Royalty Pharma plc
02/11/2026 | Press release | Distributed by Public on 02/11/2026 08:05
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand our results of operations, cash flows, other changes in financial condition and business performance. MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes to our consolidated financial statements included in our Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Special Note Regarding Forward-Looking Statements and the section titled "Risk Factors" in Part I, Item 1A.
Royalty Pharma plc is a public limited company incorporated under the laws of England and Wales. "Royalty Pharma," the "Company," "we," "us" and "our" refer to Royalty Pharma plc and its subsidiaries on a consolidated basis. Our principal asset is a controlling equity interest in Royalty Pharma Holdings Ltd ("RP Holdings"), a private limited company incorporated under the laws of England and Wales. We conduct our business through RP Holdings and its subsidiaries.
Business Overview
We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. Since our founding in 1996, we have been pioneers in the royalty market, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry's leading therapies, which includes royalties on more than 35 commercial products, including Vertex's Trikafta and Alyftrek, GSK's Trelegy, Biogen's Tysabri and Spinraza, Roche's Evrysdi, Astellas and Pfizer's Xtandi, Johnson & Johnson's Tremfya, AbbVie and Johnson & Johnson's Imbruvica, Servier's Voranigo, Gilead's Trodelvy, Amgen's Imdelltra and Alnylam's Amvuttra, among others, and 20 development-stage product candidates.
Background and Format of Presentation
RP Holdings is owned by Royalty Pharma plc and, indirectly, by various partnerships (the "Continuing Investors Partnerships") and, in addition, post-Internalization (as defined below), by the Holders of RP Holdings Class E Interests (as defined below). RP Holdings is the sole owner of Royalty Pharma Investments 2019 ICAV ("RPI 2019 ICAV"), which is an Irish collective asset management vehicle and is the successor to Royalty Pharma Investments, an Irish unit trust. In 2022, we became an indirect owner of an 82% economic interest in Royalty Pharma Investments ICAV, which was previously owned directly by Royalty Pharma Investments. In connection with the Internalization, Royalty Pharma Investments distributed all of its assets to Royalty Pharma Investments 2011 ICAV (together with Royalty Pharma Investments ICAV, "Old RPI").
We consummated an exchange offer on February 11, 2020 (the "Exchange Offer") to facilitate our initial public offering ("IPO"). Prior to the Exchange Offer, Royalty Pharma Investments was owned by various partnerships (the "Legacy Investors Partnerships"). Through the Exchange Offer, investors which represented 82% of the aggregate limited partnership in the Legacy Investors Partnerships exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP and RPI International Holdings 2019, LP, which are part of the Continuing Investors Partnerships. Following the Exchange Offer, we became the indirect owner of an 82% economic interest in Royalty Pharma Investments which entitled us to 82% of the economics of its wholly-owned subsidiary RPI Finance Trust, a Delaware statutory trust ("RPIFT") and 66% of Royalty Pharma Collection Trust, a Delaware statutory trust ("RPCT"). In December 2023, we acquired the remaining 34% interest in RPCT owned by Royalty Pharma Select Finance Trust, a Delaware statutory trust ("RPSFT").
Prior to Internalization, we were externally managed by RP Management, LLC, a Delaware limited liability company (the "Legacy Manager" or "RPM"), pursuant to advisory and management agreements (collectively, the "Legacy Management Agreement").
On January 10, 2025, we entered into an agreement (as amended, the "Purchase Agreement") with RPM, Royalty Pharma Manager, LLC, a Delaware limited liability company ("RP Manager") and the sellers named therein (the "Sellers"). Pursuant to the Purchase Agreement, RPM contributed substantially all of its assets and liabilities to RP Manager and we agreed to acquire all of the equity interests of RP Manager from the Sellers (the "Internalization"). The Sellers included our founder, chief executive officer and chairman, Pablo Legorreta, RPM I, LLC and RP MIP Holdings, LLC ("RP MIP Holdings"). The equity interest holders of RP MIP Holdings include our named executive officers and certain employees of the Legacy Manager, who became employees of Royalty Pharma, LLC, a wholly-owned subsidiary of RP Holdings, in connection with the Internalization. We completed the acquisition of RP Manager on May 16, 2025.
Understanding Our Financial Reporting
Our portfolio of investments contains royalties and royalty-like terms held through different forms or instruments. Most of the royalties we acquire are treated as investments in cash flow streams and are classified as financial assets measured under the effective interest method in accordance with generally accepted accounting principles in the United States ("GAAP"). Under this accounting methodology, we calculate the effective interest rate on each financial royalty asset using a forecast of the expected cash flows to be received over the life of the financial royalty asset relative to the initial acquisition price. The yield, which is calculated at the end of each reporting period and applied prospectively, is then recognized via accretion into our income at the effective rate of return over the expected life of the financial royalty asset.
The measurement of income from our financial royalty assets requires significant judgments and estimates, including management's judgment in forecasting the expected future cash flows of the underlying royalties and the expected duration of each financial royalty asset. Our cash flow forecasts are updated each reporting period primarily using sell-side equity research analysts' consensus sales estimates. We then calculate our expected royalty receipts by applying our royalty terms to these consensus sales forecasts. As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the consolidated statements of operations as non-cash provision expense. If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a non-cash credit to the provision, or provision income.
As a result of the non-cash charges associated with applying the effective interest method accounting methodology to our financial royalty assets, our consolidated statements of operations activity can be volatile and unpredictable. Small declines in sell-side equity research analysts' consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future. For example, in late 2014 we acquired the cystic fibrosis franchise and shortly after, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expense in our consolidated statements of operations. Over the course of the next 10 quarters, we continued to recognize non-cash provision expense because of these changes in sales forecasts, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017. With the approval of Vertex's Trikafta in October 2019, sell-side equity research analysts' consensus sales forecasts increased to reflect the larger addressable market and the extension of the expected duration of the Trikafta royalty, resulting in the reversal of the remaining $1.10 billion cumulative allowance. The recognition of the associated non-cash provision income of $1.10 billion in 2019 was not tied to royalty receipts, but rather to the increase in sales forecasts due to the U.S. Food and Drug Administration ("FDA") approval of Trikafta. This example illustrates the volatility caused by our accounting model in our consolidated statements of operations.
We believe there is no direct correlation between income from financial royalty assets and royalty receipts due to the nature of the accounting methodology applied for financial royalty assets. Further, income from financial royalty assets and the provision for changes in expected cash flows related to these financial royalty assets can be volatile and unpredictable.
Our operations have historically been financed primarily with cash flows generated by our royalties. Given the importance of cash flows and their predictability to management's operation of the business, management uses Portfolio Receipts (as defined below) as a primary measure of our operating performance. See "-Portfolio Overview" for additional discussion regarding Portfolio Receipts.
Understanding Our Results of Operations
We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us and which are attributable to:
1. The Legacy Investors Partnerships' ownership of approximately 18% in Old RPI, which is the only remaining historical non-controlling interest that existed prior to our IPO. The value of this non-controlling interest will continue to decline over time as the assets in Old RPI expire. The Legacy Investors Partnerships are referred to as the "legacy non-controlling interests."
2. The Continuing Investors Partnerships' indirect ownership in RP Holdings through their indirect ownership of RP Holdings' Class B ordinary shares (the "RP Holdings Class B Interests"). RP Holdings Class B Interests are exchangeable into our Class A ordinary shares. As the Continuing Investors Partnerships conduct exchanges, the Continuing Investors Partnerships' indirect ownership in RP Holdings decreases and the value of this non-controlling interest decreases.
3. Pablo Legorreta's ultimate ownership of the RP Holdings' Class C ordinary share (the "RP Holdings Class C Special Interest") which entitles him to receive Equity Performance Awards ("Founder's Equity").
Equity Performance Awards ("EPAs") represent 20% of the Net Economic Profit (as defined below) generated from investments made during each two-year investment period (each, a "Portfolio"). Net Economic Profit is defined as the aggregate cash receipts for all new portfolio investments in a Portfolio less Total Expenses, which is defined as interest expense, operating expense and recovery of acquisition cost related to that Portfolio. Distributions of EPAs occur only upon the satisfaction of specified performance and return thresholds. EPAs are generally settled in RP Holdings' Class B Interests, which are immediately exchanged upon issuance for Class A ordinary shares. A portion of the EPAs may be paid in cash as a tax advance to cover income tax obligations incurred by the beneficial owners of the RP Holdings Class C Special Interest.
Mr. Legorreta granted ownership units in the entities that hold the RP Holdings Class C Special Interest to certain employees of RPM, who became employees of Royalty Pharma, LLC, a wholly-owned subsidiary of RP Holdings, in connection with the Internalization. These grants allow such employees to participate on a pro rata basis in the economic returns of the EPAs for a specific Portfolio (the "Employee EPAs"). Prior to the Internalization, Founder's Equity, which included the Employee EPAs, was accounted for as an equity transaction and recorded as non-controlling interest. Following the Internalization, Founder's Equity, which no longer includes Employee EPAs, continues to be accounted as non-controlling interest.
4. The Sellers' indirect ownership in RP Holdings through their indirect ownership of RP Holdings' Class E ordinary shares (the "RP Holdings Class E Interests"). In connection with the Internalization, we issued 24.5 million RP Holdings Class E Interests, subject to vesting conditions, to the Sellers (the "Holders of RP Holdings Class E Interests") as part of the transaction considerations. Upon vesting, the RP Holdings Class E Interests become exchangeable on a one-for-one basis for Class A ordinary shares, and upon such exchange, the value of this non-controlling interest decreases.
The Continuing Investors Partnerships, the Founder's Equity and the Holders of RP Holdings Class E Interests, collectively, are referred to as the "continuing non-controlling interests."
Total income and other revenues
Total income and other revenues is primarily comprised of interest income from our financial royalty assets and royalty income generally arising from successful commercialization of products developed through research and development ("R&D") funding arrangements. Most of our royalties are classified as financial assets as our ownership rights are generally passive in nature.
The royalty payors that accounted for greater than 10% of our total income and other revenues are shown in the table below:
| Year ended December 31, | ||||||||||||||||||||
| Royalty Payor | Royalty | 2025 | 2024 | |||||||||||||||||
| Vertex | Cystic fibrosis franchise | 35 | % | 36 | % | |||||||||||||||
| Roche | Evrysdi, Mircera | * | 10 | % | ||||||||||||||||
*Represents less than 10%.
