10-K – 2026-02-11 – rprx-20251231.htm

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Financial Royalty Assets and related Interest Income

Description of the Matter As disclosed in Note 8 to the consolidated financial statements, the Company’s total financial royalty assets, net, were carried at $17,062,868 thousand as of December 31, 2025. For the year ended December 31, 2025, the Company recognized income from financial royalty assets of $2,261,152 thousand. As explained in Note 2 to the consolidated financial statements, the Company’s financial royalty assets are measured at amortized cost using the prospective effective interest rate method.

Auditing the valuation of the financial royalty assets and related interest income involved complex auditor judgment, because the assumptions used by management to forecast the expected cash flows from the underlying royalties are forward-looking and are therefore affected by future economic and market conditions, such as the impact of the entry of competing or generic products to the market, among other uncertainties. The key assumptions used in the valuation of the financial royalty assets and related interest income are product growth rates applied to forecasted sales and the royalty duration.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the valuation of financial royalty assets and related interest income. This included testing controls over management’s review of the significant assumptions and other inputs used in estimating the royalty duration and product growth rates.

To test the valuation of the financial royalty assets and related interest income, our audit procedures included, among others, evaluating the methodology and completeness and accuracy of the data used to develop the key assumptions identified above. For example, with the support of statistical modelling specialists, we evaluated management’s statistical methodology for sales growth forecasts and performed sensitivity analysis over the resulting forecasted product sales. We also tested the inputs to the model, principally comprising historic product sales and third-party analyst estimates of nearer-term sales amounts, by comparing to analyst reports or published sales information. For royalty duration, among other procedures, we compared management’s assessment of the likely date of expiry of the Company’s cash flows against original purchase agreements, as well as independently assessing the royalty duration against available published information sources, such as those from regulatory bodies, counterparties, and product marketers.

We assessed the historical accuracy of management’s estimates by comparing expected cash flows to actual cash receipts. We also evaluated the related disclosures in the consolidated financial statements.

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Initial recognition and valuation of Employee EPAs assumed as part of the Internalization

Description of the Matter As described in Note 3 to the consolidated financial statements, on May 16, 2025, the Company completed its acquisition of Royalty Pharma Manager, LLC for total consideration of $565.2 million (the “Internalization”). The transaction was accounted for as a business combination. As a result of the Internalization the company recognized an initial liability related to Employee Equity Performance Awards (“Employee EPAs”) of $422.5 million.

The initial recognition and valuation of the Employee EPAs required management to establish an accounting policy for the classification and measurement of the Employee EPAs and make significant judgments, estimates and assumptions. Auditing the initial recognition and valuation of the Employee EPAs was complex due to the judgment and estimation required by management. The complexity is due to the high subjectivity and estimation uncertainty of the assumptions used by management to estimate the fair value using the Monte Carlo Simulation model. The key assumptions used in the valuation of the Employee EPAs are product growth rates applied to forecasted sales and the duration of cash receipts.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the accounting and valuation of the Employee EPAs. This included testing controls over management’s review of the technical accounting considerations, significant assumptions, and other inputs used in estimating the valuation of the liability.

To audit the Company's accounting policy for the initial recognition of the Employee EPAs we assessed the appropriateness of the conclusions reached in accordance with the applicable accounting principles.

To test the valuation of the liability and related share-based compensation expense, our audit procedures included, among others, evaluating the methodology and completeness and accuracy of the data used to develop the key assumptions identified. For example, we engaged valuation specialists to gain an understanding of the approach taken by the Company and to assess the appropriateness of the methodology used, and to develop their own point estimate for the Employee EPA liability at fair value using the Monte Carlo Simulation.
 
We also evaluated the related disclosures in the consolidated financial statements.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2022.

Boston, Massachusetts
February 11, 2026

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Royalty Pharma plc

Opinion on Internal Control Over Financial Reporting

We have audited Royalty Pharma plc's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Royalty Pharma plc (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls covering a portion of general and administrative expenses attributable to cash employee compensation for personnel of Royalty Pharma Manager, LLC which constituted 7% of general and administrative expenses for the year ended December 31, 2025. Our audit of internal control over financial reporting of the Company also did not include an evaluation of internal control over cash employee compensation for personnel of Royalty Pharma Manager, LLC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 11, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Boston, Massachusetts
February 11, 2026
78

ROYALTY PHARMA PLC
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)

As of December 31,
2025 2024
Assets
Current assets
Cash and cash equivalents $ 618,696   $ 929,026  

Financial royalty assets 854,386   783,770  

Available for sale debt securities 18,800   58,200  

Other royalty income receivable 29,316   26,956  
Other current assets 6,893   4,187  
Total current assets 1,528,091   1,802,139  

Financial royalty assets, net 16,208,482   15,127,158  
Equity securities 171,312   186,960  
Available for sale debt securities 419,000   693,500  

Equity method investments 289,968   379,424  
Goodwill 924,634   —  
Other assets 79,293   33,534  
Total assets $ 19,620,780   $ 18,222,715  

Liabilities and shareholders’ equity
Current liabilities
Distributions payable to legacy non-controlling interests $ 72,825   $ 75,811  
Accounts payable and accrued expenses 19,404   13,370  
Interest payable 110,818   98,062  

Current portion of long-term debt 380,000   997,773  

Other current liabilities 53,164   68,600  
Total current liabilities 636,211   1,253,616  

Long-term debt 8,570,917   6,614,653  

Accrued compensation liabilities 577,870   —  
Other liabilities 120,843   12,080  
Total liabilities 9,905,841   7,880,349  
Commitments and contingencies
Shareholders’ equity
Class A ordinary shares, $ 0.0001 par value; issued and outstanding: 2025– 428,669 and 2024– 445,985
43   45  
Class B ordinary shares, $ 0.000001 par value; issued and outstanding: 2025– 148,438 and 2024– 143,128
—   —  
Class R redeemable shares, £ 1 par value; issued and outstanding: 2025– 50 and 2024– 50
63   63  
Deferred shares, $ 0.000001 par value; issued and outstanding: 2025– 411,475 and 2024– 392,255
—   —  
Additional paid-in capital 4,123,088   4,103,482  
Retained earnings 2,356,318   2,845,653  
Non-controlling interests 3,238,039   3,395,785  
Treasury interests ( 2,612 ) ( 2,662 )
Total shareholders’ equity 9,714,939   10,342,366  

Total liabilities and shareholders’ equity $ 19,620,780   $ 18,222,715  

See accompanying notes to these consolidated financial statements.
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ROYALTY PHARMA PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Years Ended December 31,
2025 2024 2023
Income and other revenues
Income from financial royalty assets $ 2,261,152   $ 2,149,422   $ 2,197,754  
Other royalty income and revenues 117,041   114,154   156,800  
Total income and other revenues 2,378,193   2,263,576   2,354,554  

Operating (income)/expense
Provision for changes in expected cash flows from financial royalty assets ( 295,838 ) 732,461   560,656  
Provision for credit losses on unfunded commitments
89,032   —   —  
Research and development funding expense 452,000   2,000   52,000  
General and administrative expenses (includes $ 290,890 , $ 3,224 , and $ 3,302 of share-based compensation expense for the years ended December 31, 2025, 2024 and 2023, respectively; see Note 4)
573,481   236,671   249,748  
Total operating expense, net 818,675   971,132   862,404  

Operating income 1,559,518   1,292,444   1,492,150  

Other (income)/expense
Equity in earnings of equity method investees ( 29,089 ) ( 29,611 ) ( 28,882 )
Interest expense 307,664   225,512   187,187  
Losses on derivative financial instruments —   6,000   2,290  
Losses/(gains) on equity securities 21,852   ( 39,549 ) ( 87,139 )
Gains on available for sale debt securities ( 45,859 ) ( 154,906 ) ( 230,840 )
Interest income ( 33,591 ) ( 47,343 ) ( 72,291 )
Other non-operating expenses, net 14,349   1,528   21,737  
Total other expense/(income), net 235,326   ( 38,369 ) ( 207,938 )
Consolidated net income before tax 1,324,192   1,330,813   1,700,088  
Income tax expense —   —   —  
Consolidated net income 1,324,192   1,330,813   1,700,088  

Net income attributable to non-controlling interests 553,245   471,830   565,254  

Net income attributable to Royalty Pharma plc $ 770,947   $ 858,983   $ 1,134,834  

Earnings per Class A ordinary share:
Basic $ 1.79   $ 1.92   $ 2.54  
Diluted $ 1.78   $ 1.91   $ 2.53  
Weighted average Class A ordinary shares outstanding:
Basic 429,801   448,185   447,601  
Diluted 564,455   594,108   602,900  

See accompanying notes to these consolidated financial statements.
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ROYALTY PHARMA PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
( In thousands, except per share amounts )

Class A
Ordinary Shares Class B
Ordinary Shares Class R
Redeemable Shares Deferred Shares Additional Paid-in Capital Retained Earnings Non-Controlling Interests Treasury Interests Total Shareholders’ Equity
Shares Amount Shares Amount Shares Amount Shares Amount
Balance at December 31, 2022 443,166   $ 44   164,058   $ —   50   $ 63   371,325   $ —   $ 3,666,160   $ 1,964,689   $ 3,897,223   $ ( 2,806 ) $ 9,525,373  
Contributions —  —  —  —  —  —  —  —  —  —  11,855   —  11,855  
Distributions —  —  —  —  —  —  —  —  —  —  ( 487,721 ) —  ( 487,721 )
Dividends ($ 0.80 per class A ordinary share)
—  —  —  —  —  —  —  —  —  ( 358,327 ) —  —  ( 358,327 )
Other exchanges 13,315   2   ( 13,315 ) —  —  —  13,315   —  428,629   —  ( 428,808 ) 177   —  
Share-based compensation and related issuances of Class A ordinary shares 57   —  —  —  —  —  —  —  2,357   —  —  —  2,357  
Repurchases of Class A ordinary shares ( 9,846 ) ( 1 ) —  —  —  —  —  —  ( 85,711 ) ( 219,047 ) —  —  ( 304,759 )
Net income —  —  —  —  —  —  —  —  —  1,134,834   565,254   —  1,700,088  
Purchase of non-controlling interest in RPCT —  —  —  —  —  —  —  —  —  ( 4,566 ) ( 11 ) —  ( 4,577 )
Balance at December 31, 2023 446,692   $ 45   150,743   $ —   50   $ 63   384,640   $ —   $ 4,011,435   $ 2,517,583   $ 3,557,792   $ ( 2,629 ) $ 10,084,289  
Contributions —  —  —  —  —  —  —  —  —  —  9,038   —  9,038  
Distributions —  —  —  —  —  —  —  —  —  —  ( 476,632 ) —  ( 476,632 )
Dividends ($ 0.84 per class A ordinary share)
—  —  —  —  —  —  —  —  —  ( 376,465 ) —  —  ( 376,465 )
Other exchanges 7,615   1   ( 7,615 ) —  —  —  7,615   —  166,275   —  ( 166,243 ) ( 33 ) —  
Share-based compensation and related issuances of Class A ordinary shares 81   —  —  —  —  —  —  —  2,344   —  —  —  2,344  
Repurchases of Class A ordinary shares ( 8,403 ) ( 1 ) —  —  —  —  —  —  ( 76,572 ) ( 153,340 ) —  —  ( 229,913 )
Net income —  —  —  —  —  —  —  —  —  858,983   471,830   —  1,330,813  
Purchase of non-controlling interest in RPCT —  —  —  —  —  —  —  —  —  ( 1,108 ) —  —  ( 1,108 )
Balance at December 31, 2024 445,985   $ 45   143,128   $ —   50   $ 63   392,255   $ —   $ 4,103,482   $ 2,845,653   $ 3,395,785   $ ( 2,662 ) $ 10,342,366  
ASU 2025-07 adoption impact —  —  —  —  —  —  —  —  —  ( 12,000 ) —  —  ( 12,000 )
Contributions —  —  —  —  —  —  —  —  —  —  9,983   —  9,983  
Distributions —  —  —  —  —  —  —  —  —  —  ( 541,262 ) —  ( 541,262 )
Dividends ($ 0.88 per class A ordinary share)
—  —  —  —  —  —  —  —  —  ( 378,317 ) —  —  ( 378,317 )
Other exchanges 19,220   2   ( 19,220 ) —  —  —  19,220   —  345,605   —  ( 345,657 ) 50   —  
Share issuances for EPAs, Equity Incentive Plans and related share-based compensation 877   —  —  —  —  —  —  —  27,889   ( 551 ) 108,945   —  136,283  
Shares and share-based awards issued for Internalization —  —  24,530   —  —  —  —  —  3,778   —  57,000   —  60,778  
Repurchases of Class A ordinary shares ( 37,413 ) ( 4 ) —  —  —  —  —  —  ( 357,666 ) ( 869,414 ) —  —  ( 1,227,084 )
Net income —  —  —  —  —  —  —  —  —  770,947   553,245   —  1,324,192  
Balance at December 31, 2025 428,669   $ 43   148,438   $ —   50   $ 63   411,475   $ —   $ 4,123,088   $ 2,356,318   $ 3,238,039   $ ( 2,612 ) $ 9,714,939  

