the avoidance of doubt, this term will include the ICAV’s proportionate interest in Royalty Investments acquired or held by the ICAV (including through its indirect investment in Old RPI) or any Subsidiary. | ||||
“RP Holdings” | means Royalty Pharma Holdings Limited, a company established under the laws of England and Wales. |
“RP PLC” | means Royalty Pharma PLC, a public limited company established under the laws of England and Wales. | ||||
“RPI Group” | means the ICAV and its Subsidiaries. | ||||
“Security Investment” | means (i) equity securities (including controlling and non-controlling interests, warrants, options and the equity component of any convertible or other hybrid security) that have economic characteristics similar to common stock of entities in the pharmaceutical, biopharmaceutical, medical or healthcare industry or operating assets thereof (other than Royalties); (ii) any securities, investments or contracts that may provide a hedge for the investments referred to in clause (i); and (iii) other assets and investments considered by the Manager to be related to the investments referred to in clauses (i) and (ii). | ||||
“Security Investment Values” | means the value of each Security Investment held, directly or indirectly by the ICAV as of such date, determined in accordance with GAAP. | ||||
“Share” or “Shares” | means unless the context otherwise requires, a share or shares of whatsoever class in the capital of the ICAV (other than subscriber shares) entitling the holders to participate in the profits of the ICAV attributable as described in the Prospectus. | ||||
“Shareholder” | means a shareholder of the ICAV. | ||||
“Subsidiary” | means any Other Account, Control of which is held directly or indirectly by the ICAV. | ||||
“Sub-Processor | shall have the meaning set forth in Section 27(b)(i) (Data Protection). | ||||
“VAT” | means any value added tax or any similar sales, use or turnover tax. |
ROYALTY PHARMA INVESTMENTS 2019 ICAV By: /s/ Pablo Legorreta Name: Pablo Legorreta Title: Director | RP MANAGEMENT, LLC By: /s/ George Lloyd Name: George Lloyd Title: Executive Vice President, Investments & General Counsel |
Name (written out in full): | Pablo Legorreta | ||||
Position: | Director | ||||
Address: | 110 Each 59th Street, Fl. 33, New York, New York, 10022, United States | ||||
Signature | /s/ Pablo Legorreta |
Name (written out in full): | George Lloyd | ||||
Position: | EVP & General Counsel | ||||
Address: | 110 Each 59th Street, Fl. 33, New York, New York, 10022, United States | ||||
Signature | /s/ George Lloyd |
Data Exporter | |||||
Name: | Pablo Legorreta | ||||
Authorized Signature: | /s/ Pablo Legorreta | ||||
Data Importer | |||||
Name: | George Lloyd | ||||
Authorized Signature: | /s/ George Lloyd |
Data Exporter | |||||
Name: | Pablo Legorreta | ||||
Authorized Signature: | /s/ Pablo Legorreta | ||||
Data Importer | |||||
Name: | George Lloyd | ||||
Authorized Signature: | /s/ George Lloyd |
/s/ Pablo Legorreta | ||
Pablo Legorreta | ||
Chief Executive Officer |
/s/ Terrance Coyne | ||
Terrance Coyne | ||
Chief Financial Officer |
/s/ Pablo Legorreta | ||
Name: Pablo Legorreta | ||
Chief Executive Officer |
/s/ Terrance Coyne | ||
Name: Terrance Coyne | ||
Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Revenues | $ 573,463 | $ 585,773 | $ 1,671,467 | $ 1,713,763 |
Operating expenses | ||||
Provision for changes in expected cash flows from financial royalty assets | 305,061 | 137,837 | 595,396 | 186,337 |
Research and development funding expense | 25,500 | 90,500 | 126,606 | 96,263 |
Amortization of intangible assets | 0 | 5,796 | 5,670 | 17,200 |
General and administrative expenses | 50,692 | 48,588 | 154,075 | 136,665 |
Total operating expenses, net | 381,253 | 282,721 | 881,747 | 436,465 |
Operating income | 192,210 | 303,052 | 789,720 | 1,277,298 |
Other expense/(income) | ||||
Equity in losses/(earnings) of equity method investees | 3,251 | (2,749) | 2,117 | (18,532) |
Interest expense | 46,977 | 44,327 | 141,006 | 119,168 |
(Gains)/losses on derivative financial instruments | (25,785) | 16,972 | (97,590) | 21,436 |
(Gains)/losses on equity securities | (5,168) | 19,289 | 22,970 | 17,980 |
(Gains)/losses on available for sale debt securities | (44,243) | 14,885 | (97,985) | (8,246) |
Interest income | (14,034) | (12,261) | (34,482) | (42,896) |
Other non-operating expense, net | 10,798 | 793 | 13,590 | 858 |
Total other (income)/expenses, net | (28,204) | 81,256 | (50,374) | 89,768 |
Consolidated net income before tax | 220,414 | 221,796 | 840,094 | 1,187,530 |
Income tax expense | 0 | 0 | 0 | 0 |
Consolidated net income | 220,414 | 221,796 | 840,094 | 1,187,530 |
Net income attributable to non-controlling interests | 77,763 | 119,867 | 341,178 | 575,706 |
Net income attributable to Royalty Pharma plc | $ 142,651 | $ 101,929 | $ 498,916 | $ 611,824 |
Earnings per Class A ordinary share: | ||||
Basic (in dollars per share) | $ 0.32 | $ 0.24 | $ 1.14 | $ 1.49 |
Diluted (in dollars per share) | $ 0.32 | $ 0.24 | $ 1.14 | $ 1.49 |
Weighted average Class A ordinary shares outstanding: | ||||
Basic (in shares) | 439,293 | 428,230 | 436,542 | 409,253 |
Diluted (in shares) | 607,226 | 607,174 | 607,209 | 607,152 |
Financial Royalty Assets | ||||
Revenues | $ 551,682 | $ 505,832 | $ 1,578,555 | $ 1,538,871 |
Intangible Royalty Assets | ||||
Revenues | 1,073 | 63,406 | 37,196 | 139,594 |
Royalty Income, Other | ||||
Revenues | $ 20,708 | $ 16,535 | $ 55,716 | $ 35,298 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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Statement of Comprehensive Income [Abstract] | ||||
Consolidated net income | $ 220,414 | $ 221,796 | $ 840,094 | $ 1,187,530 |
Changes in other comprehensive income/(loss): | ||||
Unrealized gains/(losses) on available for sale debt securities | 13,050 | (2,575) | 24,000 | 8,574 |
Reclassification of unrealized gains on available for sale debt securities | (7,111) | (11,756) | (24,053) | (40,545) |
Other comprehensive income/(loss) | 5,939 | (14,331) | (53) | (31,971) |
Comprehensive income | 226,353 | 207,465 | 840,041 | 1,155,559 |
Comprehensive income attributable to non-controlling interests | 80,161 | 113,867 | 341,109 | 561,594 |
Comprehensive income attributable to Royalty Pharma plc | $ 146,192 | $ 93,598 | $ 498,932 | $ 593,965 |
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Parenthetical) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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Dividends declared and paid (in dollars per share) | $ 0.17 | $ 0.19 | ||
Class A Ordinary Shares | ||||
Dividends declared and paid (in dollars per share) | $ 0.19 | $ 0.17 | $ 0.57 | $ 0.51 |
Organization and Purpose |
9 Months Ended |
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Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Purpose | Organization and Purpose Royalty Pharma plc is an English public limited company incorporated under the laws of England and Wales that was created for the purpose of consolidating our predecessor entities and facilitating the initial public offering (“IPO”) of our Class A ordinary shares. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis. We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. We fund innovation in the biopharmaceutical industry both directly and indirectly—directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators. We control Royalty Pharma Holdings Ltd. (“RP Holdings”), a private limited company incorporated under the laws of England and Wales and U.K. tax resident, through our ownership of RP Holdings’ Class A ordinary shares and RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”). The Continuing Investors Partnerships (defined below) have a non-controlling interest in RP Holdings through their ownership of RP Holdings Class B Interests. We conduct our business through RP Holdings and its subsidiaries. RP Holdings is the sole owner of Royalty Pharma Investments 2019 ICAV (“RPI 2019 ICAV”), which is an Irish collective asset management entity formed to facilitate our Exchange Offer Transactions (defined below), and is the successor to Royalty Pharma Investments, an Irish unit trust (“Old RPI”). RP Holdings is directly or indirectly owned by RPI US Partners 2019, LP, a Delaware limited partnership, RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”) and Royalty Pharma plc. Prior to the Exchange Offer Transactions, 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”). Exchange Offer Transactions We consummated an exchange offer on February 11, 2020 to facilitate the IPO. Through the exchange offer, investors which represented 82% of the aggregate limited partnership in the Legacy Investors Partnerships exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in the Continuing Investors Partnerships. The exchange offer transaction together with (i) the concurrent incurrence of indebtedness under senior secured credit facilities and (ii) the issuance of additional interests in Continuing Investors Partnerships to satisfy performance payments payable in respect of assets acquired prior to the date of the IPO are referred to as the “Exchange Offer Transactions.” As a result of the Exchange Offer Transactions, we own indirectly an 82% economic interest in Old RPI through our subsidiary RPI 2019 Intermediate Finance Trust, a Delaware statutory trust (“RPI Intermediate FT”). We are entitled to 82% of the economics of Old RPI’s wholly-owned subsidiaries, RPI Finance Trust, a Delaware statutory trust (“RPIFT”) and RPI Acquisitions (Ireland) Limited (“RPI Acquisitions”), an Irish private limited company, and 66% of Royalty Pharma Collection Trust, a Delaware statutory trust (“RPCT”). The remaining 34% of RPCT is owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), which is wholly-owned by Royalty Pharma Select, an Irish unit trust.
