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RP

Royalty Pharma plc (RPRX)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered double‑digit cash metrics: Royalty Receipts up 11% to $811M and Portfolio Receipts up 11% to $814M, supported by Voranigo, Tremfya, and the cystic fibrosis franchise . Net cash from operations was $703M, essentially flat year/year .
  • Guidance raised for the third time in 2025: Portfolio Receipts to $3.20B–$3.25B (from $3.05B–$3.15B), implying ~14%–16% growth; operating/professional costs maintained at ~9%–9.5% of Portfolio Receipts; interest paid ~$275M .
  • Versus S&P Global consensus, EPS beat while revenue and EBITDA missed: EPS $1.17 vs $1.04 consensus (beat); GAAP revenue $609M vs $764M consensus (miss); EBITDA $429M vs $720M consensus (miss)*. Strength in Portfolio Cash Flow ($657M) and Adjusted EBITDA ($779M) underscores cash conversion .
  • Capital deployment and portfolio expansion were major catalysts: ~$1.0B deployed including Amgen’s Imdelltra royalty (up to $950M), Zenas obexelimab funding (up to $300M), and Blackstone’s 1% royalty on Alnylam’s Amvuttra ($310M) post-quarter . Management emphasized sustained ROIC ~15.7% and ROIE ~22.9% LTM and reiterated the strategy as premier capital allocator in life sciences .

What Went Well and What Went Wrong

What Went Well

  • Sustained double‑digit cash growth: “We delivered 11% growth in both portfolio receipts… and royalty receipts,” driven by Voranigo, Tremfya and CF franchise .
  • Guidance raised again: “We now expect portfolio receipts to be between $3.2 billion and $3.25 billion,” the third raise this year and 14th since IPO .
  • Attractive returns and balance sheet capacity: ROIC 15.7% and ROIE 22.9% LTM; leverage ~3.2x total debt to Adjusted EBITDA (2.9x net); $939M cash and $9.2B investment‑grade debt, weighted duration ~13 years .

What Went Wrong

  • GAAP revenue and EBITDA missed consensus despite strong cash metrics: Revenue $609M vs $764M consensus; EBITDA $429M vs $720M consensus*, reflecting timing/GAAP dynamics versus cash receipts *.
  • Higher G&A and R&D cash funding: G&A $119M versus $57M prior year (share‑based comp $73M vs $1M); R&D funding expense $51M vs $1M as the company leaned into development funding .
  • 2026 headwinds telegraphed: Promacta royalties expected to be minimal with generics; interest paid to rise to ~$350–$360M, reducing near‑term cash yield if not offset by portfolio growth .

Financial Results

GAAP and Cash Metrics (Q1 → Q3 2025)

Metric ($USD Millions)Q1 2025Q2 2025Q3 2025
Total income and other revenues$568 $579 $609
Net income attributable to RPRX$238 $30 $288
Royalty Receipts$788 $672 $811
Portfolio Receipts$839 $727 $814
Adjusted EBITDA (non‑GAAP)$738 $633 $779
Portfolio Cash Flow (non‑GAAP)$611 $641 $657
Net cash from operating activities$596 $364 $703
Weighted avg diluted shares (MM)578 562 560

Note: Portfolio Cash Flow margin approximated at 73% (Q1), 88% (Q2), and 81% (Q3), calculated from cited Portfolio Receipts and Portfolio Cash Flow values .

Actual vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue consensus vs actual ($MM)$750.5 vs $568$693.7 vs $579$763.5 vs $609
Primary EPS consensus vs actual ($)$0.95 vs $1.06$1.03 vs $1.14$1.04 vs $1.17
EBITDA consensus vs actual ($MM)$703.4 vs n/a$606.6 vs $225.5$720.0 vs $429.4

Values retrieved from S&P Global.*

Product Portfolio Receipts Breakdown (Q3 2025 vs Q3 2024)

ProductMarketer(s)Therapeutic AreaQ3 2025 ($MM)Q3 2024 ($MM)Change
Cystic fibrosis franchiseVertexRare disease$222 $207 +7%
TrelegyGSKRespiratory$96 $91 +6%
TysabriBiogenNeuroscience$68 $68 0%
EvrysdiRocheRare disease$52 $48 +8%
XtandiPfizer, AstellasCancer$50 $43 +15%
TremfyaJohnson & JohnsonImmunology$49 $34 +44%
ImbruvicaAbbVie, J&JCancer$41 $46 −11%
PromactaNovartisHematology$38 $42 −9%
VoranigoServierCancer$33 —n/a
Cabometyx/CometriqExelixis, Ipsen, TakedaCancer$21 $19 +15%
SpinrazaBiogenRare disease$14 $14 −4%
ErleadaJohnson & JohnsonCancer$12 $10 +23%
TrodelvyGileadCancer$12 $11 +6%
Other productsVariousVarious$102 $98 +3%
Royalty Receipts total——$811 $732 +11%
Milestones/other receipts——$3 $3 0%
Portfolio Receipts total——$814 $735 +11%

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Cash & cash equivalents ($MM)$1,088 $632 $939
Total debt (principal, $B)$7.8 $8.2 $9.2 (incl. $2.0B notes)
Leverage (Debt/Adj EBITDA; Net basis)n/an/a~3.2x; ~2.9x
Share repurchases ($MM; shares)$723; 23M (Q1) $277; 8M (Q2) $152; ~4M (Q3)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Portfolio ReceiptsFY 2025$3,050–$3,150M $3,200–$3,250M Raised
Payments for operating & professional costsFY 2025~9%–9.5% of PR ~9%–9.5% of PR Maintained
Interest paidFY 2025~$275M ~$275M Maintained
Milestones & other receiptsFY 2025~$110M ~$125M Raised
Q4 interest paidQ4 2025~$8M ~$7M Lowered