See accompanying notes to these consolidated financial statements.
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ROYALTY PHARMA PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Years Ended December 31,
2025 2024 2023
Cash flows from operating activities:
Cash collections from financial royalty assets $ 3,354,750   $ 2,983,410   $ 3,201,410  
Cash collections from intangible royalty assets 720   14,647   1,302  
Other royalty cash collections 114,021   108,846   158,843  
Distributions from equity method investees 13,396   13,396   18,823  
Interest received 34,308   46,482   71,604  
Development-stage funding payments ( 452,000 ) ( 2,000 ) ( 52,000 )
Payments for operating and professional costs ( 288,138 ) ( 236,225 ) ( 243,012 )
Payments for Employee EPAs ( 10,943 ) —   —  
Interest paid ( 276,291 ) ( 159,570 ) ( 169,168 )
Net cash provided by operating activities 2,489,823   2,768,986   2,987,802  

Cash flows from investing activities:
Acquisition of businesses, net of cash acquired ( 74,416 ) —   —  
Distributions from equity method investees 105,149   23,641   43,882  
Investments in equity method investees —   ( 10,955 ) ( 12,542 )
Purchases of equity securities ( 58,427 ) ( 62,500 ) —  
Proceeds from equity securities 34,723   98,575   —  
Purchases of available for sale debt securities ( 175,000 ) ( 150,000 ) —  
Proceeds from available for sale debt securities 21,226   19,786   1,440  
Proceeds from sales of available for sale debt securities 510,553   —   —  

Proceeds from sales and maturities of marketable securities —   —   24,391  
Acquisitions of financial royalty assets ( 1,697,729 ) ( 2,505,701 ) ( 2,115,522 )
Acquisitions of other financial assets —   ( 18,000 ) —  
Milestone payments ( 271,313 ) ( 75,000 ) ( 12,400 )
Other ( 8,946 ) 2,039   ( 2,038 )
Net cash used in investing activities ( 1,614,180 ) ( 2,678,115 ) ( 2,072,789 )

Cash flows from financing activities:
Distributions to legacy non-controlling interests - Portfolio Receipts ( 354,901 ) ( 362,280 ) ( 376,987 )
Distributions to continuing non-controlling interests ( 167,475 ) ( 125,159 ) ( 119,534 )
Dividends to shareholders ( 378,253 ) ( 376,465 ) ( 358,327 )
Repurchases of Class A ordinary shares ( 1,227,383 ) ( 229,651 ) ( 304,759 )
Contributions from legacy non-controlling interests - R&D 220   747   543  
Contributions from non-controlling interests - other 5,697   4,360   6,933  
Cash acquired in connection with purchase of non-controlling interest —   —   4,973  
Proceeds from revolving credit facility 1,275,000   —   350,000  
Repayment of revolving credit facility ( 1,275,000 ) —   ( 350,000 )
Repayment of long-term debt ( 1,000,000 ) —   ( 1,000,000 )
Proceeds from issuance of long-term debt, net of discount 1,954,475   1,471,235   —  
Debt issuance costs and other ( 16,563 ) ( 12,616 ) ( 1,596 )
Other ( 1,790 ) ( 9,026 ) —  
Net cash (used in)/provided by financing activities
( 1,185,973 ) 361,145   ( 2,148,754 )

Net change in cash and cash equivalents ( 310,330 ) 452,016   ( 1,233,741 )
Cash and cash equivalents, beginning of period 929,026   477,010   1,710,751  
Cash and cash equivalents, end of period $ 618,696   $ 929,026   $ 477,010  

See accompanying notes to these consolidated financial statements.
82

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Purpose

Royalty Pharma plc is a public limited company incorporated under the laws of England and Wales. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis. We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. Our principal asset is a controlling equity interest in Royalty Pharma Holdings Ltd (“RP Holdings”), a private limited company incorporated under the laws of England and Wales. We conduct our business through RP Holdings and its subsidiaries.

Prior to May 16, 2025, we were externally managed by RP Management, LLC, a Delaware limited liability company (the “Legacy Manager” or “RPM”), pursuant to advisory and management agreements (collectively, the “Legacy Management Agreement”). On May 16, 2025, we completed the Internalization (as defined below) and became an integrated company with the former employees of RPM becoming employees of Royalty Pharma, LLC, a wholly-owned subsidiary of RP Holdings. Refer to Note 3-Internalization for additional discussion.

2. Summary of Significant Accounting Policies

Basis of Preparation and Use of Estimates

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

The preparation of 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.

Basis of Consolidation

The 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 income attributable to non-controlling interests in our consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties, except for the RP Holdings Class C Interests (as defined below), which are recorded based on their rights.

RP Holdings is owned by Royalty Pharma plc, and, indirectly, by various partnerships (the “Continuing Investors Partnerships”) and, post-Internalization, by the Holders of RP Holdings Class E Interests (as defined below). RP Holdings is the sole owner of Royalty Pharma Investments 2019 ICAV (“RPI 2019 ICAV”), which is an Irish collective asset management vehicle and is the successor to Royalty Pharma Investments, an Irish unit trust. In 2022, we became an indirect owner of an 82 % economic interest in Royalty Pharma Investments ICAV, which was previously owned directly by Royalty Pharma Investments. In connection with the Internalization, Royalty Pharma Investments distributed all of its assets to Royalty Pharma Investments 2011 ICAV (together with Royalty Pharma Investments ICAV, “Old RPI”).

We consummated an exchange offer on February 11, 2020 (the “Exchange Offer”) to facilitate our initial public offering (“IPO”). Prior to the Exchange Offer, Royalty Pharma Investments was owned by various partnerships (the “Legacy Investors Partnerships”). Through the Exchange Offer, investors which represented 82 % of the aggregate limited partnership in the Legacy Investors Partnerships exchanged their limited partnership interests in the Legacy Investors Partnerships for limited partnership interests in RPI US Partners 2019, LP and RPI International Holdings 2019, LP which are part of the Continuing Investors Partnerships. Following the Exchange Offer, we became the indirect owner of an 82 % economic interest in Royalty Pharma Investments which entitled us to 82 % of the economics of its wholly-owned subsidiar y RPI Finance Trust, a Delaware statutory trust (“RPIFT”) , and 66 % of Royalty Pharma Collection Trust, a Delaware statutory trust (“RPCT”). In December 2023, we acquired the remaining 34 % interest in RPCT owned by Royalty Pharma Select Finance Trust, a Delaware statutory trust (“RPSFT”).
83

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We report four non-controlling interests:

1. The Legacy Investors Partnerships’ ownership of approximately 18 % in Old RPI, which is the only remaining historical non-controlling interest that existed prior to our IPO.
2. The Continuing Investors Partnerships’ indirect ownership in RP Holdings through their indirect ownership of RP Holdings’ Class B ordinary shares (the “RP Holdings Class B Interests”).
3. Pablo Legorreta’s ultimate ownership of the RP Holdings’ Class C ordinary share (the “RP Holdings Class C Special Interest”) which entitles him to receive Equity Performance Awards (the “Founder’s Equity”). See discussion in Note 5-Shareholders’ Equity.
4. The Sellers’ (as defined in Note 3-Internalization) indirect ownership in RP Holdings through their indirect ownership of RP Holdings’ Class E ordinary shares (the “RP Holdings Class E Interests”). In connection with the Internalization, we issued 24.5  million RP Holdings Class E Interests to the Sellers (the “Holders of RP Holdings Class E Interests”), subject to vesting conditions, as part of the transaction consideration.

The Continuing Investors Partnerships, the Founder’s Equity and the Holders of RP Holdings Class E Interests, collectively, are referred to as the “continuing non-controlling interests.”

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 financial royalty assets, available for sale debt securities and receivables. 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, Biogen, Roche, Astellas, Pfizer, Johnson & Johnson, AbbVie, Servier, Gilead, Amgen and Alnylam. As of December 31, 2025 and 2024, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 32 % and 34 % 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 revenue on our royalty assets.

Recently Adopted and Issued Accounting Standards

In September 2025, the Financial Accounting Standards Board (“FASB”) issued amendments which refine the scope of the guidance on derivatives in Accounting Standards Codification (“ASC”) 815 and clarify the guidance on share-based payments from a customer in ASC 606 (“ASU 2025-07”). ASU 2025-07 adds a new scope exception to the derivative guidance for contracts, such as certain research and development funding arrangements, that are not traded on an exchange and contain an underlying that is based on the operations or activities specific to one of the parties involved. ASU 2025-07 is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted in any interim or annual period for which financial statements have not yet been issued or made available for issuance.

84

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We adopted ASU 2025-07 in 2025 using the modified retrospective transition method, effective January 1, 2025. The only impact of adopting this standard related to the CK-586 R&D funding arrangement, which we entered into in 2024 and had previously accounted for as a derivative. As of December 31, 2024, this derivative had a carrying amount of $ 12.0 million recorded within Other Assets . Upon reassessment under the new guidance, we concluded that the CK-586 funding arrangement qualifies for the derivative scope exception. Accordingly, we recorded a $ 12.0 million cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2025 to derecognize the derivative asset and reflect the CK-586 funding arrangement as R&D expense.

The scope clarification for share-based non-cash consideration from a customer in a revenue contract is not applicable to us. As such, we adopted this update on December 31, 2025 on a prospective method.

In November 2023, the FASB issued a new accounting standard that amends the guidance for required disclosures related to a public entity’s reportable segments (“ASU 2023-07”). The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. It also requires disclosure of the amount and description of the composition of other segment items and interim disclosures of a reportable segment’s profit or loss and assets. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. This update became effective for us in 2024 and our expanded disclosures are included below under “Segment Information.”

Segment Information

Our CODM is our Chief Executive Officer, who reviews financial information presented on a consolidated basis to allocate resources, evaluate financial performance and make overall operating decisions. As such, we concluded that we operate as one single reportable segment, which is primarily focused on acquiring biopharmaceutical royalties. The measure of segment profit or loss that is most consistent with our consolidated financial statements is consolidated net income. The accounting policies of our single reportable segment are the same as those for the consolidated financial statements. The level of disaggregation and amounts of significant segment expenses that are regularly provided to the CODM are the same as those presented in the consolidated statements of operations. Likewise, the measure of segment assets is reported on the consolidated balance sheets as total assets.

Royalty Assets

An acquisition of a royalty asset provides the buyer with contractual rights to cash flows from the sale of patent-protected biopharmaceutical products by unrelated biopharmaceutical companies. The majority of our royalties provide us with rights that are protective and passive in nature. In other words, we do not own the intellectual property or have the right to commercialize the underlying products. These contractual cash flow rights are classified as financial royalty assets.

In the limited instances where we possess rights to exploit the underlying patents, rights to the intellectual property related to the biopharmaceutical products, or the ability to influence the amount or duration of future royalty payments, these royalties are classified as intangible royalty assets. The cost of an intangible royalty asset is amortized over the expected life of the asset on a straight-line basis.

Financial Royalty Assets, Net

Although financial royalty assets do not have the contractual terms typical of a loan (such as principal and interest), we account for them under ASC Topic 310 Receivables. In limited instances, our royalty assets may be classified as contract assets and recorded as part of financial royalty assets because they are accounted for in the same manner. Our financial royalty assets are classified similar to loans receivable and are measured at amortized cost using the prospective effective interest method described in ASC 835-30 Imputation of Interest .

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The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount. The effective interest rate is recalculated each reporting period as differences between expected cash flows and actual cash flows are realized and as there are changes to expected future cash flows. Income is calculated by multiplying the carrying value of the financial royalty asset by the periodic effective interest rate. The carrying value of a financial royalty asset is made up of the opening balance, or net purchase price for a new financial royalty asset, which is increased by accrued interest income and decreased by cash receipts in the period to arrive at the ending balance. If the ending balance is greater than the net present value of the expected future cash flows, a provision is recorded to reduce the asset balance to the net present value. The provision is recorded through the statements of operations as Provision for changes in expected cash flows from financial royalty assets and the carrying value of Financial royalty assets, net is presented net of the cumulative allowance for changes in expected cash flows.

The application of the prospective approach to measure our financial royalty assets at amortized cost requires management’s judgment in forecasting the expected future cash flows of the underlying royalties. The amounts and duration of forecasted expected future cash flows used to calculate and measure interest income are largely impacted by sell-side equity research analyst coverage, commercial performance of the product, and royalty duration, each discussed in further detail below .

• Analyst coverage. Expected future cash flows are derived from sales projections for the underlying biopharmaceutical products, based primarily on sell-side equity research analyst consensus forecasts. These forecasts incorporate market research on global economic conditions, industry trends and product life cycles. Our policy is to rely on sell-side research analysts’ consensus sales forecasts to derive annual sales projections for each financial royalty asset over the periods for which we are entitled to royalties or milestones. When analyst estimates do not extend through the full royalty term, we project future sales using statistical curves which are modelled using a combination of historical product trends and available consensus estimates. Depending on the level of details provided in analyst models, management may apply additional assumptions to allocate annual sales to quarterly periods and by geographic regions, determine product and pricing mix for franchises, or exclude sales for unapproved products. Contractual royalty rates, terms and milestones are then applied to the adjusted sales projections to estimate the royalty or milestone payments over the asset’s life, forming the basis for expected future cash flows used in calculating and measuring interest income.

