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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________ to __________
Commission file number 001-39329
Royalty Pharma plc
(Exact name of registrant as specified in its charter)
England and Wales
98-1535773
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
110 East 59th Street
New York, New York 10022
(Address of principal executive offices and zip code)

(212) 883-0200
(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Class A ordinary shares, par value $0.0001RPRXThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
                
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐     No  





As of May 3, 2024, Royalty Pharma plc had 450,981,030 Class A ordinary shares outstanding and 146,456,241 Class B ordinary shares outstanding.

ROYALTY PHARMA PLC

INDEX

PART I.FINANCIAL INFORMATION
Item 1.Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (unaudited)
Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (unaudited)
Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2024 and 2023 (unaudited)
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)
Notes to Condensed Consolidated Financial Statements (unaudited)
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II.OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits




















Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “target,” “forecast,” “guidance,” “goal,” “predicts,” “project,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective assets, our industry, our beliefs and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of the numerous risks outlined in Part II under Item 1A. under “Risk Factors.”

These risks and uncertainties include factors related to, among other topics:

sales risks of biopharmaceutical products on which we receive royalties;
the ability of RP Management, LLC (the “Manager”) to locate suitable assets for us to acquire;
uncertainties related to the acquisition of interests in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates to our product portfolio;
the assumptions underlying our business model;
our ability to successfully execute our royalty acquisition strategy;
our ability to leverage our competitive strengths;
actual and potential conflicts of interest with the Manager and its affiliates;
the ability of the Manager or its affiliates to attract and retain highly talented professionals;
the effect of changes to tax legislation and our tax position; and
the risks, uncertainties and other factors we identify elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the U.S. Securities and Exchange Commission (“SEC”).

Although we believe the expectations reflected in the forward-looking statements are reasonable, any of those expectations could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and business objectives will be achieved. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations.






PART 1.     FINANCIAL INFORMATION
Item 1.         CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ROYALTY PHARMA PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
 As of March 31, As of December 31,
20242023
Assets
Current assets
Cash and cash equivalents$843,000 $477,010 
Financial royalty assets660,482 738,438 
Available for sale debt securities29,000 18,300 
Other royalty income receivable22,227 22,405 
Other current assets5,010 18,040 
Total current assets1,559,719 1,274,193 
Financial royalty assets, net13,465,407 14,088,655 
Equity securities277,217 199,487 
Available for sale debt securities473,700 437,100 
Equity method investments350,355 375,894 
Other assets4,488 6,522 
Total assets$16,130,886 $16,381,851 
Liabilities and shareholders’ equity
Current liabilities
Distributions payable to legacy non-controlling interests$91,409 $83,155 
Accounts payable and accrued expenses11,551 15,165 
Interest payable12,595 51,682 
Other current liabilities9,019 11,375 
Total current liabilities124,574 161,377 
Long-term debt6,139,376 6,135,285 
Other liabilities3,220 900 
Total liabilities6,267,170 6,297,562 
Commitments and contingencies
Shareholders’ equity
Class A ordinary shares, $0.0001 par value; issued and outstanding: 2024–450,981 and 2023–446,692
45 45 
Class B ordinary shares, $0.000001 par value; issued and outstanding: 2024–146,456 and 2023–150,743
  
Class R redeemable shares, £1 par value; issued and outstanding: 2024–50 and 2023–50
63 63 
Deferred shares, $0.000001 par value; issued and outstanding: 2024–388,927 and 2023–384,640
  
Additional paid-in capital4,074,849 4,011,435 
Retained earnings2,427,448 2,517,583 
Non-controlling interests3,363,965 3,557,792 
Treasury interests(2,654)(2,629)
Total shareholders’ equity9,863,716 10,084,289 
Total liabilities and shareholders’ equity$16,130,886 $16,381,851 

See accompanying notes to these unaudited condensed consolidated financial statements.
1




ROYALTY PHARMA PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

For the Three Months Ended March 31,
20242023
Income and other revenues
Income from financial royalty assets$541,546 $664,687 
Other royalty income and revenues26,432 19,284 
Total income and other revenues567,978 683,971 
Operating expenses
Provision for changes in expected cash flows from financial royalty assets583,600 118,804 
Research and development funding expense500 500 
General and administrative expenses57,652 85,695 
Total operating expenses, net641,752 204,999 
Operating (loss)/income(73,774)478,972 
Other expense/(income)
Equity in losses/(earnings) of equity method investees14,149 (34,606)
Interest expense44,232 46,950 
Gains on derivative financial instruments (7,090)
(Gains)/losses on equity securities(77,730)10,818 
Gains on available for sale debt securities(46,420)(32,300)
Interest income(7,417)(16,702)
Other non-operating expense, net3,685 2,813 
Total other income, net(69,501)(30,117)
Consolidated net (loss)/income before tax(4,273)509,089 
Income tax expense  
Consolidated net (loss)/income(4,273)509,089 
Net (loss)/income attributable to non-controlling interests(9,051)168,334 
Net income attributable to Royalty Pharma plc$4,778 $340,755 
Earnings per Class A ordinary share:
     Basic$0.01 $0.76 
     Diluted$0.01 $0.76 
Weighted average Class A ordinary shares outstanding:
     Basic448,623 445,612 
     Diluted597,479 607,251 
See accompanying notes to these unaudited condensed consolidated financial statements.
2




ROYALTY PHARMA PLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except per share amounts)
(Unaudited)

Class A
Ordinary Shares
Class B
Ordinary Shares
Class R
Redeemable Shares
Deferred SharesAdditional Paid-in CapitalRetained EarningsNon-Controlling InterestsTreasury InterestsTotal Shareholders’ Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 2023446,692 $45 150,743 $ 50 $63 384,640 $ $4,011,435 $2,517,583 $3,557,792 $(2,629)$10,084,289 
Contributions— — — — — — — — — — 2,412 — 2,412 
Distributions— — — — — — — — — — (124,411)— (124,411)
Dividends ($0.21 per Class A ordinary share)
— — — — — — — — — (93,805)— — (93,805)
Other exchanges4,287 — (4,287)— — — 4,287 — 62,802 — (62,777)(25) 
Share-based compensation and related issuances of Class A ordinary shares2 — — — — — — — 612 — — — 612 
Net income/(loss)— — — — — — — — — 4,778 (9,051)— (4,273)
Purchase of non-controlling interest in RPCT— — — — — — — — — (1,108)— — (1,108)
Balance at March 31, 2024450,981$45 146,456$ 50$63 388,927$ $4,074,849 $2,427,448 $3,363,965 $(2,654)$9,863,716 