Additional 2026 modeling notes: minimal Promacta royalties; interest paid ~$350–$360M including 2025 notes .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Capital deployment & dealsBiogen litifilimab R&D funding up to $250M; Revolution Medicines transaction up to $2B including synthetic royalty Imdelltra royalty up to $950M; obexelimab funding up to $300M; Amvuttra 1% royalty $310M post‑quarter Accelerating; diversified across disease areas
Internalization & cost savingsInternalization completed in May; >$100M cash savings in 2026, rising to >$175M by 2030 Operating/pro costs at 4.2% of PR in Q3 vs >12% in H1; management fee extinguished Cost ratio trending lower H2
Cash conversion metricsPortfolio Cash Flow $611M (Q1), $641M (Q2) Portfolio Cash Flow $657M (~81% margin) Sustained high conversion
Returns & leverageReturns highlighted at Investor Day; stability through cycles ROIC 15.7%, ROIE 22.9% LTM; leverage ~3.2x / 2.9x net Stable returns; prudent leverage
LP(a) investmentsInitiation plans and class build‑out Event rate tracking slower noted; management remains optimistic on class across two royalties Watch timing; thesis intact
CF franchise dynamicsVertex approvals, receipts strong +7% receipts YoY; noted EC approval for Alyftrek and pending dispute resolution procedures previously disclosed Strength continues; monitor contracting dynamics
Regulatory/macroMultiple EU/FDA approvals across portfolio (Tremfya, Cabometyx, Skytrofa) Alzheimer’s trontinemab Phase 3 initiated; daraxonrasib positive data; sNDA approval for Airsupra Robust regulatory cadence

Management Commentary

  • “We now expect portfolio receipts to be between $3.2 billion and $3.25 billion, which represents impressive growth of around 14–16%… This is the third time we have raised guidance this year and the 14th since our IPO in 2020.” — Pablo Legorreta .
  • “Portfolio receipts… to $814 million… operating and professional costs equated to 4.2% of portfolio receipts… portfolio cash flow… $657 million… equivalent to a margin of around 81%.” — Terry Coyne .
  • “Return on invested capital… 15.7%… return on invested equity… 22.9% for the last 12 months” — Terry Coyne .
  • “We acquired a royalty interest on Amgen’s Imdelltra for up to $950 million… funding agreement on obexelimab for up to $300 million… acquired a royalty on Alnylam’s Amvuttra for $310 million.” — Management highlights .

Q&A Highlights

  • External environment & M&A: Management sees biotech M&A uptick as supportive for royalty funding; building China relationships for potential out‑licensing royalties over time .
  • Obesity royalties: Space is on the radar; disciplined approach to find differentiated assets that create value .
  • Amvuttra competition: Broad scenario analysis including Nucresiran considered; confident in low double‑digit unlevered IRR or better across ranges .
  • LP(a) event rates: Slower event rate seen in outcomes trials; does not change management’s view of probability of success across class; optimistic on multibillion‑dollar potential .
  • Returns stability: Returns expected to remain mid‑teens ROIC despite quarterly variability; capital allocation disciplined across approved and development stage .

Estimates Context

  • Q3 vs consensus: EPS beat ($1.17 vs $1.04); revenue miss ($609M vs $764M); EBITDA miss ($429M vs $720M)*. Portfolio Cash Flow and Adjusted EBITDA were strong on company‑defined cash metrics .
  • Potential estimate revisions: Raised FY Portfolio Receipts guidance (+~4% midpoint) and higher milestones guidance imply upward revisions to cash‑based models; GAAP revenue/EBITDA models may need to reconcile to elevated G&A/share‑based comp and timing of interest .
  • FY 2026 considerations: Promacta generics and higher interest paid suggest more conservative 2026 cash metrics absent offsetting portfolio growth .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Cash engine remains robust: Double‑digit Royalty/Portfolio Receipts and ~81% Portfolio Cash Flow margin support high reinvestment capacity and buybacks .
  • Capital deployment is a near‑term catalyst: Imdelltra, obexelimab, and Amvuttra expand diversified exposures; watch pivotal readouts and launch trajectories .
  • Guidance momentum: Raised FY 2025 Portfolio Receipts and milestones; near‑term interest burden light in Q4 (~$7M), but 2026 interest steps up .
  • Estimates likely mixed: EPS beat but revenue/EBITDA miss versus consensus*; expect Street to adjust models toward cash metrics and guidance cadence *.
  • Portfolio risks manageable: 2026 Promacta generic impact telegraphed; offsets via growth assets (Tremfya, Voranigo, CF, Xtandi) and potential pipeline readouts .
  • Returns profile compelling: ROIC ~15.7%, ROIE ~22.9% LTM; leverage ~3.2x total/2.9x net supports capacity for deals and buybacks .
  • Trading setup: Near‑term narrative favors guidance raises and deal flow; watch upcoming Phase 3 events (deucrictibant, obexelimab) and LP(a) timelines for incremental catalysts .

Appendix: Cross‑Period References and Additional Data

  • Condensed Statements of Operations and Cash Flow (Q3): revenue $609M; operating income $427M; net income attributable $288M; net cash from operations $703M .
  • Liquidity: Cash $939M; total debt principal ~$9.2B incl. $2.0B notes issued in September; weighted average cost ~3.75%; duration ~13 years .
  • Share repurchases: ~$152M (Q3), $1.2B YTD through nine months; weighted diluted shares 560M in Q3 vs 593M prior year .
  • Prior quarters snapshots: Q1 Portfolio Receipts $839M; Q2 $727M; Q1 net cash ops $596M; Q2 $364M .
  • Non‑GAAP reconciliations provided in company tables .