DRI Healthcare Trust

Good morning, everyone. Welcome to DRI Healthcare's 2026 Second Quarter Earnings Call. Listeners are reminded that certain statements made in this earnings call presentation, including responses to questions, may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and a due reliance should not be placed on such statements. Certain material factors include or assumptions are applied in making forward living statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward statements, please consult the MD&A for this quarter. the Risk Factors section of the Annual Information Form and DRI Healthcare's other filings with Canadian Securities Regulators. DRI Healthcare does not undertake to update any forward-looking statements. Such statements speak only as of the date made. Today's presentation also references non-GAAP measures. The definitions of these measures and reconciliations to measures recognized under IFRS are included in our earnings, new release, as well as in our MD&A for this quarter, both which are available on our website and our CEDAR+. Unless otherwise specified, all dollar amounts discussed today are in U.S. dollars. I want to remind everyone that this conference call is being recorded today, Monday, August 10, 2026. BRI quarterly results news release and the slides from today's call will be available in the investor page of the company's website at brihealthcare.com. I would now like to introduce Mr. Ali Hedayat, CEO of BRI Healthcare. Please go ahead, Mr. Hedayat.

Thank you, operator, and good morning, everyone, and thank you for taking the time to join us today. With me on the call are Naveen Jacob, our Chief Investment Officer, and Zahid Malani, our Chief Financial Officer. On the call today, I will provide a recap of our second quarter highlights. Naveen will then discuss our portfolio assets and share insights into our market outlook, and Zahid will cover off our key financial highlights for the second quarter before moving on to Q&A. We are pleased to have delivered another solid quarter. posting record financial performance with double-digit growth across total income, cash receipts, and adjusted EBITDA. We continue to see a validation of DRI's approach to pre-approval assets over the past months with the monetization of our external investment and the approval of the LigraTag, demonstrating the payoff of our thought leadership in structuring attractive risk return outcomes in that segment. From a top-line perspective, we delivered royalty income growth of 8%, contributing to our total income of $50.1 million, which was up 13% year-over-year. Royalty income growth was led by the inclusion of Ectorly, as well as strong performances from Bongeau, Omidria, and Zolaire, partially offset by slightly softer results from Marservu and Rydat. Notably, our royalty income also included a $450,000 milestone payment from Zempazine this quarter. X milestones, our royalty income growth was 7% year over year, and total income was up 12%. I also think it's worth stepping back to look at the two-year stack. Our focus over the past eight quarters has been on optimizing our operating model for durable compounding growth. Over this time horizon, royalty income has grown from $41 million in Q2 of 2024 to $48.2 million this quarter, up nearly 18% cumulatively. Total income has grown even faster, up more than 20% over the same comparative period. Our expense structure generated strong operating leverage in the quarter as we continue to execute and realize our expected internalization synergies while operating with cost management discipline. Our adjusted EBITDA margin is tracking slightly above our internal expectations due to the high incremental margin from the adjusted cash receipt outperformance we are showing versus our internal expectations this quarter. I would like to touch on interest expense for a moment, as it's higher year over year on a reported basis, and I don't want that to be misread against the refinancing work we completed in the first quarter of this year. In Q2, our reported total interest expense of $9.3 million reflects a 2.5% increase year over year. However, this increase includes transaction costs related to our recent financing initiatives. Excluding these costs, our interest expense would have been $7.9 million in the quarter, representing an approximately 6% reduction year over year. Interest on our credit facility borrowings came down meaningfully quarter over quarter, reflecting the benefit of the lower cost, more diversified capital structure that we put in place with the senior notes private placement and the debenture issuance. That's the underlying trend I want to point you to. Closing out our operating performance, all in, our adjusted EBITDA margin for the quarter was 92%, up meaningfully from the 82% that we posted in the second quarter of last year, on a normalized basis. Looking ahead, we maintain our view that adjusted EBITDA margins in the second half of the year are expected to be in the high 80s to 90% range. Operationally, I'd like to share the latest developments surrounding our Ectorly investment. In June, Chiesi Group completed the acquisition of CalVista Pharmaceuticals, which constitutes a change in control under our royalty agreement with CalVista. Subsequent to the quarter, we exercised our put option on Ectorly for a total net repurchase price of approximately $178 million, creating a significant and immediate realized return of 1.5x and high 20s IRR for unit holders. Subject to the terms of the royalty agreement, we expect to receive payment by approximately mid-August. While the extra redisposition may reduce our portfolio receipts in the near term, On a portfolio level, we expect to benefit from the compounding effects of bringing forward that capital for redeployment, meaningfully creating additional value for unit holders. Also in June, we were pleased to see the approval of Viridian's Valygritog, now named Lumbola, by the FDA. With Lumbola's approval, we made a milestone payment of $75 million to Viridian, which was partially