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Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Preparation and Use of Estimates The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal and recurring adjustments. Certain information and footnote disclosures have been condensed or omitted as permitted under GAAP. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in our Annual Report on Form 10-K. The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of income, revenues and expenses during the reporting period. Actual results may differ from those estimates. The results for the interim periods are not necessarily indicative of results for the full year. We continue to monitor the impact from the COVID-19 pandemic on our operational and financial performance. To date, certain marketers have commented that the performance of products on which we own royalties have been impacted by the COVID-19 pandemic. However, the COVID-19 pandemic has not had a material impact on our results of operations and liquidity and we do not believe it is reasonably likely to in the future. Basis of Consolidation The unaudited condensed consolidated financial statements include the accounts of Royalty Pharma plc and all majority-owned and controlled subsidiaries, as well as variable interest entities, where we are the primary beneficiary. We consolidate based upon evaluation of our power, through voting rights or similar rights, to direct the activities of another entity that most significantly impact the entity’s economic performance. For consolidated entities where we own or are exposed to less than 100% of the economics of such entity, we record Net income attributable to non-controlling interests on our condensed consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties. We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us which are attributable to: (1) the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI, (2) the Continuing Investors Partnerships’ ownership in RP Holdings through their ownership of RP Holdings Class B Interests, (3) a de minimis interest in RPCT held by RPSFT and (4) RPI EPA Holdings, LP’s (“EPA Holdings”) ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”). Income will not be allocated to EPA Holdings until certain performance conditions are met. All intercompany transactions and balances have been eliminated in consolidation. 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 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 September 30, 2022 and December 31, 2021 were held with State Street, Bank of America and Scotiabank. Our primary operating accounts significantly exceed the Federal Deposit Insurance Corporation limits. The majority of our financial royalty assets and receivables arise from contractual royalty agreements that entitle us to royalties on the sales of underlying biopharmaceutical products in the United States, Europe and the rest of the world, with concentrations of credit risk limited due to the broad range of marketers responsible for paying royalties to us and the variety of geographies from which our royalties on product sales are derived. The products in which we hold royalties are marketed by leading industry participants, including, among others, Vertex, Biogen, AbbVie, Johnson & Johnson, Merck & Co., Pfizer, Astellas, Novartis and Gilead. As of September 30, 2022 and December 31, 2021, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 31% and 32%, respectively, of our current portion of financial royalty assets and represented the largest individual marketer and payor of our royalties. We monitor the financial performance and creditworthiness of the counterparties to our royalty agreements so that we can properly assess and respond to changes in their credit profile. To date, we have not experienced any significant losses with respect to the collection of income or revenue on our royalty assets. Significant Accounting Policies There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the year ended December 31, 2021.
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available for Sale Debt Securities | Available for Sale Debt Securities Cytokinetics Commercial Launch Funding On January 7, 2022, we entered into a long-term funding agreement with Cytokinetics, Incorporated (“Cytokinetics”) to support further development of aficamten and potential commercialization of omecamtiv mecarbil. As part of the funding agreement, we agreed to provide capital (“Cytokinetics Commercial Launch Funding”) of up to $300 million, which is comprised of five tranches, including an initial tranche of $50 million that was funded upon closing. In the three months ended June 30, 2022, we amended the long-term funding agreement with Cytokinetics to increase the required draw amount. 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”). As of September 30, 2022, we expect $125 million of the optional $200 million to remain available under the Cytokinetics Commercial Launch Funding due to the likelihood that certain regulatory milestones will not be met by December 31, 2022. Each tranche has an interest-free and payment-free period of six calendar quarters, followed by 34 calendar quarters of installment re-payments totaling 1.9 times the amount drawn. We elected the fair value option to account for the Cytokinetics Commercial Launch Funding, recorded within Available for sale debt securities on the condensed consolidated balance sheets, as it most accurately reflects the nature of the funding arrangement. The Cytokinetics Funding Commitments, which include options and forwards over the subsequent tranches, are recognized at fair value within Other liabilities as of September 30, 2022 and within Available for sale debt securities as of December 31, 2021 on the condensed consolidated balance sheets. The unrealized 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 condensed consolidated statements of operations. MorphoSys Development Funding Bonds On June 2, 2021, we announced a long-term strategic funding partnership with MorphoSys AG (“MorphoSys”) to support its acquisition of Constellation Pharmaceuticals, Inc. which closed on July 15, 2021. As part of the funding agreement, we agreed to provide MorphoSys up to $350 million of capital (the “Development Funding Bonds”), of which MorphoSys was required to draw a minimum of $150 million. Our commitment to fund at least $150 million of the Development Funding Bonds was recognized as the Development Funding Bond Forward. During the three months ended September 30, 2022, we funded $300 million of the Development Funding Bonds, which represents additional funding of $150 million above the minimum funding commitment (“Additional Funding”) and we settled the Development Funding Bond Forward at the same time. We have no remaining funding commitment under the Development Funding Bonds. We expect to receive a return of 2.2 times the amount funded on the Development Funding Bonds payable on a quarterly basis over nine years, with the first payment beginning during the three months ended December 31, 2024. We elected the fair value option to account for the Development Funding Bonds and the Development Funding Bond Forward as it most accurately reflects the nature of the instruments. The Development Funding Bonds and the Development Funding Bond Forward are recorded within Available for sale debt securities on our consolidated balance sheet. The changes in the fair values of the Development Funding Bonds and the Development Funding Bond Forward are recorded within (Gains)/losses on available for sale debt securities in the condensed consolidated statements of operations. Series A Biohaven Preferred Shares On April 5, 2019, RPIFT funded the purchase of 2,495 Series A Biohaven Preferred Shares from Biohaven Pharmaceutical Holding Company Ltd. (“Biohaven”) at a price of $50,100 per preferred share for a total of $125 million. The approval of Nurtec ODT by the U.S. Food and Drug Administration (“FDA”) in February 2020 resulted in a payment due to us of two times the original purchase price of the Series A Biohaven Preferred Shares payable in equal quarterly installments beginning in the three months ended March 31, 2021 through the three months ended December 31, 2024. In the three months ended March 31, 2021, we began receiving payments from the quarterly redemption of the Series A Biohaven Preferred Shares. On October 3, 2022, Pfizer acquired Biohaven, which was a change of control event that accelerated the redemption of all outstanding Series A Biohaven Preferred Shares at a price equal to two times the original purchase price. In connection with the completion of Pfizer’s acquisition of Biohaven, all outstanding Series A Biohaven Preferred Shares were redeemed in a lump sum payment. We no longer hold any Series A Biohaven Preferred Shares. The Series A Biohaven Preferred Shares are classified as Available for sale debt securities on our condensed consolidated balance sheets. The unrealized change in the fair value of the Series A Biohaven Preferred Shares is recorded within Unrealized gains/(losses) on available for sale debt securities in the condensed consolidated statements of comprehensive income. In the three and nine months ended September 30, 2022, $7.1 million and $24.1 million, respectively, of the unrealized gains were reclassified from other comprehensive income to Interest income in the condensed consolidated statements of operations. In the three and nine months ended September 30, 2021, $11.8 million and $40.5 million, respectively, of the unrealized gains were reclassified from other comprehensive income to Interest income in the condensed consolidated statements of operations. Series B Biohaven Preferred Shares On August 7, 2020, we entered into the Series B Biohaven Preferred Share Purchase Agreement (“Series B Biohaven Preferred Share Agreement”) with Biohaven where we committed to acquire 3,992 shares of Series B Biohaven Preferred Shares at a price of $50,100 per preferred share (the “Commercial Launch Preferred Equity”) for a total of $200 million payable on a quarterly basis between the three months ended March 31, 2021 and the three months ended December 31, 2024. Our commitment to purchase the Series B Biohaven Preferred Shares is recognized as the Series B Forwards. On October 3, 2022, Pfizer acquired Biohaven, which was a change of control event that accelerated the issuance of all unissued Series B Biohaven Preferred Shares and the redemption of all outstanding Series B Biohaven Preferred Shares at a price equal to approximately 1.8 times the original issue price. In connection with the completion of Pfizer’s acquisition of Biohaven, we purchased all remaining Series B Biohaven Preferred Shares simultaneously with the redemption of all outstanding Series B Biohaven Preferred Shares, for which we received a lump sum payment. We no longer hold any Series B Biohaven Preferred Shares. As of September 30, 2022, we have acquired 2,279 shares of Series B Biohaven Preferred Shares. We elected the fair value option to account for the Series B Biohaven Preferred Shares and the Series B Forwards, which are recorded in aggregate as Available for sale debt securities on the condensed consolidated balance sheets. We believe the fair value option most accurately reflects the nature of these instruments. The unrealized changes in the fair values of the Series B Biohaven Preferred Shares and Series B Forwards are recorded within (Gains)/losses on available for sale debt securities in the condensed consolidated statements of operations. The table below summarizes our available for sale debt securities recorded at fair value as of September 30, 2022 and December 31, 2021 (in thousands):
(1)The cost for the Series A Biohaven Preferred Shares represents amortized cost. The cost for the Series B Biohaven Preferred Shares represents the amounts paid to purchase the instruments. The cost of the Development Funding Bonds represents the amounts funded. The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date. (2)There are no costs associated with the forwards. The cost associated with the funding commitments represents the fair value on the purchase date. (3)Reflected within Other liabilities on the condensed consolidated balance sheet.
