Royalty Pharma plc

Ladies and gentlemen, thank you for standing by. Welcome to Royalty Farmer's second quarter earnings conference call. I would like now to turn the conference 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 Farmer's second quarter 2024 results. You can find the press release with our earnings results and slides to this call on the investor's page of our website at royaltypharma.com. Moving to slide three, I'd 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 a 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 liquidity measures will be used to help you understand our financial performance. The reconciliation of these measures to our GAAP financials is 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, Marshall Uris, EVP, Head of Research and Investments, Chris Tite, EVP Vice Chairman, and Terry Coyne, EVP Chief Financial Officer. Pablo will discuss the key highlights, after which Marshall and Chris will provide portfolio updates, highlighting three important recent transactions. Terry will then review the financials, and 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 a successful quarter of execution against our vision to be the leading partner funding innovation in life sciences. Slide six summarizes our strong business momentum in the second quarter. In terms of the financials, we delivered 12% growth in portfolio receipts, our top line. This was significantly above our guidance of high single-digit growth, which we provided last quarter. the bedrock of this strong performance was an impressive 11% growth in royalty receipts. This represents our recurring cash flows and are driven by our high-quality portfolio of more than 35 commercial products. Turning to capital allocation, we had a very active quarter for new royalty transactions. Capital deployment was approximately $2 billion, including the cash to be paid for U.S. royalties on Varanego. which was just approved a couple of days ago. In addition, we continue to pursue our balance capital location strategy, and we stepped up the pace of share repurchases given the disconnect of our share price with our strong fundamental outlook. Looking at our portfolio, we acquired royalties on six therapies in the quarter, including one approved and five development stage therapies. More specifically, We increased our royalty exposure to the blockbuster Ebrisi for spinal muscular atrophy and to Africampton, an exciting cardiovascular therapy, which is expected to be filed with regulators imminently. Chris will expand on those details as we, as well as highlight the multiple upcoming events for our development stage portfolio, which has the potential to unlock significant value for royalty pharma. In this regard, we were pleased to see FDA approval of Voronego this week, as well as the positive phase three results for celtorexant in depression and for Trenfaya and Crohn's disease, all of which could represent important new growth drivers for Royalty Pharma. Lastly, I'm happy to report that we're raising our full year 2024 guidance by 3% at the midpoint. following our excellent performance in the first six months of the year, driven by the strong momentum of our diversified portfolio. We now expect portfolio receipts to be between $2.7 billion and $2.775 billion. This is based on expected growth in royalty receipts of around 9% to 12%, which compares with our previous guidance of 5% to 9%. Consistent with our standard practice, this guidance is based on our current portfolio and does not include the benefit of future transactions. Slide seven shows our impressive track record of strong growth since our IPO. As I noted earlier, we delivered 11% growth in royalty receipts in the second quarter. Taken together with our double digit performance in royalty receipts in the first quarter, This sets us up well to deliver our new full-year guidance. This consistent track record of strong growth speaks to our ability to execute successfully against our strategy in the growing market for biopharma royalties. Slide eight shows that we continue to be the clear leader in the market for large royalty transactions, with two more transactions north of $500 million announced this year. Of the 26 royalty transactions to date valued at $500 million or more, we have executed 20 with a market share of 77%. You will also note that half of our transactions have taken place in the four years since our IPO. This, in part, reflects an important competitive advantage of our business, namely our scale and rapid access to substantial capital. It also reflects the talent and creativity of our team as we strive to create win-win solutions for our partners in the growing biopharma royalty market. Finally, it reflects the acceleration of the biopharma royalty market as a whole, where we are the clear market leader. With that, I will hand it over to Marshall.