Income from financial royalty assets
Our financial royalty assets represent investments in cash flow streams with yield components that most closely resemble loans measured at amortized cost under the effective interest method. We calculate the effective interest rate using forecasted expected cash flows to be received over the life of the royalty asset relative to the initial acquisition price. Interest income is recognized at the effective rate of return over the expected life of the asset, which is calculated at the end of each reporting period and applied prospectively. As changes in sell-side equity research analysts' consensus sales estimates are updated on a quarterly basis, the effective rate of return changes. For example, if sell-side equity research analysts' consensus sales forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods.
Variables affecting the recognition of interest income from financial royalty assets under the prospective effective interest method include any one of the following: (1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts' consensus sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (e.g., patent expiration date), (5) changes in amounts and timing of projected royalty receipts and milestone payments and (6) changes in the portion of sales that are subject to the royalty, which is referred to as royalty bearing sales. Our financial royalty assets are directly linked to sales of underlying pharmaceutical products whose life cycle typically peaks at a point in time, followed frequently by declining sales trends due to the entry of generic competition, resulting in natural declines in the asset balance and periodic interest income over the life of our royalties. The recognition of interest income from royalties requires management to make estimates and assumptions around many factors, including those impacting the variables noted above.
Other royalty income and revenues
Other royalty income and revenues primarily includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of R&D funding arrangements. Occasionally, a royalty asset may be amortized on an accelerated basis due to collectability concerns, which, if resolved, may result in future cash collections when no financial royalty asset remains. Similarly, we may continue to collect royalties on a fully amortized financial royalty asset beyond the estimated duration. In each scenario where a financial royalty asset has been fully amortized, income from such royalty is recognized as Other royalty income and revenues.
Provision for changes in expected cash flows from financial royalty assets
The Provision for changes in expected cash flows from financial royalty assetsincludes the following:
•non-cash expense or income related to the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows; and
•non-cash expense or income related to the provision for current expected credit losses, which reflects the activity for the period, primarily due to new financial royalty assets with limited protective rights and changes to cash flow estimates for financial royalty assets with limited protective rights.
As discussed above, income is accreted on our financial royalty assets using the effective interest method. As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the consolidated statements of operations through the line item Provision for changes in expected cash flows from financial royalty assets. If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a credit to the provision, or provision income.
The same variables and management's estimates affecting the recognition of interest income on our financial royalty assets noted above also directly impact the provision.
Provision for credit losses on unfunded commitments
The provision for credit losses on unfunded commitments, a non-cash item, represents the current expected credit losses on the unfunded portions of our funding arrangements with Revolution Medicines. Because we have limited protective rights with respect to each unfunded portion once the committed funding is provided, we are required to recognize an allowance for current expected credit losses based on our estimate of probability of future funding. We estimate this allowance using the probability of default and loss given default method. We are required to reassess our estimate of current expected credit losses as of each reporting date, and any subsequent change to such allowance, which can be income or expense, is reflected within Provision for credit losses on unfunded commitmentsin the consolidated statements of operations.
R&D funding expense
R&D funding expense consists of certain development-stage funding payments that we have made to counterparties to acquire royalties or milestones on product candidates. The payments can be made on an upfront basis, upon pre-approval milestones or over time as the related product candidates undergo clinical trials.
General and administrative expenses
Prior to the Internalization, the most significant component of general and administrative ("G&A") expenses was the Management Fees (as defined below). Under the Legacy Management Agreement, we paid a quarterly operating and personnel payment to RPM or its affiliates equal to 6.5% of the cash receipts from Royalty Investments (as defined in the Legacy Management Agreement) and 0.25% of the value of our security investments under GAAP as of the end of such quarter ("Management Fees").
Following the Internalization, we no longer pay Management Fees; instead, employee compensation expenses represent the most significant component of G&A expenses. Employee compensation includes cash-based and share-based expenses. Share-based compensation expenses arising from the Internalization primarily include the following:
1.Approximately 22.8 million RP Holdings Class E Interests with an aggregate fair value of approximately $755.4 million, which are expensed over vesting periods on a straight-line basis of generally five to nine years. As of December 31, 2025, we had $646.5 million of unrecognized compensation expense related to 19.5 million RP Holdings Class E Interests that is expected to vest over a weighted average period of 5.5 years.
2.The vesting of the Employee EPAs over their remaining service periods and the subsequent change in their fair value. The fair value of the Employee EPAs is driven by the performance of the investments within the Portfolio and will fluctuate based on the timing and amount of investments made during the investment period as well as the actual and expected returns on the investments.
Additionally, as each new Portfolio commences after the Internalization, any related Employee EPAs will also be recognized as share-based compensation expense over the required service periods of generally four years and included within General and administrative expensesin the consolidated statement of operations. Lastly, G&A expenses include rent, legal fees and other expenses for professional services.
Equity in earnings of equity method investees
Equity in earnings of equity method investees primarily includes the results of our share of income or loss from the following non-consolidated affiliates:
1.Legacy SLP Interest.In connection with the Exchange Offer, we acquired an equity method investment from the Continuing Investors Partnerships in the form of a special limited partnership interest in the Legacy Investors Partnerships (the "Legacy SLP Interest") in exchange for issuing shares in our subsidiary. The Legacy SLP Interest entitles us to the equivalent of performance distribution payments that would have been paid to the general partner of the Legacy Investors Partnerships and a performance income allocation on a similar basis. As the Legacy Investors Partnerships no longer participate in investment opportunities, the value of the Legacy SLP Interest is expected to decline over time.
2.The Avillion Entities. The Avillion Entities (as defined below) partner with global biopharmaceutical companies to perform R&D in exchange for success-based milestones or royalties if products are commercialized. Our investments in Avillion Financing I, LP ("Avillion I") and BAv Financing II, LP ("Avillion II" and together with Avillion I, the "Avillion Entities") are accounted for using the equity method.
Other income, net
Other income, net primarily includes the changes in fair value of our equity securities and available for sale debt securities, including related forwards and funding commitments, and interest income.
Net income attributable to non-controlling interests
The net income attributable to non-controlling interests includes income attributable to the legacy non-controlling interests and the continuing non-controlling interests. Following our acquisition of the remaining non-controlling interest in RPCT held by RPSFT in December 2023, and since the Legacy Investors Partnerships no longer participate in investment opportunities, the related net income attributable to the legacy non-controlling interests is expected to continue to decline over time as the assets held by Old RPI mature.
The net income attributable to the continuing non-controlling interests related to the Continuing Investors Partnerships and the Holders of RP Holdings Class E Interests is expected to decline over time if the investors who indirectly own the RP Holdings Class B Interests and the Holders of RP Holdings Class E Interests, respectively, conduct exchanges for our Class A ordinary shares.
Net income attributable to non-controlling interests above can fluctuate significantly from period to period, primarily driven by volatility in the income statement activity of the respective underlying entity as a result of the non-cash charges associated with applying the effective interest accounting methodology to our financial royalty assets as described in the section titled "Understanding Our Financial Reporting."
Further, the net income attributable to the continuing non-controlling interests includes EPAs attributable to Founder's Equity that we began recognizing in the first quarter of 2025 as certain conditions were met.
Results of Operations
In this section, we discuss the results of our operations for 2025 compared to 2024. For a discussion of 2024 compared to 2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
The comparison of our historical results of operations is as follows (in thousands):
| Years Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Income and other revenues | |||||||||||||||||||||||
| Income from financial royalty assets | $ | 2,261,152 | $ | 2,149,422 | 111,730 | 5.2 | |||||||||||||||||
| Other royalty income and revenues | 117,041 | 114,154 | 2,887 | 2.5 | |||||||||||||||||||
| Total income and other revenues | 2,378,193 | 2,263,576 | 114,617 | 5.1 | |||||||||||||||||||
| Operating (income)/expense | |||||||||||||||||||||||
| Provision for changes in expected cash flows from financial royalty assets | (295,838) | 732,461 | (1,028,299) | * | |||||||||||||||||||
| Provision for credit losses on unfunded commitments | 89,032 | - | 89,032 | n/a | |||||||||||||||||||
| Research and development funding expense | 452,000 | 2,000 | 450,000 | * | |||||||||||||||||||
| General and administrative expenses | 573,481 | 236,671 | 336,810 | 142.3 | |||||||||||||||||||
| Total operating expense, net | 818,675 | 971,132 | (152,457) | (15.7) | |||||||||||||||||||
| Operating income | 1,559,518 | 1,292,444 | 267,074 | 20.7 | |||||||||||||||||||
| Other (income)/expense | |||||||||||||||||||||||
| Equity in earnings of equity method investees | (29,089) | (29,611) | 522 | (1.8) | |||||||||||||||||||
| Interest expense | 307,664 | 225,512 | 82,152 | 36.4 | |||||||||||||||||||
| Other income, net | (43,249) | (234,270) | 191,021 | (81.5) | |||||||||||||||||||
| Total other expense/(income), net | 235,326 | (38,369) | 273,695 | * | |||||||||||||||||||
| Consolidated net income | 1,324,192 | 1,330,813 | (6,621) | (0.5) | |||||||||||||||||||
| Net income attributable to non-controlling interests | 553,245 | 471,830 | 81,415 | 17.3 | |||||||||||||||||||
| Net income attributable to Royalty Pharma plc | $ | 770,947 | $ | 858,983 | (88,036) | (10.2) | |||||||||||||||||
*Percentage change is not meaningful.
Total income and other revenues
Income from financial royalty assets
Income from financial royalty assets by top products is as follows, in order of contribution to income in 2025 (in thousands):
| Years Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| Cystic fibrosis franchise | $ | 828,181 | $ | 826,205 | 1,976 | 0.2 | |||||||||||||||||
| Evrysdi | 206,972 | 224,429 | (17,457) | (7.8) | |||||||||||||||||||
| Voranigo | 154,420 | 46,153 | 108,267 | * | |||||||||||||||||||
| Trelegy | 154,100 | 146,920 | 7,180 | 4.9 | |||||||||||||||||||
| Tremfya | 152,936 | 147,141 | 5,795 | 3.9 | |||||||||||||||||||
| Tysabri | 116,876 | 124,815 | (7,939) | (6.4) | |||||||||||||||||||
| Other products | 647,667 | 633,759 | 13,908 | 2.2 | |||||||||||||||||||
| Total income from financial royalty assets | $ | 2,261,152 | $ | 2,149,422 | 111,730 | 5.2 | |||||||||||||||||
*Percentage change is not meaningful.
Income from financial royalty assets increased by $111.7 million, or 5.2%, in 2025 as compared to 2024, primarily due to the addition of Voranigo which we acquired in August of 2024 upon FDA approval, partially offset by lower income from Evrysdi due to a decline in sell-side equity research analysts' consensus sales forecasts.
