Royalty Pharma plc

Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the call over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's fourth quarter and full year 2022 results. You can find the press release with our earnings results and slides to this call on the investors page of our website at royaltypharma.com. Moving to slide three, I would like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these statements. I refer you to our 10-K on file with the SEC for description of these risks. All forward-looking statements are based on information currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP financial measures will be used to help you understand our financial performance. The GAAP to non-GAAP reconciliations are provided in the earnings press release available on our website. And with that, please advance to slide four. Our speakers on the call today are Pablo Legareta, Founder and Chief Executive Officer, Chris Height, EVP, Vice Chairman, Marshall Uris, EVP, Head of Research and Investments, and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, and Chris will discuss trends in our transaction pipeline. Marshall will then provide a portfolio update, after which Terry will review the financials. Following concluding remarks from Pablo, we will hold a Q&A session. And with that, I'd like to turn the call over to Pablo.

Thank you, George, and welcome to everyone on the call. I am delighted to report another year of strong execution on our strategy as a leading funder of innovation and life sciences. Slide six summarizes our financial and portfolio achievements in 2022, which underscore our strong momentum and the power of our business model. First, we delivered a strong financial performance. Adjusted cash receipts, our top line, grew by 10%. Adjusted EBITDA by 10%. and adjusted cash flow by 15%, which are all prior to an accelerated Biohaven redemption payment we received in the quarter, which I will discuss on the next slide. Our reported growth, of course, was significantly higher as a result of this Biohaven payment. Second, we strengthened our royalty portfolio. We added six new therapies, including the Blockbuster Trilogy, and we expanded our development stage pipeline through the acquisition of several attractive therapies, such as cytokinetics, AfriCampin, and Amgen's Opaceran. We also entered into a novel R&D funding collaboration with Merck, which could form the blueprint for future deals with large biopharma. Meanwhile, Pfizer's acquisition of Biohaven resulted in accelerated value creation to Royalty Pharma. Third, we had another strong year of capital deployment, building off of the momentum since our IPO, we announced up to $3.5 billion in transactions, maintaining our leading share of the royalty funding market. And given the rapid expanding opportunity set at our investor day last May, we raised our capital deployment goal to $10 billion to $12 billion over the next five years. On slide seven, you can see our financials in a little more detail. We received an accelerated Biohaven redemption payment resulting from Pfizer's acquisition of Biohaven, which benefited adjusted cash receipts by $458 million. Prior to this payment, as just mentioned, we delivered 12% growth in our top line in the quarter and 10% for the full year. Foreign exchange continued to represent the headwind, impacting our top line by around 5% in the quarter and 3% to 4% for the full year. Including the Biohaven payment, our top line nearly doubled in the quarter. Consistent with our top line, we grew our adjusted EBITDA by 13% in the quarter and by 10% for the full year prior to the Biohaven payment. Adjusted EBITDA is an important non-gap measure for us, which has arrived at by deducting payments for operating and professional costs from our top line. Lastly, our adjusted cash flow, our bottom line, grew by 35% in the quarter and by 15% for the full year prior to the Biohaven payment. The substantial increase in our fourth quarter partially reflected lower upfront development space payments when compared to the prior period. Slide 8 shows our impressive track record of strong top-line growth since our IPO in June 2020. This reflects our ability to execute successfully against our strategy. Slide 9 digs deeper into our top-line performance in 2022 to show the various moving parts. Royalty expiries and foreign exchange represented significant headwinds to our growth in 2022. Despite this, the strong performance of our base business and the acquisition of trilogy royalties allowed us to deliver approximately 10% top-line growth before taking into account the accelerated by heaven payment. We have absorbed significant losses of exclusivity over the past two years and still delivered top-line growth in the double digits. This speaks to the unique power of our business model to replenish the portfolio and to drive compounding growth. My final slide expands on this critical point. Slide 10 shows that since 2020, we have announced approximately $10 billion in transactions across close to 20 deals and acquired royalty interest in some of the most transformative therapies in the industry. Roughly 70% of our capital deployed since 2020 has been on approved therapies and 30% on development stage products. These new royalties already account for around 10% of our adjusted cash receipts by 2025. They are expected to add around $1 billion to our top line. Put simply, we have replenished a significant portion of our business over a five-year period and at the same time sustained double-digit growth. Very few companies in the life sciences industry have the ability to do this. With that, I will hand it over to Chris to update you on our transaction pipeline.