• Commercial performance. The approval of a product for use in new indications can extend the date through which we are entitled to royalties or milestones on that product. For certain financial royalty assets, such as the cystic fibrosis franchise, we are entitled to royalties on approved combination products and on future combination products, which create new cash flow streams that were previously not reflected. We generally do not recognize income from, or forecast sales for, unapproved products unless they are incorporated into analyst consensus forecasts in such a way that we cannot isolate the probability of regulatory success that is built into the analyst’s estimates. If a product is removed from all or a portion of a market, subsequent sell-side equity research analysts’ consensus sales forecasts will reflect the expected drop in sales. Both the new cash flow streams and the cessation of cash flow streams related to a product’s performance in the market over the royalty term can materially affect our forecast of expected future cash flows, which directly impacts the measurement of interest income.

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• Royalty duration. The duration of a royalty can be based on a variety of factors, such as regulatory and marketing approval dates, patent expiration dates, the number of years from first commercial sale, the first date of manufacture of the patent-protected product, the entry of generics or a contractual date arising from litigation, which are all impacted by the point in time in the product’s life cycle at which we acquire the royalty. Royalty durations vary by geography as the United States, European Union and other jurisdictions may be subject to different country-specific patent protection terms or exclusivity based on contractual terms. Products may be covered by a number of patents and, where a royalty term is linked to the existence of valid patents, management is required to make judgments about the patent providing the strongest protection to align the period over which management forecasts expected future cash flows to the royalty term. It is common for the latest expiring patent in effect at the date we acquire a financial royalty asset to be extended, adjusted or replaced with newer dated patents subsequent to our acquisition of a royalty due to new information, resulting in changes to the royalty duration in later periods. Patents may expire earlier than expected at the time of the acquisition due to the loss of patent protection, loss of data exclusivity on intellectual property, contractual licensing terms limiting royalty payments based on time from product launch, recent legal developments or litigation. Macroeconomic factors, such as changes in economies or the competitive landscape, including the unexpected loss of exclusivity to the products underlying our portfolio of royalties, changes in government legislation, product life cycles, industry consolidations and other changes beyond our control could result in a positive or negative impact on our forecast of expected future cash flows and the related measurement of interest income.

As part of the preparation of the forecasted expected future cash flows, which relies on the sources and variables discussed above, management is required to make assumptions around the following forecast inputs: (1) estimates of the duration of the royalty, which includes consideration of the strength of patent protection and anticipated timing for entry of generics, (2) product growth rates and sales trends in outer years, generally projected through statistical curves, (3) the product and pricing mix for franchised products, (4) the geographical allocation of annual sales data from sell-side equity research analysts’ models, and (5) the portion of sales that are subject to royalties, which is referred to as royalty bearing sales. The most sensitive of these assumptions relates to management’s estimate of the royalty duration in the final years of an asset’s life. In some cases, patent protection may extend to a later period than the expiration date management has estimated. Management may apply a shorter royalty term in this situation if, based on its experience and expertise, it believes that it is more likely that the associated patents are subject to opposition or infringement, that the market for a particular product may shift based on pipeline approvals and products, or that product sales may be harmed by competition from generics. For products providing perpetual royalties, management applies judgment in establishing the duration over which it forecasts expected future cash flows .

A shortened royalty term can result in a reduction in the effective interest rate, lower income from financial royalty assets, a decline in the carrying value of the financial royalty asset and recognition of provision expense, reductions in royalty payments compared to expectations, or a permanent impairment. Additionally, royalty payments may occasionally continue beyond the estimated royalty expiration date for such reasons we cannot foresee such as excess inventory in the channel or additional scope of patent protection identified after expiry, including royalties we may become entitled to from new indications, new compounds, or for new regulatory jurisdictional approvals .

Certain acquisition agreements provide for future incoming or outgoing contingent payments based on the commercial, regulatory or clinical performance of the related biopharmaceutical product generally over a multi-year period. For purposes of measuring income from financial royalty assets, commercial milestones payable or receivable are reflected in the forecasted expected future cash flows in the period in which the milestone criteria is projected to be satisfied based on sell-side equity research analysts’ consensus sales forecasts. Milestones based on regulatory approval or clinical criteria are generally not reflected in the expected future cash flows until such approval or criteria is achieved. We assess all milestone payments to determine whether we must account for these arrangements as derivatives instruments under ASC 815 – Derivatives and Hedging.

Amounts related to outgoing contingent milestone payments are not considered contractual obligations as they are contingent on the successful completion of the defined milestones. Payments under these agreements generally become due and payable upon achievement of certain commercial milestones, or when the contingency is resolved.

The current portion of financial royalty assets represents an estimation for current quarter royalty receipts which are collected during the subsequent quarter and for which the estimates are derived from the latest external publicly available sell-side equity research analyst reports, reported in arrears.
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Cumulative Allowance and Provision for Changes in Expected Cash Flows from Financial Royalty Assets

We evaluate financial royalty assets for impairment on an individual basis by comparing the effective interest rate at each reporting date to that of the prior period. If the effective interest rate is lower for the current period than the prior period, and if the gross cash flows have declined (expected and collected), we record provision expense for the change in expected cash flows. The provision is measured as the difference between the financial royalty asset’s amortized cost basis and the net present value of the expected future cash flows, calculated using the prior period’s effective interest rate. The amount recognized as provision expense increases the financial royalty asset’s cumulative allowance, which reduces the net carrying value of the financial royalty asset .

In a subsequent period, if there is an increase in expected future cash flows, or if actual cash flows are greater than cash flows previously expected, we reduce the previously established cumulative allowance in part or in full, resulting in a non-cash credit to the provision recorded through the Provision for changes in expected cash flows from financial royalty assets on the consolidated statements of operations. We also recalculate the amount of accretable yield to be recognized based on the revised remaining future cash flows. The adjustment to the accretable yield is treated as a change in estimate and is recognized prospectively over the remaining life of the financial royalty asset by adjusting the effective interest rate used to calculate income .

Movements in the cumulative allowance for changes in expected cash flows, which forms part of the Financial royalty assets, net line item on the consolidated balance sheets, are accompanied by corresponding provision income or expense. Amounts not expected to be collected are written off against the allowance at the time that such a determination is made. In some cases, when a financial royalty asset’s contractual cash flows expire, the final royalty payment may differ from the remaining net carrying value. We account for this non-cash true-up at the end of the royalty term as either Provision for changes in expected cash flows from financial royalty assets or as Income from financial royalty assets on the consolidated statements of operations .

Allowance for Current Expected Credit Losses

We recognize an allowance for current expected credit losses under ASC 326 – Financial Instruments – Credit Losses on (1) our portfolio of financial royalty assets for which we have limited protective rights and (2) on the unfunded portions of certain funding commitments for which we have limited protective rights once funded. The credit loss allowance is estimated using the probability of default and loss given default method. The credit rating, which is assessed primarily based on publicly available data and updated quarterly, is the primary credit quality indicator used to determine the probability of default of the marketers responsible for paying our royalties and the resulting loss given default.

The allowance for current expected credit losses related to financial royalty assets is presented net within the non-current portion of financial royalty assets on the consolidated balance sheets, and changes to such allowance are recorded within Provision for changes in expected cash flows from financial royalty assets on the consolidated statements of operations. The allowance for current expected credit losses related to the unfunded portions of relevant funding arrangements is recorded within Other liabilities on the consolidated balance sheet, with changes to such allowance reflected within Provision for credit losses on unfunded commitments in the consolidated statements of operations.

Income from Financial Royalty Assets

We recognize income from financial royalty assets when there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The accretable yield is recognized as income at the effective rate of return over the expected life of financial royalty assets. An acquisition of a royalty on a development-stage product classified as a financial royalty asset is generally placed in non-accrual status where income is not recognized until we are able to reliably estimate expected cash flows, generally when the product receives regulatory approval.

We evaluate such financial royalty assets held at cost for impairment based on, among other factors, a review of development progress and publicly available information around regulatory discussions, clinical trial results and approval status. An impairment loss is recognized if it is probable that we will be unable to recover the carrying value of the financial royalty asset held at cost and the amount of loss can be reasonably estimated.
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Other Royalty Income and Revenues

Other royalty income and revenues includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of research and development (“R&D”) funding arrangements. Other royalty income and revenues also includes revenues from intangible royalty assets.

Financial Instruments and Fair Value Measurements

Our financial instruments consist primarily of cash and cash equivalents, equity securities, available for sale debt securities, royalty interests, Employee EPAs (as defined in Note 5-Shareholders’ Equity) and long-term debt. Cash and cash equivalents, equity securities, available for sale debt securities, Employee EPAs and certain royalty interests are reported at their respective fair values on our consolidated balance sheets. Outstanding borrowings under our senior unsecured notes, term loan and non-current financial royalty assets are reported at amortized cost on our consolidated balance sheets, for which fair values are disclosed. The remaining financial instruments are reported on our consolidated balance sheets at amounts that approximate fair value.

For financial instruments carried at fair value, the level in the fair value hierarchy is based on the lowest level of inputs that is significant to the fair value measurement in its entirety. We determine the fair value of assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value as follows:

• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
• Level 2: Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
• Level 3: Prices or valuation that require inputs that are both significant to the fair value measurement and unobservable.

Cash and Cash Equivalents

Cash and cash equivalents include cash held at financial institutions and all highly liquid financial instruments with original maturities of 90 days or less.

Equity Securities and Available for Sale Debt Securities

Our equity securities primarily consist of investments in publicly traded equity securities and are measured and recorded at fair value, with unrealized gains and losses recorded in earnings. For equity securities without a readily determinable fair value, recorded within Other assets on the consolidated balance sheets, we use the fair value measurement alternative and measure the securities at cost less impairment, if any.

Investments classified as available for sale debt securities are recorded at fair value. We elect to apply the fair value option for available for sale debt securities when the fair value option better aligns with the economics of the investment. Upon such election, the entire investment is measured at fair value on a recurring basis, with movements in fair value recognized in earnings.

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Investment in Non-Consolidated Affiliates

Investments in entities that provide us with the ability to exercise significant influence, but not a controlling financial interest, and where we are not the primary beneficiary are accounted for under the equity method or as equity securities under the fair value option. Investments accounted for under the equity method are initially recorded at fair value. If there is a difference between the fair value and the carrying amount of the equity method investment at inception, we quantify the basis difference and amortize it in a rational manner over the life of the investment. Subsequently, we recognize through earnings our proportionate share of the investee’s net income or loss, net of any adjustment to reflect the amortization of basis differences. We generally record our share of the results of our investees one quarter in arrears within Equity in earnings of equity method investees in the consolidated statements of operations. The investment is reflected as Equity method investments on the consolidated balance sheets.

We have variable interests in entities formed for the purposes of entering into co-development arrangements for potential biopharmaceutical products (the “Avillion entities”). The Avillion entities are variable interest entities for which we are not the primary beneficiary as we do not have the power to direct the activities that most significantly influence the economic performance of the entity. In determining whether we are the primary beneficiary of an entity, management applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant. Management continuously assesses whether we are the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in the consolidation or deconsolidation of one or more of its investees.

When we have committed to provide further support to the investee through capital call commitments and the investment has been reduced to zero, we provide for additional losses, resulting in a negative equity method investment, which is presented as a liability on the consolidated balance sheets.

Acquisitions

We first determine whether a set of assets acquired constitutes a business and should be accounted for as a business combination. If the assets acquired do not constitute a business, we account for the transaction as an asset acquisition. Business combinations are accounted for by means of the acquisition method of accounting. The acquisition method of accounting for business combinations requires us to use significant estimates and assumptions, including fair value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period, which is defined as the period, not to exceed one year, in which we may adjust the provisional amounts recognized for a business combination. Under the acquisition method of accounting, we recognize separately from goodwill the identifiable assets acquired and the liabilities assumed, generally at the acquisition date fair value. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill.

Goodwill

As a result of the Internalization (as defined below), we recorded goodwill which represents the excess of the total purchase price over the fair value of the net assets acquired. Goodwill has an indefinite life and therefore is not amortized under the provisions of ASC 350 – Intangibles – Goodwill and Other . We have one reporting unit and assess goodwill for impairment annually in the fourth quarter, or more frequently if there are indicators of impairment.

Research and Development Funding Expense

We enter into transactions where we agree to fund a portion of the R&D performed by our partners for products undergoing late-stage clinical trials in exchange for future royalties or milestones if the products are successfully developed and commercialized. In accordance with ASC 730 – Research and Development , we account for the funded amounts as R&D expense when we have the ability to obtain the results of the R&D, the transfer of financial risk is genuine and substantive and, at the time of entering into the transaction, it is not yet probable that the product will receive regulatory approval. If these conditions are not met, we may record the funded amounts as a financial royalty asset. We may fund R&D upfront or over time as the underlying products undergo clinical trials.

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Royalties earned on successfully commercialized products generated from R&D arrangements are recognized as Other royalty income and revenues in the same period in which the sale of the product occurs. Fixed or milestone payments receivable based on the achievement of contractual criteria for products arising out of our R&D arrangements are also recognized as Other royalty income and revenues in the period that the milestone threshold is met. Milestone thresholds are typically not triggered until after all funding obligations have been completed.

