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.

Thanks, Pablo. Let's move to slide 12. The strong momentum in our business is underpinned by encouraging trends in the royalty market, as well as the fact that royalties are becoming a mainstream tool to fund innovation. Between 2015 and 2022, the number of royalty funding transactions increased more than six-fold to 27 deals, while the dollar value of transactions rose tenfold to $6.2 billion. Over that period, Royalty Pharma has maintained the leading share of the royalty market. In 2022, we accounted for more than half the dollar value of transactions and over one quarter of transaction volume, and we remain the clear leader in larger transactions. Slide 13 details the funnel of opportunities we saw in 2022. We reviewed more than 350 potential transactions. This resulted in 106 confidentiality agreements signed, 70 in-depth reviews, and 38 proposals submitted. Our disciplined and highly selective approach resulted in us executing nine transactions across six new therapies for just 3% of our initial reviews. This is consistent with our historical average in the low single-digit percentage range and reflects the exceptionally high bar we apply to royalty funding opportunities. Slide 14 shows the growth in our pipeline opportunity set. Between 2019 and 2022, we saw a 75% increase in initial reviews and in-depth reviews, and the value of the transactions we executed on increased by 58%. Clearly, the difficult equity market for biotechs in 2022 helped us. However, we have seen positive market trends for a number of years as royalty funding has become an increasingly mainstream funding modality. This supports our confidence in meeting our raised five-year capital deployment target that Pablo mentioned. And with that, I will hand it over to Marshall.

Thanks, Chris. On my next few slides, I want to discuss two recent transactions that brought us two exciting opportunities in the lipoprotein A, or LP little a, class of cardiovascular medicine. Last month, we were pleased to announce a win-win partnership with Ionis. We acquired royalties on Spinraza, a blockbuster for spinal muscular atrophy, and Pelacarcin, an exciting development stage LP little a therapy for cardiovascular disease. Through this collaboration, we deployed $500 million upfront and committed up to $625 million in potential milestones. The unique deal structure provides an attractive risk reward for Royalty Pharma. Our interest in Spinraza, a blockbuster medicine approved in more than 60 countries with 2022 sales of $1.8 billion, supports the investment with a lower risk royalty. However, the really exciting part of the deal is the significant upside potential from Pella Carson, which Novartis has projected to have greater than $3 billion in peak sales potential. Pella-Carson is the most advanced of the two leading clinical stage compounds in the LP little a class with Phase III cardiovascular outcomes data expected in 2025. On slide 17, I want to highlight that we also acquired royalties to the other exciting investigational therapy in the LP little a class, Amgen's Olpaceran. We acquired this royalty from Arrowhead Pharmaceuticals in November 2022 in exchange for a $250 million upfront payment and potential milestones of up to $160 million. The Phase II clinical data on Elpastran is very encouraging and, as with Pella-Carson, a Phase III outcome study is underway, and this study is expected to complete in late 2026. Consensus expectations are that this new class of cardiovascular therapies will generate more than $4 billion of sales by the early part of the next decade, and there are many reasons to believe that these estimates could prove conservative. Slide 18 returns to our concept from our investor day last May. From a strategic perspective, the Lp class exhibits two of our key investment themes. The first one is the idea of under-innovated large markets. The shift towards specialty markets over the last decade, with smaller patient population and higher price points, has meant that some of the incredible innovation that we've seen has not been applied to the same extent in some of the larger markets that are higher volume, but that still have significant unmet patient need. Cardiology is a great example of this, and the Lp class has transformative potential. In addition, we have seen that targeted therapies can drive significant patient benefit in cancer. However, there's been comparatively less development of targeted therapies in therapeutic areas outside of oncology. So this is another theme that we're excited about. We think there's significant potential for patients to benefit from targeted therapies in areas such as cardiology, given the increased understanding of mechanistic drivers of disease. Our cytokinetics partnership is a good example as well. So why does Royalty Pharma believe in the transformative potential and in the multi-blockbuster opportunity for this class? First, LP little a is an independent cardiovascular risk factor supported by extensive data from genetic studies, among other sources of evidence. Second, there is huge unmet need. Over 8 million people worldwide have elevated LP little a in cardiovascular disease, and these people face a more than two-fold increased risk of cardiovascular events. Importantly, LP little a cannot be addressed by dietary modification or approved lipid-lowering drugs. Third, both Pellicars and Anilpaciran have been shown in Phase II studies to produce robust reductions in LP little a with encouraging safety profiles. And lastly, there are two well-designed outcome studies enrolling more than 14,000 people, which are expected to read out around the middle of the decade, supported by two of the strongest cardiovascular medicine companies in Amgen and Novartis. Taken together, we believe that LpA reduction could represent one of the next major frontiers in the treatment of cardiovascular disease and be a potentially important growth driver for Royalty Pharma towards the end of this decade and beyond 2030. On the next slide, I want to highlight Royalty Pharma's unique ability to invest in multiple products in a given therapeutic area. We have historically demonstrated this in multiple sclerosis, prostate cancer, migraine, and in the anti-TNF category. As a result of our Arrowhead and Ionis deals, we now have royalties on two important medicines for spinal muscular atrophy, as well as two leading investigational LP little a therapies. This unique ability to invest in multiple products in the most innovative therapeutic classes is clearly a differentiating feature of our business model. Moving to slide 21, AstraZeneca's Air Supra, formerly PTO27, was just approved by the FDA last month for the treatment of asthma. This is a first-in-class fixed-dose combination therapy that treats both the symptoms and underlying inflammation of asthma. This is another example of how our development stage portfolio can make important contributions to our business. We're entitled to a low single-digit tiered royalty on annual U.S. net sales, success-based milestones, and other potential payments. The market size is significant. In the U.S. alone, there are more than 25 million asthma patients and 71 million rescue inhalers used annually. Consensus currently projects AirSupra to approach $1 billion in sales by 2030. On slide 22, if we look at the early performance of our transactions since 2020, the picture is encouraging. For the approved therapies we recently acquired, the majority have seen increases to street consensus sales forecasts since the acquisition date, with several increasing by more than 40%. Although we, of course, invest based on internal forecasts, and we do not necessarily need products to outperform the consensus in order to achieve our return targets, nevertheless, this way of assessing the recent additions to our approved product portfolio is a directionally useful indicator to show that our bar for quality remains high. One disappointment within our approved product investments has been Govretto, a therapy which we and Roche fully impaired based on the updated commercial outlook for the products. For the development stage therapies, we have seen some important progress, such as the approvals of Arisupra and Averizdi and positive data readouts for Zevegipan and Trumphia. However, Otilimab and Gentinarumab development has been discontinued, although we remain enthusiastic about the overall morphosis transaction, given the significant outperformance from Trumphia. Lastly, we're excited for several important upcoming events in 2023 from these recent deals, including the potential approval of intranasals of Zevegipan, base-read data from orals of Zevegipan and migraine prevention, Apicampin in obstructive hypertrophic cardiomyopathy, and Tremphia in ulcerative colitis and Crohn's disease. With that, I'll hand it over to Terry.