funded via our acquisition credit facility. This marks an exciting milestone for us, and we will begin earning royalties in Q3 with receipts collected on our one-quarter lag. Together, the Exterly and Lumvo outcomes demonstrate our underwriting team's discipline and specialized expertise across the full cycle of an asset, from regulatory approval to realized returns for unit holders. Let me take a moment now to share some thoughts on where we stand strategically, because I think it speaks directly to the work this team has done over the past several quarters. As we've discussed on prior calls, we've been deliberate about optimizing our balance sheet and diversifying our sources of capital. That work has put us in a position of considerable strength today. We have a robust balance sheet and a strong liquidity position, and I want to be direct about what that means operationally. We are not constrained by cash at this time. That gives us real flexibility in how and when we deploy capital without being limited by our funding position. It also allows us to participate in meaningfully larger acquisitions than we have done historically. The second point I'd highlight is the composition of the portfolio itself. We currently have no Phase 3 approval risk anywhere in the book. Every pre-approval asset we have held has cleared that hurdle, which meaningfully derisks our forward return profile and is a good reminder of the discipline and unique expertise behind how we structured these transactions from the outset. Taken together, a strong balance sheet, ample liquidity, and capacity to add pre-approval risk puts DRI in an advantageous position for new deployments. We're actively evaluating a range of assets across the market today, and based on what we're seeing in our pipeline, we expect to complete a transaction in the second half of this year. We'll continue to apply the same underwriting discipline that has served us well, but as we go into this next chapter of deployment, we are doing so from a position of real strength. To conclude my remarks, given we're at the midpoint of the fiscal year, we believe that we are on track to deliver towards the high end of our 2026 adjusted EBITDA guidance. Our financial performance year-to-date together with the balance sheet work and portfolio de-risking, only reinforces our confidence in achieving our targets, as well as further buoying our confidence in the longer-term 2026 through 2030 financial aspirations. Before I hand the call over, I'd like to take a moment to thank our entire DRI team for delivering another outstanding quarter. Now, let me pass the call over to our Chief Investment Officer, Naveen Jacob.

Thank you, Ali. Touching first on our portfolio performance, Slide 7 shows the individual royalty receipts for the second quarter of 2026 compared to the same period in the previous year and the previous quarter. Our portfolio generated total cash receipts of over $46 million, an increase of $6.3 million, or 16% versus Q2 2025. The increase was driven by several factors. First, a $3.7 million increase in assertive from growing sales in the European market. Second, over $2 million of receipts earned from HectorLeaks which, as a reminder, has no receipts in Q2 of last year. Third, the Zempozine milestone payment received in Q2-26 triggered by the achievement of a certain performance threshold. These increases were partially offset by a $0.6 million decline in major receipts due to declining sales volume, as well as a $0.5 million decline in Zyteco receipts due to the generic entry in the European market. Turning to the specific individual product performance, let me start with Casgetic. As a reminder, we already received our entitled annual license fee of $5 million in the first quarter. Our entitled sales base fee is incurred when sales are over $1 billion, and as such, we do not anticipate any more receipts for Casgevery in 2026. Performance for the product is strong, and we see two sources of upside relative to our acquisition estimates. First, on the regulatory front, Casgevery received U.S. FDA approval on July 1st for pediatric patients 2 and older with severe sickle cell disease or transfusion-dependent beta thalassemia. This label expansion adds roughly 5,500 patients in the U.S. who are now eligible for CasJavi, with the first pediatric patient already having initiated therapy. Second, general performance of CasJavi has been better than our initial expectations. To date, there have been more CasJavi infusions in the first half of 2026 than in all of 2025, with the second quarter representing the third sequential quarter with over 100 patient initiations. EarthMix reported Q2 26 sales of $76 million for Kestrel. Overall, the product is launching between one to two years ahead of our expectations, and as such, we are not confident there is a decent probability of receiving at least one more sales-based payment versus our original underwriting. Looking now at EctoV, we recorded cash receipts of $2.2 million in Q2 26, which is ahead of our acquisition forecast. To build on Ali's earlier comments, Ectorly represented precisely the kind of asset that showcases the type of discipline I conviction investing dare I can deliver. From the outset, our research identified Ectorly as a compelling opportunity, which at the time of our investment was a differentiated, non-consensus conclusion. A strong, realized outcome is a direct testament to the rigorous diligence process our investment team applies in every decision, to make on behalf of our unit holders. The recent initiation of a put option allows DRI to crystallize an exceptional return on this investment while providing us with significant flexibility and drive powder to pursue for future opportunities with the same conviction. We're extremely proud to have partnered with CalVista and its outstanding management team throughout this journey, and we want to recognize the tremendous work they have done in bringing this novel drug to patients. As X-Ray continues its next chapter on the Chiesi Group, we wish the entire