Other royalty income and revenues
Other royalty income and revenues were relatively flat in 2025as compared to 2024.
Provision for changes in expected cash flows from financial royalty assets
Provision activity is a combination of income and expense items. The provision breakdown by royalty asset (exclusive of the provision for current expected credit losses) based on the largest contributors to each year's provision income or expense (in thousands) is as follows:
| Royalty | 2025 | Royalty | 2024 | |||||||||||||||||
| Cystic fibrosis franchise | $ | (259,353) | Evrysdi | $ | 378,565 | |||||||||||||||
| Tremfya | (77,895) | Cystic fibrosis franchise | 256,814 | |||||||||||||||||
| Xtandi | (64,368) | Crysvita | 164,265 | |||||||||||||||||
| Promacta | 54,772 | IDHIFA | (75,059) | |||||||||||||||||
| Evrysdi | 115,558 | Tysabri | (158,433) | |||||||||||||||||
| Other | (38,389) | Other | 65,894 | |||||||||||||||||
| Total provision, exclusive of provision for credit losses | (269,675) | Total provision, exclusive of provision for credit losses | 632,046 | |||||||||||||||||
| Provision for current expected credit losses | (26,163) | Provision for current expected credit losses | 100,415 | |||||||||||||||||
| Total provision | $ | (295,838) | Total provision | $ | 732,461 | |||||||||||||||
In 2025, we recorded provision income of $295.8 million, comprised of $269.7 million in provision income for changes in expected cash flows and $26.2 million in provision income for current expected credit losses. We recorded provision income for changes in expected cash flows primarily related to the cystic fibrosis franchise, Tremfya, and Xtandi due to increases in sell-side equity research analysts' consensus sales forecasts, partially offset by provision expense related to Evrysdi due to declines in sell-side equity research analysts' consensus sales forecasts. The provision income for credit losses was primarily related to Niktimvo as a result of changes in sell-side equity research analysts' consensus sales forecasts, partially offset by the addition of Imdelltra to our portfolio.
In 2024, we recorded provision expense of $732.5 million, comprised of $632.0 million in provision expense for changes in expected cash flows and $100.4 million in provision expense for current expected credit losses. We recorded provision expense for changes in expected cash flows primarily related to Evrysdi due to declines in sell-side equity research analysts' consensus sales forecasts. We recorded provision expense for changes in expected cash flows related to the cystic fibrosis franchise, primarily due to the inclusion of consensus estimates in 2024 for Vertex's Alyftrek and the conservative assumption that royalties will only be collected on the tezacaftor component of Alyftrek and not on the deuterated ivacaftor component. Although we believe that the deuterated ivacaftor component of Alyftrek is the same as ivacaftor and is therefore royalty-bearing, Vertex has made public statements that it believes the deuterated ivacaftor component is not royalty-bearing. If deuterated ivacaftor is determined to be royalty-bearing, we may recognize provision income in our results of operations at that time or recognize higher interest income prospectively. Additionally, we recorded provision expense for Crysvita due to declines in sales forecasts. The provision expense for changes in expected cash flows was partially offset by provision income for changes in expected cash flows related to Tysabri due increases in sales forecasts. The provision expense for credit losses was primarily driven by the addition of Niktimvo to our portfolio.
Provision for credit losses on unfunded commitments
Provision for credit losses on unfunded commitments was $89.0 million in 2025, related to our funding arrangement with Revolution Medicines, which was entered into in June 2025.
R&D funding expense
R&D funding expense increased by $450.0 million in 2025 as compared to 2024 due to R&D funding arrangements entered into in 2025 related to daraxonrasib and litifilimab of $250.0 million and $200.0 million, respectively.
G&A expenses
G&A expenses increased by $336.8 million, or 142.3%, in 2025 as compared to 2024, primarily driven by additional share-based compensation expenses of $287.1 million recognized following the Internalization and acquisition-related costs of $28.9 million incurred for the Internalization. The increase in G&A expenses was also partially attributable to higher Management Fees of $33.0 million pre-Internalization as a result of the January 2025 sale of the MorphoSys Development Funding Bonds.
Equity in earnings of equity method investees
Equity in earnings of equity method investees were relatively flat in 2025 as compared to 2024. In 2025, we recorded income allocations from the Legacy SLP Interest of $17.0 million and $12.1 million from the Avillion Entities, primarily driven by a gain related to the FDA approval of Airsupra's supplemental new drug application which triggered a milestone payable from AstraZeneca to the Avillion Entities. In 2024, we recorded income allocations from the Legacy SLP Interest of $10.4 million and $19.2 million from the Avillion Entities, primarily driven by a gain related to the positive result of Airsupra's Phase III clinical trial which triggered a milestone payment from AstraZeneca to the Avillion Entities.
Interest expense
Interest expense increased by $82.2 million, or 36.4% in 2025 as compared to 2024, primarily driven by the issuance of the $1.5 billion and $2.0 billion of senior unsecured notes in June 2024 and September 2025, respectively, and the $380 million term loan that we assumed as part of the Internalization. The weighted average coupon rate on our senior unsecured notes outstanding as of December 31, 2025 and 2024 was 3.75% and 3.06%, respectively.
Refer to the "Liquidity and Capital Resources" section for additional discussion of our debt financing arrangements.
Other income, net
Other income, net of $43.2 million in 2025 was primarily comprised of $45.9 million of gains on available for sale debt securities and $33.6 million of interest income earned on cash and cash equivalents, partially offset by $21.9 million of losses on equity securities. The gains on available for sale debt securities were primarily driven by the changes in fair value of the Cytokinetics Funding Arrangements.
Other income, net of $234.3 million in 2024 was primarily comprised of $154.9 million of gains on available for sale debt securities, $47.3 million of interest income earned on cash and cash equivalents and $39.5 million of gains on equity securities. The gains on available for sale debt securities were primarily driven by the changes in fair value of the MorphoSys Development Funding Bonds.
Net income attributable to non-controlling interests
Net income attributable to the Legacy Investors Partnerships increased by $37.6 million in 2025 as compared to 2024, primarily driven by higher net income attributable to Old RPI. The higher net income is a result of provision income recognized in 2025 as compared to provision expense recognized in 2024.
Net income attributable to the Continuing Investors Partnerships decreased by $45.6 million in 2025 as compared to 2024, primarily driven by lower net income attributable to RP Holdings as a result of higher R&D expense and share-based compensation expense recognized in 2025, which was partially offset by provision income. Conversely, in 2024, we recognized provision expense and minimal R&D expense and share-based compensation expense.
Net income attributable to Founder's Equity was $60.2 million in 2025. We began recognizing EPAs in the first quarter of 2025 as certain conditions were met during the period. Total EPAs earned in 2025 was $81.2 million, attributable to Founder's Equity and Employee EPAs, with settlement consisting of a combination of Class A ordinary shares and cash distributions provided as tax advances.
Net income attributable to RP Holdings Class E Interests was $29.2 million in 2025. The RP Holdings Class E Interests were issued in connection with the Internalization.
Portfolio Overview
Our business model is different from that of traditional operating companies in the biopharmaceutical industry. Our operating performance is a function of our liquidity as our operations have historically been financed primarily with cash flows generated by our royalties. We use the cash generated by our existing royalties to fund investments in new royalties. We consider a variety of metrics in assessing the performance of our business. Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments. Portfolio Receipts also enables management to better analyze our liquidity and long-term growth prospects by providing a more granular product-by-product presentation of the underlying cash generation of our royalty investments.
Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts. Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to us ("Royalty Receipts"). Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that are attributed to us. Portfolio Receipts does not include royalty receipts and milestones and other contractual receipts that were received on an accelerated basis under the terms of the agreement governing the receipt or payment. Portfolio Receipts also does not include proceeds from equity securities or proceeds from purchases and sales of marketable securities, both of which are not central to our fundamental business strategy.
Portfolio Receipts is calculated as the sum of the following line items from our GAAP consolidated statements of cash flows: Cash collections from financial royalty assets, Cash collections from intangible royalty assets, Other royalty cash collections, Proceeds from available for sale debt securitiesand Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts, which represent contractual distributions of Royalty Receipts, milestones and other contractual receipts to the Legacy Investors Partnerships.
Our portfolio consists of royalties on more than 35 marketed therapies and 20 development-stage product candidates. The therapies in our portfolio address therapeutic areas such as rare disease, oncology, neuroscience, infectious disease, hematology and diabetes, and are delivered to patients across both primary and specialty care settings. The table below shows Portfolio Receipts, including Royalty Receipts by product and milestones and other contractual receipts, in order of contribution to total Royalty Receipts in 2025 (in thousands):
| Years Ended December 31, | Change | |||||||||||||||||||||||||||||||||||||
| Products | Marketer(s) | Therapeutic Area | 2025 | 2024 | $ | % | ||||||||||||||||||||||||||||||||
|
Cystic fibrosis franchise(1)
|
Vertex | Rare disease | $ | 916,869 | $ | 856,792 | 60,077 | 7.0 | ||||||||||||||||||||||||||||||
| Trelegy | GSK | Respiratory | 332,451 | 283,747 | 48,704 | 17.2 | ||||||||||||||||||||||||||||||||
| Tysabri | Biogen | Neuroscience | 249,619 | 261,671 | (12,052) | (4.6) | ||||||||||||||||||||||||||||||||
| Evrysdi | Roche | Rare disease | 201,584 | 173,508 | 28,076 | 16.2 | ||||||||||||||||||||||||||||||||
| Xtandi | Pfizer, Astellas | Oncology | 196,917 | 168,667 | 28,250 | 16.7 | ||||||||||||||||||||||||||||||||
| Tremfya | Johnson & Johnson | Immunology | 178,398 | 139,561 | 38,837 | 27.8 | ||||||||||||||||||||||||||||||||
| Imbruvica | AbbVie, Johnson & Johnson | Oncology | 170,357 | 191,014 | (20,657) | (10.8) | ||||||||||||||||||||||||||||||||
| Promacta | Novartis | Hematology | 141,780 | 158,419 | (16,639) | (10.5) | ||||||||||||||||||||||||||||||||
| Voranigo | Servier | Oncology | 118,206 | 4,928 | 113,278 | * | ||||||||||||||||||||||||||||||||
| Cabometyx/Cometriq | Exelixis, Ipsen, Takeda | Oncology | 84,551 | 72,647 | 11,904 | 16.4 | ||||||||||||||||||||||||||||||||
| Spinraza | Biogen | Rare disease | 52,452 | 44,981 | 7,471 | 16.6 | ||||||||||||||||||||||||||||||||
| Trodelvy | Gilead | Oncology | 46,605 | 43,094 | 3,511 | 8.1 | ||||||||||||||||||||||||||||||||
| Erleada | Johnson & Johnson | Oncology | 46,150 | 38,997 | 7,153 | 18.3 | ||||||||||||||||||||||||||||||||
| Imdelltra | Amgen | Oncology | 9,625 | - | 9,625 | n/a | ||||||||||||||||||||||||||||||||
|
Other products(2)
|
381,265 | 332,593 | 48,672 | 14.6 | ||||||||||||||||||||||||||||||||||
| Royalty Receipts | $ | 3,126,829 | $ | 2,770,619 | 356,210 | 12.9 | ||||||||||||||||||||||||||||||||
| Milestones and Other Contractual Receipts | 127,532 | 30,827 | 96,705 | 313.7 | ||||||||||||||||||||||||||||||||||
|
Portfolio Receipts(3)
|
$ | 3,254,361 | $ | 2,801,446 | 452,915 | 16.2 | ||||||||||||||||||||||||||||||||
*Percentage change is not meaningful.