Thanks, Pablo. I want to focus today on the value of repeat business to our model and why we are so excited about acquiring a royalty on survey aids for our side NIP, now available commercially as for Inigo. Slide 10 shows an important aspect of what differentiates us from our competition, namely repeat business with our partners. Recently, we completed our second transaction with IGS and our third transactions with cytokinetics and PTC. If we go back further, we have a strong track record over nearly two decades of completing multiple transactions with our partners. Slide 11 shows that of the approximately $15 billion of transactions we have announced since 2020, around $6 billion, or nearly 40%, has been with repeat partners. Our partner-centric approach is one of our core values at Royalty Pharma. It brings multiple benefits, including speed of execution and in-depth knowledge of both product and our partners. resulting in a higher probability of transacting both the first and subsequent deals as our partners grow over time. Slide 12 summarizes our recent transaction with IGS to acquire their royalty on U.S. net sales of Servier's Boronigo, which we believe has blockbuster commercial potential in the treatment of low-grade glioma. We will pay $905 million following Boronigo's FDA approval on Tuesday, which was based on the remarkable Phase III results and high unmet patient needs. We are entitled to a 15% royalty on US sales up to $1 billion, which steps down to a 12% royalty on sales greater than $1 billion. Furthermore, For Inigo has a long duration of patent protection with royalties through 2038, and we forecast peak sales greater than $1 billion and expect an IRR in the teens. Importantly, For Inigo is another great example of our ability to consistently execute large transactions, as we have completed 10 transactions of $500 million or more, and four transactions of $1 billion or greater just since our IPO in 2020. As Pablo discussed earlier, we have strong competitive advantages which have allowed us to remain the clear market leader for large royalty transactions. Slide 13 provides an overview of why we think Guarnico could represent a blockbuster commercial opportunity. First, there's high unmet patient need with overall survival of approximately 10 years for relatively young patients with low-grade glioma, and no approved targeted therapies. Second, IDH mutations are estimated to drive low-grade gliomas in over 70% of patients, resulting in an estimated 1,500 incident and 10,000 prevalent U.S. patients addressable by Boronigo. Third, we expect Boronigo to have a long duration of treatment of over two years, given the median 27 months of progression-free survival in Phase III and manageable safety profile. Fourth, There are no other potentially competing therapies in late-stage clinical development. We have performed deep due diligence, including a comprehensive demand survey, which indicates physician excitement for Voronigo and expected broad and deep uptake across many subsets of low-grade glioma patients. Lastly, given that low-grade glioma patients tend to be relatively young and Voronigo's orphan status from the FDA, we do not expect any impact from the IRA. We see additional upside from the launch ramp, duration of therapy, and depth of prescribing across patient segments and low-grade glioma.

And with that, I'll hand it over to Chris.

