01—Abstract
Summary
Summary of the 10-Q filed May 9, 2024. Cited figures are marked; the original filing is the authoritative source.
Royalty Pharma plc's first-quarter 2024 results show a sharp drop in profitability driven by a non-cash provision for changes in expected cash flows from financial royalty assets.
Total income and other revenues were $567,978 thousanda (about $568.0 million) versus $683,971 thousand in the first quarter of 2023, a decrease of $115,993 thousand (17.0%). The company recorded a provision for changes in expected cash flows of $583,600 thousand, against $118,804 thousand a year earlier, primarily related to the cystic fibrosis franchise and Crysvita. As a result, the company reported an operating loss of $73,774 thousand and net income attributable to Royalty Pharma plc of $4,778 thousand, or $0.01 per diluted Class A share, compared with $340,755 thousand, or $0.76 per share, in the prior-year quarter.
The prior-year quarter included a non-recurring $475.0 millionb Zavzpret milestone payment. Cash generation remained substantial even as GAAP earnings fell. Net cash provided by operating activities was $664,638 thousand, compared with $1,033,837 thousand in the first quarter of 2023.
Portfolio Receipts were $716,997 thousandc versus $1,131,033 thousand, and Adjusted EBITDA (non-GAAP) was $656,476 thousand. Cash and cash equivalents rose to $843,000 thousand at March 31, 2024, from $477,010 thousand at December 31, 2023. The company paid a quarterly dividend of $0.21 per Class A share totaling $93.8 million, invested $93 million in royalties, milestones and other contractual receipts during the quarter, and did not repurchase any shares.
Senior unsecured notes totaled $6.3 billiond in par value, and the company had $1.8 billion of revolving commitments available. Subsequent to quarter end, the company announced it would acquire royalties and milestones on frexalimab from ImmuNext, Inc. for approximately $525 million including estimated transaction costs. The filing also notes that the company's accounting model for financial royalty assets can produce volatile and unpredictable GAAP results, and that the company will consider Portfolio Receipts as its key operating performance measure.
02—Key points
Key Highlights
- Net income attributable to Royalty Pharma plc fell to $4,778 thousand ($0.01 per diluted share) from $340,755 thousand ($0.76 per diluted share) a year earlier.
- Provision for changes in expected cash flows from financial royalty assets was $583,600 thousand, up from $118,804 thousand, mainly tied to the cystic fibrosis franchise ($390,462 thousand) and Crysvita ($127,989 thousand).
- Total income and other revenues declined to $567,978 thousand from $683,971 thousand, reflecting the non-recurring $475.0 million Zavzpret milestone received in Q1 2023.
- Net cash provided by operating activities was $664,638 thousand versus $1,033,837 thousand; Portfolio Receipts were $716,997 thousand versus $1,131,033 thousand.
- Cash and cash equivalents increased to $843,000 thousand from $477,010 thousand at December 31, 2023.
- The company paid $93.8 million in dividends ($0.21 per Class A share) and made no share repurchases during the quarter.
- Subsequent to quarter end, the company announced an approximately $525 million acquisition of royalties and milestones on frexalimab from ImmuNext, Inc.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed May 9, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $567.98M$683.97M | −17.0% |
| R&D Expenses | $500K$500K | 0.0% |
| Operating Expenses | $641.75M$205.00M | +213.1% |
| Operating Income | -$73.77M$478.97M | −115.4% |
| Interest Expense | $44.23M$46.95M | −5.8% |
| Net Income | $4.78M$340.75M | −98.6% |
| EPS (Basic) | $0.01$0.76 | −98.7% |
| EPS (Diluted) | $0.01$0.76 | −98.7% |
| Shares Outstanding (Basic) | 448.62M445.61M | +0.7% |
| Shares Outstanding (Diluted) | 597.48M607.25M | −1.6% |
05—Questions
Frequently Asked Questions
Why did net income fall so sharply in the first quarter of 2024?
The main driver was a non-cash provision for changes in expected cash flows from financial royalty assets of $583,600 thousand, compared with $118,804 thousand in the first quarter of 2023. The filing attributes most of the 2024 provision to the cystic fibrosis franchise, including consensus estimates for Vertex's new triple combination therapy, and to Crysvita due to lower sales forecasts. The prior-year quarter also benefited from the non-recurring $475.0 million Zavzpret milestone.
Did the company's cash generation weaken as much as its GAAP earnings?
Cash generation declined but by less proportionally than GAAP earnings relative to the prior year. Net cash provided by operating activities was $664,638 thousand compared with $1,033,837 thousand, and Portfolio Receipts were $716,997 thousand compared with $1,131,033 thousand. The filing notes that the prior-year period included the $475.0 million milestone payment. Cash and cash equivalents rose to $843,000 thousand at March 31, 2024.
How much debt does Royalty Pharma have and when does it mature?
As of March 31, 2024, senior unsecured notes had a par value of $6.3 billion, with a carrying value of $6,139,376 thousand after unamortized discount and issuance costs. The filing lists $1.0 billion maturing in September 2025 and $1.0 billion in September 2027, with the remainder due in 2031 and later. The company also has up to $1.8 billion of revolving commitments, with no outstanding borrowings as of March 31, 2024, and states it was in compliance with its covenants.
What is the company's dividend and share repurchase position?
The company declared and paid one quarterly cash dividend of $0.21 per Class A ordinary share in the first quarter of 2024, totaling $93.8 million. It did not repurchase any Class A ordinary shares during the quarter, leaving $695,241 thousand available under the $1.0 billion share repurchase program authorized in March 2023, which expires on June 23, 2027.
What significant events occurred after the quarter ended?
In May 2024, the company announced it will acquire royalties and milestones on frexalimab, owned by ImmuNext, Inc., for approximately $525 million including estimated transaction costs. Frexalimab, developed by Sanofi, is in Phase 3 studies for multiple sclerosis and Phase 2 studies for systemic lupus erythematosus and Type 1 Diabetes. The filing also describes Vertex's May 2024 submission of a new triple combination therapy for FDA and EMA approval.
06—Continue