Royalty Pharma Reports Q1 2026 Results: Full Earnings Call Transcript

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Royalty Pharma (NASDAQ:RPRX) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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View the webcast at https://edge.media-server.com/mmc/p/krhn6s78/

Summary

Royalty Pharma PLC reported a strong start to 2026 with a 10% growth in portfolio receipts and 13% growth in royalty receipts, driven by a diversified portfolio and strategic investments.

The company announced $1.25 billion in transactions on three therapies, repurchased 1 million shares for $50 million, and increased its dividend by 7%.

Royalty Pharma PLC expanded its portfolio through R&D co-funding agreements with Teva and J&J, and acquired a royalty on JAZ and B1 Sahara, an approved cancer therapy with blockbuster potential.

Future guidance was raised, expecting full-year portfolio receipts between $3.325 billion and $3.45 billion, reflecting strong business momentum.

Operational highlights include positive clinical and regulatory updates, such as Phase 3 results for Revolution Medicines in pancreatic cancer and FDA approval of Denali’s Avia in Hunter Syndrome.

Management emphasized the growing opportunity for R&D co-funding and the strategic importance of expanding their global platform and capabilities, including investments in AI and the Asia Pacific region.

Full Transcript

OPERATOR

Ladies and Gentlemen, thank you for standing by. Welcome to the Royalty Pharma first quarter 2026 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.

George Grofik

Thank you for joining us to review Royalty Pharma’s Royalty Pharma’s first quarter results. You can find the press release with our earnings results and slides for this call on the Investors page of our website at royaltypharma.com on slide 2. 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. We refer you to our most recent Form 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 results and 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 3. Our speakers on the call today are Pablo Legorreta, Chief Executive Officer and Chairman of the Board, Chris Hite, Chairman, Partnering and Investments, Marshall Urist, Executive Vice President Head of Research and Investments and Terry Coyne, Executive Vice President Chief Financial Officer. Pablo will discuss the key highlights, after which Chris will discuss the growing opportunity for R and D co funding. Marshall will then provide a portfolio update and Terry will review the financials following concluding remarks from Pablo. We will hold the Q and A session and with that I’d like to turn the call over to Pablo.

Pablo Legorreta

Thank you George and welcome to everyone on the call. I am happy to report a strong start to 2026 as we execute towards our goal to be the premier capital allocator in life sciences with consistent compounding growth. Slide 5 summarizes our strong business momentum in the first quarter starting with the financials. We delivered 10% growth in portfolio receipts, our top line, and 13% growth in royalty receipts which are our recurring cash flows. The sustained double digit momentum was driven by strength of our diversified portfolio. We also maintained strong returns in our business with returns on invested capital of around 14% and returns on invested equity of around 20%. By combining strong growth and attractive returns, we’re confident that we have a clear path to drive shareholder value creation. Turning to capital allocation, we had a busy quarter with 1.25 billion of announced transactions on three attractive therapies while capital deployed was in excess of half a billion dollars. We also repurchased 1 million shares for 50 million in the quarter and increased our dividend by 7%. Moving to our portfolio, we’re thrilled to see a number of positive clinical and regulatory updates, including the extraordinary Phase 3 results for Revolution Medicines in pancreatic cancer and FDA approval of Denali’s Avlaya in Hunter Syndrome. We also expanded our portfolio through R and D co funding agreements with Teva, which we discussed on our previous earnings call, and recently with J and J for their autoimmune therapy. 4804 Chris will highlight the growing market opportunity for R and D co funding with Global Biopharma. Lastly, we were pleased to acquire a royalty on JAZ and B1 Zihera, an approved cancer therapy with blockbuster potential. Looking ahead, we’re increasing our 2026 full year guidance based on the strong business momentum I just highlighted. Slide 6 is one that I keep coming back to each quarter as it demonstrates our consistent double digit growth on average since our IPO. We have delivered this impressive record year in, year out regardless of the market backdrop. This speaks to the quality of our investment selection and our unique business model. In the first quarter we also took major steps to strengthen our global platform and capabilities in partnering the Asia Pacific region and Artificial Intelligence. We have brought in exceptional new leaders to our team with Greg Botts, Ken Sun and Lucas Glass. Their expertise will support our long term growth ambitions and help to strengthen our competitive modes as the undisputed leader in the biopharma royalty market. Chris Hyde, who has served as our Vice Chairman throughout our journey as a public company, has moved into a new role as Chairman partnering in investments. In this role we will continue to expand our global relationship network and play a central role in transactions. Chris has been an incredible partner and I am delighted that he will continue to provide strong leadership and leverage his relationships in this role. With that, I will hand it over to Chris.