Thanks, Marshall. I want to expand on a recent transaction involving Evaristi and Affey-Campden and highlight the broader potential of our growing development stage pipeline. Slide 15 highlights our growing partnership with PTC on Evaristi. We gained our first exposure to this exciting therapy in 2020 when we acquired 43% of PTC's royalty interest for $650 million. In 2023, we entered into a second royalty transaction with PTC. In this case, in return for an upfront payment of $1 billion, we acquired 67% of PTC's remaining royalty. It also extended the royalty duration to 2035 to 2036 from the early 2030s. Importantly, this transaction included a joint option structure for the remainder of PTC's royalty interest. This would allow PTC to sell all of its residual royalty to us by the end of 2025 in return for a $500 million payment less royalties received. In June of this year, as part of that option structure, we made our third investment in return for a payment of $242 million we acquired additional royalties on EverISD, which we will start to receive in the third quarter of 2024. This new investment is expected to deliver an unlevered return in the low double digits. In total, it takes our investment to $1.9 billion across the three transactions and increases our effective royalty rate to 7.2% to 14.5%. This makes EverISD the third largest investment in our history, after cystic fibrosis and typhoid. Furthermore, the option structure means PTC retains the right to sell the remainder of its Everisde royalties to us by the end of 2025. For those less familiar, Everisde is the global leader in the treatment of a rare disease called spinal muscular atrophy, or SMA. Roche recently reported in the first six months of 2024 of approximately $940 million, growing by 25%. Given that consensus forecasts are tracking to 3 billion plus by 2030, we now expect to receive annual peak royalties on Everisd of around $350 million. Slide 16 is another great example of repeat business and highlights how we have strengthened our longstanding partnership with Cytokinetics, including our May 2024 transaction we have provided access to more than $1 billion in total funding across three deals. As a reminder, cytokinetics recently presented the pivotal phase three results for apicampin, which we believe demonstrate its potential to be the best in class therapy for hypertrophic cardiomyopathy. Following our most recent transaction, we are now entitled to a 4.5% royalty on net sales up to $5 billion and a 1% royalty on sales above $5 billion. Based on research analyst consensus, AFI-Campson has the potential to generate peak annual royalties for Royalty Pharma in excess of $180 million. We've also provided launch and development funding, of which $200 million has been drawn, and an additional $350 million remains available. The return on this funding is based on fixed payments expected to range between 1.9x to 2.4x over time. Taken together, our third transaction with Cytokinetics highlights our ability to structure creative funding solutions and underscores the breadth of our funding capabilities. On slide 17, I want to now move to the multiple important clinical and regulatory events which we expect for our exciting development stage portfolio over the next 12 months or so. In particular, I would point to the upcoming FDA action dates for CAR-XD and schizophrenia, and TRIMFIA and ulcerative colitis, and Crohn's. FDA and EMA regulatory filings for afecantin, and long-term safety data for TEVA-749 and schizophrenia. We also expect the Phase 1-2B results for roshistrantinamab and Alzheimer's before the end of this year. And in 2025, we expect outcome data for Pella Carson, which has the potential to be a very significant royalty for our portfolio. As you can see, these events have the potential to unlock very significant value for Royalty Pharma. Slide 18 shows our late-stage development pipeline by potential peak sales and the associated royalties we could expect to receive. As you saw on my previous slide, Many of these assets will have major potential de-risking events in the next 12 months or so. Importantly, the programs listed here all have first or best-in-class potential and are supported by world-class marketers. The majority have multi-blockbuster potential, and in aggregate, we estimate the combined fee sales at over $25 billion on a non-risk-adjusted basis. Based on the respective royalty rates, this could potentially translate to over $1.2 billion in annual peak royalties to Royalty Pharma, with Frexalamab and Olpatherin potentially being the largest individual contributors. We expect many of these products to contribute to our attractive compounding growth in the years ahead. With that, I would like to hand it over to Terry.