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements and Financial Instruments | Fair Value Measurements and Financial Instruments Fair Value Hierarchy We determine the fair value of assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value as follows: •Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. •Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. •Level 3: Prices or valuation that require inputs that are both significant to the fair value measurement and unobservable. 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 condensed consolidated balance sheets. For financial instruments which are 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. Outstanding borrowings and non-current financial royalty assets are reported at their amortized costs on our condensed consolidated balance sheets, for which fair values are disclosed. The remaining financial instruments are reported on our condensed consolidated balance sheets at amounts that approximate fair values. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following table summarizes assets and liabilities measured at fair value on a recurring basis at the dates indicated, classified in accordance with the fair value hierarchy described above (in thousands):
(1)Reflects the fair value of the Series A Biohaven Preferred Shares and Series B Biohaven Preferred Shares. As of September 30, 2022, amounts also include the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the Development Funding Bonds. (2)Reflects the fair value of our obligations to fund the acquisitions of the Series B Biohaven Preferred Shares as recorded within current assets as of September 30, 2022 and within non-current assets as of December 31, 2021. As of December 31, 2021, the amount also reflects the fair value of our obligations to fund the Development Funding Bonds as recorded within non-current assets. (3)Related to the Milestone Acceleration Option (defined below) recorded within Other current assets and Other assets on the condensed consolidated balance sheet. (4)Recorded within Other assets on the condensed consolidated balance sheet. See Note 8–Non-Consolidated Affiliates for additional discussion. (5)Related to the fair value of the Cytokinetics Funding Commitments as reflected within Other liabilities on the condensed consolidated balance sheet. For the three and nine months ended September 30, 2022, we recognized gains of $5.2 million and losses of $12.8 million, respectively, on equity securities still held as of September 30, 2022. For the three and nine months ended September 30, 2021, we recognized gains of $10.0 million and $22.6 million, respectively, on equity securities still held as of September 30, 2022. The tables presented below summarize the change in the combined fair value (current and non-current) of Level 3 financial instruments, which relate to equity securities, a royalty interest, derivative instruments and available for sale debt securities, including the underlying securities, forwards and funding commitments (in thousands):
(1)Represents the difference in (a) the fair value of the Additional Funding (as defined above) of the Development Funding Bonds and (b) the actual additional funded amount of $150 million. Refer to footnote (3) below for discussion on the change in fair value of the Development Funding Bond Forward. (2)Related to Series A Biohaven Preferred Shares. (3)Amounts reflect changes in the fair values of the Series B Biohaven Preferred Shares, Series B Forwards, and Development Funding Bond Forward. For the three months ended September 30, 2022, amounts also reflect the change in the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments. (4)Amounts reflect the fair value attributed to the Series B Forwards that were settled as we acquired the Series B Biohaven Preferred Shares, which is included in the fair value of the Series B Biohaven Preferred Shares. Amounts also reflect the fair value attributed to the Development Funding Bond Forward that was settled upon funding the Development Funding Bonds in the three months ended September 30, 2022, which is included in the fair value of the Development Funding Bonds.
(1)Represents purchase price allocation to arrive at the appropriate fair value on initial recognition. Amounts also represent the difference in (a) the fair value of the Additional Funding (as defined above) of the Development Funding Bonds and (b) the actual additional funded amount of $150 million. Refer to footnote (3) below for discussion on the change in fair value of the Development Funding Bond Forward. (2)Related to Series A Biohaven Preferred Shares. (3)Amounts reflect changes in the fair values of the Series B Biohaven Preferred Shares, Series B Forwards and Development Funding Bond Forward. For the nine months ended September 30, 2022, amounts also reflect the change in the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments. (4)Amounts reflect the fair value attributed to the Series B Forwards that were settled as we acquired the Series B Biohaven Preferred Shares, which is included in the fair value of the Series B Biohaven Preferred Shares. Amounts also reflect the fair value attributed to the Development Funding Bond Forward that was settled upon funding the Development Funding Bonds in the three months ended September 30, 2022, which is included in the fair value of the Development Funding Bonds. (5)Related to transfer restriction expiration of BioCryst common stock. 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. ApiJect Investment We utilized the discounted cash flow method using Level 3 inputs, including forecasted cash flows and the weighted average cost of capital, to estimate the fair value as of September 30, 2022 of the equity securities and revenue participation right that we acquired from ApiJect Holdings, Inc. (“ApiJect”), a private company, in April 2022. 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 in the event of a sale of the instruments, 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 We estimated the fair value of the funded Cytokinetics Commercial Launch Funding as of September 30, 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 requires 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. Our expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than the timing of an actual change of control event, and if so, would mean that the estimated fair value could be significantly higher or lower than the fair value determined by management at any particular date. We estimated the fair value of the Cytokinetics Funding Commitments as of September 30, 2022 using a Monte Carlo simulation methodology that includes simulating the interest rate movements using a Geometric Brownian Motion-based pricing model. This methodology simulates the likelihood of future discount rates exceeding the counterparty’s assumed cost of debt, which would impact Cytokinetics’ decision to exercise its option to draw on each respective tranche. This methodology incorporates Level 3 fair value measurements and inputs, including an assumed interest rate volatility of 30% and an assumed risk-adjusted discount rate of 17.9%. We also assumed probabilities for the occurrence of each regulatory or clinical milestone, which impacts the availability of each future tranche of funding. Our estimate of the risk-adjusted discount rate, the interest rate volatility and the probabilities of each underlying milestone could reasonably be different than the assumptions selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower. BioCryst Common Stock In November 2021, we purchased 3,846 thousand shares of common stock of BioCryst Pharmaceuticals, Inc. (“BioCryst”), calculated based on the volume-weighted average price of BioCryst’s common stock over a period preceding the closing of the transaction. As part of the transaction, we were restricted from selling the BioCryst common stock for six months following the close of the transaction. We determined the fair value of the BioCryst common stock as of December 31, 2021 based on the closing stock price and adjusted for the transfer restriction, which was determined by calculating the value of a put option over the BioCryst common stock to match the duration of the transfer restriction. This methodology incorporated Level 3 inputs, including the estimated volatility of the BioCryst common stock, which required the use of significant judgement. Our estimated volatility could be reasonably different than the actual volatility of BioCryst’s common stock, which would mean that the estimated fair value for the BioCryst common stock could be significantly higher or lower than the fair value determined by management at any particular date. The transfer restriction expired and the BioCryst common stock was transferred from a Level 3 to a Level 1 asset during the three months ended June 30, 2022. MorphoSys Development Funding Bonds The fair value of the Development Funding Bonds and the Development Funding Bond Forward as of September 30, 2022 and December 31, 2021, respectively, was based on a discounted cash flow calculation using an estimated risk-adjusted discount rate, which is a Level 3 fair value input. Our estimate of a risk adjusted discount rate could reasonably be different than the discount rate selected by a market participant in the event of a sale of the instrument, which would mean that the estimated fair value could be significantly higher or lower. During the three months ended September 30, 2022, the Development Funding Bond Forward was settled upon funding the Development Funding Bonds. Series A Biohaven Preferred Shares The fair value of the Series A Biohaven Preferred Shares as of September 30, 2022 and December 31, 2021 was based on the cash flows due to us from Biohaven of two times the original purchase price of the Series A Biohaven Preferred Shares payable in equal quarterly installments of $15.6 million following the FDA approval and starting one-year after FDA approval through the three months ended December 31, 