Chiesi team unlimited success in the years ahead. Amidria Q2 26 royalty receipts declined by 7% from the previous year. As a reminder, Amidria is on a 60-day lag, and as such, our Q2 royalty receipts reflect a mix of Q1 and Q2 sales. Q2 receipts were in line with our previously discussed updated estimates. Q2-26 imagery sales, which exhibited year-over-year growth of positive 9% versus Q2-25, was slightly ahead of our updated expectations. Even though we have now seen two quarters of sales growth in the mid-to-high single-digit range, we maintain our previously discussed expectation of flat or no growth for annual sales of imagery over the next few years. Moving to assertive. ERI recorded wealthy receipts of $16.6 million in Q2-26, a robust 29% year-over-year increase versus Q2-25 due to accelerating sales momentum in the European market. As we have stated before, our acquisition forecast assumes 2025 would represent peak sales given anticipated competitive pressures from other oral certs and novel PI3K inhibitors. Performance to date in 2026 has held up better than expected, with Q2 26 sales implying $17.6 million of royalties, which will be paid in Q3 26. Q3 will be a pivotal marker for the investment, as this is when we will fully recoup our initial capital outlay for Assertive 2, well ahead of our original expectations. Recall we already recouped our initial outlay on Assertive 1 a couple quarters ago. As we've discussed before, we're closely monitoring several ongoing Asuru lifecycle management studies that, if successful, could unlock substantial upside beyond our original acquisition thesis, extending the growth run rate for this asset even further into the future. Benraza Q226 cash receipts were down 2% year-over-year, mainly due to shipping issues impacting inventory to certain international markets. Biogen reported worldwide spend rather Q226 sales of $402 million, a modest increase of 2% year-over-year versus Q225, and was in line with our expectations. Q226 sales should translate to approximately $3.7 million of royalty receipts in Q326. Monjo Q226 cash receipts, which reflect Q126 sales, rose 11% year-over-year driven by stocking in the U.S., partly offset by order phasing in the international region. Though we recently reported Q2-26 sales of approximately $34 million, which should translate into royalty receipts of approximately $3.9 million in Q3-26. As a reminder, we revised our expectations downward on Bonjo in Q3-25, and this quarter's results track in line with the updated forecast, reinforcing our confidence in the reforecast trajectory for the asset. So we have several life cycle management opportunities for Bonjo, including the Pacifica Phase 3 confirmatory study in myelofibrosis with severe thrombocytopenia. So we have confirmed that Pacifica completed enrollment in April, which, if successful, could be used for regulatory submissions of propritinib Bonjo in the EU and Japan. So we have also indicated that the Paxos Phase 2 trial evaluating Bonjo in vexus syndrome is also progressing. This indication was not contemplated in our original acquisition forecast. On Semp Design, we recorded $3.3 million of royalty receipts for Q2-26, which is a marked increase versus the prior year, driven largely by strong overall growth and milestone income as previously discussed. Sanity reported worldwide Semp Design sales of $74 million in Q2-26, which is ahead of our expectations. Turning to Slide 8. As we announced, Lumbola, formerly known as Bellagortub, received FDA approval on June 26, 2026. This milestone triggered a $75 million payment, which we paid to Viridian in Q3 26. Lumbola pricing is set at parity with the current market leader, Tepeza, on a per-course basis. Thus, the pitch to physicians and patients rests on clinical strength and convenience. Based on key opinion leader feedback, where a competent Lumbolus launch will be built on real clinical differentiation. It is the first approved therapy with both active and chronic thyroid eye disease data in its label. Furthermore, it has shown rapid proptosis and diplopia responses in both settings. Lumbolus treatment is also shorter and more convenient. Five infusions over 12 weeks versus a longer, more burdensome regimen for defesa. Viridian expects it will take six to nine months for Lumbola to reach broad access for U.S. patients, with revenue becoming more meaningful as they enter 2027, once a permanent J-code is in place, which is expected to be available by Q1-27. On Eligrobar, recall Viridian released top-line data from Reveal 1, a study in patients with active thyroid eye disease, also known as TET. During Q2, Viridian released positive top-line results on Reveal 2 in patients with chronic TET, The client-set data was slightly better than our expectations and perhaps a more relevant data set when considering the potential for Elagabar. Kronika is a highly under-penetrated market, thus Reveal 2 provides Viridian the opportunity to fully maximize Elagabar's potential as the first true subcutaneous auto-injector in the market. In summary, our outlook for Elagabar, and of course Limboa, remains very positive. In closing, I'd like to touch on thoughts regarding the market and our positioning for 2026. It has been DRI's strong belief that royalty financing would become a more common or mainstay method of raising capital. Our thesis appears to be materializing. During the second quarter of 2026, despite more than 60 equity deals across the United States and Europe for a total of $16 billion raised by biopharma companies, we tracked at least eight royalty deals for a total of approximately $1.7 billion in announced value. On a trailing 12-month basis, the size of royalty deals is at least $5.3 billion, roughly flat versus the same period ending in Q2 2025, despite the robust rebound in the biotech equity capital markets. Five former boards and management teams are recognizing the value creation that royalty financing can provide to the ecosystem. I will now turn the call over to Zahid Mawani to review our second quarter financial performance.