Chris Hite

Thanks Pablo. I’m genuinely excited about the new capabilities we’re building and the opportunity to forge even stronger, more meaningful relationships across the biopharma ecosystem. For my section today I want to focus on the major opportunity we see for R and D co-funding with Global Biopharma. Beginning on slide 9, we see R and D co-funding as a win win solution for Global Biopharma and for Royalty Pharma. This market has enormous potential with over 1 trillion of cumulative projected R and D spend by Global Biopharma in the next five years. Co funding arrangements allow Biopharma to share risk at scale, to enhance program return on investment, to expand R and D capacity and to diversify diversify pipelines. From Royalty Pharma’s perspective we see multiple potential benefits. These include unlocking a new market opportunity, gaining access to high priority clinical programs, leveraging our partners global development and commercialization expertise, and the ability to conduct deep diligence to drive high conviction in our investments. Slide 10 illustrates the strong momentum for this funding modality. The demand by biopharma was impacted by accounting uncertainty last decade, but over the last several years more clarity around contra R&D accounting treatment has resulted in a surge for co-funding deals. As an example, in the first quarter alone we signed deals with Johnson & Johnson and Teva totaling 1 billion in announced value. On the right hand side of this slide you can see that the number of global biopharma companies that have utilized this funding modality has doubled since 2020, which underscores the growing acceptance of this form of funding. Slide 11 shows our capital deployment mix by funding modality and how this has changed over time and where we see it heading in the future. At the start of the 2000s we were a business focused almost exclusively on acquiring existing royalties. Today, existing royalties remain a stable and important component of our capital deployment, but we have evolved into a more diversified with a growing emphasis on providing capital through innovative funding structures, most notably synthetic royalties with emerging biopharma companies which has been a key growth driver. While R and D co-funding with large biopharma companies has historically represented a smaller share of our activity, we see a clear opportunity to scale this significantly in response to increasing demand. Importantly, this shift creates meaningful upside potential. In addition, potential business from acquiring existing royalties that have originated in China, where we are actively building a platform, represents another avenue for future growth that could drive the existing royalty market significantly. Slide 12 highlights the number of the R and D co-funding agreements that we have entered into since 2022. Together, these five highlighted deals at the time of announcement have the potential to provide up to $1.8 billion in capital to our partners, including up to $1 billion alone in the Teva and Johnson & Johnson transactions that we announced in the first quarter this year. As I previously noted, as you can see, these deals check the core elements of our investment framework. Specifically, each transaction involves a biopharma with deep clinical expertise and global commercial infrastructure and provides royalty pharma with royalty rights to a potentially transformative therapy covering a diverse range of indications. On slide 13, I want to close by highlighting why we are so confident that Royalty Pharma is well positioned to scale R and D co-funding. Remember that we have been partnering with biopharma for approximately 30 years as we pioneered the royalty market. When we think about the depth of our relationships, our brand reputation, our responsiveness and our flexibility and structuring royalty Pharma is the clear leader. In addition, we take a long term view with royalties and milestones paid over many years and we have a cost of capital similar to Pharma so we can offer competitive pricing and win more deals. For these reasons we expect to be able to capitalize strongly on this tremendous growth opportunity in the coming years. With that, let me hand it over to Marshall.