Thanks, Chris. Let's move to slide 20. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 11% in the second quarter, reflecting the strength of our diversified portfolio. The key drivers of growth were the strong performance of our base business, notably our Cystic Fibrosis franchise, Trilogy, Trimfiya, and Evrisdi, including a modest contribution from milestones and other contractual receipts. Portfolio receipts are top line. grew by 12% to $608 million. As we move down the column, operating professional costs equated to 7.9% of portfolio receipts. Net interest received at $14 million reflected the semiannual timing of our interest payment schedule, with payments falling due in the first and third quarters. Moving further down the column, we've consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to adjusted EBITDA plus net interest paid, or as we call it, portfolio cash flow. This amounted to $574 million in the quarter, equivalent to a margin of around 94%. This high level of cash conversion once again underscores the efficiency of our business model. Capital deployment in the second quarter was $951 million, and as Marshall highlighted, we will pay $905 million this month following the FDA approval of Oronigo. This would take our total for the year to approximately $2 billion. Slide 21 shows that we continue to maintain significant financial capacity for future royalty acquisitions. In total, we have approximately $3 billion available through a combination of cash on our balance sheet, the cash our business generates, and access to the debt markets. At the end of the second quarter, we had cash and equivalents of just under $1.8 billion. Following the $905 million payment related to Voronego, this will take our cash and equivalents to $860 million on a pro forma basis. When we turn to our borrowing position, we issued $1.5 billion of notes in the second quarter, which increased our outstanding investment-grade debt to $7.8 billion, with a weighted cost of debt of 3.1%. Our weighted average maturity is around 13 years, which aligns with the duration of our royalty portfolio. Our total and net pro forma leverage now stands at around three times, and we have stated that we would be prepared to take our leverage up to four times if the right opportunity arose. Furthermore, we have the additional undrawn financial capacity from the $1.8 billion revolver. As Pablo noted, despite a busy quarter for royalty acquisitions, we also took advantage of the fundamental disconnect in our share price and stepped up the pace of share repurchases in the second quarter. On a year-to-date basis, we have spent $115 million on buyback. Slide 22 is a reminder of our capital allocation strategy and how we expect this to drive shareholder value creation. At our investor day in 2022, we outlined that over a five-year period through a combination of cash generation and our debt capacity, we expected to have access to around $20 billion of capital. As you can see on this slide, we expect to deploy the majority of our capital on value-enhancing royalty acquisitions. with a target of $10 to $12 billion invested over the period. As many of you are aware, we are on track to meet or exceed this target, having announced transactions of $9.4 billion with actual capital deployment of $6.6 billion since 2022. The difference represents contingent payments uncertain of our investments. We aim to balance this primary focus on royalty acquisitions with returning capital to shareholders through a combination of dividends, and share repurchases. Regarding the latter, the board authorized a multi-year share buyback program of up to $1 billion in March of 2023, of which we had spent just over $400 million to date. While investing in royalties is our number one priority, we use our share buyback program tactically for repurchases when we see a disconnect between our intrinsic value and the current stock price. We believe our intrinsic value is well in excess of the current stock price. And as a result, we have repurchased $115 million of our shares from the second quarter through today. By executing against this capital allocation strategy, we are confident we will continue to deliver on our mission of accelerating innovation in life sciences while generating strong returns and creating significant shareholder value. Slide 23 provides our raised full year 2024 financial guidance. We now expect portfolio receipts to be in the range of $2.7 to $2.775 billion. Let me walk you through our assumptions. First, within our top-line guidance, we expect to deliver growth in royalty receipts of around 9% to 12%. The increase from our previous guidance of 5% to 9% reflects the strong momentum of our diversified portfolio. Second, when we move to portfolio receipts, we face a high base of comparison as a result of the $525 million of Biohaven-related payments we received last year. Milestones and other contractual receipts are therefore expected to decline from around $600 million in 2023 to approximately $30 million in 2024. Lastly, our guidance assumes a negligible foreign exchange impact. Importantly, and consistent with our standard practice, This guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisition. Turning to operating costs, payment for operating professional costs are expected to be approximately 8% to 9% of portfolio receipts in 2024. Interest paid for full year 2024 is expected to be around $160 million with a de minimis amount to be paid in Q4. This does not take into account any interest received on our cash balance, which was $21 million in the first six months of the year. It also does not reflect the interest payments on the $1.5 billion of notes issued in June of 2024, for which the first payment is due in the first quarter of 2025. To close, we are very pleased to be able to raise guidance based on the excellent momentum of our diversified royalty portfolio. and continued successful execution against our strategy. With that, I would like to hand the call back to Pablo.

Thanks, Terry. Let me begin my concluding remarks by saying how proud I am of the performance in the first six months of 2024. We delivered double-digit growth in royalty receipts. We strengthened our portfolio, including our exciting development stage pipeline. and we maintained our leadership position in the royalty market, which is growing rapidly and being driven by powerful secular tailwinds. My final slide highlights our incredible track record of consistently identifying exciting waves of biopharma innovation and finding ways to participate. The roster of therapies listed here include some of the most transformative and commercially successful in the history of our industry. from retoxin, the first monoclonal antibody for cancer, to Gilead's HIV franchise, to Humira, to more recent life-changing therapies, such as Trikafta for cystic fibrosis, or Ebrisdi for spinal muscular atrophy. And when we look ahead, we expect to see a number of the exciting therapies we'll discuss today join this list, transforming the lives of patients with brain cancer, cardiovascular disease, multiple sclerosis, schizophrenia among others the ability to identify new waves of innovation and to constantly replenish our portfolio with novel transformative therapies is in our DNA taken together with a simple but powerful business model and our deep access to capital we're confident we will continue to deliver attractive compounding growth over the remainder of this decade and beyond with that I We would be happy to take your questions.