Share-based Compensation

We account for share-based compensation in accordance with ASC 718 – Share-based Compensation . We have share-based compensation arrangements in the form of (1) Employee EPAs (as defined in Note 5–Shareholders’ Equity), which are liability classified, (2) RP Holdings Class E Interests, which were issued as part of the Internalization consideration, and (3) RSUs, which are issued to directors and employees. RP Holdings Class E Interests and RSUs are both equity classified. Share-based compensation expense for equity-classified awards is measured at grant-date fair value and recognized on a straight-line basis over the requisite service period within General and administrative expenses . We have elected to account for forfeitures as they occur. The fair value of the Employee EPAs is remeasured at each reporting date using a Monte Carlo simulation methodology, with changes in the fair value recognized as part of the share-based compensation expense.

Income Taxes

We periodically assess if our activities, as conducted through our subsidiaries, and as currently contemplated, constitute being engaged in the conduct of a trade or business within the United States. Neither the U.S. Internal Revenue Code (“the Code”) nor the applicable Treasury regulations provide a general definition of what constitutes as being engaged in the conduct of a trade or business within the United States, and the limited case law on the subject does not provide definitive guidance. Based on our periodic assessment, we believe that we are not engaged in the conduct of a trade or business within the United States, and as such, we do not record a provision for U.S. income taxes with respect to effectively connected income for the years presented in the consolidated financial statements .

We have funding arrangements in place where our counterparties have drawn on capital or are allowed to draw on capital over a prescribed period of time. Income from these funding arrangements is subject to U.S. taxation and we record a provision for U.S. income taxes within General and administrative expenses in accordance with ASC 740 – Income Taxes, with respect to this income. We expect the associated income tax provision expense to become more significant in the future as we enter into more funding arrangements.

We operate so as to be treated solely as resident in the U.K. for tax purposes. As a U.K. tax resident company, we are subject to U.K. corporation tax on our worldwide taxable profits and gains. U.K. tax resident companies are subject to U.K. corporation tax on dividend receipts or other income distributions in respect of shares held by them, unless those dividends or other distributions fall within an exempt class. We believe that dividends received by us from RP Holdings, and dividends received by RP Holdings from RPI 2019 ICAV, should fall within such an exempt class and therefore should not be subject to U.K. corporation tax. As such, we do not record a provision for U.K. income taxes with respect to the dividends received from RP Holdings or with respect to the dividends received by RP Holdings from RPI 2019 ICAV .

We are also subject to the U.K.’s “controlled foreign companies” rules (the “U.K. CFC Rules”). The U.K. CFC Rules, broadly, apply to U.K. tax resident companies that have, alone or together with certain other persons, interests in a non-U.K. tax resident company (the “Controlled Foreign Company”) which is controlled by a U.K. person or persons. The charge under the U.K. CFC Rules applies by reference to certain types of chargeable profit arising to the Controlled Foreign Company, whether or not that profit is distributed, subject to specific exemptions. Certain non-U.K. entities in which we hold a greater than 25% interest, including RPI 2019 ICAV (which is an Irish tax resident) and Old RPI (which is an Irish tax resident and is held indirectly by us through our participation in RP Holdings), are considered Controlled Foreign Companies for U.K. tax purposes. We are therefore required to apply the U.K. CFC Rules in respect of our direct and indirect interests in these entities on an ongoing basis. We do not expect material tax charges to arise under the U.K. CFC Rules with respect to our direct and indirect interests in these entities and we therefore do not record a provision for U.K. income taxes related to this matter .

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ROYALTY PHARMA PLC
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Other Taxation Matters

We are subject to U.S. federal withholding tax on certain fixed or determinable annual or periodic gains, profits and income, such as royalties from sources within the United States, unless reduced or eliminated under an applicable tax treaty or provision of the Code. Generally, this tax is imposed by withholding 30% of the payments, or deemed payments, that are subject to this tax. We believe our subsidiaries are eligible for benefits under the U.S.-Ireland income tax treaty, and, under that treaty, are not subject to any U.S. withholding taxes on U.S.-source royalty, interest or other income payments.

Earnings per Share

Basic earnings per share (“EPS”) is calculated by dividing net income attributable to us by the weighted average number of Class A ordinary shares outstanding during the period. Diluted EPS is calculated by dividing net income attributable to us by the weighted average number of Class A ordinary shares outstanding during the period, including the number of Class A ordinary shares that would have been outstanding if the potentially dilutive securities had been issued.

Our Class B ordinary shares, Class R redeemable shares and deferred shares do not share in the earnings or losses attributable to us and are therefore not participating securities.

Our outstanding Class B ordinary shares are considered potentially dilutive shares of Class A ordinary shares because Class B ordinary shares, together with the related RP Holdings Class B Interests and vested RP Holdings Class E Interests, are exchangeable into Class A ordinary shares on a one -for-one basis. In addition, potentially dilutive securities include Class B ordinary shares contingently issuable for the EPAs and Class A ordinary shares issuable upon vesting of RSUs issued to directors and employees.

We include potentially dilutive shares in the denominator to compute diluted EPS if (i) the inclusion of the ordinary shares is dilutive for the respective reporting periods, and (ii) contingencies are satisfied as of the end of the reporting period for ordinary shares that are contingently issuable. We use the “if-converted” method to determine the potentially dilutive effect of our outstanding Class B ordinary shares, and the treasury stock method to determine the potentially dilutive effect of the unvested RSUs.

Shares Repurchases

Amounts paid to repurchase shares in excess of the par value are allocated between Additional paid-in capital and Retained earnings .

3. Internalization

On January 10, 2025, we entered into an agreement (as amended, the “Purchase Agreement”) with RPM, Royalty Pharma Manager, LLC, a Delaware limited liability company (“RP Manager”) and the sellers named therein (the “Sellers”). Pursuant to the Purchase Agreement, RPM contributed substantially all of its previously held assets and liabilities to RP Manager and we agreed to acquire all of the equity interests of RP Manager from the Sellers (the “Internalization”). The Sellers included our founder, chief executive officer and chairman, Pablo Legorreta, RPM I, LLC and RP MIP Holdings, LLC (“RP MIP Holdings”), as the former equity owners of RPM. The equity interest holders of RP MIP Holdings include our named executive officers and certain employees of the Legacy Manager, who became employees of Royalty Pharma, LLC, a subsidiary of RP Manager, in connection with the Internalization. We completed the acquisition of RP Manager on May 16, 2025 and accounted for the transaction as a business combination in accordance with ASC 805.

The announced transaction value for the Internalization of $ 1.1  billion included cash and 24.5  million newly issued RP Holdings Class E Interests, of which 1.7  million shares were recognized as part of the purchase price and 22.8  million shares were subject to vesting, with related share-based compensation expense to be recognized over the vesting period post-Internalization. The announced transaction value also included the assumption of a $ 380  million term loan. In accordance with ASC 805, the $ 380  million term loan was not recognized as part of the purchase price. Instead, it was recorded as a liability acquired in the preliminary allocation of purchase price below.

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In addition, we issued replacement equity awards in the form of RSUs to employees and recognized a liability related to the Employee EPAs. As described and each term as defined in Note 5-Shareholders’ Equity, the Employee EPAs represent the participation of certain employees in the economic returns of the EPAs for a specific Portfolio, which exclude Founder’s Equity, which represents Mr. Legorreta’s retained EPAs. Accordingly, at the closing of the Internalization, the portions of each of these components attributable to the pre-Internalization service period were included as part of the purchase price.

The following table presents the components of the total purchase price to acquire RP Manager (in thousands):

Cash $ 81,950  
Fair value of equity attributable to pre-Internalization service period:

RP Holdings Class E Interests 57,000  
Employee RSUs 3,778  
Employee EPAs
422,479  
Total purchase price
$ 565,207  

RP Holdings Class E Interests

We issued 24.5  million RP Holdings Class E Interests and an equal number of Royalty Pharma plc Class B ordinary shares to the Sellers, with an aggregate fair value of $ 812.4 million based on our stock price of $ 33.12 upon the closing of the Internalization. Approximately 1.7  million of the RP Holdings Class E Interests valued at approximately $ 57.0 million, were considered to be attributable to services rendered pre-Internalization and were included as part of the purchase price. The remaining 22.8  million RP Holdings Class E Interests with an aggregate fair value of approximately $ 755.4 million are subject to straight-line vesting generally over five to nine years and forfeiture if vesting conditions are not met. We recognize the related share-based compensation expense over the corresponding vesting periods.

Employee RSUs

We issued approximately 316 thousand Class A ordinary shares as replacement awards to certain employees (the “Employee RSUs”) valued at $ 10.5 million based on our stock price of $ 33.12 upon the closing of the Internalization. Approximately $ 3.8 million of the Employee RSUs were considered to be attributable to service rendered pre-Internalization and were included as part of the purchase price. The remaining Employee RSUs are subject to straight-line vesting generally over a period up to four years and forfeiture if vesting conditions are not met.

Employee EPAs

As described and each term as defined in Note 5-Shareholders’ Equity, after the Internalization, employees who participate in the EPAs became employees of Royalty Pharma, LLC and the service required for vesting became service required to be rendered to the Company. Accordingly, we began to account for the Employee EPAs under ASC 718 as compensation arrangements and began recognizing share-based compensation expense over the remaining post-Internalization service period. The Employee EPAs exclude Founder’s Equity, which represents Mr. Legorreta’s retained EPAs. The periodic cash distributions as tax advances related to the Employee EPAs are presented as an operating activity in the consolidated statement of cash flows.

As a result of the Internalization, we recognized a liability for the Employee EPAs. The fair value of approximately $ 422.5  million, measured as of the closing of the Internalization, was considered attributable to service rendered pre-Internalization and was included as part of the purchase price. The fair value of the remaining Employee EPAs is recorded as share-based compensation expense over the remaining vesting period. The fair value of the Employee EPAs is recognized as a liability within Accrued compensation liabilities on the consolidated balance sheet and is estimated using a Monte Carlo simulation methodology. See Note 4-Share-Based Compensation for additional discussion.

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Preliminary Allocation of the Purchase Price

We allocated the purchase price to the estimated fair values of assets and liabilities acquired. The purchase price allocation is based on management’s estimates and assumptions, as well as information compiled by management. Our estimates and assumptions are subject to change during the measurement period of up to twelve months from the date of the Internalization as further information becomes available. The excess of the total purchase price over the fair value of the net assets acquired was allocated to goodwill. The goodwill recorded as part of the Internalization includes the assembled workforce and synergies resulting from the Internalization.

The following is a summary of a preliminary allocation of the purchase price (in thousands):

Preliminary allocation of purchase price Location on Consolidated Balance Sheet
Cash and cash equivalents $ 7,535   Cash and cash equivalents
Other current assets 1,458   Other current assets
Property, plant and equipment 23,085   Other assets
Operating lease right of use asset 20,967   Other assets
Other assets 172   Other assets
Accounts payable and accrued liabilities ( 1,867 ) Accounts payable and accrued expenses
Interest payable ( 3,822 ) Interest payable
Term Loan ( 380,000 ) Long-term debt
Operating lease liabilities, current ( 2,749 ) Other current liabilities
Operating lease liabilities ( 18,218 ) Other liabilities
Other liabilities ( 5,988 ) Other liabilities
Goodwill 924,634   Goodwill
Total purchase price
$ 565,207  

Following the Internalization, we no longer pay Management Fees (as defined in Note 16-Related Party Transactions). The Internalization did not result in the recognition of gains or losses in the consolidated statements of operations.

In 2025, we recorded approximately $ 28.9  million of acquisition-related costs within General and administrative expenses in the consolidated statements of operations, all of which were paid and included within Payments for operating and professional costs on the consolidated statement of cash flows. These costs are primarily related to legal, advisory and professional services.

In 2025, approximately 62 % of the total General and administrative expenses were related to costs incurred by RP Manager and its subsidiaries. These costs primarily consisted of employee compensation expenses, including share-based compensation.

Pro Forma Information (Unaudited)

The unaudited pro forma results presented below are for informational purposes only and are not necessarily indicative of what our actual results of operations would have been had the Internalization occurred at the beginning of 2024 nor are they indicative of our results of operations for future periods. The following table summarizes the pro forma consolidated information assuming we had completed the Internalization on January 1, 2024 (in thousands):

Years Ended December 31,
2025 2024
Pro forma revenue $ 2,378,193   $ 2,263,576  
Pro forma net income (1)
1,395,756   1,136,623  

(1) Pro forma net income in 2024 reflects a $ 28.9  million adjustment for non-recurring acquisition-related expenses.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4. Share-Based Compensation

We record share-based compensation expense on a straight-line basis over the corresponding service-based vesting periods within General and administrative expenses in the consolidated statements of operations.

Prior to the Internalization, our share-based awards consisted only of RSUs issued to directors, for which we recognized immaterial share-based compensation expense. As a result of the Internalization, we began to recognize share-based compensation expense related to RP Holdings Class E Interests that were issued as part of the Internalization consideration, Employee EPAs and Employee RSUs. The share-based compensation expense is comprised of the following (in thousands):

Years Ended December 31,
2025 2024 2023
RP Holdings Class E Interests $ 108,945   $ —   $ —  
Employee EPAs 176,334   —   —  
Employee and Director RSUs 5,611   3,224   3,302  
Total Share-Based Compensation $ 290,890   $ 3,224   $ 3,302  

RP Holdings Class E Interests

In connection with the Internalization, approximately 22.8 million RP Holdings Class E Interests with an aggregate fair value of approximately $ 755.4 million will be expensed generally over vesting periods ranging from five to nine years .

