NEW YORK, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Royalty Pharma plc (Nasdaq: RPRX) today reported financial results for the third quarter of 2020 and updated full-year 2020 guidance for Adjusted Cash Receipts⁽¹⁾ (a non-GAAP financial measure).

“Our performance in the third quarter underscored the strong momentum in the business", said Pablo Legorreta, Royalty Pharma founder and Chief Executive Officer. "Net cash provided by operating activities increased by 17%, while Adjusted Cash Receipts increased 12%, driving Adjusted Cash Flow growth of 27%. At the same time, we strengthened our balance sheet through our inaugural bond offering, locking in an attractive cost of debt and more than doubling our maturity profile. We also achieved notable success with our hybrid funding strategy as a result of Gilead’s acquisition of Immunomedics, which not only provides an accelerated return for our shareholders but also enhances the prospects for Trodelvy, an innovative new therapy for cancer patients. Following the recent deal to expand our cystic fibrosis (CF) royalties, we have now announced $2.3 billion in new transactions this year. This speaks to the growing role of royalties as an important tool in the funding of innovation which is supported by our robust transaction pipeline".

GAAP financial results demonstrate continued strong operating cash flow generation and revenue growth

• Cash provided by operating activities increased to $509 million in the third quarter of 2020 compared with $436 million on a pro forma basis in the same period of 2019 primarily due to higher royalty receipts.
• Cash used in investing activities of $1,042 million largely reflected two royalty acquisitions.
• Cash used in financing activities of $357 million resulted from repayment of debt and dividends paid.
• Total income and other revenues of $538 million grew 16% driven by the CF franchise and Imbruvica.

Non-GAAP financial results driven by strong, broad-based growth across the portfolio

• Adjusted Cash Receipts⁽¹⁾ increased 12% on a pro forma basis led by the CF franchise and Imbruvica.
• Adjusted Cash Flow⁽²⁾ grew 27% on a pro forma basis to $394 million, supported by lower interest payments.

Portfolio continues to expand with new royalty acquisitions and regulatory and clinical milestones achieved

• Expansion of agreement with the CF Foundation brings announced transactions to $2.3 billion this year.
• Regulatory approvals granted for Kaftrio by the European Commission and Evrysdi by the FDA.
• Positive clinical study results presented for Trodelvy in metastatic triple-negative breast and urothelial cancer.

Net cash provided by operating activities (GAAP) was $509 million in the third quarter of 2020 compared to $436 million on a pro forma basis in the same period of 2019. The increase over the prior period resulted from higher cash collections from financial royalty assets, primarily from the CF franchise, Imbruvica and Promacta and a decline in interest paid due to a change in the payment schedule to semi-annual interest payments. This was partially offset by higher payments for operating and professional costs in the third quarter of 2020 incurred in connection with Royalty Pharma's initial public offering and debt refinancing.

Total Royalty Receipts were $588 million, an increase of 7% in the third quarter of 2020 compared to the same period of 2019 on a pro forma basis. This was largely attributable to the performance of the CF franchise, Imbruvica, Promacta and the addition of new royalties, partially offset by a decrease in royalties for Lyrica and Letairis resulting from losses of exclusivity.

Drivers of royalty receipts in the third quarter of 2020 are discussed below, based on commentary from the marketers of the products underlying the royalties in the preceding quarter (as royalty receipts generally lag product performance by one calendar quarter).

• CF franchise – Royalty receipts from Vertex’s CF franchise, which includes Kalydeco, Orkambi, Symdeko/Symkevi and Trikafta/Kaftrio, all approved for patients with certain mutations causing CF, were $157 million in the third quarter of 2020, an increase of 36% compared to the same period of 2019, primarily driven by the highly successful launch of Trikafta in the U.S.
• Tysabri – Royalty receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, were $77 million in the third quarter of 2020, a decrease of 8% compared to the same period of 2019. The performance was impacted by inventory dynamics and COVID-19, given delays in dosing at infusion sites.
• Imbruvica – Royalty receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, were $78 million in the third quarter of 2020, an increase of 16% compared to the same period of 2019 driven by the continued penetration in patients with chronic lymphocytic leukemia.
• HIV franchise – Royalty receipts from the HIV franchise, which are based on products marketed by Gilead that contain emtricitabine, including Biktarvy, Genvoya and Truvada, among others, were $67 million in the third quarter of 2020, an increase of 6% compared to the same period of 2019.
• Januvia, Janumet, Other DPP-IVs – Royalty receipts from the DPP-IVs for type 2 diabetes, which include Januvia and Janumet, both marketed by Merck & Co., were $34 million in the third quarter of 2020, an increase of 2% compared to the same period of 2019.
• Xtandi – Royalty receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, were $38 million in the third quarter of 2020, an increase of 21% compared to the same period of 2019, driven by demand across various prostate cancer indications.
• Promacta – Royalty receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia purpura (ITP) and aplastic anemia, were $40 million in the third quarter of 2020, an increase of 28% compared to the same period of 2019. Global growth was driven by increased use in ITP and further uptake as first-line treatment for severe aplastic anemia in the US.