2024. When the FDA approved Nurtec ODT in February 2020, we became entitled to receive a fixed payment amount of $250 million payable in equal quarterly payments between the three months ended March 31, 2021 and the three months ended December 31, 2024. We estimated the fair value of the Series A Biohaven Preferred Shares as of September 30, 2022 and December 31, 2021 using probability-adjusted discounted cash flow calculations incorporating Level 3 fair value measurements and inputs, including estimated risk-adjusted discount rates and the probability of a change of control event occurring during the investment term, which would result in accelerated payments and redemptions. Assessing the probability that there will be a change of control event over a four-year time period and developing a risk-adjusted discount rate requires significant judgement. As of September 30, 2022, we estimated that a change of control event was imminent and, as such, we did not apply a discount rate. Our estimate of a risk adjusted discount rate was 9.5% as of December 31, 2021.Our estimated 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. Series B Biohaven Preferred Shares The fair value of each of the Series B Biohaven Preferred Shares and Series B Forwards as of September 30, 2022 and December 31, 2021 were based on probability-adjusted discounted cash flow calculations using Level 3 fair value measurements and inputs, including estimated risk-adjusted discount rates and the probability that there will be a change of control event in different periods of time, which would result in accelerated payments and redemptions. Assessing the probability that there will be a change of control event over the duration of the Series B Biohaven Preferred Shares and developing a risk-adjusted discount rate requires significant judgement. As of September 30, 2022, we estimated that a change of control event was imminent. Our estimate of a risk adjusted discount rate, expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than those determined by a market participant, which would mean that the estimated fair value could be significantly higher or lower. Milestone Acceleration Option On August 7, 2020, we entered into an expanded funding agreement with Biohaven, including the Series B Biohaven Preferred Share Agreement, to fund the development of zavegepant and the commercialization of Nurtec ODT in exchange for royalties and success-based milestones payable over time. We exercised our right to accelerate outstanding zavegepant milestone payments in a lump sum amount (“Milestone Acceleration Option”) in connection with Pfizer’s acquisition of Biohaven. The Milestone Acceleration Option is an embedded derivative instrument for which the associated fair value was not material prior to three months ended June 30, 2022, when Pfizer announced its intended acquisition of Biohaven. As of September 30, 2022, the fair value of the Milestone Acceleration Option was $97.6 million, of which $84.9 million was recorded within Other current assets and $12.7 million was recorded within Other assets on the condensed consolidated balance sheet. For the three and nine months ended September 30, 2022, we recorded unrealized gains of $25.8 million and $97.6 million, respectively, related to the change in the fair value of the Milestone Acceleration Option within (Gains)/losses on derivative financial instruments in the condensed consolidated statements of operations. We estimated the fair value of the Milestone Acceleration Option as of September 30, 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 rates, estimated probabilities of achieving the success-based milestones, and the probability that there will be a change of control event in different periods of time, which would result in accelerated milestone payments. Assessing the probability that there will be a change of control event, the likelihood that the success-based milestones are achieved over the duration of the Milestone Acceleration Option and developing a risk-adjusted discount rate requires significant judgement; however, as of September 30, 2022, we estimated that a change of control was imminent. Our estimate of a risk adjusted discount rate, probabilities of achieving marketing approval, and the probability and timing of the occurrence of a change of control event could reasonably be different than those determined by a market participant, which would mean that the estimated fair value could be significantly higher or lower. Other Financial Instruments Financial instruments whose fair values are measured on a recurring basis using Level 2 inputs primarily consist of commercial paper, certificates of deposit and U.S. government securities. We measure the fair value of these financial instruments with the help of third-party pricing services that either provide quoted market prices in active markets for identical or similar securities or observable inputs for their pricing without applying significant adjustments. Financial Assets Not Measured at Fair Value Financial royalty assets are measured and carried on the condensed consolidated balance sheets at amortized cost using the effective interest method. The current portion of financial royalty assets approximates fair value. Management calculates the fair value of financial royalty assets using the forecasted royalty payments that are expected to be received based on the projected product sales for all royalty bearing products as estimated by sell-side equity research analysts’ consensus sales forecasts. Where such consensus sales forecasts are not available, management uses reasonable judgment to make assumptions about the projected product sales. These projected future royalty payments by asset along with any projected incoming or outgoing milestone payments are then discounted to a present value using appropriate individual discount rates. 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. Estimated fair values based on Level 3 inputs and related carrying values for the non-current portion of financial royalty assets as of September 30, 2022 and December 31, 2021 are presented below (in thousands):
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Financial Royalty Assets |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Royalty Assets | Financial Royalty AssetsFinancial royalty assets consist of contractual rights to cash flows relating to royalty payments derived from the expected sales of patent-protected biopharmaceutical products that entitle us and our subsidiaries to receive a portion of income from the sale of such products by third parties. 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 September 30, 2022 and December 31, 2021 are as follows (in thousands):
(1)Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography. There can be no assurances that our royalties will expire when expected. (2)Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (3)RPIFT acquired a perpetual royalty on net sales of Tysabri. We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed. (4)The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 6–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.
(1)Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography. There can be no assurances that our royalties will expire when expected. (2)Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (3)RPIFT acquired a perpetual royalty on net sales of Tysabri. We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed. (4)Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion. (5)The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 6–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.
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Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets | 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 condensed consolidated balance sheets and includes the following activities: •the movement in the cumulative allowance related to changes in forecasted royalty payments expected to be received based on projected product sales for royalty bearing products as estimated by sell-side equity research analysts’ consensus sales forecasts, 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):
(1)Includes $310.8 million related to cumulative allowance for credit losses. (2)In the nine months ended September 30, 2022, the provision income for credit losses was primarily related to a change in the payor for a particular product and a significant decline in the value of the Tazverik financial royalty asset.
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Intangible Royalty Assets, Net |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Royalty Assets, Net | Intangible Royalty Assets, Net The following tables summarize the cost, accumulated amortization and net carrying value of our intangible royalty assets as of September 30, 2022 and December 31, 2021 (in thousands):
As of September 30, 2022, the intangible royalty assets were fully amortized as our royalties on Januvia and Janumet expired in the three months ended March 31, 2022. Our royalties on the other DPP-IV products have also substantially ended. Revenue from intangible assets is tied to underlying patent protected sales of DPP-IV products of various licensees. Such revenue is earned from sales occurring primarily in the United States and Europe; however, we do not have the ability to disaggregate such revenue from licensees based on the geography of the underlying sales as this information may not be provided to us by marketers. For the three months ended September 30, 2022, revenue from intangible royalty assets was not material. Individual licensees exceeding 10% or more of revenue from intangible royalty assets accounted for 63% of revenues from intangible royalty assets in the three months ended September 30, 2021. Individual licensees exceeding 10% or more of revenue from intangible royalty assets accounted for 90% and 80% of revenues from intangible royalty assets in the nine months ended September 30, 2022 and 2021, respectively.