In 2025, we recorded $ 108.9 million of share-based compensation expense related to the RP Holdings Class E Interests. As of December 31, 2025, we had $ 646.5 million of unrecognized compensation expense related to 19.5 million RP Holdings Class E Interests that is expected to vest over a weighted average period of 5.5 years.

Employee EPAs

In accordance with ASC 718, we accounted for the Employee EPAs as liability-classified share-based compensation arrangements. The Employee EPAs are subject to a service-based vesting period, generally four years , commencing at the start of each respective Portfolio (as defined in Note 5-Shareholders’ Equity).

We recognized a liability of approximately $ 422.5 million related to Employee EPAs as of the date of the Internalization. The fair value of the remaining Employee EPAs is recognized as share-based compensation expense over the remaining vesting period. We remeasure the fair value of the Employee EPAs at each reporting date with changes in the fair value recognized as part of share-based compensation expense. As of December 31, 2025, the fair value of Employee EPAs was $ 577.9 million as recorded within Accrued compensation liabilities on the consolidated balance sheet. We estimated the fair value of the Employee EPAs using a Monte Carlo simulation methodology under the option pricing framework. Using the Monte Carlo model, we first simulate cash flows for all underlying investments within the respective portfolio, incorporating a range of potential outcomes driven primarily by projected product sales and reflecting features such as milestone payments, royalty tiers, caps, and floors, as well as sales-level volatility. Based on these simulated portfolio outcomes, the Monte Carlo model estimates the probability of satisfying the applicable performance and return thresholds that determine Employee EPA payouts.

In 2025, we recorded $ 176.3 million of share-based compensation expense related to the Employee EPAs. As of December 31, 2025, we had $ 80.5 million of unrecognized expense related to the Employee EPAs that is expected to vest over a weighted average period of 2.0 years.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Employee and Directors RSUs

We issue RSUs to employees and independent directors under the 2025 Equity Incentive Plan and the 2020 Independent Director Equity Incentive Plan, respectively. The 2025 Equity Incentive Plan became effective on May 16, 2025 in connection with the Internalization and 2  million Class A ordinary shares were authorized for issuance. The 2020 Independent Director Equity Incentive Plan was effective on June 15, 2020, whereby 800  thousand Class A ordinary shares were authorized for issuance. As of December 31, 2025, approximately 1.6  million and 321 thousand shares remain available for future issuance under the 2025 Equity Incentive Plan and 2020 Independent Director Equity Incentive Plan, respectively.

In 2025, 2024 and 2023, we recorded $ 5.6 million, $ 3.2 million and $ 3.3 million of share-based compensation expense related to the employee and directors RSUs, respectively. As of December 31, 2025, we had $ 7.6 million of unrecognized expense related to the employee RSUs that are expected to vest over a weighted average period of 2.4 years and the total unrecognized expense related to the outstanding directors’ RSUs was not material.

5. Shareholders’ Equity

Capital Structure

Royalty Pharma plc has 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. The 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 December 31, 2025, Royalty Pharma plc had 428,669  thousand Class A ordinary shares and 148,438  thousand Class B ordinary shares outstanding.

An exchange agreement entered into by, among others, Royalty Pharma plc, RP Holdings, the Continuing Investors Partnerships, RPI International Partners 2019, LP, RPI US Feeder 2019, LP, RPI International Feeder 2019, LP, RPI EPA Vehicle, LLC and certain recipients nominated by the Sellers (as amended from time to time, the “Exchange Agreement”) facilitates the exchange of RP Holdings Class E Interests and the exchange of RP Holdings Class B Interests for Class A ordinary shares. Pursuant to the Exchange Agreement, RP Holdings Class B Interests are exchangeable on a one -for-one basis for Class A ordinary shares on a quarterly basis. Each such exchange also results in the re-designation of the same number of Class B ordinary shares as deferred shares. Such deferred shares are non-voting and do not confer a right to participate in our profits or any right to receive dividends. As of December 31, 2025, Royalty Pharma plc had 411,475  thousand deferred shares outstanding.

In addition, Royalty Pharma plc issued 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 sufficient sterling denominated share capital. 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 January 2025, our board of directors authorized a new share repurchase program, which replaced the share repurchase program announced on March 27, 2023, under which we may repurchase up to $ 3.0  billion of our Class A ordinary shares. The repurchases may be made in the open market or in privately negotiated transactions. The new share repurchase program has been approved by our board of directors through June 2027 and shareholders have approved the terms of our share repurchase contracts and counterparties thereto through May 2030. In 2025, we repurchased 37.4 million shares at a cost of approximately $ 1.2  billion. In 2024, we repurchased 8.4 million shares at a cost of approximately $ 229.9  million. As of December 31, 2025, approximately $ 1.8 billion remained available under the new share repurchase program.

In connection with our repurchase of Class A ordinary shares that began in the second quarter of 2023, RP Holdings also began to retire a corresponding number of RP Holdings’ Class A ordinary shares (“RP Holdings Class A Interests”) held by us which reduces our ownership in RP Holdings and which is reflected through Other exchanges in the tables below and in our consolidated statements of shareholders’ equity.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Non-Controlling Interests

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

RPSFT Legacy Investors Partnerships Continuing Investors Partnerships Founder’s Equity (1)
RP Holdings Class E Interests Holders
Total
December 31, 2022 $ ( 597 ) $ 1,527,887   $ 2,369,933   $ —   $ —   $ 3,897,223  
Contributions —   7,981   3,874   —   —   11,855  
Distributions ( 4,437 ) ( 363,635 ) ( 119,649 ) —   —   ( 487,721 )
Other exchanges —   —   ( 428,808 ) —   —   ( 428,808 )
Net income 5,045   167,483   392,726   —   —   565,254  
Purchase of non-controlling interest in RPCT ( 11 ) —   —   —   —   ( 11 )
December 31, 2023 $ —   $ 1,339,716   $ 2,218,076   $ —   $ —   $ 3,557,792  
Contributions —   5,161   3,877   —   —   9,038  
Distributions —   ( 351,474 ) ( 125,158 ) —   —   ( 476,632 )
Other exchanges —   —   ( 166,243 ) —   —   ( 166,243 )
Net income —   194,937   276,893   —   —   471,830  
December 31, 2024 $ —   $ 1,188,340   $ 2,207,445   $ —   $ —   $ 3,395,785  
Contributions —   7,643   2,340   —   —   9,983  
Distributions —   ( 345,188 ) ( 119,683 ) ( 60,243 ) ( 16,148 ) ( 541,262 )
Other exchanges —   —   ( 521,579 ) —   175,922   ( 345,657 )
Share-based compensation —   —   —   —   108,945   108,945  
Internalization —   —   —   —   57,000   57,000  
Net income —   232,524   231,260   60,243   29,218   553,245  
December 31, 2025 $ —   $ 1,083,319   $ 1,799,783   $ —   $ 354,937   $ 3,238,039  

(1) Amounts represent the entirety of the EPAs prior to the Internalization and only the Founder’s Equity portion after the Internalization.

Continuing Investors Partnerships

The Continuing Investors Partnerships hold the number of 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.

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 estimated purchase price, subject to post-closing adjustments, was approximately $ 11.4  million and was unpaid as of December 31, 2023. In 2024, we paid the finalized purchase price of approximately $ 12.5  million. Following this December 2023 transaction, RPSFT no longer holds a non-controlling interest in RPCT.

Founder’s Equity

In 2020, RP Holdings issued the RP Holdings Class C Special Interest which entitles the holder, through RPI EPA Vehicle, LLC and other intermediary entities that are ultimately controlled by our founder and Chief Executive Officer, Pablo Legorreta, to receive distributions of Equity Performance Awards (the “Founder’s Equity”).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Equity Performance Awards (“EPAs”) represent 20 % of the Net Economic Profit (as defined below) generated from investments made during each two-year investment period (each, a “Portfolio”). Net Economic Profit is defined as the aggregate cash receipts for all new investments in a Portfolio, less Total Expenses, which is defined as interest expense, operating expense, and recovery of acquisition cost related to that Portfolio. Distributions of EPAs occur only upon the satisfaction of specified performance and return thresholds. EPAs are generally settled in RP Holdings Class B Interests, which are immediately exchanged upon issuance for Class A ordinary shares. A portion of the EPAs may be paid in cash as a tax advance to cover income tax obligations incurred by the beneficial owners of the RP Holdings Class C Special Interest.

Mr. Legorreta granted ownership units in the entities that hold the RP Holdings Class C Special Interest to certain employees of RPM. These grants allow such employees to participate on a pro rata basis in the economic returns of the EPAs for a specific Portfolio (the “Employee EPAs”). In exchange for participation in the EPAs, these employees agreed to render services to RPM for generally four years , commencing at the beginning of each Portfolio.

Prior to the Internalization, the service requirement for employee participation in the EPAs was previously tied to services rendered to RPM, which was not a consolidated entity. Accordingly, Founder’s Equity, including the employee participation in the EPAs, was accounted for as non-controlling interest. Post-Internalization, Founder’s Equity only includes Mr. Legorreta’s retained EPAs which continues to be accounted for as non-controlling interest.

Prior to 2025, no payments for EPAs were made as certain performance and return thresholds had not been met. In the first quarter of 2025, we began making payments for EPAs as these thresholds were met during the period. In 2025, total EPAs earned were $ 81.2  million, attributable to Founder’s Equity and Employee EPAs, with settlement consisting of a combination of approximately equal amounts in Class A ordinary shares and cash payments provided as tax advances. The table presented below summarizes the breakdown of total EPAs earned in 2025 (in thousands):

Year Ended December 31, 2025 Location Recorded in Consolidated Financial Statements

Founder’s Equity (1)
$ 60,243   Net income attributable to non-controlling interests

Employee EPAs
20,943   Accrued compensation liabilities (reduction of Employee EPAs liability)

Total $ 81,186  

Form of Settlement

Cash
$ 42,585   Distributions to continuing non-controlling interests (Founder’s Equity)
Payments for Employee EPAs (Employee EPAs)

Shares (2)
$ 38,601  
Total $ 81,186  

(1) Founder’s Equity includes $ 38.4 million for Mr. Legorreta’s retained EPAs encompassing all of the 2025 period and $ 21.8 million attributable to employees’ participation in the EPAs, which were considered part of Founder’s Equity prior to the closing of the Internalization.
(2) Amount represents shares earned in 2025, substantially all of which were settled during the year except for $ 14.3 million payable as of December 31, 2025, which is expected to be settled in shares during the first quarter of 2026.

Holders of RP Holdings Class E Interests

We issued 24.5  million RP Holdings Class E Interests as part of the transaction consideration for the Internalization, all of which were outstanding as of closing of the Internalization and approximately 24.45  million remained outstanding as of December 31, 2025. The Holders of RP Holdings Class E Interests represent a non-controlling interest. The change in RP Holdings ownership following the issuance of RP Holdings Class E Interests is reflected through Other exchanges in the above table and in our consolidated statements of shareholders’ equity. The Holders of RP Holdings Class E Interests are entitled to any dividends and distributions from RP Holdings pro rata (on a per share basis) and on a pari passu basis with each RP Holdings Class A Interest and RP Holdings Class B Interest. They are also entitled to a pro rata portion (on a per share basis) and on a pari passu basis with each RP Holdings Class A Interest and RP Holdings Class B Interest of RP Holdings’ net assets. Accordingly, we record Net income attributable to non-controlling interests for Holders of RP Holdings Class E Interests based on the weighted average number of RP Holdings Class E Interests outstanding during the period. Upon vesting, the RP Holdings Class E Interests are exchangeable on a one -for-one basis for Royalty Pharma plc Class A ordinary shares. As of December 31, 2025, approximately 2.8 million of RP Holdings Class E Interests have legally vested.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Non-Controlling Interests Ownership

The changes in RP Holdings ownership among the Continuing Investors Partnerships, the Holders of RP Holdings Class E Interests and us are reflected through Other exchanges in the above tables and in our consolidated statements of shareholders’ equity. These changes typically result from activities during the period, including (1) the exchanges of RP Holding Class B Interests for Class A ordinary shares, (2) retirement of RP Holdings Class A Interests in connection with our repurchase of Class A ordinary shares and (3) the exchanges of RP Holding Class E Interests for Class A ordinary shares.

As of December 31, 2025, the ownership of RP Holdings was as follows: 4 % by the Holders of RP Holdings Class E Interests, 22 % by the Continuing Investors Partnerships and 74 % by Royalty Pharma plc. As of December 31, 2024, the ownership of RP Holdings was as follows: 24 % by the Continuing Investors Partnerships and 76 % by Royalty Pharma plc. As of December 31, 2023 the ownership of RP Holdings was as follows: 25 % by the Continuing Investors Partnerships and 75 % by Royalty Pharma plc.