Thanks, Marshall. Let's move to slide 24. Total royalty receipts grew 79% in the fourth quarter and 24% for full year 2022 versus the respective year-ago periods. Excluding the accelerated biohaven payment, royalty receipts grew 7% for Q4 and 5% for full year. The magnitude of growth in the fourth quarter reflects the accelerated Biohaven payment, together with strong contributions from Cystic Fibrosis Franchise, Xtandi, Tramphaia, and the Trilogy Royalty, which we acquired in July. We also saw growing royalty contributions from Calomedics and from several medicines not shown on this slide, particularly Evrizdi, Trodelvi, and Orlodeo. These positive factors were partially offset by the loss of the D2P4 royalties, by weakness in Imbruvica, and to a lesser extent, Tysabri, and by the adverse FX impact. Full-year growth was also partially offset by a decline in royalty receipts from the HIV franchise, which reached the end of its royalty term in 2021. Slide 25 shows how our efficient business model generates substantial cash flow to be redeployed. As you're aware, adjusted cash receipts is a key non-GAAP metric for us, which we arrive at after deducting distributions to non-controlling interests. This amounted to $1.1 billion in the quarter, or growth of 96% compared with last year's fourth quarter. For the full year, adjusted cash receipts were up $2.8 billion, or $2.8 billion, up 31%. As Pablo noted earlier, prior to the impact of the accelerated Biohaven payments, growth would have been approximately 12% in the quarter and 10% for the full year. As we move down the column, operating and professional costs were approximately 8% of adjusted cash receipts in the fourth quarter and for the full year. As a consequence, we reported 99% growth in adjusted EBITDA in the quarter and 32% for the full year, consistent with our top-line growth. When we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to adjusted EBITDA, less net interest paid. Net interest received in the quarter of $14 million reflected the semiannual timing of the payments on our $7.3 billion of unsecured notes, which occurs in the first and third quarters, and the strong cash position on our balance sheet, which benefited from higher interest rates. For the full year, net interest paid of $145 million included interest received of $25 million on our cash position. After the $50 million upfront payment for development stage funding of MK 8189, we generated adjusted cash flow, our bottom line, of $946 million, or $1.56 per share, for the fourth quarter. This resulted in an adjusted cash flow margin of 89%, once again highlights the efficiency of our business model. For the full year, adjusted cash flow was $2.2 billion, or $3.68 per share, and our adjusted cash flow margin was 80%. Let's move now to slide 26 in our financial position. We continue to maintain significant financial firepower for future royalty acquisitions. In 2022, we deployed $2.5 billion of capital on royalty acquisitions, as well as $461 million on dividends. This more than offset our strong cash flow generation over the year, so that our cash and marketable security stood at $1.7 billion at the end of December. In the beginning of 2023, we deployed an additional $500 million on the IONIS transaction that Marshall described. If we adjust for this post-year end outflow, our leverage on a pro forma basis would have been 2.7 times net debt to EBITDA and 2.3 times total debt to EBITDA. As a reminder, the fixed rate average coupon on our debt is slightly above 2%, which compares to our target returns on royalty acquisitions in the high single digits to teens percentage range. I would also note that around 60% of our debt matures in 2030 or beyond. Taken together, we believe our cost of capital and debt maturity profile represent a durable competitive advantage for our business. Based on our financial strength and efficient business model, we remain confident in our ability to execute on our business plan and create value for shareholders. Slide 27 provides our full year 2023 financial guidance. We expect adjusted cash receipts to be in the range of $2.375 billion to $2.475 billion. This outlook does not include the $475 million milestone which we expect to receive from Pfizer if the FDA approves Zevegipant for migraine, which has a PDUFA date in the first quarter. However, if Zevegipant is approved and the $475 million milestone is included in our guidance, it would imply an adjusted range of $2.85 to $2.95 billion. I will explain the other key considerations underlying our top-line guidance in a moment. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account any future royalty acquisitions. Turning to our operating costs, we expect payments for operating and professional costs to be approximately 8% to 9% of adjusted cash receipts in 2023, slightly above the 2022 level. We continue to believe that the degree of margin protection provided by our unique business model is impressive in today's inflationary environment. Interest paid for full year 2023 is expected to be around $170 million and to follow the established quarterly pattern with the minimus amounts payable in Q2 and Q4. This does not take into account any interest received on our cash balance, which is particularly attractive at today's rates. Finally, we expect to make a $50 million milestone payment to cytokinetics in the second half of 2023 based on the company's guidance of initiating their pivotal trial of afecantin and non-obstructive hypertrophic cardiomyopathy. My final slide drills down further on our adjusted cash receipts guidance. The graphic is illustrative but sets out the various pushes and pulls behind our outlook for 2023. Starting with the left-hand side, we face a high base of comparison from the $458 million accelerated Biohaven payment, which we received in the fourth quarter of 2022. Since the preferred shares were redeemed, we will also no longer receive the quarterly Series A fixed payments, which is another $52 million annual headwind. This brings the underlying base for 2022 adjusted cash receipts to $2.28 billion. On the right side, If we start from the adjusted cash receipt base prior to Biohaven, we expect underlying growth of between 4% to 9% this year, which is expected to be largely driven by the CF franchise, Trilogy, and Trampaya, partially offset by the losses of exclusivity on the DPP-4s and Lexiscan, as well as in Bruvica weakness. We also expect a modest contribution from three-quarters of Spinraza royalties Given the recent moderation of the US dollar strength, FX is expected to represent a relatively modest headwind of minus 1 to minus 2% using today's rates. With that, I would like to hand the call back to Pablo for his closing comments.

Thanks, Terry. Let me close by saying how pleased I am with our strong performance in 2022. Not only do we enter 2023 with solid momentum, but our prospects have never looked better. To finish on slide 30, I would like to take a moment to remind you why Royalty Pharma's business model offers a unique way to invest in biopharma, maximizing exposure to many positive industry trends while minimizing exposure to many of its common challenges. We offer attractive diversification on the top line and bottom lines. We offer strong exposure to transformative therapies, including 15 therapies with more than $1 billion in end market sales, and many well-known brands in the industry. Our portfolio benefits from an average expected duration of approximately 13 years, exceeding many big pharma and large biotechs. From a financial return perspective, we have a track record of delivering consistent and predictable double-digit unlevered returns on deployed capital. When we think about industry challenges, we do not take on significant early-stage development risk which clearly differentiates us from biopharma. Also, we have no therapeutic area bias and minimal exposure to binary risks. The differentiated reward profile, combined with our strong financial position and powerful business model, is what makes Royalty Pharma a unique and, I believe, highly attractive investment proposition. With that, we would be happy to take your questions.

We will now open up the call to your questions. Operator, please take the first question.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Chris Shibutani with Goldman Sachs. Your line is now open.

Thank you very much. Good morning. Two questions, if I may. One in general about your funnel and certain characteristics of that that you're seeing, and another on your comment from Marshall on target therapies. On the funnel, we appreciate the updates and the historical trend starts with over 300, I think it was 350, and then you go through various levels of evaluation before you finally conclude on closing something that's in the low cynical digits. As you think about the mix of what's entering the funnel in terms of commercial versus various developmental stages and how you go further down. Are you seeing that remain consistent or is there a bias or shift in particular as you notice the recent years? And then on the comment on the targeted therapy for cardiovascular and LPA, appreciated that from Marshall, I think it's interesting to see how that's evolving across other therapeutic areas, immunology in particular. Marshall would love to hear your thoughts on how you're viewing how that could shape up. Large areas, we're seeing increased vocabulary around targeted therapy development there. Thank you.

Thanks for your question, Chris. And I'm going to ask Chris Height to answer your question on the funnel. But if you recall, one of the comments I made in my remarks is that over the last three years since our IPO, where we have deployed about $10 billion, the ratio has been 70 percent approved and 30 percent unapproved. Now, if you look over a longer period of time, it tends to be closer to 50-50, or, you know, 55-45, 55 approved, 45 unapproved. But, Chris, go ahead.

Yeah, thanks for your question, Chris. The answer to your question is things haven't really changed. We actually provided a great level of detail to answer that question at our analyst day last year. which looked at the reviews and in-depth reviews by approved and pre-approved products and by pre-existing royalties versus synthetic. And that really, that mix hasn't changed. But in general, the initial reviews are basically about 80% pre-approval and 20% approved drugs. And the in-depth reviews sort of is about 50-50. It's 55% pre-approved and 45% approved. And on the synthetic side, on the in-depth reviews, it's 60% synthetic, 40% pre-existing. That was in 2021, and the mix didn't really change in 2022.

And then, hi, Chris, good morning. On your second question on target therapies outside of oncology, Absolutely. I mean, this is why at the Analyst Day we highlighted this as an interesting theme that we think is gonna create some interesting new opportunities in the future. You know, we mentioned cardiology is a good example, but would agree with you, you know, in immunology, we're starting to see good examples of that. You know, neurology is another area where I think we'll see more and more of those. So, you know, definitely interesting something to watch. You know, although I would just take the opportunity to remind everyone, you know, when we talk about themes, you know, those are not necessarily themes that we're saying we're going out and actively looking for those opportunities today. We think those are really interesting thematically that guide our thinking over the long term. But I think our core strategy of staying focused on exciting opportunities that offer a meaningful benefit to patients' positions to the system and what we're seeing and getting access to those things overall is going to be the most important driver of our strategy.

Great. Thanks for the insights.

Please stand by for our next question. Our next question comes from Chris Schott with JP Morgan. Your line is now open.