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Non-Consolidated Affiliates |
9 Months Ended |
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Sep. 30, 2022 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Non-Consolidated Affiliates | Non-Consolidated Affiliates We have equity investments in certain entities at a level that provide us with significant influence. We account for such investments as equity method investments or as equity securities for which we have elected the fair value option. ApiJect During the three months ended June 30, 2022, we acquired common stock and a revenue participation right from ApiJect. We elected the fair value option to account for our investments in ApiJect because it is more reflective of current values for our investments in ApiJect. We are also required to purchase additional common stock from ApiJect if certain milestones are achieved. The fair value of our equity investment was recorded within Equity securities and the change in fair value was recorded within (Gains)/losses on equity securities. The fair value of the revenue participation right was recorded within Other assets and the change in fair value was recorded within Other non-operating expense, net. No amounts were due from ApiJect as of September 30, 2022. The Legacy SLP Interest In connection with the Exchange Offer Transactions, we acquired a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) from the Continuing Investors Partnerships for $303.7 million in exchange for issuing shares in our subsidiary. As a result, we became a special limited partner in the Legacy Investors Partnerships. The Legacy SLP Interest entitles us to the equivalent of performance distribution payments that would have been paid to the general partner of the Legacy Investors Partnerships and an income allocation on a similar basis. Our income allocation is equal to the general partner’s former contractual rights to the income of the Legacy Investors Partnerships, net of amortization of the basis difference. The Legacy SLP Interest is treated as an equity method investment as our Manager is also the Manager of the Legacy Investors Partnerships and has the ability to exercise significant influence. The Legacy Investors Partnerships no longer participate in investment opportunities from June 30, 2020 and, as such, the value of the Legacy SLP Interest is expected to decline over time. The Legacy Investors Partnerships also indirectly own a non-controlling interest in Old RPI. The income allocation from the Legacy SLP Interest is based on an estimate as the Legacy Investors Partnerships are private partnerships that are expected to report on a lag subsequent to the date of this quarterly report. Management’s estimate of equity in earnings from the Legacy SLP Interest for the current period will be updated for historical results in the subsequent period. During the three and nine months ended September 30, 2022, we recorded a loss allocation of $2.1 million and an income allocation of $7.2 million, respectively, within Equity in losses/(earnings) of equity method investees. During the three and nine months ended September 30, 2021, we recorded income allocations of $11.2 million and $41.9 million, respectively, within Equity in losses/(earnings) of equity method investees. We received cash distributions from the Legacy SLP Interest of $5.8 million and $19.9 million in the three and nine months ended September 30, 2022, respectively. We received cash distributions from the Legacy SLP Interest of $6.2 million and $14.8 million in the three and nine months ended September 30, 2021, respectively. The Avillion Entities We account for our partnership interests in Avillion Financing I, LP and its related entities (“Avillion I”), BAv Financing II, LP and its related entities (“Avillion II,” together with Avillion I, the “Avillion Entities”) as equity method investments because RPIFT has the ability to exercise significant influence over the Avillion Entities. During the three and nine months ended September 30, 2022, we recorded a loss allocation from the Avillion Entities of $1.2 million and $9.3 million, respectively, within Equity in losses/(earnings) of equity method investees. During the three and nine months ended September 30, 2021, we recorded a loss allocation from the Avillion Entities of $8.4 million and $23.4 million, respectively, within Equity in losses/(earnings) of equity method investees. On December 19, 2017, the FDA approved a supplemental New Drug Application for Pfizer’s Bosulif. Avillion I is eligible to receive fixed payments from Pfizer based on this approval under its co-development agreement with Pfizer. The only operations of Avillion I are the collection of cash and unwinding of the discount on the series of fixed annual payments due from Pfizer. We received distributions from Avillion I of $13.4 million during each of the nine months ended September 30, 2022 and 2021, respectively. In May 2018, RPIFT entered into an agreement, which was amended in July 2021 and was further amended in June 2022, to increase the funding amount by $27.5 million, which totaled $150.0 million over multiple years in Avillion II, which is a party to a co-development agreement with AstraZeneca, to fund a portion of the costs of Phase 2 and 3 clinical trials to advance PT027 through a global clinical development program for the treatment of asthma in exchange for royalties, a series of success-based milestones and other potential payments.Our maximum exposure to loss at any particular reporting date is limited to the current carrying value of the investment plus the unfunded commitments. As of September 30, 2022 and December 31, 2021, RPIFT had unfunded commitments related to the Avillion Entities of $28.8 million and $11.2 million, respectively.
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Research & Development ("R&D") Funding Expense |
9 Months Ended |
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Sep. 30, 2022 | |
Research and Development [Abstract] | |
Research & Development ("R&D") Funding Expense | Research & Development (“R&D”) Funding Expense R&D funding expense consists of payments that we have made to counterparties to acquire royalties or milestones on product candidates. 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. During the nine months ended September 30, 2022 and 2021, we did not enter into any new ongoing R&D funding arrangements. We recognized R&D funding expense of $25.5 million and $126.6 million for the three and nine months ended September 30, 2022, respectively. We recognized R&D funding expense of $90.5 million and $96.3 million for the three and nine months ended September 30, 2021, respectively. During the nine months ended September 30, 2022, R&D funding expense primarily related to upfront and milestone development-stage funding payments of $100.0 million and $25.0 million to acquire royalties on development-stage product candidates from Cytokinetics and Theravance Biopharma, Inc., respectively. During the nine months ended September 30, 2021, we recognized $90.0 million as upfront R&D funding expense in exchange for future royalties on two development-stage products from MorphoSys.
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Borrowings |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | Borrowings Our borrowings as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):
Senior Unsecured Notes On July 26, 2021, we issued $1.3 billion of senior unsecured notes (the “2021 Notes”) comprised of $600.0 million principal amount of notes due September 2031 and $700.0 million principal amount of notes due September 2051. Interest on each series of the 2021 Notes accrues at the respective rate per annum and is payable semi-annually in arrears on March 2 and September 2 of each year, which began on March 2, 2022. The 2021 Notes were issued at a total discount of $27.5 million and we capitalized approximately $12.3 million in debt issuance costs primarily composed of underwriting fees. 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. On September 2, 2020, we issued $6.0 billion of senior unsecured notes (the “2020 Notes” and, together with the 2021 Notes, the “Notes”). We used the net proceeds from the 2020 Notes offering, together with available cash on hand, to repay in full the outstanding principal amounts of term loans under our prior senior secured credit facilities. Interest on each series of the 2020 Notes accrues at the respective rate per annum and is payable semi-annually in arrears on March 2 and September 2 of each year. The 2020 Notes were issued at a total discount of $149.0 million and we capitalized approximately $40.4 million in debt issuance costs primarily comprised of underwriting fees. The 2020 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 2.125% and 2.50%, respectively. On August 3, 2021, we completed an exchange offer for the 2020 Notes where certain holders elected to tender their unregistered outstanding notes for freely tradable exchange notes that were registered under the Securities Act of 1933. The Notes may be redeemed at our option at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis at the treasury rate, plus a make-whole premium as defined in the indenture. In each case, accrued and unpaid interest is also required to be redeemed to the date of redemption. Upon the occurrence of a change of control triggering event and downgrade in the rating of our Notes by two of three credit agencies, the holders may require us to repurchase all or part of their Notes at a price equal to 101% of the aggregate principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to the date of repurchase. Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings, a non-wholly-owned subsidiary. We are required to comply with certain covenants under our Notes and as of September 30, 2022, we were in compliance with all applicable covenants. As of September 30, 2022 and December 31, 2021, the fair value of our outstanding Notes using Level 2 inputs was approximately $5.6 billion and $7.2 billion, respectively. Senior Unsecured Revolving Credit Facility On September 15, 2021, we entered into an amended and restated revolving credit agreement (the “Credit Agreement”). The Credit Agreement amended and restated the prior credit agreement that our subsidiary RP Holdings, as borrower, entered into on September 18, 2020, which provided for a five-year unsecured revolving credit facility (the “Revolving Credit Facility”) with borrowing capacity of up to $1.5 billion for general corporate purposes. The Credit Agreement extended the maturity of the Revolving Credit Facility to September 15, 2026. As of September 30, 2022 and December 31, 2021, there were no outstanding borrowings under the Revolving Credit Facility. The Revolving Credit Facility is subject to an interest rate, at our option, of either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime rate, (2) the federal funds effective rate and the overnight bank funding rate, plus 0.5% and (3) the one month adjusted LIBOR, plus 1% or (b) the Eurocurrency Rate or the Alternative Currency Daily Rate (each as defined in the Credit Agreement), plus in each case, the applicable margin. The applicable margin for the Revolving Credit Facility varies based on our public debt rating. Accordingly, the interest rates for the Revolving Credit Facility fluctuates during the term of the facility based on changes in the applicable interest rate and future changes in our public debt rating. 