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 and RP Holdings Class E Interests are entitled to dividends and distributions from RP Holdings. During 2025, we declared and paid four quarterly cash dividends of $ 0.22 per Class A ordinary share in an aggregate amount of $ 378.3 million to holders of our Class A ordinary shares .

6. Available for Sale Debt Securities

Funding Arrangements with Cytokinetics

In May 2024, we expanded our funding collaboration with Cytokinetics, Incorporated (“Cytokinetics”). As part of the expanded funding collaboration, we provided funding of $ 100  million for Cytokinetics’ Phase 3 clinical trial of omecamtiv mecarbil (“Cytokinetics Development Funding”) and amended the funding agreement that we entered into with Cytokinetics in 2022 to provide two additional funding tranches (as amended, “Cytokinetics Commercial Launch Funding”). Following the amendment in May 2024, the Cytokinetics Commercial Launch Funding is comprised of seven tranches with total funding of up to $ 525  million.

Our return on the Cytokinetics Development Funding depends on the outcome of omecamtiv mecarbil’s Phase 3 clinical trial and approval by the U.S. Food and Drug Administration (the “FDA”). If omecamtiv mecarbil’s Phase 3 clinical trial is successful and approval by the FDA is received within a specific timeframe, we will receive a return of $ 100  million and the greater of an incremental 2.0 % royalty on annual net sales of omecamtiv mecarbil or quarterly fixed payments for 18 quarters and an incremental 2.0 % royalty thereafter. If FDA approval is not received within a specific timeframe, we will receive a return of 2.4 times the Cytokinetics Development Funding over 18 quarters. If the Phase 3 clinical trial is not successful within a specific timeframe, we will receive a return of 2.3 times the Cytokinetics Development Funding over 22 quarters.

Out of the seven tranches of the Cytokinetics Commercial Launch Funding, we have funded a total of $ 275  million under tranches one, four, five and six as of December 31, 2025, including the required minimum draw in April 2025. Tranches two and three are no longer available because the related regulatory milestones were not met. In the fourth quarter of 2025, the contingency for tranche seven was met and up to $ 175  million became available for Cytokinetics to draw (“Cytokinetics Funding Commitments”) through the fourth quarter of 2026. For tranches one, four, five, six and seven, we expect 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 each tranche was funded. In the fourth quarter of 2023, we began receiving quarterly repayments on tranche one.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We elected the fair value option to account for the Cytokinetics Development Funding and the Cytokinetics Commercial Launch Funding (collectively the “Cytokinetics Funding Arrangements”) as it most accurately reflects the nature of the funding arrangements. The funded Cytokinetics Funding Arrangements are recorded within Available for sale debt securities on the consolidated balance sheets. The Cytokinetics Funding Commitments are recognized at fair value within Other liabilities on the consolidated balance sheets. The changes in the fair value of the funded Cytokinetics Funding Arrangements and Cytokinetics Funding Commitments are recorded within Gains on available for sale debt securities in the consolidated statements of operations.

Further, as part of the expanded funding collaboration in May 2024, we purchased Cytokinetics common stock and provided funding for clinical trials of CK-586 in exchange for a royalty. Lastly, the funding collaboration also included the restructuring of our royalty on Myqorzo, formerly known as aficamten.

MorphoSys Development Funding Bonds

In September 2022, we provided MorphoSys funding of $ 300  million (“MorphoSys Development Funding Bonds”) for which we began receiving quarterly repayments in the fourth quarter of 2024. MorphoSys was acquired by Novartis in 2024. In January 2025, the MorphoSys Development Funding Bonds were sold for approximately $ 511  million.

We elected the fair value option to account for the MorphoSys Development Funding Bonds as it most accurately reflects the nature of the instrument. The MorphoSys Development Funding Bonds were recorded within Available for sale debt securities on the consolidated balance sheet. The changes in the fair value of the MorphoSys Development Funding Bonds were recorded within Gains on available for sale debt securities in the consolidated statement of operations.

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

Cost Unrealized Gains Fair Value Current Assets Non-Current Assets Non-Current Liabilities Total
As of December 31, 2025
Debt securities (1)
$ 382,378   $ 55,422   $ 437,800   $ 18,800   $ 419,000   $ —   $ 437,800  

Funding commitments (2)
( 14,500 ) 5,400   ( 9,100 ) —   —   ( 9,100 ) ( 9,100 )
Total
$ 367,878   $ 60,822   $ 428,700   $ 18,800   $ 419,000   $ ( 9,100 ) $ 428,700  

As of December 31, 2024
Debt securities (1)
$ 516,329   $ 235,371   $ 751,700   $ 58,200   $ 693,500   $ —   $ 751,700  
Funding commitments (2)
( 12,300 ) 220   ( 12,080 ) —   —   ( 12,080 ) ( 12,080 )
Total $ 504,029   $ 235,591   $ 739,620   $ 58,200   $ 693,500   $ ( 12,080 ) $ 739,620  

(1) The cost related to tranches one and six of the Cytokinetics Commercial Launch Funding and the cost for the Cytokinetics Development Funding reflect the fair values on their respective funding dates. As of December 31, 2025 and December 31, 2024, the costs related to tranche four and five of the Cytokinetics Commercial Launch Funding and the cost of the MorphoSys Development Funding Bonds, respectively, represent the amounts funded. The costs are amortized as quarterly repayments are received. The MorphoSys Development Funding Bonds were sold in January 2025.
(2) The costs associated with the Cytokinetics Funding Commitments represent the fair values on their respective transaction dates.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7. 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 December 31, 2025 As of December 31, 2024
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:

Money market funds (1)
$ 383,568   $ —   $ —   $ 383,568   $ 568,317   $ —   $ —   $ 568,317  

Available for sale debt securities (2)
—   —   18,800   18,800   —   —   58,200   58,200  

Total current assets $ 383,568   $ —   $ 18,800   $ 402,368   $ 568,317   $ —   $ 58,200   $ 626,517  

Equity securities (3)
171,312   —   —   171,312   184,719   —   2,241   186,960  

Available for sale debt securities (2)
—   —   419,000   419,000   —   —   693,500   693,500  

Cytokinetics R&D Funding Derivative (4)
—   —   —   —   —   —   12,000   12,000  
Royalty at fair value (3)
—   —   —   —   —   —   5,323   5,323  
Total non-current assets $ 171,312   $ —   $ 419,000   $ 590,312   $ 184,719   $ —   $ 713,064   $ 897,783  

Liabilities:

Cytokinetics Funding Commitments
—   —   ( 9,100 ) ( 9,100 ) —   —   ( 12,080 ) ( 12,080 )
Total non-current liabilities $ —   $ —   $ ( 9,100 ) $ ( 9,100 ) $ —   $ —   $ ( 12,080 ) $ ( 12,080 )

(1) Recorded within Cash and cash equivalents on the consolidated balance sheets.
(2) Related to the funded Cytokinetics Funding Arrangements as of respective balance sheet dates. As of December 31, 2024, amount also included the MorphoSys Development Funding Bonds, which were sold in January 2025.
(3) The amounts reflected within Level 3 as of December 31, 2024 relate to equity securities and a revenue participation right, recorded within Other assets on the consolidated balance sheet, that we acquired from ApiJect Holdings, Inc. (“ApiJect”), a private company. 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 estimated the fair value s related to both instruments using a discounted cash flow with Level 3 inputs, including forecasted cash flows and the weighted average cost of capital. In 2025, we wrote off the related balances. No amounts were due from or to ApiJect as of December 31, 2025 and 2024.
(4) Recorded within Other assets on the consolidated balance sheet as of December 31, 2024. Upon adoption of ASU 2025-07 in 2025, the Cytokinetics R&D Funding Derivative qualified for the derivative scope exception and the related derivative asset was derecognized as of January 1, 2025. See Note 2-Summary of Significant Accounting Policies for additional discussion.

For 2025, 2024 and 2023, we recognized losses of $ 39.6  million and $ 8.6 million and gains of $ 55.6 million, respectively, on equity securities still held as of December 31, 2025.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Year Ended December 31, 2025
Equity Securities Debt Securities Funding Commitments Derivative Instrument Royalty at Fair Value
Balance at the beginning of the period $ 2,241   $ 751,700   $ ( 12,080 ) $ 12,000   $ 5,323  
Purchases —  175,000   —  —  — 

Changes in fair value (1)
( 2,241 ) 42,679   3,180   —  ( 5,323 )
Sales (2)
—  ( 510,553 ) —  —  — 
Settlement of options and forward (3)
—  200   ( 200 ) —  — 

Redemptions (4)
—  ( 21,226 ) —  —  — 
ASU 2025-07 adoption impact (5)
—  —  —  ( 12,000 ) — 
Balance at the end of the period $ —   $ 437,800   $ ( 9,100 ) $ —   $ —  

(1) Changes in fair value of the financial instruments are recorded within their respective financial statement line items in the Other (income)/expense section of the consolidated statements of operations.
(2) The MorphoSys Development Funding Bonds were sold in January 2025.
(3) Amount reflects the fair value attributable to the draws under tranche four and five of the Cytokinetics Commercial Launch Funding that were settled upon funding.
(4) Amount relates to the quarterly repayments on the MorphoSys Development Funding Bonds prior to the sale and on the Cytokinetics Commercial Launch Funding.
(5) Upon adoption of ASU 2025-07 in 2025, the Cytokinetics R&D Funding Derivative qualified for the derivative scope exception and the related derivative asset was derecognized as of January 1, 2025. See Note 2-Summary of Significant Accounting Policies for additional discussion.

Year Ended December 31, 2024
Equity Securities Debt Securities Funding Commitments Derivative Instrument Royalty at Fair Value
Balance at the beginning of the period $ 297   $ 455,400   $ ( 900 ) $ —   $ 1,778  
Purchases 46,500   150,000   —  18,000   — 
Gains/(losses) on initial recognition (1)
—  5,000   ( 5,000 ) —  — 
Changes in fair value (2)
1,562   161,086   ( 6,180 ) ( 6,000 ) 3,545  
Transfer out of Level 3 (3)
( 46,118 ) —  —  —  — 
Redemptions (4)
—  ( 19,786 ) —  —  — 
Balance at the end of the period $ 2,241   $ 751,700   $ ( 12,080 ) $ 12,000   $ 5,323  

(1) Represents purchase price allocation to arrive at the appropriate fair value on initial recognition.
(2) Changes in fair value of the financial instruments are recorded within their respective financial statement line items in the Other (income)/expense section of the consolidated statement of operations.
(3) Related to the expiration of the transfer restriction on Cytokinetics common stock.
(4) Amount relates to quarterly repayments on tranche one of the Cytokinetics Commercial Launch Funding and the MorphoSys Development Funding Bonds.

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 December 31, 2025 and 2024 in the fair value hierarchy. As of December 31, 2025 and 2024, we did not have any financial instruments recorded at fair value using Level 2 inputs.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Cytokinetics Research & Development (“R&D”) Funding Derivative

In May 2024, we funded $ 50  million upfront in exchange for a royalty on CK-586. We have an option to fund up to an additional $ 150  million for which we would be eligible to receive milestone payments of up to $ 150  million upon regulatory approvals and an incremental royalty on CK-586. Upon a change of control event, we have the option to cause Cytokinetics to pay us 1.5 times the initial and additional funding amounts in a lump sum to terminate our rights to receive royalties and milestone payments. This funding arrangement was accounted for as a derivative instrument and recorded at fair value (“Cytokinetics R&D Funding Derivative”) as of December 31, 2024. We adopted ASU 2025-07 in 2025, effective January 1, 2025 and concluded that the Cytokinetics R&D Funding Derivative qualifies for the derivative scope exception. Accordingly, we recorded a $ 12.0  million cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2025 to derecognize the derivative asset and reflect the CK-586 funding arrangement as R&D expense. See Note 2-Summary of Significant Accounting Policies for additional discussion.

We estimated the fair value of the Cytokinetics R&D Funding Derivative as of December 31, 2024 by utilizing probability-adjusted discounted cash flow calculations using Level 3 inputs, including the probabilities of us exercising the additional funding option, regulatory approvals and the occurrence of a change of control event during the duration of the arrangement. We also assumed a risk-adjusted discount rate of 11.1 % as of December 31, 2024. Our estimate of expectation of timing and probabilities of us exercising the additional funding option, regulatory approvals and a change of control event, the risk-adjusted discount rate and the interest rate volatility 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.

Cytokinetics Funding Arrangements and Cytokinetics Funding Commitments

We estimated the fair values of the funded Cytokinetics Funding Arrangements as of December 31, 2025 and 2024 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 Funding Arrangements require significant judgment. 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.

