Negative Points

• Milestones and other contractual receipts declined significantly in Q2 2026 due to a one-time payment in the prior year period, impacting overall portfolio receipts growth.

• The company faces headwinds from the loss of exclusivity for Promacta and the launch of biosimilar TYSABRI in the US, which could pressure future royalty receipts.

• The cliramitug royalty is dependent on the success of a Phase III outcomes trial, with results not expected until 2028, introducing clinical and regulatory risk.

• The development-stage pipeline, while promising, carries inherent risks, and the company's guidance does not account for potential future royalty acquisitions, limiting upside visibility.

• Operating costs are expected to increase in the second half of 2026 due to seasonality, potentially impacting margins despite the benefits of internalization.

• The company's leverage stands at 2.8 times total debt to adjusted EBITDA, and interest payments are expected to be around $350 million to $360 million in 2026, which could constrain capital deployment.

• The synthetic royalty opportunity, while growing, remains a small portion of the overall biopharma funding market, and scaling it may face challenges in deal flow and competition.

• Expansion into the Chinese market is still in early stages, with regulatory and policy risks, including potential US restrictions on investments, posing uncertainties.

• The company's reliance on a few key products for growth, such as Tremfya and Evrysdi, exposes it to concentration risk if these assets underperform.

• The potential impact of the cardio transform trial on the TTR market, while possibly benefiting Amvuttra, introduces uncertainty in the competitive landscape for cliramitug.

Q & A Highlights

Q: Can you provide high-level thoughts on the implications of the recent Cardio-Transform data for Amvuttra and the TTR market, and also update us on the synthetic royalty opportunity? A: Marshall Urist (EVP, Research & Investments) stated that Royalty Pharma is pleased with its two investments in TTR amyloidosis, viewing the market as highly interesting with the addition of the potentially transformative cliramitug. Regarding Amvuttra, he noted that while the Cardio-Transform trial failing is unfortunate for patients, it removes a near-term competitor and uniquely benefits Amvuttra, as the royalty is specific to that product and not Alnylam's follow-on. Chris Hite (Chairman of Partnering & Investments) added that the synthetic royalty opportunity remains a major growth driver, with the market growing ~40% since 2015 and representing only about 5% of biopharma funding, leaving significant room for penetration.

Q: What is the flexibility to tilt deal structures toward equity given the increase in pharma/biotech M&A, and does the improved credit rating or lower rates bias you to deploy more capital? A: Terry Coyne (EVP, CFO) explained that the company has significant financial flexibility and is well-positioned to partner with companies in any way they need, which could create opportunities from sector M&A. He emphasized that Royalty Pharma is agnostic to the rate environment, having generated great returns in excess of its cost of capital during both rising and falling rate periods. The company will continue to access debt markets when needed while maintaining its investment-grade rating, and is pleased to now be BBB rated across all three major agencies.

Q: Given the company's growth and expanded team, is there interest in leaning more into development-stage assets where returns could be higher, and what are the initial learnings from building a presence in China? A: Pablo Legorreta (CEO) stated that the 65/35 split between approved and development-stage investments has been consistent over the last 5-10 years and is expected to remain at a similar level. He noted that the current 12% of invested capital in unapproved assets could trend up to mid-to-high teens while maintaining a relatively low-risk portfolio. Regarding China, Legorreta said it is early days, but the company is committed to building that market, having hired a top player and increasing activity there. He emphasized patience, noting the opportunity is large and attractive in the long run.

Q: Can you remind us of the reasons why it would be difficult to build a new competitor that resembles Royalty Pharma, and why investors should not be concerned about competition? A: Pablo Legorreta (CEO) explained that there are significant barriers to entry, including scale ($22 billion of invested capital at cost), cost of capital, and a superb team with a strong culture. He emphasized that the portfolio is irreproducible, as it took over a decade to assemble unique, one-of-a-kind assets like the Tremfya royalty or the daraxonrasib royalty. Even with $20-30 billion of capital, it would be impossible to replicate the portfolio spontaneously, as these assets are unique and the work of decades, providing a huge moat and barrier to entry.

Q: What type of IRR are you able to drive in development-stage assets versus approved assets, and what level of MACE risk reduction would be clinically meaningful for the pelacarsen Lp(a) readout? A: Marshall Urist (EVP, Research & Investments) stated that for approved products, unlevered IRR expectations are in the high single to low double-digit range, typically at the higher end. For unapproved products, IRR expectations are in the teens, depending on risk profile and counterparty. He noted that levered returns, which shareholders actually enjoy, are significantly higher due to the company's capital structure. Regarding pelacarsen, Urist said Novartis has been explicit about their expectations for clinical relevance, and the trial will be the first outcome study for Lp(a), providing valuable learnings about baseline levels and patient benefit.

Q: How do you handicap the Phase III success of cliramitug based on Phase I biomarker effects, and how do you prevent adverse selection in R&D co-funding? A: Marshall Urist (EVP, Research & Investments) highlighted the intriguing biomarker data from earlier studies, including imaging data showing amyloid removal and markers like NT-proBNP. He noted that every product in TTR amyloidosis has gone into Phase III based on biomarker data, and data from other amyloid-depleting therapies in Alzheimer's and AL amyloidosis support the potential for cardiovascular benefit. Chris Hite (Chairman of Partnering & Investments) addressed adverse selection, stating that the company emphasizes funding partners' most exciting assets and maintains a very high bar for investments, as evidenced by the Teva and J&J deals this year.

Q: How are you tracking towards the $4.7 billion portfolio receipts target for 2030, and what emerging therapeutic areas are catching your interest? A: Terry Coyne (EVP, CFO) stated that the company feels really good about tracking towards the $4.7 billion or more top-line target by 2030, but it is still early to consider changes to that guidance. Marshall Urist (EVP, Research & Investments) explained that the team is set up to be generalists, open to analyzing any therapeutic area or product anywhere in the world. The company doesn't think about the portfolio from a top-down perspective but rather remains open to creating products in whatever therapeutic area they come from, ensuring the team is ready to execute and be a great partner.

Q: What are your thoughts on US policy risk regarding China and proposed license restrictions, and should we expect milestones to be a more meaningful contributor in the second half? A: Pablo Legorreta (CEO) explained that royalties are different from equity, as they are contracts giving rise to payments, making them less visible and harder for governments to restrict. Chris Hite (Chairman of Partnering & Investments) noted the company is monitoring the Coins Act and Ben's Act closely, but the opportunity already exists given the substantial number of royalty agreements in place from the last 5-6 years of out-licensing. Terry Coyne (EVP, CFO) reiterated that milestones and other contractual receipts are still expected to be around $60 million for the year.

Q: What was the reason for relatively low operating costs in Q2, and given the guidance, what will drive the increase in the second half? A: Terry Coyne

For the complete transcript of the earnings call, please refer to the full earnings call transcript .