(1)The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek, which was approved by the FDA in December 2024.
(2)Other products primarily include Royalty Receipts on the following products: Crysvita, Emgality, Entyvio, Farxiga/Onglyza, IDHIFA, Nesina, Nurtec ODT, Orladeyo, Prevymis, Soliqua and distributions from the Legacy SLP Interest, which are presented as Distributions from equity method investees on the consolidated statements of cash flows.
(3)Portfolio Receipts for 2025 does not include the $511 million of proceeds from our sale of the MorphoSys Development Funding Bonds because it was treated as an asset sale.
Analysis of Portfolio Receipts
The key drivers of Portfolio Receipts are discussed below:
•Cystic fibrosis franchise- Royalty Receipts from the cystic fibrosis franchise, including Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek, which is marketed by Vertex for the treatment of cystic fibrosis, increased by $60.1 million in 2025 as compared to 2024. The increase was primarily due to strong cystic fibrosis patient demand globally and higher net realized pricing in the United States, while Ex-U.S. saw strong performance across multiple markets, partially offset by a revenue decline in Russia.
•Trelegy - Royalty Receipts from Trelegy, which is marketed by GSK for the maintenance treatment of chronic obstructive pulmonary disease and asthma, increased by $48.7 million in 2025 as compared to 2024, primarily driven by continued growth across all regions, reflecting patient demand, single inhaler triple therapy class growth, and increased market share.
•Tysabri- Royalty Receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, decreased by $12.1 million in 2025 as compared to 2024, due to increased competition in rest of world, partially offset by a favorable U.S. rebate estimate change and inventory dynamics.
•Evrysdi- Royalty Receipts from Evrysdi, which is marketed by Roche for the treatment of spinal muscular atrophy, increased by $28.1 million in 2025 as compared to 2024, attributable to strong growth globally, partially offset by tender-related buying patterns in international sales.
•Xtandi- Royalty Receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, increased by $28.3 million in 2025 as compared to 2024, attributable to sales growth across all regions, particularly in the United States.
•Tremfya- Royalty Receipts from Tremfya, which is marketed by Johnson & Johnson for the treatment of plaque psoriasis, active psoriatic arthritis and inflammatory bowel disease, increased by $38.8 million in 2025 as compared to 2024, driven by share gains and market growth, including strong uptake across recently launched inflammatory bowel disease indications, partially offset by the impact of Medicare Part D redesign.
•Imbruvica- Royalty Receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, decreased by $20.7 million in 2025 as compared to 2024, reflecting competitive pressures and the impact of Medicare Part D redesign.
•Promacta- Royalty Receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia purpura ("ITP") and aplastic anemia, decreased by $16.6 million in 2025 as compared to 2024, due to discontinued promotion in most markets and the U.S. launch of generic competition in May 2025.
•Voranigo -Royalty Receipts from Voranigo, which is marketed by Servier for the treatment of low-grade glioma, increased by $113.3 million in 2025 as compared to 2024, primarily driven by its strong launch in the United States. We acquired the Voranigo royalty in the third quarter of 2024 shortly after it was approved and began recording Royalty Receipts in the fourth quarter of 2024.
•Cabometyx/Cometriq- Royalty Receipts from Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and Takeda, primarily for the treatment of advanced renal cell carcinoma and hepatocellular carcinoma, increased by $11.9 million in 2025 as compared to 2024, primarily driven by continued demand growth from uptake in combination with Opdivo in first-line renal cell carcinoma and previously treated advanced neuroendocrine tumors ("NET").
•Spinraza- Royalty Receipts from Spinraza, which is marketed by Biogen for the treatment of spinal muscular atrophy, increased by $7.5 million in 2025 as compared to 2024. Royalties in the first quarter of 2024 were lower due to the $1.5 billion cap, benefiting royalty receipts growth in 2025.
•Trodelvy - Royalty Receipts from Trodelvy, which is marketed by Gilead for the treatment of metastatic triple-negative breast cancer and pre-treated hormone receptor ("HR")-positive, human epidermal growth factor receptor 2 ("HER2")-negative metastatic breast cancer, increased by $3.5 million in 2025 as compared to 2024, primarily driven by strong demand.
•Erleada - Royalty Receipts from Erleada, which is marketed by Johnson & Johnson for the treatment of prostate cancer, increased by $7.2 million in 2025 as compared to 2024, driven by market growth and continued share gains, partially offset by the impact of Medicare Part D redesign.
•Imdelltra - Royalty Receipts from Imdelltra, which is marketed by Amgen for the treatment of extensive-stage small cell lung cancer were $9.6 million in 2025, primarily driven by its strong global launch as it establishes a new standard of care in second-line extensive stage small cell lung cancer ("ES-SCLC"). We acquired the Imdelltra royalty in the third quarter of 2025 and began receiving Royalty Receipts in the fourth quarter of 2025.
•Other products - Royalty Receipts from other products increased by $48.7 million in 2025 as compared to 2024, driven by recently launched products including Niktimvo, Skytrofa and Rytelo, as well as the timing of Soliqua royalty payments, partially offset by the expiration of royalties on Entyvio and a one-time true-up of royalties on the DPP-IVs received in the prior year period.
•Milestones and other contractual receiptsincreased by $96.7 million in 2025 as compared to 2024, primarily attributable to a one-time distribution related to the Legacy SLP Interest and a milestone payment in the amount of $27.4 million related to Airsupra.
Key Developments Relating to Our Portfolio
Recent key developments related to products in our portfolio are discussed below:
Commercial Products
•Cystic fibrosis franchise.In July 2025, Vertex announced that the European Commission ("EC") approved Alyftrek for people with cystic fibrosis ages 6 years and older who have at least one non-class I mutation in the cystic fibrosis transmembrane conductance regulator gene.
In April 2025, Vertex announced EC approval for the label expansion of Kaftrio in combination with ivacaftor for cystic fibrosis patients ages 2 years and older who have at least one non-class I mutation in the cystic fibrosis transmembrane conductance regulator ("CFTR") gene.
•Tysabri.In November 2025, Sandoz announced the U.S. launch of Tyruko, the first and only FDA-approved biosimilar to Biogen's Tysabri.
•Xtandi. In July 2025, Pfizer and Astellas Pharma announced topline results from the overall survival ("OS") analysis from the Phase 3 EMBARK study evaluating Xtandi in men with non-metastatic hormone-sensitive prostate cancer. For patients treated with Xtandi plus leuprolide versus placebo plus leuprolide, EMBARK met the key secondary endpoint with a statistically significant and clinically meaningful improvement in OS. Results also showed a favorable trend towards improved OS for patients treated with Xtandi monotherapy versus placebo plus leuprolide, however the difference did not reach statistical significance.
•Tremfya. In May 2025, Johnson & Johnson announced that the EC approved Tremfya for the treatment of adult patients with moderately to severely active Crohn's disease.
In April 2025, Johnson & Johnson announced that the EC approved Tremfya for the treatment of adult patients with moderately to severely active ulcerative colitis.
In April 2025, Johnson & Johnson announced that the Phase 3b APEX study achieved both its primary endpoint of reducing signs and symptoms and its major secondary endpoint of reducing progression of structural damage in adults living with active psoriatic arthritis, compared to placebo.
In March 2025, Johnson & Johnson announced that the FDA approved Tremfya in Crohn's disease, which is now the first and only IL-23 offering both subcutaneous and intravenous induction options for the treatment of adults with moderately to severely active Crohn's disease.
•Promacta. In May 2025, Camber Pharmaceuticals announced the U.S. launch of eltrombopag, the AB-rated generic for Promacta.
•Cabometyx. In July 2025, Ipsen announced that the EC approved Cabometyx for patients with previously treated advanced neuroendocrine tumors.
In March 2025, Exelixis announced that the FDA approved Cabometyx for patients with previously treated advanced neuroendocrine tumors.
•Spinraza.In January 2026, Biogen announced that the EC granted marketing authorization for a high dose regimen of Spinraza for spinal muscular atrophy.
•Trodelvy.In November 2025, Gilead announced the Phase 3 ASCENT-07 study investigating Trodelvy as a first-line ("1L") treatment for HR+/HER2-negative metastatic breast cancer patients did not meet the primary endpoint of progression-free survival. Overall survival is a key secondary endpoint and was not mature at the time of the primary analysis.
In October 2025, Gilead announced that based on the positive Phase 3 updates from ASCENT-03 and ASCENT-04, it has submitted two supplemental biologics license applications for Trodelvy in 1L metastatic triple-negative breast cancer ("mTNBC") and expects regulatory decisions in 2026.
In May 2025, Gilead Sciences announced positive topline results from the Phase 3 ASCENT-03 study. The study met its primary endpoint, demonstrating a highly statistically significant and clinically meaningful improvement in progression-free survival ("PFS") compared to chemotherapy in patients with 1L mTNBC who are ineligible to receive immunotherapy. Overall survival, a key secondary endpoint, was not mature at the time of PFS primary analysis. Gilead will continue to monitor OS outcomes.
In April 2025, Gilead announced positive topline results from the Phase 3 Ascent-04/Keynote-D19 study, demonstrating that Trodelvy plus Keytruda significantly improved PFS compared to Keytruda and chemotherapy in patients with previously untreated PD-L1+ mTNBC. Overall survival, a key secondary endpoint, was not mature at the time of the PFS primary analysis. However, there was an early trend in improvement for OS with Trodelvy plus Keytruda and Gilead will continue to monitor OS outcomes.