Class A
Ordinary Shares
Class B
Ordinary Shares
Class R
Redeemable Shares
Deferred SharesAdditional Paid-in CapitalRetained EarningsNon-Controlling InterestsTreasury InterestsTotal Shareholders’ Equity
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 2022443,166 $44 164,058 $ 50 $63 371,325 $ $3,666,160 $1,964,689 $3,897,223 $(2,806)$9,525,373 
Contributions— — — — — — — — — — 4,709 — 4,709 
Distributions— — — — — — — — — — (129,111)— (129,111)
Dividends ($0.20 per Class A ordinary share)
— — — — — — — — — (88,633)— — (88,633)
Other exchanges5,119 1 (5,119)— — — 5,119 — 72,925 — (72,904)(22) 
Share-based compensation and related issuances of Class A ordinary shares2 — — — — — — — 573 — — — 573 
Net income— — — — — — — — — 340,755 168,334 — 509,089 
Balance at March 31, 2023448,287$45 158,939$ 50$63 376,444$ $3,739,658 $2,216,811 $3,868,251 $(2,828)$9,822,000 

See accompanying notes to these unaudited condensed consolidated financial statements.
3




ROYALTY PHARMA PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Three Months Ended March 31,
20242023
Cash flows from operating activities:
Cash collections from financial royalty assets$744,949 $1,151,635 
Cash collections from intangible royalty assets13,544 617 
Other royalty cash collections26,311 19,685 
Distributions from equity method investees13,396 16,267 
Interest received6,430 15,568 
Development-stage funding payments - ongoing(500)(500)
Payments for operating and professional costs(60,521)(86,846)
Interest paid(78,971)(82,589)
Net cash provided by operating activities664,638 1,033,837 
Cash flows from investing activities:
Distributions from equity method investees4,965 34,767 
Investments in equity method investees(6,971)(3,579)
Proceeds from available for sale debt securities1,440  
Proceeds from sales and maturities of marketable securities 24,391 
Acquisitions of financial royalty assets(86,084)(601,705)
Milestone payments (12,400)
Net cash used in investing activities(86,650)(558,526)
Cash flows from financing activities:
Distributions to legacy non-controlling interests - Portfolio Receipts(87,608)(91,938)
Distributions to continuing non-controlling interests(32,011)(33,394)
Dividends to shareholders(93,805)(88,633)
Contributions from legacy non-controlling interests - R&D88 279 
Contributions from non-controlling interests - other1,338 3,313 
Net cash used in financing activities(211,998)(210,373)
Net change in cash and cash equivalents365,990 264,938 
Cash and cash equivalents, beginning of period477,010 1,710,751 
Cash and cash equivalents, end of period$843,000 $1,975,689 
See accompanying notes to these unaudited condensed consolidated financial statements.

4

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. Organization and Purpose

Royalty Pharma plc is a public limited company that was incorporated under the laws of England and Wales to facilitate the initial public offering (“IPO”) of our Class A ordinary shares. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis.

We control Royalty Pharma Holdings Ltd (“RP Holdings”), a private limited company incorporated under the laws of England and Wales and U.K. tax resident, through our ownership of RP Holdings’ Class A ordinary shares (the “RP Holdings Class A Interests”) and RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”). We conduct our business through RP Holdings and its subsidiaries.

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 (“Old RPI”). RP Holdings is owned by Royalty Pharma plc, and, indirectly, by RPI US Partners 2019, LP, a Delaware limited partnership, and RPI International Holdings 2019, LP, a Cayman Islands exempted limited partnership (together, the “Continuing Investors Partnerships”). Prior to the Exchange Offer (defined below), Old RPI was owned by various partnerships (the “Legacy Investors Partnerships”).

RP Management, LLC (the “Manager”), a Delaware limited liability company, is responsible for our management, including our day-to-day operations, pursuant to advisory and management agreements (collectively, the “Management Agreement”).

We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. We fund innovation in the biopharmaceutical industry both directly and indirectly—directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators.

2. Summary of Significant Accounting Policies

Basis of Preparation and Use of Estimates

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

In the opinion of management, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist of normal and recurring adjustments. Certain information and footnote disclosures have been condensed or omitted as permitted under GAAP. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023, included in our Annual Report on Form 10-K.

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of income, revenues and expenses during the reporting period. Actual results may differ from those estimates. The results for the interim periods are not necessarily indicative of results for the full year.

Basis of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Royalty Pharma and all majority-owned and controlled subsidiaries, as well as variable interest entities, where we are the primary beneficiary. We consolidate based upon evaluation of our power, through voting rights or similar rights, to direct the activities of another entity that most significantly impact the entity’s economic performance. For consolidated entities where we own or are exposed to less than 100% of the economics, we record Net (loss)/income attributable to non-controlling interests in our condensed consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties.
5

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

We consummated an exchange offer on February 11, 2020 (the “Exchange Offer”) to facilitate the IPO. 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 the Continuing Investors Partnerships. Following the Exchange Offer, we became the indirect owner of an 82% economic interest in Old RPI through our subsidiary RPI 2019 Intermediate Finance Trust, a Delaware statutory trust. We are entitled to 82% of the economics of Old RPI’s wholly-owned subsidiary RPI Finance Trust, a Delaware statutory trust (“RPIFT”), and 66% of Royalty Pharma Collection Trust, a Delaware statutory trust (“RPCT”). Prior to December 29, 2023, the remaining 34% of RPCT was owned by the Legacy Investors Partnerships and Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”), which was wholly owned by Royalty Pharma Select, an Irish unit trust.

In 2022, we became an indirect owner of an 82% economic interest in Royalty Pharma Investments ICAV (“RPI ICAV”), which was previously owned directly by Old RPI.