Hi, good morning. This is Hardik Parikh in for Chris Schott. Thank you for taking our questions. The first one is, Just generally, one of your thoughts on the current deal environment. Are you surprised we haven't seen more deals given some of the funding challenges out there?

Sure. Thank you. And I'll ask Chris and Marshall if they feel appropriate to add to my comments. But I think we have definitely seen a very significant increase in our funnel, as you see from prior years. which reflects the challenging funding environment today in life sciences. And I think, you know, consistent with that, we have deployed significantly more capital than we had in the past. If you look at sort of the average deployment, you know, maybe at the time of our IPO, we were talking about something like 1.5 billion. We got it to 1.5 billion, 7 billion over five years. And obviously, the increased activity has enabled us to increase our guidance to more like 10 to 12 billion deployments over the next five years and, you know, 2 to 2.5 billion guidance now. We reported today that we really deployed something like 3.5 billion last year. So it does reflect a lot more activity and significantly more capital deployed on our side. And I think the key thing for us, and we've been very, you know, clear about this with investors and analysts is that what really is critical is the quality of the underlying product. And while we have seen many, many more opportunity discussions, at the end of the day, we remain very disciplined with our capital deployment. And that obviously results in and the deals we're excited about where we see significant, you know, upside and Marshall this morning talks about LP little a, which we think is going to be a very significant class. And we have two royalties now in the two, really the two drugs that are being developed for that class. There's maybe a few others much earlier. What's interesting also is that, you know, we ended up having much larger royalties than we had historically in those two products. But anyway,

Yeah, the only thing I would add to that is I actually think, you know, the royalty market has been really robust. I mean, last year was a record year in 2022. As I said in my prepared remarks in the slide 12 highlights, the number of transactions has grown sixfold since 2015, and the dollar value of those transactions is up tenfold since 2015, and last year was a record year for the market as a whole. So the level of activity is really strong. So we think there's real, and we think that growth is going to continue actually.

Thank you. Thank you.

Please stand by for our next question. Our next question comes from Terrence Flynn with Morgan Stanley. Your line is now open.

Good morning. Thanks for taking the questions, too, for me. I was wondering maybe either for Pablo or Chris if you think the IRA is going to impact your analysis of royalty opportunities as you think about how to look at returns under this new law. And then maybe for Marshall, Again, I appreciate all the background on LP little a. Just wondering how you think about market creation here versus the PCSK9 drugs. Obviously, those have been less robust than people initially anticipated. How do you think LP little a plays out relative to PCSK9? Thank you.

Sure. Regarding the IRA question, Chris is going to take that question, and then Marshall can provide the other answers. One very top-level comment regarding changes that are occurring in our sector is that, as you know, we have been incredibly creative in helping people address challenges, issues, problems. And that just is a really good framework for us to try to work with companies to help them achieve their goals. And obviously, the challenges posed by IRA not only I mean, they end up also creating opportunities for us, but go ahead, Chris.

Yeah, thanks for your question. I would just comment that we've obviously seen some of it being implemented and the Part D redesign is going to be implemented now. The price negotiation, we'll have to wait and see how that's implemented and if there's any changes enacted specifically around the nine-year class. But we actually feel, I think what Pablo was highlighting is we feel we're uniquely positioned around these types of significant changes in the industry, given the fact that we can really sort of quickly adapt changes in the laws and price changes in how we make future investments. And I think that's really the key around the uniqueness of our business model is we're constantly deploying capital, as you've seen, and making new investments, and we can adapt quite quickly to the changes in the laws.

Marshall? Great. And so, Terrence, on your second question, yeah, thanks, on LP little a. So a few comments there. I think first and foremost, the most important thing in terms of creating that market is what the outcome studies show us. I think if those studies, as we certainly hope that they will show a significant cardiovascular event benefit, I think that's going to be a very strong driver of market formation there. You know, second important thing is, you know, and we highlighted this in the script, is that as opposed to the PCSK9 therapies where, you know, there are lots of ways to manage LDL, you know, here really the only option for meaningfully lowering LP little a are going to be these agents. So I think that does put them in a different category. And then lastly is, you know, there will be some market development around testing for LP little a, you know, that isn't except I think in some academic centers today, you know, a standard. But, you know, there I think the technology for the test is pretty straightforward. So once you check all the boxes in terms of having approved agents that show a clinically compelling profile, I think the need to help these patients from physicians and patients and their families is going to be a powerful driver of that market coming together. And we have, you know, two great companies in cardiovascular disease between Novartis and Amgen to make all that happen.

Thanks, Taryn. Alfred, next question, please.

Please stand by for our next question. Our next question comes from Jeff Meacham with Bank of America. Your line is now open.

Hi, good morning. This is Susan on for Jeff.

Our question is, how will interest rate changes affect the company's net interest and expense income? And related to that, what are the company's underlying assumptions for 2023 changes in interest rates? Thank you for taking our question.

Thank you for the question. Terry, you should take that one.

Hi. So as we mentioned in the prepared remarks, we are in a very fortunate position where 60% of our debt matures in 2030 and beyond. And we're currently borrowing at very low rates. So we feel very fortunate there. Our guidance does not imply any additional debt. It's just the $7.3 billion we have outstanding at our current coupon of around 2.25%. As we look longer term, we do have a billion dollar maturity towards the end of this year. And we are in a nice position there because we have a lot of cash flow coming in, particularly with the Biohaven acquisition. So we have some flexibility depending on how the pipeline plays out over the year. We could repay that debt. We could refinance. We could also use our revolver if the rate environment is not particularly attractive at that time because the revolver is prepayable. So I think we feel like we're in a very good position. We have plenty of access to capital. We have a nice cash flow generation and a strong balance sheet to be opportunistic and to deploy capital in great new royalties. So we feel very good.

Thank you, Susan. Operator, next question, please.

Please stand by for our next question. Our next question comes from Umar Rafat with Evercore. Your line is now open.

Hi, guys. This is Mikey Fiore in for Umar. Thanks so much for taking my question. I just want to ask on the recent deal regarding your acquiring a share of Ionis and Spinraza royalties. What are your views on the long-term prospects of Spinraza, especially given the fact that U.S. sales have struggled? although Bibb does note a possible ex-U.S. resiliency, and how much meaningful contribution do you envision for high-dose Spinraza as well as the adult SMA opportunity? Thank you.

Sure. Marshall.

Yeah, thanks for the question, Mike. You know, I think overall SMA is a market we've followed for years and I think looked at all of the major medicines there. You know, Spinraza being first-in-class, first in disease has, you know, a very, you know, important role in the treatment paradigm for patients, their families, for physicians. And when we were doing diligence for Ionis, we took a fresh perspective there and, you know, definitely see a meaningful role for Spinraza into the future in the management of SMA around the world. So that was really our underlying view that supported the Ionis, the Spinraza portion of the Ionis investment. And given the unmet need for these patients, these patients do need options, and that's why we're really happy to be, to participate in Everisd as well as Spinraza. On the other two, on the high-dose Spinraza as well as adults, you know, whenever we make an investment, you know, we think about all of the scenarios and the high-dose data and, you know, continued expansion into adults, and we could see more, you know, competition from Zolgensma, the gene therapy, and adults as well in the future, and I think those were all things we contemplated. Although I would just remind you, you know, our royalty position – our royalty is only on sales up to $1.5 billion every year. So some of these things, high dose, et cetera, might have less of an impact on the portion of sales that we participate in because of the way that it's structured. But regardless, we always take a very scenario-based approach and think about how all of these could impact our investment. And we feel very happy to have Spinraza as part of the portfolio.

And maybe just to add, you know, if you look at the total capital deployed and, you know, just internally on how we allocated that 500 million, we're, you know, very comfortable with different scenarios materializing on Spinraza delivering, you know, our target returns for approved products, which are high single digit, low double digit. So, you know, that is obviously a very important point. aspect of this transaction. And then, you know, if you look at the capital that we allocated to, you know, the really exciting LP little a component of the transaction, you know, that, you know, should provide very significant upside for us. on this new class. So again, we approach this investment with a lot of discipline and really making sure that each investment on its own was going to deliver attractive returns, unlevered returns. Obviously, Spinraza also has this characteristic that we can lever that with a very low cost of debt, which enhances dramatically the returns for us. Thanks so much.

Please stand by for our next question. Our next question comes from Ashwani Varma with UBS. Your line is now open.