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 consolidated EBITDA, each as defined and calculated with the ratio level calculated with further adjustments as set forth in the Credit Agreement and (ii) a consolidated coverage ratio at or above 2.50 to 1.00 of consolidated EBITDA to consolidated interest expense, each as defined and calculated with further adjustments as set forth in the Credit Agreement. All obligations under the Revolving Credit Facility are unconditionally guaranteed by us. Noncompliance with the leverage ratio and interest coverage ratio covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed. If these financial covenants are not satisfied, the Credit Agreement prohibits us from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets. As of September 30, 2022, RP Holdings was in compliance with these covenants. Principal Payments on the Notes The future principal payments for our borrowings as of September 30, 2022 over the next five years and thereafter are as follows (in thousands):
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Shareholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity Capital Structure We have two classes of voting shares: Class A ordinary shares and Class B ordinary shares, each of which has one vote per ordinary share. The Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of shareholders, except as otherwise required by applicable law. Our Class B ordinary shares are not publicly traded and holders of Class B ordinary shares only have limited rights to receive a distribution equal to their nominal value upon a liquidation, dissolution or winding up of the Company. As of September 30, 2022, we had 441,104 thousand Class A ordinary shares and 166,118 thousand Class B ordinary shares outstanding. An exchange agreement entered into in connection with the IPO by us, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP and EPA Holdings (the “Exchange Agreement”) governs the exchange of RP Holdings Class B Interests held by the Continuing Investors Partnerships for Class A ordinary shares. Pursuant to the Exchange Agreement, RP Holdings Class B interests are exchangeable on a one-for-one basis for Class A ordinary shares on a quarterly basis. Each such exchange also results in the re-designation of the same number of our Class B ordinary shares as deferred shares. As of September 30, 2022, we had outstanding deferred shares of 369,265 thousand. In addition, we have in issue 50 thousand Class R redeemable shares, which do not entitle the holder to voting or dividend rights. The Class R redeemable shares may be redeemed at our option in the future. Any such redemption would be at the nominal value of £1 each. Non-Controlling Interests The net change in the balance of our four non-controlling interests for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):
The Continuing Investors Partnerships’ ownership in RP Holdings decreases as the Continuing Investors Partnerships exchange RP Holdings Class B Interests held for Class A ordinary shares. As of September 30, 2022, the Continuing Investors Partnerships owned approximately 27% of RP Holdings with the remaining 73% owned by Royalty Pharma plc. 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. 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. 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. Dividends The holders of Class A ordinary shares are entitled to receive dividends subject to approval by our board of directors. The holders of Class B ordinary shares do not have any rights to receive dividends; however, RP Holdings Class B Interests are entitled to dividends and distributions from RP Holdings. In the nine months ended September 30, 2022, we declared and paid three quarterly cash dividends of $0.19 per Class A ordinary share for an aggregate amount of $249.1 million to holders of our Class A ordinary shares. In the nine months ended September 30, 2021, we declared and paid three quarterly cash dividends of $0.17 per Class A ordinary share for an aggregate amount of $211.6 million to holders of our Class A ordinary shares. 2020 Independent Directors Equity Incentive Plan On June 15, 2020, our 2020 Independent Director Equity Incentive Plan was approved and became effective, whereby 800 thousand Class A ordinary shares have been reserved for future issuance to our independent directors. RSU Activity and Share-based Compensation We grant RSUs to our independent directors under the 2020 Independent Director Equity Incentive Plan. Share-based compensation expense is recognized on a straight-line basis over the requisite service period of generally one year as part of General and administrative expenses in the condensed consolidated statements of operations. In the three and nine months ended September 30, 2022 and 2021, respectively, we did not recognize material share-based compensation expenses.
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic earnings per share (“EPS”) is calculated by dividing net income attributable to us by the weighted average number of Class A ordinary shares outstanding during the period. Diluted EPS is calculated by dividing net income attributable to us, including the impact of potentially dilutive securities, by the weighted average number of Class A ordinary shares outstanding during the period, including the number of Class A ordinary shares that would have been outstanding if the potentially dilutive securities had been issued. Our Class B ordinary shares, Class R redeemable shares and deferred shares do not share in the earnings or losses attributable to us and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share for Class B ordinary shares, Class R redeemable shares and deferred shares under the two-class method has not been presented. Our outstanding Class B ordinary shares are, however, considered potentially dilutive shares of Class A ordinary shares because Class B ordinary shares, together with the related RP Holdings Class B Interests, are exchangeable into Class A ordinary shares on a one-for-one basis. Potentially dilutive securities also include Class B ordinary shares contingently issuable to EPA Holdings related to Equity Performance Awards and unvested RSUs issued under our 2020 Independent Director Equity Incentive Plan. We use the “if-converted” method to determine the potentially dilutive effect of our outstanding Class B ordinary shares, and the treasury stock method to determine the potentially dilutive effect of the unvested RSUs. For the three and nine months ended September 30, 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 reconciliations of the numerators and denominators used to calculate basic and diluted earnings per Class A ordinary share for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share amounts):
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Indirect Cash Flow |
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Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indirect Cash Flow | Indirect Cash Flow Adjustments to reconcile consolidated net income to net cash provided by operating activities are summarized below (in thousands):
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Funding Commitments We have various funding commitments as of September 30, 2022 as described below. See Note 3–Available for Sale Debt Securities for additional discussion of the respective arrangements. Cytokinetics Commercial Launch Funding As of September 30, 2022, $250 million of the Cytokinetics Commercial Launch Funding remained unfunded. Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones. As of September 30, 2022, we expect $125 million of the optional $200 million to remain available under the Cytokinetics Commercial Launch Funding due to the likelihood that certain regulatory milestones will not be met by December 31, 2022. Series B Biohaven Preferred Shares As of September 30, 2022, we have a remaining commitment of $85.8 million under the Commercial Launch Preferred Equity to purchase 1,713 shares of Series B Biohaven Preferred Shares. On October 3, 2022, Pfizer acquired Biohaven which was a change of control event that accelerated the issuance and redemption of all unissued Series B Biohaven Preferred Shares. In connection with the completion of Pfizer’s acquisition of Biohaven, we have no remaining commitment related to the Series B Biohaven Preferred Shares. Other Commitments We have commitments to advance funds to counterparties through our investment in the Avillion Entities. Please refer to Note 8–Non-Consolidated Affiliates for details of these arrangements. We also have requirements to make Operating and Personnel Payments over the life of the Management Agreement as described in Note 15–Related Party Transactions, which are variable and primarily based on cash receipts. Indemnifications In the ordinary course of our business, we may enter into contracts or agreements that contain customary indemnifications relating to such things as confidentiality agreements and representations as to corporate existence and authority to enter into contracts. The maximum exposure under such agreements is indeterminable until a claim, if any, is made. However, no such claims have been made against us to date and we believe that the likelihood of such occurrences taking place in the future is remote. Legal Proceedings We are a party to legal actions with respect to a variety of matters in the ordinary course of business. Some of these proceedings may be based on complex claims involving substantial uncertainties and unascertainable damages. Unless otherwise noted, it is not possible to determine the probability of loss or estimate damages, and therefore we have not established accruals for any of these proceedings on our condensed consolidated balance sheets. When we determine that a loss is both probable and reasonably estimable, we record a liability, and, if the liability is material, we disclose the amount of the liability reserved. We do not believe the outcome of any existing legal proceedings to which we are a party, either individually or in the aggregate, will adversely affect our business, financial condition or results of operations.