In December 2023, RPI 2019 ICAV acquired the remaining interest in RPCT owned by RPSFT and, as such, RPSFT no longer holds a non-controlling interest in RPCT. Prior to December 2023, we reported non-controlling interest related to a de minimis interest in RPCT held by RPSFT (together with the Legacy Investors Partnership’s interest in Old RPI and RPI ICAV, the “legacy non-controlling interests”), which also existed prior to our IPO.

As of December 31, 2023, we report three non-controlling interests: (1) the Legacy Investors Partnerships’ ownership of approximately 18% in Old RPI and RPI ICAV, which existed prior to our IPO, and, following the consummation of our IPO, (2) the Continuing Investors Partnerships’ indirect ownership in RP Holdings through their indirect ownership of RP Holdings Class B Interests (the “continuing non-controlling interests”) and (3) RPI EPA Holdings, LP’s (“EPA Holdings”) ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”). Income will not be allocated to EPA Holdings until certain performance conditions are met.

All intercompany transactions and balances have been eliminated in consolidation.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation.

Concentrations of Credit Risk

Financial instruments that subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, available for sale debt securities, financial royalty assets and receivables. Our cash management and investment policy limits investment instruments to investment-grade securities with the objective to preserve capital and to maintain liquidity until the funds are needed for operations. Our cash and cash equivalents balances as of March 31, 2024 and December 31, 2023 were held with Bank of America, State Street, U.S. Bank, TD Bank, Citibank, DNB Bank and Scotiabank. Our primary operating accounts significantly exceed the Federal Deposit Insurance Corporation limits.

The majority of our financial royalty assets and receivables arise from contractual royalty agreements that entitle us to royalties on the sales of underlying biopharmaceutical products in the United States, Europe and the rest of the world, with concentrations of credit risk limited due to the broad range of marketers responsible for paying royalties to us and the variety of geographies from which our royalties on product sales are derived. The products in which we hold royalties are marketed by leading industry participants, including, among others, Vertex, GSK, Roche, Johnson & Johnson, Biogen, AbbVie, Astellas, Pfizer, Novartis and Gilead. As of March 31, 2024 and December 31, 2023, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 34% and 32% of our current portion of financial royalty assets, respectively, and represented the largest individual marketer and payor of our royalties.

We monitor the financial performance and creditworthiness of the counterparties to our royalty agreements so that we can properly assess and respond to changes in their credit profile. To date, we have not experienced any significant credit losses with respect to the collection of income or revenues on our royalty assets.

6

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Significant Accounting Policies

There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the year ended December 31, 2023.

3. Available for Sale Debt Securities

Cytokinetics Commercial Launch Funding

On January 7, 2022, we entered into a long-term funding agreement, which was later amended in 2022, with Cytokinetics, Incorporated (“Cytokinetics”). We agreed to provide funding of up to $300 million (“Cytokinetics Commercial Launch Funding”) in five tranches. The initial tranche of $50 million was funded upon closing. Cytokinetics is required to draw $50 million if a certain contingency is met and has the option to draw the remaining $200 million upon the occurrence of certain regulatory and clinical development milestones (“Cytokinetics Funding Commitments”). Because the regulatory milestones for the second and third tranches were not met, $75 million of the optional funding is not available. For tranches one, four and five, we expect to receive a return of 1.9 times the amount drawn over 34 consecutive quarterly payments beginning on the last business day of the seventh quarter following the quarter of the funding date of each tranche. In the fourth quarter of 2023, we began receiving quarterly payments on the return of the first tranche. As of March 31, 2024, $175 million remained available under the Cytokinetics Funding Commitments.

We elected the fair value option to account for the Cytokinetics Commercial Launch Funding due to the nature of the funding arrangement. The funded Cytokinetics Commercial Launch Funding is recorded within Available for sale debt securities on the condensed consolidated balance sheets. The Cytokinetics Funding Commitments, which include options and forwards over the subsequent tranches, are recognized at fair value within Other liabilities on the condensed consolidated balance sheets. The changes in the fair value of the funded Cytokinetics Commercial Launch Funding and the Cytokinetics Funding Commitments are recorded within Gains on available for sale debt securities in the condensed consolidated statements of operations.

MorphoSys Development Funding Bonds

On June 2, 2021, we announced a long-term strategic funding agreement with MorphoSys AG (“MorphoSys”) to support its acquisition of Constellation Pharmaceuticals, Inc. In September 2022, we provided MorphoSys funding of $300 million (“Development Funding Bonds”). We expect to receive a return of 2.2 times the Development Funding Bonds, payable on a quarterly basis over nine years, with the first payment beginning in the fourth quarter of 2024.

We elected the fair value option to account for the Development Funding Bonds as it most accurately reflects the nature of these instruments. The Development Funding Bonds are recorded within Available for sale debt securities on the condensed consolidated balance sheets. The changes in the fair value of the Development Funding Bonds are recorded within Gains on available for sale debt securities in the condensed consolidated statements of operations.

7

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The table below summarizes our available for sale debt securities recorded at fair value (in thousands):

Cost
Unrealized Gains
Fair Value Current AssetsNon-Current AssetsNon-Current LiabilitiesTotal
As of March 31, 2024
Debt securities(1)
$359,923 $142,777 $502,700 $29,000 $473,700 $ $502,700 
Funding commitments(2)
(7,300)4,080 (3,220)  (3,220)(3,220)
Total available for sale debt securities$352,623 $146,857 $499,480 $29,000 $473,700 $(3,220)$499,480 
As of December 31, 2023
Debt securities(1)
$359,667 $95,733 $455,400 $18,300 $437,100 $ $455,400 
Funding commitments(2)
(7,300)6,400 (900)  (900)(900)
Total available for sale debt securities$352,367 $102,133 $454,500 $18,300 $437,100 $(900)$454,500 
(1)The cost associated with the funded Cytokinetics Commercial Launch Funding reflects the fair value on the purchase date which is amortized as we received quarterly repayments on the first tranche. The cost of the Development Funding Bonds represents the amount funded.
(2)Related to Cytokinetics Funding Commitments for which related tranches remain available as of the respective balance sheet dates. The cost associated with the Cytokinetics Funding Commitments represents the fair value on the purchase date.