We estimated the fair value of the Cytokinetics Funding Commitments as of December 31, 2025 and 2024 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 December 31, 2025 and 2024 this methodology incorporates Level 3 inputs, including the probability of a change of control event occurring during the investment term, an assumed interest rate volatility of 42.5 % and 40.0 %, respectively, and an assumed risk-adjusted discount rate of 10.9 % and 11.1 % , 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 MorphoSys Development Funding Bonds as of December 31, 2024 based on a discounted cash flow calculation using estimated risk-adjusted discount rates, which are Level 3 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. The MorphoSys Development Funding Bonds were sold in January 2025.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Disclosure of Financial Assets Not Measured at Fair Value

Financial royalty assets are not measured at fair value. Instead, they are measured and carried at amortized cost using the effective interest method on the consolidated balance sheets. Financial royalty assets do not include our entire portfolio of investments and specifically exclude the following:

1. development-stage product candidates where the funding was (i) expensed as upfront R&D upon acquisition (e.g., Trodelvy and Nurtec ODT) or (ii) expensed as ongoing R&D (e.g., our funding arrangement for litifilimab with Biogen); and
2. contractual funding arrangements (e.g., the MorphoSys Development Funding Bonds and the Cytokinetics Funding Arrangements), which are accounted for as available for sale debt securities.

We used a Monte Carlo simulation under the option pricing framework to calculate the fair value of our portfolio of financial royalty assets for disclosure given the complexity of our royalty investments, which may include features such as milestone payments, royalty tiers, caps, and floors that could alter the cash flows based on future commercial, clinical or regulatory outcomes. The Monte Carlo model allows us to simulate a range of different outcomes based on various inputs, primarily the underlying projected product sales of each royalty bearing product, to project the cash flows, including royalty receipts and milestone payments, based on each of the simulated sales scenarios. The Monte Carlo methodology also takes volatility at the sales level into consideration. The fair value of financial royalty assets disclosed herein is classified as Level 3 within the fair value hierarchy since it is determined based on inputs that are both significant and unobservable.

As of December 31, 2025, the estimated fair values of the current and non-current portions of financial royalty assets were $ 0.9 billion and $ 23.4 billion, respectively. As of December 31, 2025, approximately 7 % of the current portion and 7 % of the non-current portion of the financial royalty assets was attributable to the legacy non-controlling interests.

As of December 31, 2024, the estimated fair values of the current and non-current portions of financial royalty assets were $ 0.8 billion and $ 21.4 billion, respectively. As of December 31, 2024, approximately 9 % of the current portion and 8 % of the non-current portion of the financial royalty assets was attributable to the legacy non-controlling interests.

8. 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.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2025
Estimated Royalty Duration (1)
Gross Carrying Value Cumulative Allowance for Changes in Expected Cash Flows (Note 9)
Net Carrying Value (3)

Cystic fibrosis franchise 2039-2041 (2)
$ 4,901,121   $ —   $ 4,901,121  
Evrysdi 2035-2036 2,331,262   ( 494,123 ) 1,837,139  
Voranigo 2038
982,802   —   982,802  
Trelegy 2029-2030
993,629   ( 17,356 ) 976,273  
Imdelltra 2038-2041
924,239   —   924,239  
Tremfya 2031-2032
909,607   —   909,607  
Other 2025-2042
9,417,689   ( 2,674,043 ) 6,743,646  
Total $ 20,460,349   $ ( 3,185,522 ) $ 17,274,827  
Less: Cumulative allowance for credit losses (Note 9)
( 211,959 )
Total current and non-current financial royalty assets, net $ 17,062,868  

(1) Durations shown represent our estimates as of the current reporting date of when a royalty will substantially end, which may vary by geography and may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors. There can be no assurances that our royalties will expire when expected.
(2) Royalty is perpetual. We estimate royalty duration of 2039-2041 due to expected Alyftrek patent expiration and potential generic entry thereafter leading to sales decline.
(3) The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 9-Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.

As of December 31, 2025, the balance of $ 17.1 billion above for total current and non-current financial royalty assets, net included $ 1.4 billion in unapproved financial royalty assets held at cost related to frexalimab for $ 522.6  million and other assets, including primarily olpasiran, pelacarsen, neladalkib and olanzapine (TEV-’749).

As of December 31, 2024
Estimated Royalty Duration (1)
Gross Carrying Value Cumulative Allowance for Changes in Expected Cash Flows (Note 9)
Net Carrying Value (4)

Cystic fibrosis franchise 2039-2041 (2)
$ 5,126,521   $ ( 259,353 ) $ 4,867,168  
Evrysdi 2035-2036 2,085,851   ( 378,565 ) 1,707,286  
Trelegy 2029-2030 1,121,980   ( 66,647 ) 1,055,333  
Tysabri (3)
1,319,298   ( 276,134 ) 1,043,164  
Voranigo 2038
946,588   —   946,588  
Tremfya 2031-2032
935,069   ( 77,895 ) 857,174  
Other 2025-2042
8,164,902   ( 2,492,565 ) 5,672,337  
Total $ 19,700,209   $ ( 3,551,159 ) $ 16,149,050  
Less: Cumulative allowance for credit losses (Note 9)
( 238,122 )
Total current and non-current financial royalty assets, net $ 15,910,928  

(1) Durations shown represent our estimates as of December 31, 2024 of when a royalty will substantially end, which may vary by geography and may depend on clinical trial results, regulatory approvals, contractual terms, commercial developments, estimates of regulatory exclusivity and patent expiration dates (which may include estimated patent term extensions) or other factors. There can be no assurances that our royalties will expire when expected.
(2) Royalty is perpetual. We estimate royalty duration of 2039-2041 due to expected Alyftrek patent expiration and potential generic entry thereafter leading to sales decline.
(3) Royalty is perpetual. We have applied an end date of 2035 for purposes of accreting income over the royalty term, which is periodically reviewed based on our estimates of impact from biosimilars.
(4) The net carrying value by asset is presented before the allowance for credit losses. Refer to Note 9-Cumulative Allowance and the Provision for Changes in Expected Cash Flows from Financial Royalty Assets for additional information.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

• the movement in the cumulative allowance related to changes in forecasted royalty payments to be received based on royalty bearing products’ projected sales which are primarily derived from 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 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 Year
Balance at December 31, 2022 (1)
$ ( 2,591,882 )
Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets ( 1,006,933 )
Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets 468,562  
Write-off of cumulative allowance 87,393  

Provision for credit losses, net (2)
( 22,285 )
Balance at December 31, 2023 $ ( 3,065,145 )
Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets ( 1,438,001 )
Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets 805,955  
Write-off of cumulative allowance 8,325  

Provision for credit losses, net (2)
( 100,415 )
Balance at December 31, 2024
$ ( 3,789,281 )
Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets ( 687,269 )
Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets 956,944  
Write-off of cumulative allowance 95,962  

Provision for credit losses, net (2)
26,163  
Balance at December 31, 2025 $ ( 3,397,481 )

(1) Includes $ 115.4 million related to cumulative allowance for credit losses.
(2) In 2023, the provision expense for credit losses was primarily related to the additions of Adstiladrin and Skytrofa to our portfolio. In 2024, the provision expense for credit losses was primarily related to the addition of Niktimvo to our portfolio. In 2025, the provision income for credit losses was primarily related to Niktimvo as a result of changes in sell-side equity research analysts’ consensus sales forecasts, partially offset by the addition of Imdelltra to our portfolio.

10. 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.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 we have the ability to exercise significant influence over the Legacy Investors Partnerships. 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.

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 earnings of equity method investees. We recorded income allocations of $ 17.0  million, $ 10.4  million and $ 4.3  million in 2025, 2024 and 2023, respectively. We collected cash receipts from the Legacy SLP Interest of $ 74.8  million, $ 22.7  million and $ 14.3  million during 2025, 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 earnings of equity method investees. We recorded income allocations of $ 12.1  million, $ 19.2  million and $ 24.6  million in 2025, 2024 and 2023, respectively.

On December 19, 2017, the FDA approved a supplemental New Drug Application (“NDA”) 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 in each of 2025 and 2024, and $ 13.6  million in 2023.

In May 2018, we 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. In the fourth quarter of 2024, Airsupra met the primary endpoint in the Phase 3 clinical trial and triggered a milestone payment of $ 55  million from AstraZeneca to Avillion II, of which we received our pro rata share of approximately $ 27.4  million in the first quarter of 2025. In the third quarter of 2025, the FDA approval of a supplemental NDA for Airsupra triggered a milestone payable of $ 22  million from AstraZeneca to Avillion II, of which we received our pro rata share of approximately $ 10  million in January 2026. We received distributions of $ 3.0  million and $ 1.0  million from Avillion II related to the Airsupra royalty in 2025 and 2024, respectively.

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 December 31, 2025 and 2024, we had unfunded commitments related to the Avillion Entities of $ 10.3  million.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

11. Research and Development Funding Expense

R&D funding expense consists of certain development-stage funding payments that we have made to counterparties to acquire royalties or milestones on product candidates. The payments can be made upfront as milestones upon the achievement of certain predefined criteria, or over time as the related product candidates undergo clinical trials. In the first quarter of 2025, we entered into an R&D funding arrangement with Biogen to provide $ 250  million over six quarters, including $ 50  million upfront for the development of litifilimab. We did not enter into any new ongoing R&D funding arrangements in 2024 or 2023.

We recognized R&D funding expense of $ 452.0  million, $ 2.0  million and $ 52.0  million in 2025, 2024 and 2023, respectively. The R&D expense in 2025 is primarily related to an upfront payment of $ 250.0  million to acquire royalties on daraxonrasib and the R&D funding arrangement for litifilimab. The R&D expense in 2024 related to ongoing development-stage funding payments. The R&D expense in 2023 primarily related to a $ 50.0  million clinical milestone payment to Cytokinetics for Myqorzo, formerly known as aficamten.

As of December 31, 2025, we had an unfunded commitment of $ 50  million related to the R&D funding arrangement with Biogen for litifilimab.

12. Borrowings

Our borrowings consisted of the following (in thousands):

Type of Borrowing Date of Issuance Maturity As of December 31, 2025 As of December 31, 2024
Senior Unsecured Notes:
$ 1,000,000 , 1.20 % (issued at 98.875 % of par)
9/2020 9/2025 $ —  $ 1,000,000  
$ 1,000,000 , 1.75 % (issued at 98.284 % of par)
9/2020 9/2027 1,000,000   1,000,000  
$ 500,000 , 5.15 % (issued at 98.758 % of par)
6/2024 9/2029 500,000   500,000  
$ 1,000,000 , 2.20 % (issued at 97.760 % of par)
9/2020 9/2030 1,000,000   1,000,000  
$ 600,000 , 4.45 % (issued at 98.909 % of par)
9/2025 3/2031 600,000   —  
$ 600,000 , 2.15 % (issued at 98.263 % of par)
7/2021 9/2031 600,000   600,000  
$ 500,000 , 5.40 % (issued at 97.872 % of par)
6/2024 9/2034 500,000   500,000  
$ 900,000 , 5.20 % (issued at 97.989 % of par)
9/2025 9/2035 900,000   —  
$ 1,000,000 , 3.30 % (issued at 95.556 % of par)
9/2020 9/2040 1,000,000   1,000,000  
$ 1,000,000 , 3.55 % (issued at 95.306 % of par)
9/2020 9/2050 1,000,000   1,000,000  
$ 700,000 , 3.35 % (issued at 97.565 % of par)
7/2021 9/2051 700,000   700,000  

$ 500,000 , 5.90 % (issued at 97.617 % of par)
6/2024 9/2054 500,000   500,000
$ 500,000 , 5.95 % (issued at 95.824 % of par)
9/2025 9/2055 500,000   —
Term Loan See below 7/2026 380,000   —
Unamortized debt discount and issuance costs ( 229,083 ) ( 187,574 )

Total debt carrying value 8,950,917   7,612,426
Less: Current portion of long-term debt ( 380,000 ) ( 997,773 )
Total long-term debt $ 8,570,917   $ 6,614,653  

Senior Unsecured Notes

In September 2025, we issued $ 2.0  billion of senior unsecured notes (the “2025 Notes”). The 2025 Notes were issued at a total discount of $ 45.5  million and we capitalized approximately $ 16.2  million in debt issuance costs, primarily composed of underwriting fees. The 2025 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 5.16 % and 5.61 %, respectively.

In June 2024, we issued $ 1.5  billion of senior unsecured notes (the “2024 Notes”). The 2024 Notes were issued at a total discount of $ 28.8  million and we capitalized approximately $ 12.6  million in debt issuance costs primarily composed of underwriting fees. The 2024 Notes were issued with a weighted average coupon rate and a weighted average effective interest rate of 5.48 % and 5.92 %, respectively.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

We issued $ 1.3  billion and $ 6.0  billion of senior unsecured notes in 2021 (the “2021 Notes”) and 2020 (the “2020 Notes” and, collectively with the “2021 Notes”, “2024 Notes” and “2025 Notes”, the “Notes”), respectively. The 2021 Notes and 2020 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. Through December 31, 2025, we have repaid $ 2.0  billion of the 2020 Notes upon maturity.

Interest on each series of the Notes accrues at the respective rate per annum and is payable semi-annually in arrears in March and September of each year. The first interest payment for the 2025 Notes will be in March 2026.

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 and RP Manager, our non-wholly-owned subsidiaries. We are required to comply with certain covenants under our Notes and as of December 31, 2025 , we were in compliance with all applicable covenants.

As of December 31, 2025 and 2024, the fair value of our outstanding Notes using Level 2 inputs was approximately $ 7.9  billion and $ 6.5  billion, respectively.