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Related Party Transactions |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions | Related Party Transactions The Manager The Manager is the investment manager of Royalty Pharma plc and its subsidiaries. The sole member of the Manager, Pablo Legorreta, holds an interest in us and serves as our Chief Executive Officer and Chairman of our board of directors. Pursuant to the Management Agreement, we pay quarterly operating and personnel expenses to the Manager or its affiliates (“Operating and Personnel Payments”) equal to 6.5% of the cash receipts from royalty investments for such quarter and 0.25% of the value of our security investments under GAAP as of the end of such quarter. The operating and personnel payments for Old RPI, an obligation of the Legacy Investors Partnerships as a non-controlling interest in Old RPI and for which the expense is reflected on our consolidated net income, is calculated as the greater of $1 million per quarter and 0.3125% of Royalty Investments (as defined in the limited partnership agreements of the Legacy Investor Partnerships) during the previous twelve calendar months. During the three and nine months ended September 30, 2022, total operating and personnel payments incurred were $40.6 million and $117.8 million, respectively, including the amounts attributable to Old RPI, and were recognized within General and administrative expenses in the condensed consolidated statements of operations. During the three and nine months ended September 30, 2021, total operating and personnel payments incurred were $39.9 million and $108.0 million, respectively, including the amounts attributable to Old RPI, and were recognized within General and administrative expenses in the condensed consolidated statements of operations. Distributions Payable to Non-Controlling Interests The distributions payable to 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 RPSFT’s non-controlling interest in RPCT. The distributions payable to non-controlling interests include the following (in thousands):
Acquisition from Bristol Myers Squibb In November 2017, 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 September 30, 2022 and December 31, 2021, the financial royalty asset of $110.9 million and $130.9 million, respectively, on the condensed consolidated balance sheets represents only our right to the future payment streams acquired from BMS. Other Transactions Henry Fernandez, the lead independent director of our board of directors, serves as the chairman and chief executive officer of MSCI Inc. (“MSCI”). On April 16, 2021, we entered into an agreement with MSCI with an initial term of seven years to assist MSCI in the design of a classification framework and index methodologies in order to expand MSCI’s thematic index suite with the launch of new indexes. In return, we will receive a percentage of MSCI’s revenues from those indexes. No amounts were due from MSCI as of both September 30, 2022 and December 31, 2021. The financial impact associated with this transaction has not been material to date. In connection with the Exchange Offer Transactions, we acquired the Legacy SLP Interest from the Continuing Investors Partnerships in exchange for issuing shares in our subsidiary. As a result, we became a special limited partner in the Legacy Investors Partnerships. The Legacy Investors Partnerships own a non-controlling interest in Old RPI. 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 Partnership whose only substantive operations are their investment in our subsidiaries. The total investment of $4.3 million is recorded as treasury interests, of which $1.5 million and $1.6 million were held by non-controlling interests as of September 30, 2022 and December 31, 2021, respectively. Based on its ownership percentage of RP Holdings relative to the Company, each Continuing Investor Partnership pays a pro rata portion of any costs and expenses in connection with the contemplation of, formation of, listing and ongoing operation of us and any of our subsidiaries, including any third-party expenses of managing us and any of our subsidiaries, such as accounting, audit, legal, reporting, compliance, administration (including directors’ fees), financial advisory, consulting, investor relations and insurance expenses relating to our affairs and those of any subsidiary.
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Subsequent Events |
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Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In October 2022, we entered into a R&D funding agreement with MSD International Business GmbH (“Merck”) to co-fund the development of MK-8189, an investigational oral PDE10A inhibitor currently being evaluated in a Phase 2b study for the treatment of schizophrenia. We funded $50 million upon closing, and if Merck decides to proceed with Phase 3. we have the option to fund up to an additional $375 million. In exchange, we are eligible to receive milestone payments upon certain regulatory approvals and royalties on annual worldwide sales of any approved product. In October 2022, GSK plc (“GSK”) announced that the limited efficacy demonstrated in the ContRAst Phase 3 program does not support a suitable benefit/risk profile for otilimab as a potential treatment for rheumatoid arthritis. As a result, GSK has decided not to progress with regulatory submissions. Following this announcement, we wrote off the financial royalty asset associated with otilimab, which had a carrying value of $160.1 million as of September 30, 2022.
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Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Preparation | The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist only of normal and recurring adjustments. Certain information and footnote disclosures have been condensed or omitted as permitted under GAAP. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in our Annual Report on Form 10-K. |
Use of Estimates | The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of income, revenues and expenses during the reporting period. Actual results may differ from those estimates. The results for the interim periods are not necessarily indicative of results for the full year. We continue to monitor the impact from the COVID-19 pandemic on our operational and financial performance. To date, certain marketers have commented that the performance of products on which we own royalties have been impacted by the COVID-19 pandemic. However, the COVID-19 pandemic has not had a material impact on our results of operations and liquidity and we do not believe it is reasonably likely to in the future.
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Basis of Consolidation | The unaudited condensed consolidated financial statements include the accounts of Royalty Pharma plc and all majority-owned and controlled subsidiaries, as well as variable interest entities, where we are the primary beneficiary. We consolidate based upon evaluation of our power, through voting rights or similar rights, to direct the activities of another entity that most significantly impact the entity’s economic performance. For consolidated entities where we own or are exposed to less than 100% of the economics of such entity, we record Net income attributable to non-controlling interests on our condensed consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties. We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us which are attributable to: (1) the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI, (2) the Continuing Investors Partnerships’ ownership in RP Holdings through their ownership of RP Holdings Class B Interests, (3) a de minimis interest in RPCT held by RPSFT and (4) RPI EPA Holdings, LP’s (“EPA Holdings”) ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”). Income will not be allocated to EPA Holdings until certain performance conditions are met. All intercompany transactions and balances have been eliminated in consolidation.
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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 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 September 30, 2022 and December 31, 2021 were held with State Street, Bank of America and Scotiabank. Our primary operating accounts significantly exceed the Federal Deposit Insurance Corporation limits.The majority of our financial royalty assets and receivables arise from contractual royalty agreements that entitle us to royalties on the sales of underlying biopharmaceutical products in the United States, Europe and the rest of the world, with concentrations of credit risk limited due to the broad range of marketers responsible for paying royalties to us and the variety of geographies from which our royalties on product sales are derived. The products in which we hold royalties are marketed by leading industry participants, including, among others, Vertex, Biogen, AbbVie, Johnson & Johnson, Merck & Co., Pfizer, Astellas, Novartis and Gilead. |
Fair Value Measurements | Fair Value Hierarchy We determine the fair value of assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value as follows: •Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. •Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly. •Level 3: Prices or valuation that require inputs that are both significant to the fair value measurement and unobservable. 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 condensed consolidated balance sheets. For financial instruments which are 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. Outstanding borrowings and non-current financial royalty assets are reported at their amortized costs on our condensed consolidated balance sheets, for which fair values are disclosed. The remaining financial instruments are reported on our condensed consolidated balance sheets at amounts that approximate fair values.
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Available for Sale Debt Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Available for Sale Debt Securities | The table below summarizes our available for sale debt securities recorded at fair value as of September 30, 2022 and December 31, 2021 (in thousands):
(1)The cost for the Series A Biohaven Preferred Shares represents amortized cost. The cost for the Series B Biohaven Preferred Shares represents the amounts paid to purchase the instruments. The cost of the Development Funding Bonds represents the amounts funded. The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date. (2)There are no costs associated with the forwards. The cost associated with the funding commitments represents the fair value on the purchase date. (3)Reflected within Other liabilities on the condensed consolidated balance sheet.
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Fair Value Measurements and Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Hierarchy | The following table summarizes assets and liabilities measured at fair value on a recurring basis at the dates indicated, classified in accordance with the fair value hierarchy described above (in thousands):
(1)Reflects the fair value of the Series A Biohaven Preferred Shares and Series B Biohaven Preferred Shares. As of September 30, 2022, amounts also include the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the Development Funding Bonds. (2)Reflects the fair value of our obligations to fund the acquisitions of the Series B Biohaven Preferred Shares as recorded within current assets as of September 30, 2022 and within non-current assets as of December 31, 2021. As of December 31, 2021, the amount also reflects the fair value of our obligations to fund the Development Funding Bonds as recorded within non-current assets. (3)Related to the Milestone Acceleration Option (defined below) recorded within Other current assets and Other assets on the condensed consolidated balance sheet. (4)Recorded within Other assets on the condensed consolidated balance sheet. See Note 8–Non-Consolidated Affiliates for additional discussion. (5)Related to the fair value of the Cytokinetics Funding Commitments as reflected within Other liabilities on the condensed consolidated balance sheet.