4. Fair Value Measurements and Financial Instruments

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

As of March 31, 2024As of December 31, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Money market funds(1)
$581,666 $ $ $581,666 $157,420 $ $ $157,420 
Available for sale debt securities(2)
  29,000 29,000   18,300 18,300 
Total current assets$581,666 $ $29,000 $610,666 $157,420 $ $18,300 $175,720 
Equity securities(3)
277,217   277,217 199,190  297 199,487 
Available for sale debt securities(2)
  473,700 473,700   437,100 437,100 
Royalty at fair value(3)
      1,778 1,778 
Total non-current assets$277,217 $ $473,700 $750,917 $199,190 $ $439,175 $638,365 
Liabilities:
Funding commitments(4)
  (3,220)(3,220)  (900)(900)
Total non-current liabilities$ $ $(3,220)$(3,220)$ $ $(900)$(900)
(1)Recorded within Cash and cash equivalents on the condensed consolidated balance sheets.
(2)Reflects the fair value of the Development Funding Bonds and the funded Cytokinetics Commercial Launch Funding.
(3)Fair values reflected within Level 3 are related to equity securities and a revenue participation right acquired from ApiJect Holdings, Inc. (“ApiJect”). We estimated the fair values related to both instruments using a discounted cash flow with Level 3 inputs including forecasted cash flows and the weighted average cost of capital. The revenue participation right was recorded within Other assets on the condensed consolidated balance sheet as of December 31, 2023. See Note 7–Non-Consolidated Affiliates for additional discussion.
(4)Related to the fair value of the Cytokinetics Funding Commitments recorded within Other liabilities on the condensed consolidated balance sheets.

For the first quarter of 2024 and 2023, we recognized gains of $77.7 million and losses of $10.8 million, respectively, on equity securities still held as of March 31, 2024.

8

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The tables presented below summarize the change in the combined fair value (current and non-current) of Level 3 financial instruments (in thousands):

For the Three Months Ended March 31, 2024
Equity SecuritiesDebt SecuritiesFunding CommitmentsRoyalty at Fair Value
Balance at the beginning of the period$297 $455,400 $(900)$1,778 
Losses on equity securities(297)— — — 
Gains/(losses) on available for sale debt securities included in earnings— 48,740 (2,320)— 
Other non-operating expense— — — (1,778)
Redemptions(1)
— (1,440)— — 
Balance at the end of the period$ $502,700 $(3,220)$ 
(1)Amount relates to the quarterly repayment from the first tranche of the Cytokinetics Commercial Launch Funding.

For the Three Months Ended March 31, 2023
Equity SecuritiesDebt SecuritiesFunding Commitments
Derivative Instruments(1)
Royalty at Fair Value
Balance at the beginning of the period$8,472 $227,600 $(2,500)$96,610 $14,500 
Losses on equity securities(437)— — — — 
Gains on derivative financial instruments— — — 7,090 — 
Gains/(losses) on available for sale debt securities included in earnings
— 42,100 (9,800)— — 
Other non-operating expense— — — — (256)
Settlements
— — — (94,320)— 
Balance at the end of the period$8,035 $269,700 $(12,300)$9,380 $14,244 
(1)Represents the embedded derivative instruments related to our option to accelerate the zavegepant milestone payments into a single payment. In March 2023, the U.S. Food and Drug Administration (“FDA”) approved Zavzpret, the intranasal formulation of zavegepant, and we received a $475 million milestone payment which resulted in partial settlement of the derivative instruments.

Valuation Inputs for Recurring Fair Value Measurements

Below is a discussion of the valuation inputs used for financial instruments classified as Level 3 measurement as of March 31, 2024 and December 31, 2023 in the fair value hierarchy. As of March 31, 2024 and December 31, 2023, we did not have any financial instruments recorded at fair value using Level 2 inputs.

Cytokinetics Commercial Launch Funding and Cytokinetics Funding Commitments

We estimated the fair value of the funded Cytokinetics Commercial Launch Funding as of March 31, 2024 and December 31, 2023 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including an estimated risk-adjusted discount rate and the probability that there will be a change of control event, which would result in accelerated payments. Developing a risk-adjusted discount rate and assessing the probability that there will be a change of control event over the duration of the Cytokinetics Commercial Launch Funding require significant judgement. Our estimate of the risk-adjusted discount rate could reasonably be different than the discount rate selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower. Our expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than the timing of an actual change of control event, and if so, would mean that the estimated fair value could be significantly higher or lower than the fair value determined by management at any particular date.

9

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

We estimated the fair value of the Cytokinetics Funding Commitments as of March 31, 2024 and December 31, 2023 using a Monte Carlo simulation methodology that includes simulating the interest rate movements using a Geometric Brownian Motion-based pricing model. This methodology simulates the likelihood of future discount rates exceeding the counterparty’s assumed cost of debt, which would impact Cytokinetics’ decision to exercise its option to draw on each respective tranche. As of March 31, 2024 and December 31, 2023, this methodology incorporates Level 3 fair value measurements and inputs, including the probability of a change of control event occurring during the investment term, an assumed interest rate volatility of 37.5% as of each date and an assumed risk-adjusted discount rate of 11.7% and 10.9%, respectively. We also assumed probabilities for the occurrence of each regulatory or clinical milestone, which impacts the availability of each future tranche of funding. Our estimate of expectation of the probability and timing of the occurrence of a change of control event, the risk-adjusted discount rate, the interest rate volatility and the probabilities of each underlying milestone could reasonably be different than the assumptions selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

MorphoSys Development Funding Bonds

We estimated the fair value of the Development Funding Bonds as of March 31, 2024 and December 31, 2023 based on a discounted cash flow calculation using estimated risk-adjusted discount rates, which are Level 3 fair value inputs. Our estimate of the risk adjusted discount rates could reasonably be different than the discount rates selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower.

Financial Assets Not Measured at Fair Value

Financial royalty assets are measured and carried on the condensed consolidated balance sheets at amortized cost using the effective interest method. Financial royalty assets do not include development stage products for which the purchase price was expensed as upfront research and development (“R&D”) upon acquisition, or for which we provide and expense ongoing R&D funding. Refer to Note 8–Research and Development Funding Expense for additional discussion.