Marshall Urist (EVP Head of Research and Investments)

Thanks Chris. I want to focus today on several exciting updates to our portfolio. First, our recent royalty deal for Zihera, an approved cancer therapy. Second, the incredible Phase three data that was recently disclosed by our partner Revolution Medicines for Duraxan, Rasib and Pancreatic cancer and third, a look forward to important upcoming events across our broad development stage portfolio. Beginning on slide 15. We entered into a strategic funding agreement in March with Zymeworks where we provided $250 million upfront in return for 30% of their royalty on jazz and B1 Zihera which translates to a low to mid single digit royalty for Royalty Pharma. For those less familiar, zahera is a HER2 targeted bispecific antibody which is FDA approved for a rare tumor metastatic biliary tract cancer. From a patient and commercial perspective, the real excitement here is that Zihero was recently submitted for approval in gastric cancer which represents a particularly high unmet need with a five year survival rate of less than 10%. The pivotal study in this indication demonstrated an impressive five to seven month or nearly 40% overall survival advantage over currently available therapies. In our view, this positions Zihera to become the standard of care in this very tough to treat indication supporting blockbuster potential consensus models include peak sales of Zahira of greater than $2 billion. Based on this outlook, we expect the transaction to deliver attractive returns with an unlevered IRR in the low double digits. Moving to Diraxan Rasib on slide 16, Revolution Medicines recently reported unprecedented results from the Rasalute Phase 3 trial and second line pancreatic cancer. On our last earnings call I said that Daraxan Rasib has the potential to revolutionize this devastating disease and these Phase three results certainly support this. The key headline is that Dirax and Rasib nearly doubled overall survival from just under seven months with chemotherapy to over 13 months. These are truly remarkable outcomes for patients in a disease that has seen no true innovation for decades. The next step for Revolution Medicines is to submit for approval by global regulatory agencies, including the fda, under the Commissioner’s National Priority Voucher that has the potential to speed the time to approval in terms of the implications for Royalty Pharma. As a reminder, we agreed in 2025 to provide up to $2 billion in long term funding to Revolution Medicines to help the company aggressively pursue clinical development and commercialization of Dirax and Rhasid. With the positive data Royalty Pharma has now invested a total of $500 million for a synthetic royalty that begins at 4.55% on sales up to $2 billion and then tiers down from there. Based on consensus peak annual sales of greater than $10 billion, we expect peak potential annual royalties to be in the range of approximately $180 million based on the currently funded amount of and up to $340 million if they draw the additional $750 million of synthetic royalty funding. We are excited to see what the future holds for this incredible medicine backed by a phenomenal team. Next I’ll turn to our development stage pipeline and upcoming events. We’re exceptionally well positioned for our next wave of value creation with a deep and innovative pipeline. Slide 17 shows that in addition to Dirax and Rasib, our portfolio has delivered a number of successful clinical readouts and regulatory approvals already in 2026. Just yesterday we were thrilled to see the positive top line results for Mycorzo in its pivotal trial in non obstructive hypertrophic cardiomyopathy. Other highlights include positive clinical trial results for xenesis obexilumab in IgG4 related disease, positive phase 2 results for Biogen Zolidifilimab in cutaneous lupus, FDA approval of Denali’s Avlaya in Hunter syndrome and the filing of new valence Neladelquib in Alk positive non small cell lung cancer. As you can see, there are plenty more events anticipated this year and we expect these to lead to several new royalty generating launches in 2026 and 2027. To highlight positive news on one of our pipeline products, last week Teva announced the acquisition of MLX for up to $900 million, with regulatory submission planned for MLX’s Echo Pipem for Tourette’s in the second half of the year. As a reminder, Royalty Pharma is entitled to royalties of 6% on EchoPipam sales up to $400 million and and 10% on sales of $400 million or greater and we are excited to see EchoPipem in the hands of Teva, a marketer with deep commercial expertise in neuroscience. Expanding on this theme, slide 18 shows that there is much more to come from our development stage pipeline with multiple major pivotal readouts expected over 2026 and 2027. Over the remainder of 2026, we’ll see the results of the outcomes trial for Novartis. Paulo Carson we continue to believe that the LP class can be the next major class of drugs in cardiovascular disease, and we’re perfectly positioned with the two lead pipeline products in Pelocarsen and Amgen Zolpasiran. We’ll also see phase 3 data for lidifilimab in systemic lupus. In 2027, we expect pivotal data from Sanofi’s fraxelumab in multiple sclerosis and from JJ Seltzorexant in major depressive disorder. We also expect phase three results from Diraxan Ratib in non small cell lung cancer and Glitofilimab in cutaneous lupus. Each of these potentially transformative therapies would add significant royalties to our top line. So to close we see tremendous potential for our pipeline to unlock substantial value in the near term. With that, I’d like to hand it over to Terry.