Thank you.

Operator, please take the first question.

Thank you. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw the question, please press star 1-1 again. And the first question will come from Chris Shubatani with Goldman Sachs. Your line is now open.

Great. Thank you very much. Appreciate the strong performance and the guidance raised here. One aspect that everyone is keen to understand is how you're seeing the outlook in terms of what's available to you. I know you have a consistent model, scientific discipline, but what are you seeing in terms of receptivity, valuations, opportunities, just the general environment overall to continue to gather more royalties? Thank you.

Thank you for the question. And I'll ask Marshall maybe to add, or Chris, maybe Chris is the better one, to add a little bit to what I'm going to say. But I think there's two key things that are happening with our business. One is the massive capital needs that innovation requires in life sciences, you know, both from the biotech ecosystem, 8,000 or so biotech companies out there, and the large pharma, which, you know, in some of our materials in the past, We actually have quantified this at about 200 plus billion dollars invested per year in R&D and life sciences. And, you know, so it's a massive figure growing. There's another 100 billion invested by academic institutions, but, you know, that's not something we fund. That's funded by government. But when you look at the investment by the corporate side, it's this 200 billion that is required every year. When we look at the, you know, decade that is in front of us, we're talking about a $3 billion, $3 trillion, you know, capital need to fund the ecosystem. So that's one thing. The second thing that is definitely an important driver is the acceptance today among biotech companies of using royalties to fund late-stage clinical trials, what we call synthetic royalties, that has developed in a very attractive way. There's so many companies now that know that this is a very attractive way to fund their business and that reach out to us. Or we go out and visit them, get to know them, and have discussions with them about funding their business. And then there's also, you know, now real acceptance from the side of the big pharma to drive, you know, this growth. And you've seen us do transactions with Merck for this schizophrenia program. recently with Teva and other schizophrenia drug and other transactions. But, you know, that's my answer to your question. Chris, do you want to add anything to that?

Sure. Thanks, Pablo, and thanks for the question, Chris. The deal pipeline continues to be very robust. The timing of new acquisitions is always, as you know, difficult to predict and can be highly variable, but we have shown over our history that that we can deploy a lot of capital, particularly over a multi-year period. And that's really the way we encourage you to think about it. And just as a reminder, we've deployed about $10.4 billion since 2020 and announced transactions of about $14.7 billion since 2020. And the value of those transactions has increased every year. And if you think about our deal funnel, we've seen a significant increase in opportunities as witnessed by our in-depth reviews in 2023, up over 130% since 2019. So we're super excited about the quality of the deals that we've done and certainly the one in the opportunity set that we're looking at currently.

Great, thank you.

And our next question comes from Chris Schott with JP Morgan, your line is now open.

Hi, this is Hardik Parikh in for Chris Schott. Just wanted to ask about, you issued about $1.5 billion of debt in June, and you just said you're willing to kind of raise that leverage to about 4x. How do you think about raising additional debt going forward as you invest beyond your internal cash flow and then you know, if this deal kind of flow continues to exceed your internal targets, is the Forex a reasonable probability?

Right. Thank you for the question. Perry, one of you take this question, please.