•Airsupra.In September 2025, AstraZeneca announced that the FDA approved a supplemental NDA for Airsupra to reflect the statistically significant severe exacerbation risk reduction in patients with mild asthma compared to albuterol based on the BATURA study results.
•Cobenfy.In December 2025, Bristol Myers Squibb announced that it will enroll additional patients in the Phase 3 ADEPT-2 study of Cobenfy in psychosis associated with Alzheimer's disease. Following consultation with the FDA and a review by the independent Data Monitoring Committee, the study will continue as planned, with results expected by the end of 2026.
In April 2025, Bristol Myers Squibb announced that topline results from the Phase 3 ARISE trial evaluating Cobenfy as an adjunctive treatment to atypical antipsychotics in adults with schizophrenia did not reach the threshold for a statistically significant difference compared to placebo.
•Imdelltra.In November 2025, Amgen announced that the FDA granted full approval to Imdelltra for the treatment of adult patients with ES-SCLC with disease progression on or after platinum-based chemotherapy, converting Imdelltra's prior accelerated approval into a full approval.
•Myqorzo.In December 2025, Cytokinetics announced the FDA approval of Myqorzo (formerly known as aficamten) for the treatment of adults with symptomatic obstructive hypertophic cardiomyopathy.
In May 2025, Cytokinetics announced positive topline results from MAPLE-HCM, a Phase 3 trial comparing aficamten to metoprolol in patients with symptomatic obstructive hypertrophic cardiomyopathy. The study met its primary endpoint, demonstrating a statistically significant improvement in peak oxygen uptake from baseline to Week 24 with a favorable safety profile.
•Skytrofa. In July 2025, Ascendis announced the FDA approved Skytrofa for the once-weekly treatment of adults with growth hormone deficiency.
Development-Stage Product Candidates
•Daraxonrasib.In October 2025, Revolution Medicines announced that the FDA granted a non-transferrable voucher for daraxonrasib under the Commissioner's National Priority Voucher pilot program, which accelerates target review times to 1-2 months versus 6+ months.
In September 2025, Revolution Medicines announced positive Phase 1 results from its clinical trials evaluating daraxonrasib as a monotherapy and daraxonrasib in combination with chemotherapy in 1L metastatic pancreatic ductal adenocarcinoma ("PDAC"). Based upon these data, Revolution Medicines initiated a Phase 3 trial for daraxonrasib in 1L metastatic PDAC in the fourth quarter of 2025.
•Deucrictibant.In December 2025, Pharvaris announced positive topline data from the RAPIDe-3 pivotal Phase 3 study, which met its primary endpoint and all secondary efficacy endpoints with statistical significance. The data will serve as the basis for marketing authorization applications expected to be filed in first half of 2026.
•Ecopipam. In February 2025, Emalex announced positive Phase 3 results for ecopipam in patients with Tourette syndrome. The study showed statistical significance between ecopipam and placebo for both the primary efficacy endpoint in pediatrics and the secondary efficacy endpoint in pediatrics and adults.
•Litifilimab.In October 2025, Biogen announced that both litifilimab Phase 3 studies for systemic lupus erythematosus are fully enrolled with expected data readout for both studies accelerated to the second half of 2026.
•Obexelimab.In January 2026, Zenas BioPharma ("Zenas") announced positive results from the Phase 3 INDIGO trial of obexelimab in Immunoglobulin G4-related disease ("IgG4-RD"), which met the primary endpoint demonstrating a clinically meaningful and highly statistically significant reduction in risk of IgG4-RD flare. Zenas anticipates submitting a Biologics License Application in Q2 2026 and a Marketing Authorization Application to the European Medicines Agency ("EMA") in the second half of 2026.
In October 2025, Zenas announced positive results from the Phase 2 trial of obexelimab in relapsing multiple sclerosis, which demonstrated a highly statistically significant 95% relative reduction in new gadolinium (Gd)-enhancing T1 lesions over week 8 and week 12 compared with placebo. Zenas anticipates reporting 24-week data in the first quarter of 2026.
•Pelabresib. In January 2026, Novartis announced plans to submit a European Union regulatory filing for pelabresib in 2026, and that it would begin a new Phase 3 study in the United States, Canada and Japan.
•TEV-'749.In December 2025, Teva Pharmaceuticals ("Teva") submitted a NDA to the FDA for TEV-'749 ("olanzapine LAI") for the treatment of schizophrenia in adults.
In January 2025, Teva announced that olanzapine LAI achieved Phase 3 targeted injections without Post-injection Delirium/Sedation Syndrome ("PDSS").
In January 2025, Teva announced that olanzapine LAI achieved Phase 3 targeted injections without Post-injection Delirium/Sedation Syndrome ("PDSS").
•Trontinemab.In September 2025, Roche announced that it initiated the Phase 3 program for trontinemab in early symptomatic Alzheimer's disease. Additionally, Roche announced plans to initiate a Phase 3 study in preclinical Alzheimer's disease, in people at high risk of cognitive decline.
Investments Overview
Ongoing investment in new royalties is fundamental to the long-term prospects of our business. New investments provide a source of growth for our Royalty Receipts, supplementing growth within our existing portfolio and offsetting declines for royalties on products that have lost market exclusivity. We evaluate an array of royalty acquisition opportunities on a continuous basis and expect to continue to make acquisitions in the ordinary course of our business. We have established a strong track record of identifying, evaluating and investing in royalties tied to leading products across therapeutic areas and treatment modalities. We invest in approved products and development-stage product candidates that have generated robust proof of concept data. We invest in these therapies through the purchase of royalties, milestones and other contractual receipts by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets.
In 2025, we invested $2.6 billion in royalties, milestones and other contractual receipts. While volatility exists in the funding of new acquisitions on a year-to-year basis due to the unpredictable timing of new investment opportunities, we have consistently deployed significant amounts of cash when measured over multi-year periods. Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold.
Included below are tables of investment activities over each of the last five years (in thousands). Announced transactions amounts reflect maximum transaction value for transactions entered into over each of the periods presented. Capital Deployment represents the total outflows that will drive future Portfolio Receipts and includes cash paid at the acquisition date and any subsequent associated milestone investments reflected in the period in which cash was paid. Capital Deployment in approved/marketed royalties versus development-stage royalties is based upon the approval status of the therapy at the time of our upfront investment.
| Average | 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| Announced Transactions | |||||||||||||||||||||||||||||||||||
| Upfront payments | $ | 2,104,600 | $ | 1,965,000 | $ | 2,325,000 | $ | 2,109,000 | $ | 1,963,000 | $ | 2,161,000 | |||||||||||||||||||||||
| Potential payments/milestones | 1,445,200 | 2,735,000 | 493,000 | 1,850,000 | 1,443,000 | 705,000 | |||||||||||||||||||||||||||||
| Total announced transaction value | $ | 3,549,800 | $ | 4,700,000 | $ | 2,818,000 | $ | 3,959,000 | $ | 3,406,000 | $ | 2,866,000 | |||||||||||||||||||||||
| Capital Deployment | |||||||||||||||||||||||||||||||||||
| Approved/marketed royalties | $ | 1,776,045 | $ | 1,733,720 | $ | 1,775,545 | $ | 1,875,232 | $ | 1,920,958 | $ | 1,574,769 | |||||||||||||||||||||||
|
Development-stage royalties(1)
|
720,986 | 862,102 | 985,364 | 316,689 | 507,399 | 933,374 | |||||||||||||||||||||||||||||
|
Total Capital Deployment(2)
|
$ | 2,497,031 | $ | 2,595,822 | $ | 2,760,909 | $ | 2,191,921 | $ | 2,428,357 | $ | 2,508,143 | |||||||||||||||||||||||
(1)Development-stage royalties include: direct R&D funding arrangements and funding arrangements executed through our joint venture partnership with the Avillion Entities, investments in development-stage product candidates and investments in debt securities primarily made in connection with acquisitions of royalties on development-stage products from the seller.
(2)Capital Deployment is calculated as the summation of the following line items from our GAAP consolidated statements of cash flows: Investments in equity method investees, Purchases of available for sale debt securities, Acquisitions of financial royalty assets, Acquisitions of other financial assets, Milestone payments, Development-stage funding payments less Contributions from legacy non-controlling interests - R&D.
Summary of Acquisition Activities
•In January 2026, we announced a funding agreement with Teva for TEV-'408 for up to $500 million. The agreement includes $75 million to co-fund a Phase 2b study for vitiligo targeted for 2026. Based on the future results from the Phase 2b study in vitiligo, we will have an option to provide an additional $425 million to co-fund the Phase 3 development program.
•In December 2025, we acquired the remaining royalties on Roche's Evrysdi for the treatment of spinal muscular atrophy from PTC Therapeutics for an upfront payment of $240 million and up to $60 million in sales-based milestones.
•In December 2025, we acquired a pre-existing royalty interest in Nuvalent's neladalkib and zidesamtinib from an undisclosed party for up to $315 million, including an upfront payment of $155 million. Neladalkib and zidesamtinib are next-generation tyrosine kinase inhibitors ("TKIs"). Neladalkib is in development for patients with anaplastic lymphoma kinase ("ALK") mutation-positive non-small cell lung cancer ("NSCLC") and zidesamtinib is in development for ROS proto-oncogene 1 ("ROS1") mutation-positive NSCLC.
•In December 2025, we announced a transaction to acquire a royalty interest in Denali Therapeutics' tividenofusp alfa for up to $275 million. Tividenofusp alfa is Denali's lead investigational TransportVehicleTM-enabled enzyme replacement therapy for the treatment of mucopolysaccharidosis type II ("MPS II, or Hunter syndrome"). We will make a $200 million payment contingent on FDA accelerated approval and a $75 million payment on EMA approval if achieved by December 31, 2029.
•In November 2025, we acquired a royalty interest in Alnylam's Amvuttra from Blackstone for $310 million. Amvuttra is an approved ribonucleic acid interference ("RNAi") therapeutic for the treatment of transthyretin ("TTR") amyloidosis with cardiomyopathy and for hereditary TTR amyloidosis with polyneuropathy.
•In September 2025, we acquired a synthetic royalty on obexelimab from Zenas BioPharma for an upfront payment of $75 million and up to $225 million in milestone payments contingent on the achievements of certain clinical and regulatory events. Obexelimab is in Phase 3 development for the treatment of immunoglobulin G4-related disease and Phase 2 development for relapsing multiple sclerosis and systemic lupus erythematosus.