The fair value of financial royalty assets is classified as Level 3 within the fair value hierarchy since it is determined based on inputs that are both significant and unobservable. Management calculates the fair value of financial royalty assets using forecasted royalty receipts based on the projected product sales for all royalty bearing products which are estimated using sell-side equity research analysts’ consensus sales forecasts. These projected future royalty receipts by asset, along with any projected incoming or outgoing milestone payments, are then discounted to a present value using appropriate individual discount rates.

The current portion of financial royalty assets included approximately 13.2% and 10.1% attributable to legacy non-controlling interests as of March 31, 2024 and December 31, 2023, respectively. The fair value of the non-current portion of financial royalty assets included approximately 9.2% and 9.4% attributable to legacy non-controlling interests as of March 31, 2024 and December 31, 2023, respectively.

The estimated fair values and related carrying values of the current and non-current portions of financial royalty assets are presented below (in thousands):

As of March 31, 2024As of December 31, 2023
Financial Royalty Assets
Fair Value
Carrying Value, Net
Fair Value
Carrying Value, Net
Current
$660,482 $660,482 $738,438 $738,438 
Non-current
18,546,190 13,465,407 19,077,706 14,088,655 
Total financial royalty assets
$19,206,672 $14,125,889 $19,816,144 $14,827,093 

5. Financial Royalty Assets

Financial royalty assets consist of contractual rights to cash flows relating to royalties derived from the expected sales of patent-protected biopharmaceutical products that entitle us and our subsidiaries to receive a portion of income from the sale of such products by third parties.

10

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The gross carrying value, cumulative allowance for changes in expected cash flows, exclusive of the allowance for credit losses, and net carrying value for the current and non-current portion of financial royalty assets are as follows (in thousands):

As of March 31, 2024
Estimated Royalty Duration(1)
Gross Carrying ValueCumulative Allowance for Changes in Expected Cash Flows (Note 6)
Net Carrying Value(4)
Cystic fibrosis franchise
2039-2041(2)
$5,266,693 $(393,000)$4,873,693 
Evrysdi
2035-2036
1,803,179 (24,931)1,778,248 
Trelegy2029-20301,171,848  1,171,848 
Tysabri
(3)
1,460,897 (451,755)1,009,142 
Tremfya
2031-2032
927,609 (137,217)790,392 
Xtandi2027-2028878,728 (252,310)626,418 
Other2024-20416,265,680 (2,252,494)4,013,186 
Total$17,774,634 $(3,511,707)$14,262,927 
Less: Cumulative allowance for credit losses (Note 6)(137,038)
Total current and non-current financial royalty assets, net$14,125,889 
(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; range shown assumes approval of the vanzacaftor/tezacaftor/deutivacaftor combination product and represents expected patent expiration and potential sales decline based on timing of potential generic entry.
(3)RPIFT acquired a perpetual royalty on net sales of Tysabri. We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed.
(4)The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 6–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.

As of March 31, 2024, the balance of $14.1 billion above for total current and non-current financial royalty assets, net included $629.6 million in unapproved financial royalty assets held at cost primarily related to olpasiran, pelacarsen, KarXT and seltorexant.

As of December 31, 2023
Estimated Royalty Duration(1)
Gross Carrying ValueCumulative Allowance for Changes in Expected Cash Flows (Note 6)
Net Carrying Value(4)
Cystic fibrosis franchise
2037(2)
$5,288,833 $(2,539)$5,286,294 
Evrysdi
2035-2036
1,793,088  1,793,088 
Trelegy2029-20301,208,807  1,208,807 
Tysabri
(3)
1,511,957 (434,568)1,077,389 
Tremfya
2031-2032
927,488 (120,733)806,755 
Xtandi2027-2028911,045 (268,701)642,344 
Other2024-20416,251,020 (2,100,897)4,150,123 
Total$17,892,238 $(2,927,438)$14,964,800 
Less: Cumulative allowance for credit losses (Note 6)(137,707)
Total current and non-current financial royalty assets, net$14,827,093 
(1)Durations shown represent our estimates as of December 31, 2023 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; year shown represents Trikafta’s expected patent expiration and potential sales decline based on timing of potential generic entry.
(3)RPIFT acquired a perpetual royalty on net sales of Tysabri. We have applied an end date of 2031 for purposes of accreting income over the royalty term, which is periodically reviewed.
(4)The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 6–Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.

11

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

6. Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets

The cumulative allowance for changes in expected future cash flows from financial royalty assets is presented net within the non-current portion of financial royalty assets on the condensed consolidated balance sheets and includes the following:

the movement in the cumulative allowance related to changes in forecasted royalty payments expected to be received based on projected product sales for royalty bearing products which are estimated by sell-side equity research analysts’ consensus sales forecasts,
the write-off of cumulative allowance at the end of a royalty asset’s life which only impacts the condensed consolidated balance sheets, and
the movement in the cumulative allowance for current expected credit losses, primarily associated with new financial royalty assets with limited protective rights and changes in the underlying cash flow forecasts of financial royalty assets with limited protective rights.

The following table sets forth the activity in the cumulative allowance for changes in expected cash flows from financial royalty assets, inclusive of the cumulative allowance for credit losses (in thousands):

Activity for the Period
Balance at December 31, 2023(1)
$(3,065,145)
Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets(635,801)
Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets51,532 
Current period provision for credit losses, net
669 
Balance at March 31, 2024$(3,648,745)
(1)Includes $137.7 million related to cumulative allowance for credit losses.

7. Non-Consolidated Affiliates

We have equity investments in certain entities at a level that provide us with significant influence. We account for such investments as equity method investments or as equity securities over which we have elected the fair value option.

ApiJect

In April 2022, we acquired common stock and a revenue participation right from ApiJect. We elected the fair value option to account for our investments in ApiJect because it is more reflective of current values for such investments. We are also required to purchase additional common stock from ApiJect if certain milestones are achieved. No amounts were due from or to ApiJect as of March 31, 2024 and December 31, 2023. Our equity investment in ApiJect and the revenue participation right had no remaining fair value as of March 31, 2024.