Yeah, so just a reminder, you know, we're fortunate that the business generates pretty significant cash flow every quarter. And so that's going to be the first source of, you know, how we're going to fund new investments. But you know, over time we have used leverage when the right opportunities come along. And when I put out that, when I mentioned that four times number, that's for, you know, if there was a large acquisition that came along that we needed to fund and we were really excited about it, then we would take it up to four times. But that's certainly not the level that we plan to operate at. You know, over the last couple of years, we've been in the low threes or even lower than that. So, you know, I think that that's probably more of a normal range. But, you know, from time to time, we will take it higher if the right opportunities come along.

And by the way, that higher level of leverage is totally consistent with our investment grade rating, which is really, really important to us.

All right. Thank you.

And our next question comes from Terrence Flynn with Morgan Stanley. Your line is open.

Great. Thanks for taking the questions. Maybe two for me. Slide 18 was very helpful in terms of framing the future opportunity for some of the pipeline assets here. LP little a, you know, represents about a third of the revenue opportunity based on your numbers. So maybe just, you know, a question for Marshall, you could remind us in your confidence level in seeing positive phase three data from Novartis next year. And then the second question relates to the CF franchise. Vanzacafter has a PDUFA date in January now. So any update on timing of when we might have visibility on how the royalty situation might play out here with Vertex? Thank you.

Marshall, the first question that Terrence suggested is for you, and the second one for Terry, please.

Yep. Good morning. Thanks, Terrence. Good question. So on LP little a, just as a reminder, Just as a quick reminder for everyone, this is an emerging new class of cardiovascular drugs. We actually have two opportunities in this space from the two leading programs, one from Novartis' program in Pell Carson, where we expect outcomes data sometime next year, and then Amgen's program, Olpasteran, which we expect data the following year in 2026. And it is an exciting opportunity that we eagerly await the data. I point to a few things that we see as attractive. I think, first of all, both drugs provide pretty profound reductions in LP little a. So the data to date on the biomarker is really compelling. Second, there's a lot of clinical epidemiological genetic data that links LP little a to risk of cardiovascular disease and having cardiovascular events. Finally, you know, if you look at what's in LP little a, it does have a lot of parallels to LDL, which is obviously a highly validated target. And so you put all of that together, and I think we're really excited about seeing that data over the next couple years. But I think an important thing to just to keep in mind, if you take a step back about our pipeline chart, is Certainly, LPA is LP little a is exciting and could be a meaningful contributor for us, but as we continue to build the portfolio, we will continue to add other really exciting pipeline opportunities like that, like you've seen us do this year with Frexalamab, for example, and that's just part of our business that we'll continue to add and continue to build to the portfolio with really exciting opportunities.

And then, Terrence, on your question on the VANZA triple, There's no update from our side on timing there, but just as a reminder for everyone, we provided in the past a sensitivity to just walk through the various different sort of scenarios that could play out here. As you all know, we're paid on all three components of Trikafta. There is a debate with the new VanzaCaptor Triple on whether we're owed royalties on the deuterated ivocaster component of that triple. We believe we are, but that is an area, you know, of debate. And, you know, we feel very strongly about our position there. But what we've also said is that, you know, if we are wrong and the royalty, we are not owed a royalty on that portion, which, by the way, would take our royalty to 4% on the new triple, versus 8% if we are owed a loyalty. But if we're wrong and there's significant share conversion, 50 to 75% conversion to the new triple over time, that the impact on our top line would be a couple hundred million dollars. And so, you know, from that perspective, when you think about the growth of the business and all of the assets that we're adding and the, the, the growth that's embedded from the, from the new assets. I mean, if you look at our pipeline today, we highlighted that one over $1 billion of potential new royalties there. So, you know, this, this is, this is something, you know, we, we feel good about our, our position, but, um, you know, if it's a couple hundred million dollars either way, and it's not going to be particularly material over the longterm for royalty pharma.

And the next question comes from Michael DeFore with Evercore. Your line is now open.