•In August 2025, we acquired a royalty interest in Amgen's Imdelltra from BeOne for an upfront payment of $885 million. BeOne had the option to sell to us additional royalties on Imdelltra for up to $65 million within twelve months from the acquisition date and in November 2025, BeOne elected to sell to us $26 million of those additional royalties. Imdelltra is approved for the treatment of extensive-stage small cell lung cancer.
•In June 2025, we entered into a two part $2 billion funding arrangement with Revolution Medicines. The funding arrangement includes up to $1.25 billion, including $250 million upfront, to purchase a synthetic royalty on daraxonrasib and a senior secured term loan of up to $750 million. The first tranche of the senior secured term loan must be drawn following FDA approval of daraxonrasib. Daraxonrasib is in Phase 3 development for the treatment of RAS mutant pancreatic cancer and non-small cell lung cancer.
•In February 2025, we entered into an R&D funding arrangement with Biogen to provide up to $250 million over six quarters including $50 million upfront for the development of litifilimab. Litifilimab is in Phase 3 development for the treatment of lupus.
Liquidity and Capital Resources
Overview
Our primary source of liquidity is cash provided by operations. For 2025 and 2024, we generated $2.5 billion and $2.8 billion, respectively, in Net cash provided by operating activities. We believe that our existing capital resources, cash provided by operating activities and access to our Revolving Credit Facility (as defined below) will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions and R&D funding arrangements, and to meet our debt service obligations for the foreseeable future. We have historically operated at a low level of fixed operating costs. We no longer pay Management Fees following the Internalization, which comprised the majority of our cash G&A expenses historically. Our primary cash operating expenses, other than R&D funding commitments, include interest expense, employee personnel costs, rent expense and legal and professional fees.
We have access to substantial sources of funds in the capital markets and we may, from time to time, seek additional capital through a combination of additional debt or equity financings. As of December 31, 2025 and 2024, the par value of all of our outstanding borrowings was $9.2 billion and $7.8 billion, respectively. Additionally, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility (as defined below) and up to $350.0 million of an uncommitted line of credit under our Uncommitted Credit Facility (as defined below). A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 12-Borrowings of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
We have historically funded our investments through operating cash flows, equity contributions and debt. Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high cash flow conversion. We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and investments through cash flow and issuances of equity and debt. We have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.
Our ability to satisfy our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control.
Cash Flows
The following table and analysis of cash flow changes presents a summary of our cash flow activities for 2025 as compared to 2024 (in thousands). For a discussion of cash flow activities for 2024 compared to 2023, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
|
Cash provided by/(used in):
|
|||||||||||||||||
| Operating activities | $ | 2,489,823 | $ | 2,768,986 | $ | (279,163) | |||||||||||
| Investing activities | (1,614,180) | (2,678,115) | 1,063,935 | ||||||||||||||
| Financing activities | (1,185,973) | 361,145 | (1,547,118) | ||||||||||||||
Analysis of Cash Flow Changes
Operating Activities
Cash provided by operating activities decreased by $279.2 million in 2025 as compared to 2024, primarily due to $450.0 million of higher payments for development-stage funding agreements and $116.7 million of higher interest payments, partially offset by a $371.3 million increase in cash collections from financial royalty assets.
Investing Activities
Cash used in investing activities decreased by $1.1 billion in 2025 as compared to 2024, primarily driven by lower cash used for acquisitions of financial royalty assets of $808.0 million and $511 million in proceeds from the sale of the MorphoSys Development Funding Bonds.
Financing Activities
Cash used in financing activities in 2025 was $1.2 billion as compared to cash provided by financing activities of $361.1 million in 2024. In 2025, cash used in financing activities was primarily driven by the $1.2 billion repurchases of our Class A ordinary shares and the repayment of $1.0 billion debt, which was partially offset by the net proceeds from the issuance of $2.0 billion of senior unsecured notes. In 2024, cash provided by financing activities was primarily driven by the net proceeds from the issuance of $1.5 billion of senior unsecured notes, partially offset by the use of cash for dividends and distributions and repurchases of Class A ordinary shares.
Sources of Capital
As of December 31, 2025 and 2024, our cash and cash equivalents totaled $618.7 million and $929.0 million, respectively. We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, future cash flows from operations or the issuance of additional debt. Our ability to generate cash flows from operations, issue debt or enter into financing arrangements on acceptable terms could be adversely affected if there is a material decline in the sales of the underlying pharmaceutical products in which we hold royalties, deterioration in our key financial ratios or credit ratings, or other material unfavorable changes in business conditions. Currently, we believe that we have sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support our growth objectives.
Borrowings
Our borrowings consisted of the following (in thousands):
|
Type of Borrowing
|
Date of Issuance | Maturity | As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||||||||||
| Senior Unsecured Notes: | ||||||||||||||||||||||||||
| $1,000,000, 1.20% (issued at 98.875% of par) | 9/2020 | 9/2025 | $ | - | $ | 1,000,000 | ||||||||||||||||||||
| $1,000,000, 1.75% (issued at 98.284% of par) | 9/2020 | 9/2027 | 1,000,000 | 1,000,000 | ||||||||||||||||||||||
| $500,000, 5.15% (issued at 98.758% of par) | 6/2024 | 9/2029 | 500,000 | 500,000 | ||||||||||||||||||||||
| $1,000,000, 2.20% (issued at 97.760% of par) | 9/2020 | 9/2030 | 1,000,000 | 1,000,000 | ||||||||||||||||||||||
| $600,000, 4.45% (issued at 98.909% of par) | 9/2025 | 3/2031 | 600,000 | - | ||||||||||||||||||||||
| $600,000, 2.15% (issued at 98.263% of par) | 7/2021 | 9/2031 | 600,000 | 600,000 | ||||||||||||||||||||||
| $500,000, 5.40% (issued at 97.872% of par) | 6/2024 | 9/2034 | 500,000 | 500,000 | ||||||||||||||||||||||
| $900,000, 5.20% (issued at 97.989% of par) | 9/2025 | 9/2035 | 900,000 | - | ||||||||||||||||||||||
| $1,000,000, 3.30% (issued at 95.556% of par) | 9/2020 | 9/2040 | 1,000,000 | 1,000,000 | ||||||||||||||||||||||
| $1,000,000, 3.55% (issued at 95.306% of par) | 9/2020 | 9/2050 | 1,000,000 | 1,000,000 | ||||||||||||||||||||||
| $700,000, 3.35% (issued at 97.565% of par) | 7/2021 | 9/2051 | 700,000 | 700,000 | ||||||||||||||||||||||
| $500,000, 5.90% (issued at 97.617% of par) | 6/2024 | 9/2054 | 500,000 | 500,000 | ||||||||||||||||||||||
| $500,000, 5.95% (issued at 95.824% of par) | 9/2025 | 9/2055 | 500,000 | - | ||||||||||||||||||||||
| Term Loan | See below | 7/2026 | 380,000 | - | ||||||||||||||||||||||
| Total senior unsecured debt | 9,180,000 | 7,800,000 | ||||||||||||||||||||||||
| Unamortized debt discount and issuance costs | (229,083) | (187,574) | ||||||||||||||||||||||||
| Total debt carrying value | 8,950,917 | 7,612,426 | ||||||||||||||||||||||||
| Less: Current portion of long-term debt | $ | (380,000) | $ | (997,773) | ||||||||||||||||||||||
| Total long-term debt | $ | 8,570,917 | $ | 6,614,653 | ||||||||||||||||||||||
Senior Unsecured Notes
As of December 31, 2025, our total principal amount of senior unsecured notes outstanding was $8.8 billion (the "Notes") with a weighted average coupon rate of 3.75%. The Notes require semi-annual interest payments. Indentures governing the Notes contain certain covenants with which we were in compliance as of December 31, 2025.
Term Loan assumed from Internalization
In connection with the Internalization, RP Holdings and RP Manager were each joined as a borrower under RPM's then existing $380 million term loan (the "Term Loan") with Bank of America, N.A (as amended, the "Loan Agreement"). Pablo Legorreta, Legorreta Investments, LLC and Legorreta Investments II LLC are guarantors under the Term Loan. Upon the closing of the Internalization, RPM was released as a borrower under the Term Loan. In the third quarter of 2025, the Loan Agreement was amended to accelerate the maturity of the Term Loan to July 31, 2026 and decrease the applicable interest rate. Following the amendment, the Term Loan is subject to an interest rate, at our option, of either (i) the Daily SOFR plus 1.25% or (ii) Term SOFR plus 1.25%, each as defined in the Loan Agreement. Interest is payable in arrears quarterly. We made the first interest payment in the third quarter of 2025. The Term Loan is subject to certain customary covenants, that among other things, require us to maintain (i) a Consolidated Leverage Ratio, (ii) a Consolidated Coverage Ratio, and (iii) a Consolidated Portfolio Cash Flow Ratio, each as described further below under the description of the Credit Agreement that governs the Revolving Credit Facility.
Uncommitted Credit Facility
In August 2025, we entered into an uncommitted line of credit agreement with Société Générale (the "Uncommitted Credit Facility") which provides for an aggregate borrowing capacity of up to $350.0 million for general corporate purposes within a quarter. As of December 31, 2025, there were no outstanding borrowings under the Uncommitted Credit Facility.
Senior Unsecured Revolving Credit Facility
Our subsidiary, RP Holdings, as borrower, initially entered into the Amended and Restated Revolving Credit Agreement (the "Credit Agreement") on September 15, 2021, which provides for an unsecured revolving credit facility (the "Revolving Credit Facility"). Amendment No. 3 to the Credit Agreement, which was entered into on December 22, 2023, increased the borrowing capacity to $1.8 billion for general corporate purposes with $1.69 billion of the revolving commitments maturing on December 22, 2028 and the remaining $110.0 million of revolving commitments maturing on October 31, 2027. On January 24, 2024 and April 8, 2025, we entered into Amendments No. 4 and 5, respectively, to the Credit Agreement to make certain technical modifications. As of December 31, 2025, we have a borrowing capacity of $1.8 billion under the Revolving Credit Facility.