The Legacy SLP Interest

In connection with the Exchange Offer, we acquired a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) from the Continuing Investors Partnerships for $303.7 million in exchange for issuing shares in our subsidiary. As a result, we became a special limited partner in the Legacy Investors Partnerships. 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 an income allocation on a similar basis. Our income allocation is equal to the general partner’s former contractual rights to the income of the Legacy Investors Partnerships, net of amortization of the basis difference. The Legacy SLP Interest is accounted for under the equity method as our Manager is also the Manager of the Legacy Investors Partnerships and has the ability to exercise significant influence. The Legacy Investors Partnerships no longer participate in investment opportunities from June 30, 2020 and, as such, the value of the Legacy SLP Interest is expected to decline over time. The Legacy Investors Partnerships also indirectly own a non-controlling interest in Old RPI and RPI ICAV.

12

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The income allocation from the Legacy SLP Interest is based on an estimate as the Legacy Investors Partnerships are private partnerships that report on a lag. Management’s estimate of equity in earnings from the Legacy SLP Interest for the current period will be updated for historical results in the subsequent period. Equity in earnings from the Legacy SLP Interest is recorded within Equity in losses/(earnings) of equity method investees. We recorded a loss allocation of $9.4 million and an income allocation of $1.7 million in the first quarter of 2024 and 2023, respectively. We collected cash receipts from the Legacy SLP Interest of $5.0 million and $2.6 million in the first quarter of 2024 and 2023, respectively.

The Avillion Entities

We account for our partnership interests in Avillion Financing I, LP and its related entities (“Avillion I”) and BAv Financing II, LP and its related entities (“Avillion II” and, together with Avillion I, the “Avillion Entities”) as equity method investments because RPIFT has the ability to exercise significant influence over the Avillion Entities. Equity in earnings from the Avillion Entities is recorded within Equity in losses/(earnings) of equity method investees. During the first quarter of 2024 and 2023, we recorded a loss allocation of $4.8 million and an income allocation of $32.9 million, respectively.

On December 19, 2017, the FDA approved a supplemental New Drug Application for Pfizer’s Bosulif. Avillion I is eligible to receive fixed payments from Pfizer based on this approval under its co-development agreement with Pfizer. The only operations of Avillion I are the collection of cash and unwinding of the discount on the series of fixed annual payments due from Pfizer. We received distributions from Avillion I of $13.4 million and $13.6 million in the first quarter of 2024 and 2023, respectively.

In May 2018, RPIFT entered into an agreement with Avillion II, which was subsequently amended, to fund a total of $155 million over multiple years for a portion of the costs of Phase 2 and 3 clinical trials to advance Airsupra, formerly known as PT027, which was approved by the FDA in January 2023. Avillion II is a party to a co-development agreement with AstraZeneca to develop Airsupra for the treatment of asthma in exchange for royalties, a series of success-based milestones and other potential payments. In the first quarter of 2023, AstraZeneca notified Avillion II that it elected to pay a fee of $80 million to Avillion II to exercise an option to commercialize Airsupra in the United States and we received our pro rata portion of the exercise fee of $34.8 million from Avillion II.

Our maximum exposure to loss at any particular reporting date is limited to the carrying value of our equity method investments plus the unfunded commitments. As of March 31, 2024 and December 31, 2023, we had unfunded commitments related to the Avillion Entities of $14.3 million and $16.3 million, respectively.

8. Research and Development (R&D) Funding Expense

R&D funding expense consists of payments that we have made to counterparties to acquire royalties or milestones on product candidates. R&D funding expense includes development-stage funding payments made to counterparties on an upfront basis or upon pre-approval milestones, and development-stage funding payments that are made to counterparties over time as the related product candidates undergo clinical trials with our counterparties. During the first quarter of 2024 and 2023, we did not enter into any new ongoing R&D funding arrangements.

We recognized R&D funding expense of $0.5 million in each of the first quarter of 2024 and 2023 related to ongoing development-stage funding payments.

13

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

9. Borrowings

Our borrowings consisted of the following (in thousands):

Type of BorrowingDate of IssuanceMaturityAs of March 31, 2024As of December 31, 2023
Senior Unsecured Notes:
$1,000,000, 1.20% (issued at 98.875% of par)
9/20209/20251,000,000 1,000,000 
$1,000,000, 1.75% (issued at 98.284% of par)
9/20209/20271,000,000 1,000,000 
$1,000,000, 2.20% (issued at 97.760% of par)
9/20209/20301,000,000 1,000,000 
$600,000, 2.15% (issued at 98.263% of par)
7/20219/2031600,000 600,000 
$1,000,000, 3.30% (issued at 95.556% of par)
9/20209/20401,000,000 1,000,000 
$1,000,000, 3.55% (issued at 95.306% of par)
9/20209/20501,000,000 1,000,000 
$700,000, 3.35% (issued at 97.565% of par)
7/20219/2051700,000 700,000 
Unamortized debt discount and issuance costs(160,624)(164,715)
Total debt carrying value6,139,376 6,135,285 
Less: Current portion of long-term debt 
Total long-term debt$6,139,376 $6,135,285 

Senior Unsecured Notes

We issued $1.3 billion and $6.0 billion of senior unsecured notes in 2021 (the “2021 Notes”) and 2020 (the “2020 Notes”), respectively. The 2021 Notes and 2020 Notes (the “Notes”) were issued at a total discount of $176.4 million and we capitalized approximately $52.7 million in debt issuance costs primarily composed of underwriting fees. The 2021 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 2.80% and 3.06%, respectively. The 2020 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 2.13% and 2.50%, respectively. Interest on each series of the Notes accrues at the respective rate per annum and is payable semi-annually in arrears on March 2 and September 2 of each year. In September 2023, we repaid $1.0 billion of senior unsecured notes upon maturity.

The Notes may be redeemed at our option at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis at the treasury rate, plus a make-whole premium as defined in the indenture. In each case, accrued and unpaid interest is also required to be redeemed to the date of redemption.

Upon the occurrence of a change of control triggering event and downgrade in the rating of our Notes by two of three credit agencies, the holders may require us to repurchase all or part of their Notes at a price equal to 101% of the aggregate principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.

Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings, a non-wholly-owned subsidiary. We are required to comply with certain covenants under our Notes and as of March 31, 2024, we were in compliance with all applicable covenants.