Distributions to non-controlling interests, which reduces royalty receipts to arrive at Adjusted Cash Receipts, were $116 million in the third quarter of 2020, a decrease of 9% compared to the same period of 2019 on a pro forma basis.

Adjusted Cash Receipts (non-GAAP) ⁽¹⁾ were $472 million in the third quarter of 2020, an increase of 12% compared to the same period of 2019 on a pro forma basis, reflecting growth in Total Royalty Receipts and lower Distributions to non-controlling interests.

Adjusted EBITDA ⁽⁵⁾ is a non-GAAP measure used by Royalty Pharma which comprises Adjusted Cash Receipts less payments for operating costs and professional services. In the third quarter of 2020, Adjusted EBITDA was $413 million, a 7% increase compared to Adjusted EBITDA of $386 million on a pro forma basis in the same period of 2019:

• The increase was largely attributable to the 12% growth in Adjusted Cash Receipts.
• Payments for operating and professional costs amounted to $59 million in the third quarter of 2020 (representing 13% of Adjusted Cash Receipts) as compared to $36 million (representing 8% of Adjusted Cash Receipts) in the third quarter of 2019 on a pro forma basis, with the increase relating to expenses for the initial public offering and inaugural bond offering.

Adjusted Cash Flow ⁽²⁾ is a non-GAAP measure which is comprised of Adjusted EBITDA less development-stage funding payments —ongoing, net interest paid and miscellaneous other items relating to swap arrangements, investment in non-consolidated affiliates plus contributions from non-controlling interests—R&D. In the third quarter of 2020, Adjusted Cash Flow was $394 million, a 27% increase compared to Adjusted Cash Flow of $309 million for the same period of 2019 on a pro forma basis. The increase primarily resulted from the growth in Adjusted Cash Receipts as well as lower net interest paid and development-stage funding payments. Items in the period included:

• Development-stage funding payments of $5 million in the third quarter of 2020 was significantly lower than the $23 million in the same period in 2019, as certain ongoing R&D programs (primarily related to the Phase 3 adjuvant studies of Ibrance) reached completion at the end of 2019.
• Net interest paid of $15 million was lower than the $55 million paid in the same period of 2019 on a pro forma basis due to the impact of debt refinancing and a shift to semi-annual interest payments with the issuance of $6 billion of senior unsecured notes (the "Notes").
• Investment in non-consolidated affiliates was zero compared with $4 million in the third quarter of 2019 as there were no funding requirements in the period.

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

Key Developments Relating to the Portfolio

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

• Evrysdi (risdiplam): In August 2020, Evrysdi was approved by the FDA, representing the first oral treatment approved for infants, children and adults with all spinal muscular atrophy ("SMA") types. Subsequently, the commercial launch for Evrysdi, marketed by Roche, began in August 2020.
• CF franchise: In August 2020, Vertex announced that the European Commission had granted marketing authorization for Kaftrio in a combination regimen with ivacaftor to treat people with CF ages 12 years and older with one F508del mutation and one minimal function mutation, or two F508del mutations in the cystic fibrosis transmembrane conductance regulator gene.
• Trodelvy (sacituzumab govitecan-hziy): In September 2020, Immunomedics presented results from the confirmatory Phase 3 ASCENT study that showed that Trodelvy significantly extended overall survival (OS) and improved overall response rate and clinical benefit rate, compared to treatment of choice standard single-agent chemotherapy in brain metastases-negative patients with metastatic triple-negative breast cancer who had previously received at least two prior therapies for metastatic disease. Immunomedics also announced positive results from cohort 1 of cisplatin-eligible patients in the pivotal Phase 2 TROPHY U-01 study of Trodelvy in metastatic urothelial cancer. Results confirm the interim findings and prior Phase 1/2 study results showing Trodelvy has significant activity and is safe in patients with heavily-pretreated metastatic urothelial cancer who progressed on both platinum-based chemotherapy and checkpoint inhibitors.

  In September 2020, Gilead and Immunomedics announced that Gilead would acquire Immunomedics for $88.00 per share in cash, which valued Immunomedics at approximately $21 billion. In 2018, Royalty Pharma entered into a partnership with Immunomedics whereby it acquired a tiered, sales-based royalty on Trodelvy for $175 million and acquired 4,373,178 shares of Immunomedics common stock for $75 million. The acquisition closed in October 2020, resulting in gross cash proceeds of $385 million related to Royalty Pharma’s equity position in Immunomedics.