The Credit Agreement that governs the Revolving Credit Facility and the amended loan agreement that governs the Term Loan contain certain customary covenants, that among other things, require us to maintain (i) a Consolidated Leverage Ratio at or below 4.00 to 1.00 (or at or below 4.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Adjusted EBITDA, each as defined and calculated as set forth in the Credit Agreement, (ii) a Consolidated Coverage Ratio at or above 2.50 to 1.00 of Adjusted EBITDA to consolidated interest expense, each as defined and calculated as set forth in the Credit Agreement and (iii) a Consolidated Portfolio Cash Flow Ratio at or below 5.00 to 1.00 (or at or below 5.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Portfolio Cash Flow, each as defined and calculated as set forth in the Credit Agreement. We were in compliance with the financial covenants as of December 31, 2025.
Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that are key components of certain material covenants contained within the Credit Agreement. Noncompliance with the financial covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed. If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.
The table below presents Adjusted EBITDA and Portfolio Cash Flow, each as calculated according to its respective definition in our Credit Agreement (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Portfolio Receipts | $ | 3,254,361 | $ | 2,801,446 | |||||||
|
Payments for operating and professional costs(1)
|
(288,138) | (236,225) | |||||||||
| Adjusted EBITDA (non-GAAP) | $ | 2,966,223 | $ | 2,565,221 | |||||||
| Interest paid, net | (241,983) | (113,088) | |||||||||
|
Portfolio Cash Flow (non-GAAP)
|
$ | 2,724,240 | $ | 2,452,133 | |||||||
(1)In 2025, amount included a $33 million payment related to the Management Fees on the sale of the MorphoSys Development Funding Bonds and payments of $29 million for acquisition-related costs for the Internalization. Both payments are non-recurring. Following the Internalization, we no longer pay Management Fees and instead, we compensate employees directly.
Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. We caution readers that amounts presented in accordance with our definitions of Adjusted EBITDA and Portfolio Cash Flow may not be the same as similar measures used by other companies or analysts. A reconciliation of Adjusted EBITDA and Portfolio Cash Flow to Net cash provided by operating activities, the closest GAAP measure, is presented below (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities (GAAP) | $ | 2,489,823 | $ | 2,768,986 | |||||||
| Adjustments: | |||||||||||
|
Proceeds from available for sale debt securities(1), (2)
|
21,226 | 19,786 | |||||||||
|
Distributions from equity method investees(2)
|
105,149 | 23,641 | |||||||||
|
Interest paid, net(2)
|
241,983 | 113,088 | |||||||||
|
Development-stage funding payments
|
452,000 | 2,000 | |||||||||
|
Distributions to legacy non-controlling interests - Portfolio Receipts(2)
|
(354,901) | (362,280) | |||||||||
| Payments for Employee EPAs | 10,943 | - | |||||||||
| Adjusted EBITDA (non-GAAP) | $ | 2,966,223 | $ | 2,565,221 | |||||||
|
Interest paid, net(2)
|
(241,983) | (113,088) | |||||||||
|
Portfolio Cash Flow (non-GAAP)
|
$ | 2,724,240 | $ | 2,452,133 | |||||||
(1)Amounts include quarterly repayments on the Cytokinetics Commercial Launch Funding and a quarterly repayment on the MorphoSys Development Funding Bonds in each of 2025 and 2024. The MorphoSys Development Funding Bonds were sold in January 2025.
(2)The table below shows the line item for each adjustment and the direct location for such line item in the consolidated statements of cash flows.
| Reconciling Adjustment | Statements of Cash Flows Classification | ||||
|
Interest paid, net
|
Operating activities (Interest paidless Interest received)
|
||||
| Distributions from equity method investees | Investing activities | ||||
| Proceeds from available for sale debt securities | Investing activities | ||||
| Distributions to legacy non-controlling interests - Portfolio Receipts | Financing activities | ||||
Uses of Capital
Acquisitions of Royalties
We acquire product royalties in ways that can be tailored to the needs of our partners through a variety of structures:
•Third-party Royalties - Existing royalties on approved or late-stage development therapies. A royalty is the contractual right to a percentage of top-line sales from a licensee's use of a product, technology or intellectual property. The majority of our current portfolio consists of third-party royalties.
•Synthetic Royalties -Newly-created royalties on approved or late-stage development therapies with strong proof of concept. A synthetic royalty is the contractual right to a percentage of top-line sales by the developer or marketer of a therapy in exchange for funding.
•Other Funding Modalities - We may provide other forms of capital to our partners as a component within a royalty transaction to increase the scale of our capital. This may include senior unsecured debt, direct equity investments and launch and development capital (in exchange for fixed long-term payments).
Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.
Distributions to Shareholders
We paid dividends and distributions of $511.9 millionand $501.8 millionin 2025and 2024, respectively. We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.
Class A Ordinary Share Repurchases
In January 2025, our board of directors authorized a new share repurchase program, which replaced the share repurchase program announced on March 27, 2023, under which we may repurchase up to $3.0 billion of our Class A ordinary shares. The repurchases may be made in the open market or in privately negotiated transactions. The new share repurchase program has been approved by our board of directors through June 2027 and shareholders have approved the terms of our share repurchase contracts and counterparties thereto through May 2030. In 2025, we repurchased 37.4 million shares at a cost of approximately $1.2 billion. In 2024, we repurchased 8.4 million shares at a cost of approximately $229.9 million. As of December 31, 2025, approximately $1.8 billion remained available under the new share repurchase program.
Other Funding Arrangements
In June 2025, we entered into a two-part $2 billion funding arrangement with Revolution Medicines. The funding arrangement includes up to $1.25 billion, including $250 million paid upfront, to purchase a synthetic royalty on daraxonrasib and a senior secured term loan of up to $750 million. The first tranche of the senior secured term loan must be drawn following FDA approval of daraxonrasib. As of December 31, 2025, $1 billion of the funding commitment remained unfunded.
We have a long-term funding arrangement with Cytokinetics which is comprised of seven tranches of up to $525 million in total funding ("Cytokinetics Commercial Launch Funding"). As of December 31, 2025, $175 million remained available under the Cytokinetics Commercial Launch Funding.
We may have other funding arrangements where we are contractually obligated to fund R&D activities performed by our development partners. We also have funding arrangements related to our equity method investments in the Avillion Entities. As our committed capital requirements are based on phases of development, the completion of which is highly uncertain, only the capital required to fund the current stage of development under such funding arrangements is considered committed capital, which was approximately $63.3 million as of December 31, 2025.
We also have certain milestones payable to our counterparties that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones. These contingent milestone payments are not considered contractual obligations. In 2025, we paid a $200 million regulatory milestone following FDA approval of a new manufacturing hub for Adstiladrin and sales-based milestones of $18.6 million and $50 million related to Erleada and Trelegy, respectively.
Debt Service
The future principal and interest payments under our Notes as of December 31, 2025 are as follows (in thousands):
| Year | Principal Payments | Interest Payments | ||||||||||||
| 2026 | $ | - | $ | 332,431 | ||||||||||
| 2027 | 1,000,000 | 329,850 | ||||||||||||
| 2028 | - | 312,350 | ||||||||||||
| 2029 | 500,000 | 312,350 | ||||||||||||
| 2030 | 1,000,000 | 286,600 | ||||||||||||
| Thereafter | 6,300,000 | 3,352,450 | ||||||||||||
|
Total(1)
|
$ | 8,800,000 | $ | 4,926,031 | ||||||||||
(1)Excludes unamortized debt discount and issuance costs of $229.1 million as of December 31, 2025, which are amortized through interest expense over the remaining life of the underlying debt obligations.
In addition to our Notes, we have a $380 million Term Loan due in July 2026. The interest rate on the Term Loan is variable based on SOFR. Using the SOFR interest rate as of December 31, 2025, the estimated interest payments in 2026 are $17.7 million.
Leases
In connection with the Internalization, we entered into an operating lease agreement for our office space. The lease agreement has a non-cancelable term through October 31, 2031 and a five-year extension option. As of December 31, 2025, the future minimum lease payments under non-cancelable operating leases over the next five years and thereafter are as follows (in thousands):
| Year | Payments | |||||||
| 2026 | $ | 4,053 | ||||||
| 2027 | 3,776 | |||||||
| 2028 | 3,721 | |||||||
| 2029 | 3,726 | |||||||
| 2030 | 3,755 | |||||||
| Thereafter | 3,129 | |||||||
| Total lease payments | 22,160 | |||||||
| Less: imputed interest | (2,903) | |||||||
| Present value of lease liabilities | $ | 19,257 | ||||||
Management Fees
Prior to the Internalization, we paid quarterly Management Fees pursuant to the Legacy Management Agreement equal to 6.5% of the cash receipts from Royalty Investments (as defined in the Legacy Management Agreement) for such quarter and 0.25% of our security investments under GAAP as of the end of each quarter. The payment for our Management Fees was previously the most significant component of Payments for operating and professional costspresented in the consolidated statements of cash flows. Following the Internalization, we no longer pay Management Fees and instead, we compensate employees and pay other operating costs directly.
Guarantor Financial Information
Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings and RP Manager, our non-wholly owned subsidiaries (together, the "Guarantor Subsidiaries"). Our remaining subsidiaries (the "Non-Guarantor Subsidiaries") do not guarantee the Notes.
Under the terms of the indenture governing the Notes, Royalty Pharma plc and the Guarantor Subsidiaries each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on the Notes. As of December 31, 2025, the total outstanding and guaranteed Notes had a par value and carrying value was $8.8 billion and $8.6 billion, respectively.
The following financial information presents summarized combined balance sheet information as of December 31, 2025, and summarized combined statement of operations information for 2025 for Royalty Pharma plc, RP Holdings and RP Manager. All intercompany balances and transactions between these entities are eliminated in the presentation of the combined financial statements. RP Holdings' most significant asset is its investment in operating subsidiaries, which has been eliminated in the table below to exclude investments in Non-Guarantor Subsidiaries. Our operating subsidiaries hold the majority of our cash and cash equivalents, marketable securities and financial royalty assets. As a result, our ability to make required payments on the Notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us. There are no material restrictions on distributions from the operating subsidiaries. Amounts presented below do not represent our total consolidated amounts (in thousands):
| Summarized Combined Balance Sheet | |||||
| As of December 31, 2025 | |||||
| Current assets | $ | 27,054 | |||
| Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries | 26,932 | ||||
| Non-current assets | 926,732 | ||||
| Non-current intercompany notes receivable due from Non-Guarantor Subsidiaries | 3,011,820 | ||||
| Current liabilities | 515,312 | ||||
| Current interest payable on intercompany notes due to Non-Guarantor Subsidiaries | 26,932 | ||||
| Non-current liabilities | 9,147,894 | ||||
| Non-current intercompany notes payable due to Non-Guarantor Subsidiaries | 2,208,840 | ||||
| Summarized Combined Statement of Operations | |||||
| Year Ended December 31, 2025 | |||||
|
Interest income on intercompany notes receivable due from Non-Guarantor Subsidiaries
|
$ | 146,611 | |||
| Other income | 72,196 | ||||
| Operating expenses | 725,272 | ||||
|
Interest expense on intercompany notes due to Non-Guarantor Subsidiaries
|
72,010 | ||||
| Net loss | 578,475 | ||||
Critical Accounting Policies and Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Certain of these policies are considered critical as they have the most significant impact on our financial condition and results of operations and require the most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of income and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our most critical accounting policies relate to our financial royalty assets and the full descriptions can be found in Note 2-Summary of Significant Accounting Policies to our consolidated financial statements. Similarly, the most significant judgments and estimates applied by management are associated with the measurement of our financial royalty assets at amortized cost using the prospective effective interest method. The application of the prospective approach to calculate interest income from our financial royalty assets requires management's judgment in forecasting the expected future cash flows of the underlying royalties. These estimates and judgments arise because of the inherent uncertainty in predicting future events.