As of March 31, 2024 and December 31, 2023, the fair value of our outstanding Notes using Level 2 inputs was approximately $5.1 billion.

14

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Senior Unsecured Revolving Credit Facility

Our subsidiary, RP Holdings, as borrower, initially entered into to 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, we entered into Amendment No. 4 to the Credit Agreement to make certain technical modifications. As of March 31, 2024 and December 31, 2023, there were no outstanding borrowings under the Revolving Credit Facility.

The Revolving Credit Facility is subject to an interest rate, at our option, of either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime rate, (2) the federal funds rate plus 0.5% and (3) Term SOFR plus 1% or (b) Daily SOFR, Term SOFR, the Alternative Currency Term Rate or the Alternative Currency Daily Rate (each as defined in the Credit Agreement), plus in each case, the applicable margin. The applicable margin for the Revolving Credit Facility varies based on our public debt rating. Accordingly, the interest rates for the Revolving Credit Facility fluctuate during the term of the facility based on changes in the applicable interest rate and future changes in our public debt rating.

The Credit Agreement that governs the Revolving Credit Facility contains 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. All obligations under the Revolving Credit Facility are unconditionally guaranteed by us. Noncompliance with the leverage ratio, portfolio cash flow ratio and interest coverage ratio covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed. The Credit Agreement includes customary covenants for credit facilities of this type that limit our ability to engage in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets. As of March 31, 2024, RP Holdings was in compliance with these covenants.

Principal Payments on the Notes

The future principal payments for our borrowings as of March 31, 2024 over the next five years and thereafter are as follows (in thousands):

YearPrincipal Payments
Remainder of 2024
$ 
20251,000,000 
2026 
20271,000,000 
2028 
Thereafter4,300,000 
Total(1)
$6,300,000 
(1)Excludes unamortized debt discount and issuance costs of $160.6 million as of March 31, 2024, which are amortized through interest expense over the remaining life of the underlying debt obligations.

15

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

10. Shareholders’ Equity

Capital Structure

We have two classes of voting shares: Class A ordinary shares and Class B ordinary shares, each of which has one vote per ordinary share. The Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of shareholders, except as otherwise required by applicable law. Our Class B ordinary shares are not publicly traded and holders of Class B ordinary shares only have limited rights to receive a distribution equal to their nominal value upon a liquidation, dissolution or winding up. As of March 31, 2024, we have 450,981 thousand Class A ordinary shares and 146,456 thousand Class B ordinary shares outstanding.

An exchange agreement entered into by us, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP, RPI US Feeder 2019, LP, RPI International Feeder 2019, LP and EPA Holdings (as amended from time to time, the “Exchange Agreement”) governs the exchange of RP Holdings Class B Interests indirectly held by the Continuing Investors Partnerships for our Class A ordinary shares. Pursuant to the Exchange Agreement, RP Holdings Class B interests are exchangeable on a one-for-one basis for our Class A ordinary shares on a quarterly basis. Each such exchange also results in the re-designation of the same number of our Class B ordinary shares as deferred shares. Such deferred shares are non-voting and do not confer a right to participate in the profits of the Company or any right to receive dividends. As of March 31, 2024, we have 388,927 thousand deferred shares outstanding.

In addition, we have in issue 50 thousand Class R redeemable shares, which do not entitle the holder to voting or dividend rights. As required by the U.K. Companies Act 2006, the Class R redeemable shares were issued to ensure Royalty Pharma Limited had sufficient sterling denominated share capital upon its re-registration in 2020 as Royalty Pharma plc, a public company. The Class R redeemable shares may be redeemed at our option in the future. Any such redemption would be at the nominal value of £1 each.

Class A Ordinary Share Repurchases

In March 2023, our board of directors authorized a share repurchase program under which we may repurchase up to $1.0 billion of our Class A ordinary shares. The authorization for the share repurchase program expires on June 23, 2027 and repurchases may be made in the open market or in privately negotiated transactions. In the first quarter of 2024 and 2023, we did not repurchase any Class A ordinary shares.

Non-Controlling Interests

The changes in the balances of our non-controlling interests are as follows (in thousands):

Legacy Investors PartnershipsContinuing Investors PartnershipsEPA HoldingsTotal
December 31, 2023$1,339,716 $2,218,076 $ $3,557,792 
Contributions1,293 1,119  2,412 
Distributions(92,400)(32,011) (124,411)
Other exchanges (62,777) (62,777)
Net (loss)/income(10,590)1,539  (9,051)
March 31, 2024$1,238,019 $2,125,946 $ $3,363,965 
16

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


RPSFTLegacy Investors PartnershipsContinuing Investors PartnershipsEPA HoldingsTotal
December 31, 2022$(597)$1,527,887 $2,369,933 $ $3,897,223 
Contributions 3,795 914  4,709 
Distributions(568)(95,149)(33,394) (129,111)
Other exchanges  (72,904) (72,904)
Net income1,025 44,052 123,257  168,334 
March 31, 2023$(140)$1,480,585 $2,387,806 $ $3,868,251 

Continuing Investors Partnerships

The Continuing Investors Partnerships hold the number of our Class B ordinary shares equal to the number of RP Holdings Class B Interests indirectly held by them. As the Continuing Investors Partnerships exchange RP Holdings Class B Interests indirectly held by them for Class A ordinary shares, the Continuing Investors Partnerships’ indirect ownership in RP Holdings decreases. We operate and control the business affairs of RP Holdings through our ownership of RP Holdings Class A Interests and RP Holdings Class B Interests. In connection with our repurchase of Class A ordinary shares that began in the second quarter of 2023, RP Holdings also began to retire RP Holdings Class A Interests held by us which reduces our ownership in RP Holdings. The change in RP Holdings ownership between the Continuing Investors Partnerships and us as a result of (1) the exchanges of RP Holding Class B Interests for Class A ordinary shares and (2) retirement of RP Holdings Class A Interests is reflected through Other exchanges in the above tables and in our condensed consolidated statements of shareholders’ equity.

As of March 31, 2024, the Continuing Investors Partnerships indirectly owned approximately 25% of RP Holdings with the remaining 75% owned by Royalty Pharma plc. As of March 31, 2023, the Continuing Investors Partnerships indirectly owned approximately 26% of RP Holdings with the remaining 74% owned by Royalty Pharma plc.