Hi, good morning. Thanks for taking our questions. The first one on just the cystic fibrosis franchise. So the VANZA triplet, the phase 3 Skyline studies that are expected to complete by the end of this year. Just curious, like, what are your thoughts on how the profile can stack up against Trifecta? And is it possible that the arbitration process for the royalty on the triplet can get started with the phase 3 top line, or is that something that can only begin with the product launches? Second question, so it's a... After a little bit of a while that the biotech market has started to open up a little bit since the start of the year, just curious if you think that is going to impact your deal activity this year.

Terry, do you want to take the first part of the question and maybe Chris the second one?

Sure. So with regard to the new Vertex Triple, I think I would just reiterate what we've said previously that Trikafta sets a very high bar, and we expect that Trikafta will continue to be a very important contributor to Royalty Pharma over the long term. We saw the same Phase II data that everyone else saw, and I think at this point it would be challenging to say that the new triple is clearly differentiated. But we'll need to see the full Phase 3 data, including the long-term safety as well, to really understand that. In terms of your question around legal strategies, we just haven't elaborated at this point, and I think we'll continue to evaluate the situation and update investors at the appropriate time.

And with regard to your second question on if the equity markets came back strong and opened up for the biotech sector with that impact or deal activity. You know, I think what I would say is just going back to that slide 12 we had in our presentation just shows the growth of the market, generally speaking. And it's really been a change of mindset, I believe, in the biopharmaceutical sector, broadly speaking, between large pharma, mid-cap pharma, biotech, where considering royalty monetization or synthetic royalties as a piece of your capital structure is an evolution that's happening right now in the sector. And so whether the markets are really strong or not so strong, we think, you know, the mindset has been sort of evolving. And so we don't really see that impacting our deal activity. There's been a, you know, just an evolution of the growth of this market as potentially a piece of the capital structure.

If you actually look at this with a bit more perspective over the last 10, 15 years, we went through some incredibly strong equity capital markets for biotech, where huge amounts of capital were raised by the industry. And we still did incredibly well in those years, deploying multiple billions of dollars of capital every year in really exciting products. So I think that the comment that Chris made is really key here, because if the equity markets were to be more favorable again in the near term, the underlying really important shift in the way companies are funding themselves, which now includes royalties, is a really strong tailwind we have for our industry. And then in addition to that, the other area where we're very excited about, where we see a lot of potential interesting transactions and potentially transformative product is with big pharma. And that is, an example of that is a transaction we did with Merck at the end of the year. And we're very encouraged by that because we're having discussions with many companies about potentially funding attractive products. And it's a question also of just, again, continuing to have discussions with management teams, explain how funding with royalties is beneficial to them. And that's a really important underlying trend. But thank you for your question. Thanks.

Please stand by for our last question. Our last question comes from Steven Scala with Cohen. Your line is now open.

Thank you very much. I have two questions. The current trajectory of ibrutinib is increasingly concerning. I am wondering if you believe AbbVie guidance adequately captures all risks, and how are the challenges similar to or different from what you expected three years ago? The second question is a little bit bigger picture for Paolo. It is clear that Royalty Pharma's business has great momentum, a bright future, and is very consistent. But many quarters, including this one, you get questioned about potential risks, such as IRA and or competition, which you were asked about, the CF situation with Vertex, which you were asked about. Other quarters, you get asked about competition and sometimes even adverse tax legislations. Now, these are real risks, but they're just manageable from your perspective, and therefore your answers tend to be kind of high level. But since they are risks, I am wondering if you would be willing to rank them by your perception of the challenge they represent to the company over the long term. And to provide a reference point, please allow me to speculate on the order. So I think probably CFS at the top. competition two IRA and innovation number three and adverse tax legislation is last. Thank you.

Sure. Um, so I guess Terry will take, uh, your first question. Um, and then I can come back and provide some perspective on, on, you know, this bigger, uh, strategic, um, uh, question.

Yeah. Uh, hi Steve. So, um, on in Brubica, we, uh, certainly have been disappointed by the recent commercial performance of that product. And like many people, we had expected it to be more resilient in the face of competition. But we do take the recent trends on board, and we continue to make sure we understand what's going on in that market. And I think that our guidance, I don't want to really get into or have an opinion on what Abby has said, but I can speak to what we include in our guidance, and we have taken what we think is an appropriately conservative approach to our guidance, including all of the recent trends. And we obviously look at a range of scenarios, but certainly for this asset, that range of scenarios based on recent trends has been more focused on the downside. So that's probably all I can say on Imbruvica specifically at this point.

Yeah, and also just a reminder, if you look at that investment in Imbruvica and when we made it and the purchase price of our royalty interest and the expectations we had at the time, which were a couple billion dollars for the drug, it vastly exceeded those sales expectations. You know, I mean, even the sales that are maybe likely in the future as it, you know, continues to decline are meaningfully above what we have forecasted. So, from a return perspective, that investment for us has been a really big winner. But I think talking about, you know, how I think about long term the strategic opportunities and risks for Royalty Pharma. I think the biggest, the thing that always is the most important thing we focus on and the thing that we worry about the most, honestly, is product selection. That's sort of the number one thing for us, more than anything. And, you know, and mitigating potential risks as we make investments is really driven by, you know, really understanding the product, if it's a differentiated product or not, what value it brings to patients. Then the competitive landscape, you know, not over the next two, three years, but over the next five, 10, 15 years. And, you know, And then innovation, but obviously balancing that with the significant upside that can be derived from investing in blockbusters. And if you see historically our track record, what's been really consistent is our ability to find therapeutic classes that are going to become really important, drugs that are going to become really important, and then make several bets on many of these new therapeutic classes that are going to change people's lives. You specifically mentioned other things that you see as risks like CF, and I think we've been very clear about CF that from our perspective, First of all, we think we have a very solid position there and defensible position. And we've really looked at the IP situation there when we made our investment in 2014. And then again, when we acquired the residual interest that the Cystic Fibrosis Foundation had. And at that point, realized that we had a lot more knowledge about the IP situation when we made this last investment much more recently. And again, we were very comfortable with our position. That's why we spend another $600 million there. Now, Terry has done a great job explaining that the potential variance there to, you know, revenues, which are about $800 million currently and growing from that franchise, you know, are a couple hundred million dollars in a business, and this is sort of at the later part of this decade, in a business that, you know, should have, you know, much higher revenues than we have currently. Other things, competition. I think our position of strength increases as time goes by for many reasons. The team that we have, which is excellent, our cost of capital, and the scale our business has, which gives us a huge advantage. So I think I feel much better today. regarding our competitive position than even a couple of years ago, two, three, four years ago, when some of the new entrants came to market where they're very strong businesses, some of these private equity firms with access to a lot of capital and potential good teams. But as we've now been competing with them over the last two, three, four years, honestly, I think we feel very, very strong about market position so I think you know yes there are risks but one thing to just remember is that you know royalty pharma compared to many many other businesses and life sciences so has something which is really really unique that I think is not a not appreciated well by many investors or it's sort of underappreciated which is the fact that you know we come in and make this investment with a very, very attractive risk-reward profile because we're coming in with, first of all, with the approved product, the risk is obviously very low at that point. There is some risk, obviously, but much lower. And we have, based on our structure, an ability to make very attractive investments in approved products that, when we add the leverage, end up returning very high returns. And then with the unapproved, it's an approach of having a portfolio and having you know, many investments that, you know, have very, very significant upside potential. And when you look at our business in a nutshell, you know, it provides this ability to invest in this great industry in some of the most attractive therapies that are being developed on a diversified basis and with very, very low, you know, additional cost infrastructure costs, right? You know, very low overhead and not, you know, a lot of the sort of challenges that, um, you know, other companies face in terms of very high operating expenses, manufacturing expenses and other things. So I think, you know, um, overall, I think the risk reward is very attractive and tilted towards high, um, returns and, and also, uh, towards, you know, consistent sort of double digit top line and bottom line growth, which is very unique in life sciences. And it's predictable and it's, you know, um, uh, high, high, you know, um, high growth. So that's my answer to your question.

Thank you.

I would now like to turn the conference back to Pablo LaGreta for closing remarks.

Sure. Thank you, Operator. And thank you to everyone on the call for your continued interest in Royalty Pharma. If you have any follow-up questions, please feel free to reach out to George Grofik. Thank you, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11. Thank you. you So, Thank you.