Hi, guys. Thanks so much for taking my question, and congrats on the continued progress this quarter. Two questions for me. One regarding the CD19 development for autoimmune indications. It continues to become more widespread. Wondering if you're seeing any collaboration opportunities in that space, especially since most companies seem to be starting their development on equal footing here. And separately, with regard to your portfolio receipt guidance on slide 23, it says that it reflects a range of scenarios for the launch of Promactor generics and biosimilar Tysabri. So to the extent that you can, could you elaborate further on this, especially if your current thinking about the competitiveness of biosimilar Tysabri has changed? Thank you.

Sure. So, Marshall, why don't you take the question on CD19? And then Terry will take the question on the guidance and the contributors to the growth

Absolutely. Mike, good morning. So, on CD19, we agree with you. You know, we've been watching closely all of the really exciting clinical data that's been emerging there between the cell therapies and biospecifics, and certainly something that, you know, we are continuing to follow and understand kind of how the various players and the various programs are going to play out. And we will certainly look for opportunities that make sense for us in that space, because the data is certainly compelling. But we're going to stick to the approach that we've had in terms of building the portfolio, which is being educated and smart about emerging science, really exciting emerging science like that, but also having our discipline where we wait for the right thing to come along, where we can really drive a win-win for us and our partner.

But Certainly not locked on us, all the exciting innovation that's happening there.

And then, Mike, on your question on the guidance, we were really excited to raise the guidance. And I think it just speaks to the strong momentum of our portfolio. But like all businesses with as many products as we have, there are some that face various headwinds. So the two that we called out were Promacta and Tysabri. We don't have, we don't have, you know, perfect visibility, um, on, you know, when, uh, potential generics of Promacto or biosimilars of, of Tysabri could launch. And so that's why we, you know, wanted to, wanted to make sure that we highlighted, um, and we basically go, you know, for, in those situations, we, we have the same information that you do. So we're, we're going off of what the companies have said. And, um, so we highlighted that you know we did we do look at sensitivities around those potential biosimilar potential launches of competitive products um in the case of face fabric i think one of the things that we've highlighted in the past is that this is a unique product and we think that it's going to be more durable over time um just because of some of the unique aspects of that product we've seen it's been holding in well outside of the U.S. despite biosimilar competition. And, you know, I think we, you know, but it does seem like it's coming in the U.S. And so, you know, we'll be watching that closely as well.

Very helpful. Thank you.

And the next question comes from Michael Nedelkovich with TD Cohen. Your line is open.

Thank you. Thanks for the question. My question is on CAR-XT. I'm curious if you have a sense whether we've passed the point at which we might expect the FDA to ask for an advisory committee. And when it comes to competition, particularly from other muscarinics, do you have a base case assumption around what we should expect long-term and more imminently from the readout on Ceravel's compound, now AbbVie's compound? Thanks.

Sure. Marshall, this is a question for you.

Absolutely. Good morning. Thanks for the question. So I think on your first question on CarXP and some of the specifics around the adcom, I think that's certainly a better question for Bristol. And second, on competition, I think what's happened with CarXP is you know, is exactly the kind of opportunities that we hope to create when we invest in really important new medicines like CoreXT and more broadly thinking about your question about competition, about the competitive landscape in this class where, you know, this is a first-in-class of an exciting, of a medicine with really, you know, with a really profound impact on patients. that is now in the hands of Bristol, which has the company to really maximize its impact on patients and create the most attractive commercial opportunity possible. So certainly when we made this investment, we assumed there would be others in this class just given what was visible in the pipeline and the importance of this mechanism. But I think we are really excited to be part of this product, a really great additional portfolio, and we're excited to see what's going to happen with it commercially in the launch. And Bristol also, in terms of their public statements, you know, it seems like they share that enthusiasm.

And our next question comes from with UBS. Your line is open.

Hey, good morning. This is on behalf of Ash from UBS. Thanks for taking our question. I just want to ask, have you considered maybe splitting your fund into two different investment entities? Clearly you are rich like a large scale and have like a lion's share of the royalty investment market. Just if you look into the active like asset management space, a lot of like large at scale funds have like a right to capacity constraint and split into like two like like hero and capital groups. So, like, for instance, if you were dividing up your portfolio into, like, commercial only and clinical only drugs, do you think, like, you can get your creditors provide you better terms perhaps?