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Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | The tables presented below summarize the change in the combined fair value (current and non-current) of Level 3 financial instruments, which relate to equity securities, a royalty interest, derivative instruments and available for sale debt securities, including the underlying securities, forwards and funding commitments (in thousands):
(1)Represents the difference in (a) the fair value of the Additional Funding (as defined above) of the Development Funding Bonds and (b) the actual additional funded amount of $150 million. Refer to footnote (3) below for discussion on the change in fair value of the Development Funding Bond Forward. (2)Related to Series A Biohaven Preferred Shares. (3)Amounts reflect changes in the fair values of the Series B Biohaven Preferred Shares, Series B Forwards, and Development Funding Bond Forward. For the three months ended September 30, 2022, amounts also reflect the change in the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments. (4)Amounts reflect the fair value attributed to the Series B Forwards that were settled as we acquired the Series B Biohaven Preferred Shares, which is included in the fair value of the Series B Biohaven Preferred Shares. Amounts also reflect the fair value attributed to the Development Funding Bond Forward that was settled upon funding the Development Funding Bonds in the three months ended September 30, 2022, which is included in the fair value of the Development Funding Bonds.
(1)Represents purchase price allocation to arrive at the appropriate fair value on initial recognition. Amounts also represent the difference in (a) the fair value of the Additional Funding (as defined above) of the Development Funding Bonds and (b) the actual additional funded amount of $150 million. Refer to footnote (3) below for discussion on the change in fair value of the Development Funding Bond Forward. (2)Related to Series A Biohaven Preferred Shares. (3)Amounts reflect changes in the fair values of the Series B Biohaven Preferred Shares, Series B Forwards and Development Funding Bond Forward. For the nine months ended September 30, 2022, amounts also reflect the change in the fair value of the funded portion of the Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments. (4)Amounts reflect the fair value attributed to the Series B Forwards that were settled as we acquired the Series B Biohaven Preferred Shares, which is included in the fair value of the Series B Biohaven Preferred Shares. Amounts also reflect the fair value attributed to the Development Funding Bond Forward that was settled upon funding the Development Funding Bonds in the three months ended September 30, 2022, which is included in the fair value of the Development Funding Bonds. (5)Related to transfer restriction expiration of BioCryst common stock.
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Fair Value Disclosure of Asset and Liability Not Measured at Fair Value | Estimated fair values based on Level 3 inputs and related carrying values for the non-current portion of financial royalty assets as of September 30, 2022 and December 31, 2021 are presented below (in thousands):
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Financial Royalty Assets (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Royalty Assets, Net | 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 September 30, 2022 and December 31, 2021 are as follows (in thousands):
(1)Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography. There can be no assurances that our royalties will expire when expected. (2)Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (3)RPIFT acquired a perpetual royalty on net sales of Tysabri. We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed. (4)The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 6–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.
(1)Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of patent expiration dates (which may include estimated patent term extensions) or other factors and may vary by geography. There can be no assurances that our royalties will expire when expected. (2)Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on timing of potential generic entry. (3)RPIFT acquired a perpetual royalty on net sales of Tysabri. We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed. (4)Key patents on Evrysdi in the United States expire in 2035, but our royalty will cease when aggregate royalties paid to us equal $1.3 billion. (5)The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 6–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.
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Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||
Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cumulative Allowance for Changes in Expected Cash Flows | 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):
(1)Includes $310.8 million related to cumulative allowance for credit losses. (2)In the nine months ended September 30, 2022, the provision income for credit losses was primarily related to a change in the payor for a particular product and a significant decline in the value of the Tazverik financial royalty asset.
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Intangible Royalty Assets, Net (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Royalty Interests | The following tables summarize the cost, accumulated amortization and net carrying value of our intangible royalty assets as of September 30, 2022 and December 31, 2021 (in thousands):
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Borrowings (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Borrowings | Our borrowings as of September 30, 2022 and December 31, 2021 consisted of the following (in thousands):
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Schedule of Repayments of Debt by Year | The future principal payments for our borrowings as of September 30, 2022 over the next five years and thereafter are as follows (in thousands):
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Shareholders' Equity (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Balance Of Non-controlling Interests | The net change in the balance of our four non-controlling interests for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands):
|
Earnings per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth reconciliations of the numerators and denominators used to calculate basic and diluted earnings per Class A ordinary share for the three and nine months ended September 30, 2022 and 2021 (in thousands, except per share amounts):
|
Indirect Cash Flow (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Flow, Supplemental Disclosures | Adjustments to reconcile consolidated net income to net cash provided by operating activities are summarized below (in thousands):
|
Related Party Transactions (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Related Party Transactions | The distributions payable to 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 RPSFT’s non-controlling interest in RPCT. The distributions payable to non-controlling interests include the following (in thousands):
|
Summary of Significant Accounting Policies (Details) |
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
Feb. 29, 2020 |
|
Customer Concentration Risk | Current portion of Financial royalty assets | Vertex | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Concentration risk (as a percent) | 31.00% | 32.00% | |
Legacy Investors Partnerships | Old RPI | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Noncontrolling interest (percentage) | 18.00% |
Fair Value Measurements and Financial Instruments - Schedule of Estimated Fair Values Based on Level 3 Inputs (Details) - Level 3 - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Fair Value | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Financial royalty assets, net | $ 18,490,959 | $ 19,047,183 |
Carrying Value, net | ||
Fair Value Disclosure, Asset and Liability, Not Measured at Fair Value [Line Items] | ||
Financial royalty assets, net | $ 14,287,399 | $ 13,718,245 |
Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets - Schedule of Cumulative Allowance for Changes in Expected Cash Flows (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||
Beginning balance | $ (1,694,945) | |
Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets | (987,507) | |
Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets | 273,538 | |
Write-off of cumulative allowance | 5,625 | |
Current period provision for credit losses, net | 118,573 | |
Ending balance | (2,284,716) | |
Cumulative allowance for credit losses | $ 192,231 | $ 310,804 |
Intangible Royalty Assets, Net - Schedule of Intangible Royalty Interests (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||
Cost | $ 606,216 | $ 606,216 |
Accumulated Amortization | 606,216 | 600,546 |
Net Carrying Value | 0 | 5,670 |
DPP-IV patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 606,216 | 606,216 |
Accumulated Amortization | 606,216 | 600,546 |
Net Carrying Value | $ 0 | $ 5,670 |
Intangible Royalty Assets, Net - Narrative (Details) |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
DPP-IV patents | Revenue Benchmark | Individual Licensees Concentration List | |||
Finite-Lived Intangible Assets [Line Items] | |||
Individual licensees exceeding 10% or more of revenue (as a percent) | 63.00% | 90.00% | 80.00% |
Research & Development ("R&D") Funding Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||||
Research and development funding expense | $ 25,500 | $ 90,500 | $ 126,606 | $ 96,263 |
Cytokinetics | ||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||||
Research and development funding expense | 100,000 | |||
Theravance Biopharma | ||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||||
Research and development funding expense | $ 25,000 | |||
MorphoSys | ||||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||||
Research and development funding expense | $ 90,000 |
Borrowings - Schedule of Repayments of Debt by Year (Details) - Unsecured Debt - The Notes - USD ($) $ in Thousands |
Sep. 30, 2022 |
Sep. 02, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
Remainder of 2022 | $ 0 | |
2023 | 1,000,000 | |
2024 | 0 | |
2025 | 1,000,000 | |
2026 | 0 | |
Thereafter | 5,300,000 | |
Total | 7,300,000 | |
Unamortized discount and loan issuance costs on long-term debt | $ (188,700) | $ 149,000 |
Commitments and Contingencies (Details) $ in Millions |
9 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
shares
| |
Long-term Purchase Commitment [Line Items] | |
Funding commitment, outstanding | $ 250.0 |
Required amount to be drawn | 50.0 |
Long term funding partnership, aggregate amount | 200.0 |
Long term funding partnership, expected payment | 125.0 |
Funding Agreement With Biohaven Pharmaceuticals | |
Long-term Purchase Commitment [Line Items] | |
Purchase commitment, amount outstanding | $ 85.8 |
Shares to be purchased | shares | 1,713 |
Subsequent Events (Details) - USD ($) $ in Millions |
1 Months Ended | 9 Months Ended |
---|---|---|
Oct. 31, 2022 |
Sep. 30, 2022 |
|
otilimab | ||
Subsequent Event [Line Items] | ||
Write off of financial royalty asset | $ 160.1 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Upfront cash payment | $ 50.0 | |
Additional milestone payments | $ 375.0 |
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