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 Ureth, EVP, Head of Research and Investment, 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, Afrikampton, 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 biohaven 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.

Thanks, Pablo. Let's move to slide 12. The strong momentum in our business is underpinned by encouraging trends in the royalty market, as well as the fact that royalties are becoming a mainstream tool to fund innovation. Between 2015 and 2022, the number of royalty funding transactions increased more than six-fold to 27 deals, while the dollar value of transactions rose tenfold to $6.2 billion. Over that period, Royalty Pharma has maintained the leading share of the royalty market. In 2022, we accounted for more than half the dollar value of transactions and over one quarter of transaction volume, and we remain the clear leader in larger transactions. Slide 13. details the funnel of opportunities we saw in 2022. We reviewed more than 350 potential transactions. This resulted in 106 confidentiality agreements signed, 70 in-depth reviews, and 38 proposals submitted. Our disciplined and highly selective approach resulted in us executing nine transactions across six new therapies for just 3% of our initial reviews. This is consistent with our historical average in the low single-digit percentage range and reflects the exceptionally high bar we apply to royalty funding opportunities. Slide 14 shows the growth in our pipeline opportunity set. Between 2019 and 2022, we saw a 75% increase in initial reviews and in-depth reviews, and the value of the transactions we executed on increased by 58%. Clearly, the difficult equity market for biotechs in 2022 helped us. However, we've seen positive market trends for a number of years as royalty funding has become an increasingly mainstream funding modality. This supports our confidence in meeting our raised five-year capital deployment target that Pablo mentioned. And with that, I will hand it over to Marshall.

Thanks, Chris. On my next few slides, I want to discuss two recent transactions that brought us two exciting opportunities in the lipoprotein A, or LP little a class of cardiovascular medicine. Last month, we were pleased to announce a win-win partnership with Ionis. We acquired royalties on Spinraza, a blockbuster for spinal muscular atrophy, and Pelacarcin, an exciting development stage LP little a therapy for cardiovascular disease. Through this collaboration, we deployed $500 million upfront and committed up to $625 million in potential milestones. The unique deal structure provides an attractive risk reward for Royalty Pharma. Our interest in Spinraza, a blockbuster medicine approved in more than 60 countries with 2022 sales of $1.8 billion, supports the investment with a lower risk royalty. However, the really exciting part of the deal is the significant upside potential from Pella Carson, which Novartis has projected to have greater than $3 billion in peak sales potential. Pellicarson is the most advanced of the two leading clinical stage compounds in the LP little a class with Phase III cardiovascular outcomes data expected in 2025. On slide 17, I want to highlight that we also acquired royalties to the other exciting investigational therapy in the LP little a class, Amgen's Olpaceran. We acquired this royalty from Arrowhead Pharmaceuticals in November 2022 in exchange for a $250 million upfront payment and potential milestones of up to $160 million. The Phase II clinical data on Elpasteran is very encouraging and, as with Pelocarsin, a Phase III outcome study is underway, and this study is expected to complete in late 2026. Consensus expectations are that this new class of cardiovascular therapies will generate more than $4 billion of sales by the early part of the next decade, and there are many reasons to believe that these estimates could prove conservative. Slide 18 returns to our concept from our Investor Day last May. From a strategic perspective, the LP little a class exhibits two of our key investment themes. The first one is the idea of under-innovated large markets. The shift towards specialty markets over the last decade, with smaller patient population and higher price points, has meant that some of the incredible innovation that we've seen has not been applied to the same extent in some of the larger markets that are higher volume, but that still have significant unmet patient need. Cardiology is a great example of this, and the LP little a class has transformative potential. In addition, we have seen that targeted therapies can drive significant patient benefit in cancer. However, there's been comparatively less development of targeted therapies in therapeutic areas outside of oncology. So this is another theme that we're excited about. We think there's significant potential for patients to benefit from targeted therapies in areas such as cardiology, given the increased understanding of mechanistic drivers of disease. Our cytokinetics partnership is a good example as well. So why does Royalty Pharma believe in the transformative potential and in the multi-blockbuster opportunity for this class? First, LP little a is an independent cardiovascular risk factor supported by extensive data from genetic studies, among other sources of evidence. Second, there is huge unmet need. Over 8 million people worldwide have elevated LP little a in cardiovascular disease, and these people face a more than two-fold increased risk of cardiovascular events. Importantly, LP little a cannot be addressed by dietary modification or approved lipid-lowering drugs. Third, both Pellicars and Anilpaciran have been shown in Phase II studies to produce robust reductions in LP little a with encouraging safety profiles. And lastly, there are two well-designed outcome studies enrolling more than 14,000 people, which are expected to read out around the middle of the decade, supported by two of the strongest cardiovascular medicine companies in Amgen and Novartis. Taken together, we believe that LpA reduction could represent one of the next major frontiers in the treatment of cardiovascular disease and be a potentially important growth driver for Royalty Pharma towards the end of this decade and beyond 2030. On the next slide, I want to highlight Royalty Pharma's unique ability to invest in multiple products in a given therapeutic area. We have historically demonstrated this in multiple sclerosis, prostate cancer, migraine, and in the anti-TNF category. As a result of our Arrowhead and Ionis deals, we now have royalties on two important medicines for spinal muscular atrophy, as well as two leading investigational LP little a therapies. This unique ability to invest in multiple products in the most innovative therapeutic classes is clearly a differentiating feature of our business model. Moving to slide 21, AstraZeneca's Air Supra, formerly PTO27, was just approved by the FDA last month for the treatment of asthma. This is a first-in-class fixed-dose combination therapy that treats both the symptoms and underlying inflammation of asthma. This is another example of how our development stage portfolio can make important contributions to our business. We're entitled to a low single-digit tiered royalty on annual U.S. net sales, success-based milestones, and other potential payments. The market size is significant. In the U.S. alone, there are more than 25 million asthma patients and 71 million rescue inhalers used annually. Consensus currently projects AirSupra to approach $1 billion in sales by 2030. On slide 22, if we look at the early performance of our transactions since 2020, the picture is encouraging. For the approved therapies we recently acquired, the majority have seen increases to street consensus sales forecasts since the acquisition date, with several increasing by more than 40%. Although we, of course, invest based on internal forecasts, and we do not necessarily need products to outperform the consensus in order to achieve our return targets, nevertheless, this way of assessing the recent additions to our approved product portfolio is a directionally useful indicator to show that our bar for quality remains high. One disappointment within our approved product investments has been Govretto, a therapy which we and Roche fully impaired based on the updated commercial outlook for the products. For the development stage therapies, we have seen some important progress, such as the approvals of AirSupra and Averizdi and positive data readouts for Zovegipant and Trumfaya. However, Otilimab and Gentinarumab development has been discontinued, although we remain enthusiastic about the overall morphosis transaction, given the significant outperformance from Trumfaya. Lastly, we're excited for several important upcoming events in 2023 from these recent deals, including the potential approval of intranasal Zovegipant, phase three data from oral Zovegipant and migraine prevention, apicampin in obstructive hypertrophic cardiomyopathy, and tremphia in ulcerative colitis and Crohn's disease. With that, I'll hand it over to Terry.