RPSFT

We historically reported a non-controlling interest related to a de minimis interest in RPCT held by RPSFT. In December 2023, we acquired the remaining interest in RPCT held by RPSFT by effectively purchasing the net assets of RPSFT and its parent entities, which primarily consisted of cash and RPSFT’s right to receive a portion of royalties received by RPCT. The purchase price of approximately $11.4 million was recorded within Other current liabilities on the condensed consolidated balance sheet as of December 31, 2023. The purchase price was subject to post-closing adjustments, primarily related to the final determination of net asset values and liquidation costs. In the first quarter of 2024, the purchase price was finalized at approximately $12.5 million and partially paid with $9.0 million remaining to be paid and recorded within Other current liabilities on the condensed consolidated balance sheet as of March 31, 2024. Following this transaction in December 2023, RPSFT no longer holds a non-controlling interest in RPCT.

RP Holdings Class C Special Interest Held by EPA Holdings

EPA Holdings, an affiliate of the Manager, is entitled to Equity Performance Awards (as defined below) through its RP Holdings Class C Special Interest based on our performance, as determined on a portfolio-by-portfolio basis. Investments made during each two-year period are grouped together as separate portfolios (each, a “Portfolio”). Subject to certain conditions, at the end of each fiscal quarter, EPA Holdings is entitled to a distribution from RP Holdings in respect of each Portfolio equal to 20% of the Net Economic Profit (defined as the aggregate cash receipts for all new portfolio investments in such Portfolio less Total Expenses (defined as interest expense, operating expense and recovery of acquisition cost in respect of such Portfolio)) for such Portfolio for the applicable measuring period (the “Equity Performance Awards”). The Equity Performance Awards will be allocated to EPA Holdings, as the holder of the RP Holdings Class C Special Interest, and recorded as Net (loss)/income attributable to non-controlling interests in the condensed consolidated statements of operations.

17

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Equity Performance Awards will be payable in RP Holdings Class B Interests that will be exchanged upon issuance for Class A ordinary shares. EPA Holdings may also receive a periodic cash advance in respect of the RP Holdings Class C Special Interest to the extent necessary for EPA Holdings or any of its beneficial owners to pay when due any income tax imposed on it or them as a result of holding such RP Holdings Class C Special Interest. The Equity Performance Awards will be reflected as a transaction between equity holders in the condensed consolidated statements of shareholders’ equity and related periodic cash distributions will presented as a financing activity in the condensed consolidated statements of cash flows. We do not expect any material Equity Performance Awards to be payable until certain performance conditions discussed above are met. Similarly, we do not expect any material income to be allocated to EPA Holdings until such performance conditions are met.

Dividends

The holders of Class A ordinary shares are entitled to receive dividends subject to approval by our board of directors. The holders of Class B ordinary shares do not have any rights to receive dividends; however, RP Holdings Class B Interests are entitled to dividends and distributions from RP Holdings. In the first quarter of 2024, we declared and paid one quarterly cash dividend of $0.21 per Class A ordinary share in an aggregate amount of $93.8 million to holders of our Class A ordinary shares.

2020 Independent Directors Equity Incentive Plan and Share-based Compensation

On June 15, 2020, our 2020 Independent Director Equity Incentive Plan was approved and became effective, whereby 800 thousand Class A ordinary shares were authorized for issuance in the form of RSUs to our independent directors. RSUs granted under the plan generally vest over one year with the associated share-based compensation expense recorded as part of General and administrative expenses in the condensed consolidated statements of operations. In the first quarter of 2024 and 2023, we did not recognize material share-based compensation expense.

18

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

11. Earnings per Share

In the first quarter of 2024 and 2023, Class B ordinary shares contingently issuable to EPA Holdings were evaluated and were determined not to have any dilutive impact.

The following table sets forth reconciliations of the numerators and denominators used to calculate basic and diluted earnings per Class A ordinary share (in thousands, except per share amounts):

For the Three Months Ended March 31,
20242023
Numerator
Consolidated net (loss)/income$(4,273)$509,089 
Less: Net income attributable to continuing non-controlling interests1,539 123,257 
Less: Net (loss)/income attributable to legacy non-controlling interests(10,590)45,077 
Net income attributable to Royalty Pharma plc - basic4,778 340,755 
Add: Reallocation of net income attributable to non-controlling interests from the assumed conversion of Class B ordinary shares 1,539 123,257 
Net income attributable to Royalty Pharma plc - diluted$6,317 $464,012 
Denominator
Weighted average Class A ordinary shares outstanding - basic448,623 445,612 
Add: Dilutive effects as shown separately below
Class B ordinary shares exchangeable for Class A ordinary shares148,812 161,612 
Unvested RSUs44 27 
Weighted average Class A ordinary shares outstanding - diluted597,479 607,251 
Earnings per Class A ordinary share - basic$0.01 $0.76 
Earnings per Class A ordinary share - diluted$0.01 $0.76 

19

ROYALTY PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

12. Indirect Cash Flow

Adjustments to reconcile consolidated net (loss)/income to net cash provided by operating activities are summarized below (in thousands):
For the Three Months Ended March 31,
20242023
Cash flow from operating activities:
Consolidated net (loss)/income$(4,273)$509,089 
Adjustments to reconcile consolidated net (loss)/income to net cash provided by operating activities:
Income from financial royalty assets(541,546)(664,687)
Provision for changes in expected cash flows from financial royalty assets583,600 118,804 
Amortization of debt discount and issuance costs4,349 5,324 
Gains on derivative financial instruments (7,090)
(Gains)/losses on equity securities(77,730)10,818 
Equity in losses/(earnings) of equity method investees14,149 (34,606)
Distributions from equity method investees13,396 16,267 
Share-based compensation612 573 
Gains on available for sale debt securities(46,420)(32,300)
Other3,047 3,147 
Changes in operating assets and liabilities:
Cash collected on financial royalty assets744,949 1,151,635 
Other royalty income receivable178 (1,200)
Other current assets13,028 275 
Accounts payable and accrued expenses(3,614)(1,249)
Interest payable(39,087)(40,963)
Net cash provided by operating activities$664,638 $1,033,837 

13.