• Ibrance (palbociclib): In October 2020, Pfizer announced that the Phase 3 PENELOPE-B trial did not meet the primary endpoint of improved invasive disease-free survival (iDFS) in women with hormone receptor-positive (HR+), human epidermal growth factor-negative (HER2-) early breast cancer (eBC) who have residual invasive disease after completing neoadjuvant chemotherapy.
• Nurtec ODT (rimegepant) and zavegepant: In October 2020, Biohaven announced that the FDA had accepted for review its recently submitted supplemental New Drug Application ("sNDA") for Nurtec ODT for the preventive treatment of migraine. In September, Biohaven’s oral zavegepant, a third generation CGRP receptor antagonist, received authorization to proceed into clinical trials from the FDA and achieved first-in-human dosing.
• Omecamtiv mecarbil: In October 2020, Amgen, Cytokinetics and Servier announced topline results from GALACTIC-HF, a Phase 3 trial of omecamtiv mecarbil in patients with heart failure. The trial met the primary composite endpoint of reduction in cardiovascular death or heart failure events, but did not meet the secondary endpoint of reduction in cardiovascular death. Detailed results including sub-group analysis are expected to be presented at the AHA Scientific Sessions 2020.

Summary of Recent Royalty Acquisition Activity

• Evrysdi (risdiplam): In July 2020, Royalty Pharma acquired a royalty on Evrysdi, a development-stage product candidate for the treatment of Types 1, 2 and 3 SMA, from PTC Therapeutics in exchange for an upfront payment of $650 million.
• Nurtec ODT (rimegepant) and zavegepant: In August 2020, Royalty Pharma announced an expanded agreement with Biohaven Pharmaceuticals for up to $450 million to fund the development of zavegepant and the commercialization of Nurtec ODT. To support the zavegepant Phase 3 program, Biohaven received a $150 million upfront payment and will receive an additional $100 million payment upon the start of the oral zavegepant Phase 3 program. Royalty Pharma will receive a royalty of 0.4% on Nurtec ODT, a royalty of up to 3% on zavegepant and success-based milestone payments based on zavegepant regulatory approvals. Royalty Pharma will also provide further support for the ongoing launch of Nurtec ODT through the purchase of committed, non-contingent commercial launch preferred equity for a total of $200 million payable between 2021 and 2024 in exchange for a series of fixed quarterly payments between 2025 and 2030.
• CF franchise: In November 2020, Royalty Pharma announced that it acquired the residual royalty interest in Vertex’s CF treatments owned by the CF Foundation for an upfront payment of $575 million and a potential milestone of $75 million payable under certain circumstances. As part of previous agreements with the CF Foundation, Royalty Pharma purchased all of the CF Foundation’s royalty interests on Vertex’s CF franchise. Under the terms of those agreements, Royalty Pharma was obligated to pay the CF Foundation 50% of royalties attributable to revenue over $5.8 billion in any calendar year. This obligation is eliminated with this transaction and entitles Royalty Pharma to all royalties above the previous revenue threshold.

Liquidity and Capital Resources

• As of September 30, 2020, Royalty Pharma had cash, cash equivalents and marketable securities in the amount of $2.1 billion and long-term debt with principal value of $6.0 billion.
• In September 2020, Royalty Pharma completed a $6.0 billion issuance of Notes across six tranches with a weighted-average coupon of 2.125% that will pay interest semi-annually, with the initial interest payment occurring in March 2021. Royalty Pharma used the net proceeds from the Notes, together with available cash on hand, to repay in full its senior secured credit facilities entered into in February 2020. This transaction more than doubled Royalty Pharma's weighted average maturity to 12.5 years as of September 2020.
• In October 2020, Royalty Pharma announced the closing of a secondary offering of 17,343,037 shares of its Class A ordinary shares by selling shareholders in an underwritten public offering at a price to the public of $42.00 per share. Royalty Pharma did not receive any of the proceeds and did not pay any underwriting costs from the sale of its Class A ordinary shares by the selling shareholders.

2020 Financial Outlook

Royalty Pharma also expects that payments for operating and professional costs will be approximately 10% of Adjusted Cash Receipts in 2020.

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

Royalty Pharma has not reconciled its non-GAAP 2020 guidance to the most directly comparable GAAP measure, net cash provided by operating activities, at this time due to the inherent difficulty in accurately forecasting and quantifying certain amounts that are necessary for such reconciliation, including, primarily, payments for operating and professional costs, distributions from non-consolidated affiliates and interest received. Royalty Pharma is not able to forecast on a GAAP basis with reasonable certainty all adjustments needed in order to project net cash provided by operating activities at this time.

About Royalty Pharma plc

Founded in 1996, Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. Royalty Pharma has assembled a portfolio of royalties which entitles it to payments based directly on the top-line sales of many of the industry’s leading therapies. Royalty Pharma funds innovation in the biopharmaceutical industry both directly and indirectly - directly when it partners with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when it acquires existing royalties from the original innovators. Royalty Pharma’s current portfolio includes royalties on more than 45 commercial products, including AbbVie and J&J’s Imbruvica, Astellas and Pfizer’s Xtandi, Biogen’s Tysabri, Gilead’s HIV franchise, Merck’s Januvia, Novartis’ Promacta, and Vertex’s Kalydeco, Orkambi, Symdeko and Trikafta, and three development-stage product candidates.