Thanks, Marshall. Let's move to slide 24. Total royalty receipts grew 79% in the fourth quarter and 24% for full year 2022 versus the respective year-ago periods. Excluding the accelerated biohaven payment, royalty receipts grew 7% for Q4 and 5% for full year. The magnitude of growth in the fourth quarter reflects the accelerated Biohaven payment, together with strong contributions from Cystic Fibrosis Franchise, Xtandi, Tramphaia, and the Trilogy Royalty, which we acquired in July. We also saw growing royalty contributions from CaboMedix and from several medicines not shown on this slide, particularly Evrizdi, Trodelvi, and Orlodeo. These positive factors were partially offset by the loss of the DPP-4 royalties, by weakness in Imbruvica and, to a lesser extent, Tysabri, and by the adverse FX impact. Full-year growth was also partially offset by a decline in royalty receipts from the HIV franchise, which reached the end of its royalty term in 2021. Slide 25 shows how our efficient business model generates substantial cash flow to be redeployed. As you're aware, adjusted cash receipts is a key non-GAAP metric for us, which we arrive at after deducting distributions to non-controlling interests. This amounted to $1.1 billion in the quarter, or growth of 96% compared with last year's fourth quarter. For the full year, adjusted cash receipts were up $2.8 billion, or $2.8 billion, up 31%. As Pablo noted earlier, prior to the impact of the accelerated Biohaven payments, growth would have been approximately 12% in the quarter and 10% for the full year. As we move down the column, operating and professional costs were approximately 8% of adjusted cash receipts in the fourth quarter and for the full year. As a consequence, we reported 99% growth in adjusted EBITDA in the quarter and 32% for the full year, consistent with our top-line growth. When we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to adjusted EBITDA, less net interest paid. Net interest received in the quarter of $14 million reflected the semiannual timing of the payments on our $7.3 billion of unsecured notes, which occurs in the first and third quarters, and the strong cash position on our balance sheet, which benefited from higher interest rates. For the full year, net interest paid of $145 million included interest received of $25 million on our cash position. After the $50 million upfront payment for development stage funding of MK 8189, we generated adjusted cash flow, our bottom line, of $946 million, or $1.56 per share, for the fourth quarter. This resulted in an adjusted cash flow margin of 89%, once again highlights the efficiency of our business model. For the full year, adjusted cash flow was $2.2 billion, or $3.68 per share, and our adjusted cash flow margin was 80%. Let's move now to slide 26 in our financial position. We continue to maintain significant financial firepower for future royalty acquisitions. In 2022, we deployed $2.5 billion of capital on royalty acquisitions. as well as $461 million on dividends. This more than offset our strong cash flow generation over the year, so that our cash and marketable securities stood at $1.7 billion at the end of December. In the beginning of 2023, we deployed an additional $500 million on the IONIS transaction that Marshall described. If we adjust for this post-year end outflow, our leverage on a pro forma basis would have been 2.7 times net debt to EBITDA and 2.3 times total debt to EBITDA. As a reminder, the fixed rate average coupon on our debt is slightly above 2%, which compares to our target returns on royalty acquisitions in the high single digits to teens percentage range. I would also note that around 60% of our debt matures in 2030 or beyond. Taken together, we believe our cost of capital and debt maturity profile represent a durable competitive advantage for our business. Based on our financial strength and efficient business model, we remain confident in our ability to execute on our business plan and create value for shareholders. Slide 27 provides our full year 2023 financial guidance. We expect adjusted cash receipts to be in the range of $2.375 billion to $2.475 billion. This outlook does not include the $475 million milestone which we expect to receive from Pfizer if the FDA approves Zebegipant for migraine, which has a PDUFA date in the first quarter. However, if Zebegipant is approved and the $475 million milestone is included in our guidance, it would imply an adjusted range of $2.85 to $2.95 billion. I will explain the other key considerations underlying our top-line guidance in a moment. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account any future royalty acquisitions. Turning to our operating costs, we expect payments for operating and professional costs to be approximately 8% to 9% of adjusted cash receipts in 2023, slightly above the 2022 level. We continue to believe that the degree of margin protection provided by our unique business model is impressive in today's inflationary environment. Interest paid for full year 2023 is expected to be around $170 million and to follow the established quarterly pattern with the minimus amounts payable in Q2 and Q4. This does not take into account any interest received on our cash balance, which is particularly attractive at today's rates. Finally, we expect to make a $50 million milestone payment to cytokinetics in the second half of 2023 based on the company's guidance of initiating their pivotal trial of afacantin and non-obstructive hypertrophic cardiomyopathy. My final slide drills down further on our adjusted cash receipts guidance. The graphic is illustrative but sets out the various pushes and pulls behind our outlook for 2023. Starting with the left-hand side, we face a high base of comparison from the $458 million accelerated Biohaven payment, which we received in the fourth quarter of 2022. Since the preferred shares were redeemed, we will also no longer receive the quarterly Series A fixed payments, which is another $52 million annual headwind. This brings the underlying base for 2022 adjusted cash receipts to $2.28 billion. On the right side, If we start from the adjusted cash receipt base prior to Biohaven, we expect underlying growth of between 4% to 9% this year, which is expected to be largely driven by the CF franchise, Trilogy, and Trampaya, partially offset by the losses of exclusivity on the DPP-4s and Lexiscan, as well as in Bruvica Weakness. We also expect a modest contribution from three-quarters of Spinraza Royalties, Given the recent moderation of the U.S. dollar strength, FX is expected to represent a relatively modest headwind of minus 2% using today's rates. With that, I would like to hand the call back to Pablo for his closing comments.

Thanks, Terry. Let me close by saying how pleased I am with our strong performance in 2022. Not only do we enter 2023 with solid momentum, but our prospects have never looked better. To finish on slide 30, I would like to take a moment to remind you why Royalty Pharma's business model offers a unique way to invest in biopharma, maximizing exposure to many positive industry trends while minimizing exposure to many of its common challenges. We offer attractive diversification on the top line and bottom lines. We offer strong exposure to transformative therapies, including 15 therapies with more than $1 billion in end market sales, and many well-known brands in the industry. Our portfolio benefits from an average expected duration of approximately 13 years, exceeding many big pharma and large biotechs. From a financial return perspective, we have a track record of delivering consistent and predictable double-digit unlevered returns on deployed capital. When we think about industry challenges, we do not take on significant early-stage development risk which clearly differentiates us from biopharma. Also, we have no therapeutic area bias and minimal exposure to binary risks. The differentiated reward profile, combined with our strong financial position and powerful business model, is what makes Royalty Pharma a unique and, I believe, highly attractive investment proposition. With that, we would be happy to take your questions.

We will now open up the call to your questions. Operator, please take the first question.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Chris Shibutani with Goldman Sachs. Your line is now open.

Thank you very much. Good morning. Two questions, if I may. One in general about your funnel and certain characteristics of that that you're seeing, and another on your comment from Marshall on target therapies. On the funnel, we appreciate the updates and the historical trend starts with over 300, I think it was 350, and then you go through various levels of evaluation before you finally conclude on closing something that's in the low single digits. As you think about the mix, of what's entering the funnel in terms of commercial versus various developmental stages and how you go further down. Are you seeing that remain consistent or is there a bias or shift in particular as you notice the recent years? And then on the comment on the targeted therapy for cardiovascular and LPA, appreciated that from Marshall. I think it's interesting to see how that's evolving across other areas. therapeutic areas, immunology in particular. Marshall would love to hear your thoughts on how you're viewing how that could shape up. Large areas, we're seeing increased vocabulary around targeted therapy development there. Thank you.

Thanks for your question, Chris. And I'm going to ask Chris Height to answer your question on the funnel. But if you recall, one of the comments I made in my remarks is that over the last three years since our IPO, where we have deployed about $10 billion, the ratio has been 70 percent approved and 30 percent unapproved. Now, if you look over a longer period of time, it tends to be closer to 50-50 or, you know, 55-45, 55-approved, 45-unapproved. But, Chris, go ahead.

Yeah, thanks for your question, Chris. The answer to your question is things haven't really changed. We actually provided a great level of detail to answer that question at our analyst day last year. which looked at the reviews and in-depth reviews by approved and pre-approved products and by pre-existing royalties versus synthetic. And that really, that mix hasn't changed. But in general, the initial reviews are basically about 80% pre-approval and 20% approved drugs. And the in-depth reviews sort of is about 50-50. It's 55% pre-approved and 45% approved. And on the synthetic side, on the in-depth reviews, it's 60% synthetic, 40% pre-existing. That was in 2021, and the mix didn't really change in 2022.

And then, hi, Chris, good morning. On your second question on target therapies outside of oncology, Absolutely. I mean, this is why at the Analyst Day we highlighted this as an interesting theme that we think is gonna create some interesting new opportunities in the future. You know, we mentioned cardiology is a good example, but would agree with you, you know, in immunology, we're starting to see good examples of that. You know, neurology is another area where I think we'll see more and more of those. So, you know, definitely interesting something to watch. You know, although I would just take the opportunity to remind everyone, you know, when we talk about themes, you know, those are not necessarily themes that we're saying we're going out and actively looking for those opportunities today. We think those are really interesting thematically that guide our thinking over the long term. But I think our core strategy of staying focused on exciting opportunities that offer a meaningful benefit to patients' positions to the system and what we're seeing and getting access to those things overall is going to be the most important driver of our strategy.

Great. Thanks for the insights.