Thanks. So, Chris, do you want to take this question? I think in terms of getting our lenders and the rating agencies to give us, you know, better terms, actually the lenders better terms than their rating agencies to give us, you know, a better rating. I think, you know, the business we have is so strong. You know, like when you look at Royal Forman, compare us to many other players in life sciences, companies in life sciences, we have a really incredible portfolio with I think 15 or 16 blockbuster products, you know, that is like, When you look at the big pharmas, they typically have more like 10. We have 15 or 17, like 1.5 to 1.7 times more buckbusters in our portfolio than the big pharmas. And then we have super, super strong diversification, like really well-diversified portfolio, better than even some of the big pharmas that may be more reliant on one or two products for the vast majority of their – for more than half of the revenues – So I think, you know, in terms of our credit rating and our cost of debt capital, it's pretty efficient. It's very, very attractive. But, Chris, I'll pass it on to you for the other parts of the question.

I think you covered it, Pablo. I think that covers the answer there. Good. Thank you.

All right. Great. Thanks. Thank you.

And our next question comes from Chris Schott with J.P. Morgan. Your line is now open.

Hey, guys. This is Hardik again. Just had one more question. On Waring, you mentioned peak sales estimates of $1 billion, and I was just wondering how do you kind of see those sales ramping? So is there like a bolus of patients that can lead to a very quick launch, or on the other end, is there some more kind of groundwork that has to be laid for the launch?

Yes, thank you. Marshall, you should take this question. Absolutely.

Yeah, thanks for the follow-up question on Bornego. We're obviously really happy to see the approval this week and the strong label behind it. And, you know, we're excited to see Servier launch the product. So specifically with your question about the commercial potential, and, you know, we talked about a billion dollars in peak sales. You know, there are, you know, there are multiple, there are kind of multiple ways and multiple drivers that play into that. I think you asked about one about ramp, like we mentioned, you know, they're one of the attractive things that we thought about this opportunity was that it wasn't just about incident patients. who are coming on therapy, there are a lot of prevalent patients, you know, who are existing out there, who are following up with watch and wait with their doctor, who we believe could come on to therapy in the relatively near term. So, you know, we do think that's an exciting opportunity, but you know, like we always do when we look at products, we considered lots of different scenarios. So, like we mentioned, you know, there are, you know, certainly there's the core glioma indication. There are some, you know, some indications around that, some patient populations around that. that are also attractive. And then we talked about duration of therapy as another important driver here that has some upside, that has upside as well, potentially. So, you know, there's lots of ways I think that Voronega is going to help patients, but also be an attractive commercial opportunity, and we're looking forward to the launch.

Thank you again.

I show no further questions at this time. I would now like to turn the call back over to Pablo for closing remarks.

Thank you, operator, and thank everyone on the call for your continued interest in Royal Pharma. I'll just close by saying that the team at Royal Pharma and myself are incredibly excited about many things going on with our business. One is the very strong performance. You saw us increase our guidance. just now in the middle of the year by a meaningful amount over $100, $175 million on the $2.6, $2.7 billion base. We're also super excited about the opportunities we're seeing in very high quality assets and our ability to continue to dominate this market. Very excited about the very strong relationships we're building with management teams in the biotech and pharma and our continued ability to partner with them and deploy capital and believe that when you look at the price today of our stock, there are significant upside because it really only reflects the value of our portfolio. And this business has really two components, the portfolio that we own and then the ability of this team that um you know helps me run the business um and they're uh you know very strong uh qualifications their experience their the network the connections they have uh throughout the industry and that come to work every day at royalty pharma to uh deliver for you our investors and make this a great uh business and successful business over the very long term so i'll finish with that um And just say that if you have any other 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.