We evaluate financial royalty assets for impairment on an individual basis by comparing the effective interest rate at each reporting date to that of the prior period. If the effective interest rate for the current period is lower than the prior period and if the gross cash flows have declined (expected and collected), management records a provision for the change in expected cash flows. The provision is measured as the difference between the financial royalty asset's amortized cost basis and the net present value of the expected future cash flows, calculated based on the prior period's effective interest rate. The amount recognized as provision expense increases the financial royalty asset's cumulative allowance, which reduces the net carrying value of the financial royalty asset.
Factors Impacting Expected Future Cash Flows
The amounts and timing of forecasted expected future cash flows are largely influenced by sell-side equity research analyst coverage, commercial performance of the product and the royalty duration.
•Analyst coverage. Expected future cash flows are derived from sales projections for the underlying biopharmaceutical products, based primarily on sell-side equity research analyst consensus forecasts. These forecasts incorporate market research on global economic conditions, industry trends and product life cycles. Our policy is to rely on sell-side research analysts' consensus sales forecasts to derive annual sales projections for each financial royalty asset over the periods for which we are entitled to royalties or milestones. When analyst estimates do not extend through the full royalty term, we project future sales using statistical curves which are modelled using a combination of historical product trends and available consensus estimates. Depending on the level of details provided in analyst models, management may apply additional assumptions to allocate annual sales to quarterly periods and by geographic regions, determine product and pricing mix for franchises, or exclude sales for unapproved products. Contractual royalty rates, terms and milestones are then applied to the adjusted sales projections to estimate the royalty or milestone payments over the asset's life, forming the basis for expected future cash flows used in calculating and measuring interest income.
•Commercial performance. The approval of a product for use in new indications can extend the date through which we are entitled to royalties or milestones on that product. For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and on future combination products, which create new cash flow streams that were previously not reflected. We generally do not recognize income from, or forecast sales for, unapproved products unless they are incorporated into analyst consensus forecasts in such a way that we cannot isolate the probability of regulatory success that is built into analyst estimates. If a product is removed from all or a portion of a market, subsequent sell-side equity research analysts' consensus sales forecasts will reflect the expected drop in sales. Both the new cash flow streams and the cessation of cash flow streams related to a product's performance in the market over the royalty term can materially affect our forecast of expected future cash flows, which directly impacts the measurement of interest income.
•Royalty duration. The duration of a royalty can be based on a variety of factors, such as regulatory and marketing approval dates, patent expiration dates, the number of years from first commercial sale, the first date of manufacture of the patent-protected product, the entry of generics or a contractual date arising from litigation, which are all impacted by the point in time in the product's life cycle at which we acquire the royalty. Royalty durations vary by geography as the United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms. Products may be covered by a number of patents and, where a royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest protection to align the period over which management forecasts expected future cash flows to the royalty term. It is common for the latest expiring patent in effect at the date we acquire a financial royalty asset to be extended, adjusted or replaced with newer dated patents subsequent to our acquisition of a royalty due to new information, resulting in changes to the royalty duration in later periods. Patents may expire earlier than expected at the time of the acquisition due to the loss of patent protection, loss of data exclusivity on intellectual property, contractual licensing terms limiting royalty payments based on time from product launch, recent legal developments or litigation. Macroeconomic factors, such as changes in economies or the competitive landscape, including the unexpected loss of exclusivity to the products underlying our portfolio of royalties, changes in government legislation, product life cycles, industry consolidations and other changes beyond our control could result in a positive or negative impact on our forecast of expected future cash flows and the related measurement of interest income.
Significant Assumptions Applied in Developing Forecasted Expected Future Cash Flows
As part of the preparation of the forecasted expected future cash flows, which relies on the sources and variables discussed above, management is required to make assumptions around the following forecast inputs: (1) estimates of the duration of the royalty, which includes consideration of the strength of patent protection and anticipated timing for entry of generics, (2) product growth rates and sales trends in outer years, generally projected through statistical curves, (3) the product and pricing mix for franchised products, (4) the geographical allocation of annual sales data from sell-side equity research analysts' models, and (5) the portion of sales that are subject to royalties, which is referred to as royalty bearing sales. Generally the most significant and judgmental assumptions used in forecasting the expected future cash flows for our royalties include (1) estimates of the duration of the royalty and (2) sales trends and product growth rates in outer years of the royalty term, which are primarily derived from statistical models.
With respect to the cystic fibrosis franchise, forecasted expected future cash flows in 2025 are significantly impacted by prong 5 from above, the estimated royalty bearing sales. The forecasted expected cash flows for the cystic fibrosis franchise included consensus estimates for Vertex's Alyftrek and also included the conservative assumption that royalties will only be collected on the tezacaftor component of Alyftrek and not on the deuterated ivacaftor component. Although we believe that the deuterated ivacaftor component of Alyftrek is the same as ivacaftor and is therefore royalty-bearing, Vertex has made public statements that it believes the deuterated ivacaftor component is not royalty-bearing. If the forecasted expected cash flows for the cystic fibrosis franchise included the assumption that the deuterated ivacaftor component is royalty-bearing in 2025, we would expect the impact to be reflected through higher interest income prospectively.
The royalty duration is important for purposes of accurately measuring interest income over the life of a financial royalty asset. In making assumptions around the royalty duration for terms that are not contractually fixed, management considers the strength of existing patent protection, timing for expected entry of generics, geographical exclusivity periods and potential patent term extensions tied to the underlying product. It is common for royalty durations to expire earlier or later than anticipated due to unforeseen developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing for the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations.
When royalty-bearing pharmaceutical products have limited or no coverage by sell-side equity research analysts, or where sell-side equity research analyst estimates are not available for the full term of our royalty, particularly for the later years in a product's life, we generally incorporate a statistical curve developed using historical sales data and available consensus sales projections to forecast product sales over the remaining life of the product.
Even though we believe interest income from financial royalty assets and the associated non-cash provision for changes in expected cash flows are not indicative of our near-term financial performance and should not be used as a source for predicting future income or growth trends, changes in the aforementioned assumptions could result in a material impact to our financial statements. A shortened royalty term can result in a reduction in interest income, significant reductions in total royalty payments over time compared to expectations or a permanent impairment. If the effective interest rate is lower for the current period than the prior period and if the gross cash flows have declined (expected and collected), this would result in the immediate recognition of non-cash provision expense even though the applicable cash inflows will not be realized for many years into the future. Small declines in sell-side equity research analysts' consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future.
Below is a summary of the sensitivity of our current year results in relation to the royalty duration for our top three financial royalty assets that are uncapped based on net carrying value as of December 31, 2025. Because these are long-dated financial royalty assets, we have assumed a change of two years in the estimated duration to sensitize the financial statement impact. There have not been any significant changes to the estimated duration of expected future cash flows between 2023 and 2025 for the financial royalty assets displayed below except for the cystic fibrosis franchise. During 2024, the estimated duration for the cystic fibrosis franchise was extended from 2037 to a range of 2039 to 2041, reflecting the approval of Alyftrek.
If the duration of these financial royalty assets were extended two years by assuming the statistically projected growth trends continue and all other royalty terms and assumptions remain unchanged, any impact to interest income would be recognized prospectively over the remaining expected life of the financial asset. As there would be no current impact to interest income, the sensitivity is not disclosed below. However, an extended duration for a financial royalty asset could result in the reduction of any existing cumulative allowance for changes in expected cash flows, which would be recognized in the current period as provision income and is reflected in the table below for these top three financial royalty assets. If the duration for these financial royalty assets were reduced by two years by eliminating the corresponding forecasted expected future cash flows in that two year period while keeping all other royalty terms and assumptions unchanged, we would recognize immediate incremental provision expense in the current period as a result of applying the prospective method of the effective interest rate methodology. The extension and reduction in royalty terms are modelled in isolation for purposes of the sensitivity disclosures below and do not include any consideration of the related allowance for current expected credit losses. The measurement of interest income from our financial royalty assets is recalculated each reporting period, which requires updates to various inputs and assumptions, including estimated royalty duration. Therefore, any actual impact to recognition of provision income or expense would be different than the sensitivity disclosure below. The impact of these sensitivity assumptions is summarized as follows (in thousands):
| Year Ended December 31, 2025 | Year Ended December 31, 2025 | |||||||||||||||||||||||||||||||
|
Estimated Royalty Duration(1)
|
Change in Duration Assumption Applied | Provision Income for Changes in Expected Cash Flows | Change in Duration Assumption Applied | Provision Expense for Changes in Expected Cash Flows | ||||||||||||||||||||||||||||
| Cystic fibrosis franchise |
2039-2041(2)
|
+ 2 years | $ | - | - 2 years | $ | 216,527 | |||||||||||||||||||||||||
|
Evrysdi
|
2035-2036
|
+ 2 years | (169,874) | - 2 years | 218,787 | |||||||||||||||||||||||||||
|
Voranigo
|
2038
|
+ 2 years | - | - 2 years | 50,424 | |||||||||||||||||||||||||||
(1)Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may vary by geography and may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors. There can be no assurances that our royalties will expire when expected.
(2)Royalty is perpetual. We estimate royalty duration of 2039-2041 due to expected Alyftrek patent expiration and potential generic entry thereafter leading to sales decline.
Recent Accounting Pronouncements
See Note 2-Summary of Significant Accounting Policies to our consolidated financial statements for additional information on recently issued accounting standards.
Royalty Pharma plc published this content on February 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 11, 2026 at 14:05 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]