Please stand by for our next question. Our next question comes from Chris Schott with JP Morgan. Your line is now open.

Hi, good morning. This is Hardik Parikh in for Chris Schott. Thank you for taking our questions. The first one is, Just generally, one of your thoughts on the current deal environment. Are you surprised we haven't seen more deals given some of the funding challenges out there?

Sure. Thank you. And I'll ask Chris and Marshall if they feel appropriate to add to my comments. But I think we have definitely seen a very significant increase in our funnel, as you see from prior years. which reflects the challenging funding environment today in life sciences. And I think, you know, consistent with that, we have deployed significantly more capital than we had in the past. If you look at sort of the average deployment, you know, maybe at the time of our IPO, we were talking about something like 1.5 billion. We got it to 1.5 billion, 7 billion over five years. And obviously, the increased activity has enabled us to increase our guidance to more like 10 to 12 billion deployments over the next five years and, you know, to 2.5 billion guidance. Now, we reported today that we really deployed something like 3.5 billion last year. So it does reflect a lot more activity and significantly more capital deployed on our side. And I think the key thing for us, and we've been very, you know, clear about this with investors and analysts is that what really is critical is the quality of the underlying product. And while we have seen many, many more opportunities, discussions, at the end of the day, we remain very disciplined with our capital deployment. And that obviously results in and the deals we're excited about where we see significant, you know, upside and Marshall this morning talks about LP little a, which we think is going to be a very significant class. And we have two royalties now in the two, really the two drugs that are being developed for that cat. There's maybe a few others much earlier. What's interesting also is that, you know, we ended up having much larger royalties than we had historically in those two products. But anyway,

Yeah, the only thing I would add to that is I actually think, you know, the royalty market has been really robust. I mean, last year was a record year in 2022. As I said in my prepared remarks in the slide, 12 highlights, the number of transactions has grown sixfold since 2015, and the dollar value of those transactions is up tenfold since 2015, and last year was a record year for the market as a whole. So the level of activity is, you know, really strong. So we think there's real, and we think that growth is going to continue actually.

Thank you. Thank you.

Please stand by for our next question.

Our next question comes from Terrence Flynn with Morgan Stanley. Your line is now open.

Good morning. Thanks for taking the questions, too, for me. I was wondering maybe either for Pablo or Chris if you think the IRA is going to impact your analysis of royalty opportunities as you think about how to look at returns under this new law. And then maybe for Marshall, Again, I appreciate all the background on LP little a. Just wondering how you think about market creation here versus the PCSK9 drugs. You know, obviously those have been maybe less robust than people initially anticipated. So how do you think LP little a plays out relative to PCSK9? Thank you.

Sure. So regarding the IRA question, Chris is going to take that question and then Marshall can provide the other answers. But I think One very top-level comment regarding changes that are occurring in our sector is that, as you know, we have been incredibly creative in helping people address challenges, issues, problems. That just is a really good framework for us to try to work with companies to help them achieve their goals. Obviously, the challenges posed by IRA not only I mean, they end up also creating opportunities for us, but go ahead, Chris.

Yeah, thanks for your question. I would just comment that we've obviously seen some of it being implemented and the Part D redesign is going to be implemented now. The price negotiation, we'll have to wait and see how that's implemented and if there's any changes enacted specifically around the nine-year class. But we actually feel, I think what Pablo was highlighting is we feel we're uniquely positioned around these types of significant changes in the industry, given the fact that we can really sort of quickly adapt changes in the laws and price changes in how we make future investments. And I think that's really the key around the uniqueness of our business model is we're constantly deploying capital, as you've seen, and making new investments, and we can adapt quite quickly to the changes in the laws.

Marshall? Great. And so, Terrence, on your second question, yeah, thanks, on LP little a. So a few comments there. I think first and foremost, the most important thing in terms of creating that market is what the outcome studies show us. I think if those studies, as we certainly hope that they will show a significant cardiovascular event benefit, I think that's going to be a very strong driver of market formation there. You know, second important thing is, you know, and we highlighted this in the script, is that as opposed to the PCSK9 therapies where, you know, there are lots of ways to manage LDL, you know, here really the only option for meaningfully lowering LP little a are going to be these agents. So I think that does put them in a different category. And then lastly is, you know, there will be some market development around testing for LP little a, you know, that isn't except I think in some academic centers today, you know, a standard. But, you know, there I think the technology for the test is pretty straightforward. So once you check all the boxes in terms of having approved agents that show a clinically compelling profile, I think the need to help these patients from physicians and patients and their families is going to be a powerful driver of that market coming together. And we have, you know, two great companies in cardiovascular disease between Novartis and Amgen to make all that happen.

Thanks, Taryn. Alfred, next question, please.

Please stand by for our next question.

Our next question comes from Jeff Meacham with Bank of America. Your line is now open.

Hi, good morning. This is Susan on for Jeff.

Our question is, how will interest rate changes affect the company's net interest and expense income? And related to that, what are the company's underlying assumptions for 2023 changes in interest rates? Thank you for taking our question.

Thank you for the question. Terry, you should take that one.

Hi. So as we mentioned in the prepared remarks, we are in a very fortunate position where 60% of our debt matures in 2030 and beyond. And we're currently borrowing at very low rates. So we feel very fortunate there. Our guidance does not imply any additional debt. It's just the $7.3 billion we have outstanding at our current coupon of around 2.25%. As we look longer term, we do have a billion-dollar maturity towards the end of this year. And we are in a nice position there because we have a lot of cash flow coming in, particularly with the Biohaven acquisition. So we have some flexibility depending on how the pipeline plays out over the year. We could repay that debt. We could refinance. We could also use our revolver if the rate environment is not particularly attractive at that time because the revolver is prepayable. So I think we feel like we're in a very good position. We have plenty of access to capital. We have a nice cash flow generation and a strong balance sheet to be opportunistic and to deploy capital in great new royalties. So we feel very good.

Thank you, Susan. Operator, next question, please.

Please stand by for our next question. Our next question comes from Umar Rafat with Evercore. Your line is now open.

Hi, guys. This is Mikey Fiore in for Umar. Thanks so much for taking my question. I just want to ask on the recent deal regarding your acquiring a share of Ionis and Spinraza royalties. What are your views on the long-term prospects of Spinraza, especially given the fact that U.S. sales have struggled? although BID does note a possible ex-U.S. resiliency, and how much meaningful contribution do you envision for high-dose Spinraza as well as the adult SMA opportunity? Thank you.

Sure. Marshall.

Yeah, thanks for the question, Mike. You know, I think overall SMA is a market we've followed for years and I think looked at all of the major medicines there. You know, Spinraza being first-in-class, in disease has a very important role in the treatment paradigm for patients, their families, for physicians. And when we were doing diligence for Ionis, we took a fresh perspective there and definitely see a meaningful role for Spinraza into the future in the management of SMA around the world. So that was really our underlying view that supported the Ionis, the Spinraza portion of the Ionis investment. And given the unmet need for these patients, these patients do need options, and that's why we're really happy to be, to participate in Everisd as well as Spinraza. On the other two, on the high-dose Spinraza as well as adults, You know, whenever we make an investment, you know, we think about all of the scenarios and the high-dose data and, you know, continued expansion into adults, and we could see more, you know, competition from Zolgensma, the gene therapy, and adults as well in the future, and I think those were all things we contemplated. Although I would just remind you, you know, our royalty position – our royalty is only on sales up to $1.5 billion every year. So some of these things, high dose, et cetera, might have less of an impact on the portion of sales that we participate in because of the way that it's structured. But regardless, we always take a very scenario-based approach and think about how all of these could impact our investment. And we feel very happy to have Spinraza as part of the portfolio.

And maybe just to add, you know, if you look at the total capital deployed and, you know, just internally on how we allocated that $500 million, we're, you know, very comfortable with different scenarios materializing on Spinraza delivering, you know, our target returns for approved products, which are high single digit, low double digit. So, you know, that is obviously a very important factor aspect of this transaction. And then if you look at the capital that we allocated to the really exciting LP little a component of the transaction, that should provide very significant upside for us on this new class. So again, we approach this investment with a lot of discipline and really making sure that each investment on its own was going to deliver attractive returns, unlevered returns. Obviously, Spinraza also has this characteristic that we can lever that with our very low cost of debt, which enhances dramatically the returns for us. Thanks so much.

Please stand by for our next question. Our next question comes from Ashwani Varma with UBS. Your line is now open.

Hi. Good morning. Thanks for taking our questions. The first one on just the cystic fibrosis franchise. So the VANZA triplet, the Phase III Skyline studies that are expected to complete by the end of this year. Just curious, like, what are your thoughts on how the profile can stack up against Trifecta? And is it possible that the arbitration process for the royalty on the triplet can get started with the Phase III top line, or is that something that can only begin when the product launches? Second question, so it's a... After a little bit of a while that the biotech market has started to open up a little bit since the start of the year, just curious if you think that is going to impact your deal activity this year.

Terry, do you want to take the first part of the question and maybe Chris the second one?

Sure. So with regard to the new Vertex Triple, I think I would just reiterate what we've said previously that Trikafta sets a very high bar, and we expect that Trikafta will continue to be a very important contributor to Royalty Pharma over the long term. We saw the same Phase II data that everyone else saw, and I think at this point it would be challenging to say that the new triple is clearly differentiated. But we'll need to see the full Phase 3 data, including the long-term safety as well, to really understand that. In terms of your question around legal strategies, we just haven't elaborated at this point, and I think we'll continue to evaluate the situation and update investors at the appropriate time.

And with regard to your second question on if the equity markets came back strong and opened up for the biotech sector, would that impact our deal activity? You know, I think what I would say is, just going back to that slide 12 we had in our presentation, just shows the growth of the market, generally speaking. And it's really been a change of mindset, I believe, in the biopharmaceutical sector, broadly speaking, between large pharma, mid-cap pharma, biotech, where considering royalty monetization or synthetic royalties as a piece of your capital structure is an evolution that's happening right now in the sector. And so whether the markets are really strong or not so strong, we think, you know, the mindset has been sort of evolving. And so we don't really see that impacting our deal activity. There's been a, you know, just an evolution of the growth of this market as potentially a piece of the capital structure.

If you actually look at this with a bit more perspective over the last 10, 15 years, we went through some incredibly strong equity capital markets for biotech, where huge amounts of capital were raised by the industry. And we still did incredibly well in those years, deploying multiple billions of dollars of capital every year in really exciting products. So I think the comment that Chris made is really key here, because if the equity market were to be more favorable again in the near term, the underlying really important shift in the way companies are funding themselves, which now includes royalties, is a really strong tailwind we have for our industry. And then in addition to that, the other area where we're very excited about, where we see a lot of potential interesting transactions and potentially transformative product is with big pharma. And that is an example of that is the transaction we did with Merck at the end of the year. And we're very encouraged by that because we're having discussions with many companies about potentially funding attractive products. And it's a question also of just, again, continuing to have discussions with management teams, explain how funding with royalties is beneficial to them. And that's a really important underlying trend. But thank you for your question. Thanks.

Please stand by for our last question. Our last question comes from Steven Scala with Cohen. Your line is now open.

Thank you very much. I have two questions. The current trajectory of ibrutinib is increasingly concerning. I am wondering if you believe AbbVie guidance adequately captures all risks, and how are the challenges similar to or different from what you expected three years ago? The second question is a little bit bigger picture for Pablo. It is clear that Royalty Pharma's business has great momentum, a bright future, and is very consistent. But many quarters, including this one, you get questioned about potential risks, such as IRA and or competition, which you were asked about, the CF situation with Vertex, which you were asked about. Other quarters, you get asked about competition and sometimes even adverse tax legislation. Now, these are real risks, but they're just manageable from your perspective, and therefore your answers tend to be kind of high level. But since they are risks, I am wondering if you would be willing to rank them by your perception of the challenge they represent to the company over the long term. And to provide a reference point, please allow me to speculate on the order. So I think probably CFS at the top. competition two, IRA and innovation number three, and adverse tax legislation is last. Thank you.

Sure. So I guess Terry will take your first question, and then I can come back and provide some perspective on, you know, this bigger strategic question.

Yeah. Hi, Steve. So in Bruvica, we – certainly have been disappointed by the recent commercial performance of that product. And like many people, we had expected it to be more resilient in the face of competition. But we do take the recent trends on board, and we continue to make sure we understand what's going on in that market. And I think that our guidance, I don't want to really get into or have an opinion on what Abby has said, but I can speak to what we include in our guidance, and we have taken what we think is an appropriately conservative approach to our guidance, including all of the recent trends. And we obviously look at a range of scenarios, but certainly for this asset, that range of scenarios based on recent trends has been more focused on the downside. So that's probably all I can say on Imbruvica specifically at this point.

Yeah, and also just a reminder, if you look at that investment in Imbruvica and when we made it and the purchase price of our royalty interest and the expectations we had at the time, which were a couple billion dollars for the drug, it vastly exceeded those sales expectations. I mean, even the sales that are maybe likely in the future, as it continues to decline, are meaningfully above what we had forecasted. So from a return perspective, that investment for us has been a really big winner. But I think talking about how I think about long-term the strategic opportunities and risks for Royalty Pharma. I think the biggest, the thing that always is the most important thing we focus on and the thing that we worry about the most, honestly, is product selection. That's sort of the number one thing for us, more than anything. And, you know, and mitigating potential risks as we make investments is really driven by, you know, really understanding the product, if it's a differentiated product or not, what value it brings to patients. Then the competitive landscape, you know, not over the next two, three years, but over the next five, 10, 15 years. And, you know, And then, you know, innovation, but obviously balancing that with, you know, like the significant upside that, you know, can be derived from, you know, investing in blockbusters. And if you see historically our track record, what's been, you know, really consistent is our ability to find – therapeutic classes that are going to become really important, drugs that are going to become really important, and then make several bets on many of these new therapeutic classes that are going to change people's lives. You specifically mentioned other things that you see as risks, like CF, and I think we've been very clear about CF, that from our perspective, First of all, we think we have a very solid position there and defensible position. And we've really looked at the IP situation there when we made our investment in 2014. And then again, when we acquired the residual interest that the Cystic Fibrosis Foundation had. And at that point, realized that we had a lot more knowledge about the IP situation when we made this last investment much more recently. And again, we were very comfortable with our position. That's why we spent another $600 million there. Now, Terry has done a great job explaining that the potential variance there to revenues, which are about $800 million currently and growing from that franchise, are couple hundred million dollars in a business and this is sort of at the later part of this decade in a business that you know should have you know much higher revenues than we have currently other things competition you know I think our position of strength increases as time goes by for many reasons you know the team that we have which is excellent our cost of capital and and you know the scale our business has which gives us a huge advantage So I think I feel much better today regarding our competitive position than even a couple of years ago, two, three, four years ago when some of the new entrants came to market where, you know, they're very strong businesses, you know, some of these private equity firms with access to a lot of capital and, you know, and potential, you know, good teams. But as we've now been competing with them over the last two, three, four years, honestly, I think we feel very, very strong about our market position. So I think, yes, there are risks. But one thing to just remember is that Royalty Pharma, compared to many, many other businesses and life sciences, has something which is really, really unique that I think is not appreciated well by many investors, or it's sort of underappreciated, which is the fact that, you know, we come in and make this investment with a very, very attractive risk-reward profile because we're coming in with, first of all, with the approved product. You know, the risk is obviously very low at that point. There is some risk, obviously, but much lower. And, you know, we have, based on our structure, an ability to make very attractive investments in approved products that when we add the leverage end up returning very high returns. And then with the unapproved, it's an approach of having a portfolio and having many investments that have very significant upside potential. And when you look at our business in a nutshell, it provides this ability to invest in this great industry, in some of the most attractive therapies that are being developed on a diversified basis and with very, very low you know, additional cost, infrastructure costs, right? You know, very low overhead and not, you know, a lot of the sort of challenges that, you know, other companies face in terms of very high operating expenses, manufacturing expenses, and other things. So I think, you know, overall, I think the risk-reward is very attractive and tilted towards high returns and also towards, you know, consistent sort of double-digit top-line and bottom-line growth, which is very unique in life sciences. And it's predictable, and it's high growth. So that's my answer to your question.

Thank you.

I would now like to turn the conference back to Pablo LaGreta for closing remarks.

Sure. Thank you, Operator. And thank you to everyone on the call for your continued interest in Royalty Pharma. If you have any follow-up questions, please feel free to reach out to George Grofik. Thank you, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.