Term Loan

In connection with the Internalization, RP Holdings and RP Manager were each joined as a borrower under RPM’s then existing $ 380  million term loan (the “Term Loan”) with Bank of America, N.A (as amended, the “Loan Agreement”). Pablo Legorreta, Legorreta Investments, LLC and Legorreta Investments II LLC are guarantors under the Term Loan. Upon the closing of the Internalization, RPM was released as a borrower under the Term Loan. In the third quarter of 2025, the Loan Agreement was amended to accelerate the maturity of the Term Loan to July 31, 2026 and decrease the applicable interest rate. Following the amendment, the Term Loan is subject to an interest rate, at our option, of either (i) the Daily SOFR plus 1.25 % or (ii) Term SOFR plus 1.25 %, each as defined in the Loan Agreement. Interest is payable in arrears quarterly. We made the first interest payment in the third quarter of 2025. As of December 31, 2025, the carrying value of the Term Loan approximates fair value, as the interest rate is variable and reflects current market rates. The Term Loan is subject to certain customary covenants, that among other things, require us to maintain (i) a Consolidated Leverage Ratio, (ii) a Consolidated Coverage Ratio, and (iii) a Consolidated Portfolio Cash Flow Ratio, each as described further below under the description of the Credit Agreement that governs the Revolving Credit Facility.

Senior Unsecured Revolving Credit Facility

Our subsidiary, RP Holdings, as borrower, initially entered into the Amended and Restated Revolving Credit Agreement (the “Credit Agreement”) on September 15, 2021, which provides for an unsecured revolving credit facility (the “Revolving Credit Facility”). Amendment No. 3 to the Credit Agreement, which was entered into on December 22, 2023, increased the borrowing capacity to $ 1.8  billion for general corporate purposes with $ 1.69  billion of the revolving commitments maturing on December 22, 2028 and the remaining $ 110.0  million of revolving commitments maturing on October 31, 2027. On January 24, 2024 and April 8, 2025, we entered into Amendments No. 4 and 5, respectively, to the Credit Agreement to make certain technical modifications. As of December 31, 2025 and 2024, there were no outstanding borrowings under the Revolving Credit Facility.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 and the amended loan agreement that governs the Term Loan contain certain customary covenants, that among other things, require us to maintain (i) a Consolidated Leverage Ratio at or below 4.00 to 1.00 (or at or below 4.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Adjusted EBITDA, each as defined and calculated as set forth in the Credit Agreement, (ii) a Consolidated Coverage Ratio at or above 2.50 to 1.00 of Adjusted EBITDA to consolidated interest expense, each as defined and calculated as set forth in the Credit Agreement and (iii) a Consolidated Portfolio Cash Flow Ratio at or below 5.00 to 1.00 (or at or below 5.50 to 1.00 following a qualifying material acquisition) of consolidated funded debt to Portfolio Cash Flow, each as defined and calculated as set forth in the Credit Agreement. 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. We were in compliance with the financial covenants as of December 31, 2025.

Uncommitted Credit Facility

In August 2025, we entered into an uncommitted line of credit agreement with Société Générale (the “Uncommitted Credit Facility”) which provides for an aggregate borrowing capacity of up to $ 350.0  million for general corporate purposes within a quarter. As of December 31, 2025, there were no outstanding borrowings under the Uncommitted Credit Facility.

Principal Payments on the Borrowings

The future principal payments for our borrowings as of December 31, 2025 are as follows (in thousands):

Year Principal Payments
2026 $ 380,000  
2027 1,000,000  
2028 —
2029 500,000
2030 1,000,000
Thereafter 6,300,000
Total (1)
$ 9,180,000  

(1) Excludes unamortized debt discount and issuance costs of $ 229.1 million as of December 31, 2025, which are amortized through interest expense over the remaining life of the underlying debt obligations.

13. Earnings per Share

In 2025, Class B ordinary shares contingently issuable for the EPAs were evaluated and included in the diluted earnings per share computation as certain conditions were met. In 2024 and 2023, Class B ordinary shares contingently issuable for the EPA were evaluated and were determined not to have any dilutive impact.

In the second quarter of 2025, we issued 24.5 million RP Holdings Class E Interests and an equal number of Royalty Pharma plc Class B ordinary shares which, upon vesting, are exchangeable on a one -for-one basis for Royalty Pharma plc Class A ordinary shares. We use the “if-converted” method to determine the potentially dilutive effect related to the RP Holdings Class E Interests.

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ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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

Years Ended December 31,
2025 2024 2023
Numerator
Consolidated net income $ 1,324,192   $ 1,330,813   $ 1,700,088  
Less: Net income attributable to the Continuing Investors Partnerships 231,260   276,893   392,726
Less: Net income attributable to the Legacy Investors Partnerships 232,524   194,937   172,528
Less: Net income attributable to the Founder’s Equity (1)
60,243   —   —  
Less: Net income attributable to the RP Holdings Class E Interests Holders 29,218   —   —  
Net income attributable to Royalty Pharma plc - basic 770,947   858,983   1,134,834
Add: Reallocation of net income attributable to the Continuing Investors Partnerships from the assumed exchanges of Class B ordinary shares 231,260   276,893   392,726
Add: Reallocation of net income attributable to the Holders of RP Holdings Class E Interests from the assumed exchanges of eligible Class B ordinary shares 3,315   —   —  
Net income attributable to Royalty Pharma plc - diluted $ 1,005,522   $ 1,135,876   $ 1,527,560  

Denominator
Weighted average Class A ordinary shares outstanding - basic 429,801   448,185   447,601
Add: Dilutive effects as shown separately below
Assumed exchanges of Class B ordinary shares by Continuing Investors Partnerships 132,616   145,911   155,292
Unvested RSUs 14   12   7
Shares contingently issuable for the Equity Performance Awards 270   —   —  
Assumed exchanges of eligible Class B ordinary shares by Holders of RP Holdings Class E Interests 1,754   —   —  
Weighted average Class A ordinary shares outstanding - diluted 564,455   594,108   602,900

Earnings per Class A ordinary share - basic $ 1.79   $ 1.92   $ 2.54  
Earnings per Class A ordinary share - diluted $ 1.78   $ 1.91   $ 2.53  

(1) Amounts represent the entirety of the EPAs prior to the Internalization and only the Founder’s Equity portion after the Internalization.

111

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14. Indirect Cash Flow

Adjustments to reconcile consolidated net income to net cash provided by operating activities are summarized below (in thousands):

Years Ended December 31,
2025 2024 2023
Cash flow from operating activities:
Consolidated net income $ 1,324,192   $ 1,330,813   $ 1,700,088  
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Income from financial royalty assets ( 2,261,152 ) ( 2,149,422 ) ( 2,197,754 )
Provision for changes in expected cash flows from financial royalty assets ( 295,838 ) 732,461   560,656  
Provision for credit losses on unfunded commitments 89,032   —   —  

Share-based compensation 289,894   2,344   2,357  

Amortization of debt discount and issuance costs 22,440   19,562   20,499  

Losses on derivative financial instruments —   6,000   2,290  
Losses/(gains) on equity securities 21,852   ( 39,549 ) ( 87,139 )
Equity in earnings of equity method investees ( 29,089 ) ( 29,611 ) ( 28,882 )

Distributions from equity method investees 13,396   13,396   18,823  
Amortization of prepaid expenses 6,197   —   —  

Gains on available for sale debt securities ( 45,859 ) ( 154,906 ) ( 230,840 )
Depreciation 3,852   —   —  

Other 13,307   1,105   20,912  
Changes in operating assets and liabilities:
Cash collected on financial royalty assets 3,354,750   2,983,410   3,201,410  

Other royalty income receivable ( 2,360 ) ( 4,551 ) ( 1,521 )
Other current assets ( 7,723 ) 13,844   3,147  
Other assets 276   —   —  
Accounts payable and accrued liabilities ( 13,928 ) ( 2,290 ) 6,236  
Interest payable 8,934   46,380   ( 2,480 )

Other liabilities ( 2,350 ) —   —  
Net cash provided by operating activities $ 2,489,823   $ 2,768,986   $ 2,987,802  

Non-cash investing and financing activities are summarized below (in thousands):

Years Ended December 31,
2025 2024 2023
Milestone payable - Trelegy (1)
$ 50,000   $ 50,000   $ —  
Milestone payable - Erleada (1)
—   18,600   —  
Purchase of non-controlling interest in RPCT (2)
—   —   11,375  

(1) Related to the achievement of sales-based milestones that were not paid as of December 31, 2025 and 2024.
(2) Related to the purchase of the remaining interest in RPCT held by RPSFT that was not paid as of December 31, 2023. Refer to Note 5-Shareholders’ Equity for additional discussion.

15. Commitments and Contingencies

Revolution Medicines Funding Commitments

In June 2025, we entered into a two part funding arrangement for up to $ 2  billion with Revolution Medicines, Inc. (“Revolution Medicines”). The funding arrangement is comprised of the purchase of a royalty on daraxonrasib and a senior secured term loan.

112

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The royalty purchase is comprised of five $ 250  million tranches, totaling up to $ 1.25  billion. Out of the five tranches, the first tranche was funded upon closing which was recorded as R&D funding expense. Revolution Medicines is required to draw the second tranche upon the occurrence of a certain clinical milestone and has the option to draw the remaining tranches upon the achievement of certain clinical, regulatory, or sales-based milestones. As of December 31, 2025, $ 1  billion of the royalty remained unfunded.

The term loan is comprised of three $ 250  million tranches, totaling up to $ 750  million. Out of the three tranches, Revolution Medicines is required to draw the first tranche upon the occurrence of a certain regulatory milestone and has the option to draw the remaining tranches upon the achievement of certain sales-based milestones. As of December 31, 2025, $ 750  million of the term loan remained unfunded.

We recorded an allowance for credit losses of $ 89.0 million within Other liabilities on the consolidated balance sheet and a corresponding provision for credit losses in 2025 within Provision for credit losses on unfunded commitments in the consolidated statements of operations, related to the unfunded portions of the funding arrangements with Revolution Medicines.

Cytokinetics Funding Commitments

As of December 31, 2025, $ 175  million remained available under the Cytokinetics Funding Commitments.

Leases

In connection with the Internalization, we entered into an operating lease agreement for our office space. The lease agreement has a non-cancelable term through October 31, 2031 and a five-year extension option. The extension option is not recognized as part of our right of use asset and lease liability. As of December 31, 2025, we have recognized $ 19.1 million of right of use asset within Other assets and $ 16.1 million of lease liability within Other liabilities on the consolidated balance sheet.

As of December 31, 2025, the future minimum lease payments under the non-cancelable operating lease are as follows (in thousands):

Year Payments
2026 $ 4,053  
2027 3,776  
2028 3,721  
2029 3,726  
2030 3,755  
Thereafter 3,129  
Total lease payments 22,160
Less: imputed interest ( 2,903 )
Present value of lease liabilities $ 19,257  

Other Commitments

We have commitments to advance funds to counterparties through our investment in the Avillion Entities and R&D arrangements. Please refer to Note 10-Non-Consolidated Affiliates and Note 11-Research and Development Funding Expense for details of these arrangements.

Indemnifications

In the ordinary course of our business, we may enter into contracts or agreements that contain customary indemnifications relating to such things as confidentiality agreements and representations as to corporate existence and authority to enter into contracts. The maximum exposure under such agreements is indeterminable until a claim, if any, is made. However, no such claims have been made against us to date and we believe that the likelihood of such proceedings taking place in the future is remote.
113

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Legal Proceedings

We are a party to legal actions with respect to a variety of matters in the ordinary course of business. Some of these proceedings may be based on complex claims involving substantial uncertainties and unascertainable damages. Unless otherwise noted, it is not possible to determine the probability of loss or estimate damages, and therefore we have not established accruals for any of these proceedings on our consolidated balance sheets as of December 31, 2025 and 2024. When we determine that a loss is both probable and reasonably estimable, we record a liability, and, if the liability is material, we disclose the amount of the liability reserved. We do not believe the outcome of any existing legal proceedings to which we are a party, either individually or in the aggregate, will adversely affect our business, financial condition or results of operations.

Beginning in the second quarter of 2025, we did not receive from Vertex the full amount of royalty receipts on Alyftrek net sales to which we believe that we are contractually entitled. Accordingly, we commenced the dispute resolution procedures contemplated by the agreements relating to our royalties on Vertex’s cystic fibrosis products. Any amounts receivable by us, if any, in connection with this dispute will be recognized only upon the resolution of the matter in our favor.

16. Related Party Transactions

Internalization

On May 16, 2025, we acquired from the Sellers all of the equity interests in RP Manager. The Sellers included Pablo Legorreta, RPM I, LLC and RP MIP Holdings. Pablo Legorreta was the managing member of the Legacy Manager, holds an interest in us and serves as our Chief Executive Officer and Chairman of our board of directors. The equity interest holders of RP MIP Holdings include our named executive officers. The Sellers received cash and equity consideration, with the equity consideration subject to vesting conditions. Refer to Note 3-Internalization for additional discussion.

Payments to Legacy Manager

Prior to the Internalization, we paid a quarterly operating and personnel payment to RPM or its affiliates pursuant to the Legacy Management Agreement equal to 6.5 % of the cash receipts from Royalty Investments (as defined in the Legacy Management Agreement) for such quarter and 0.25 % of the value of our security investments under GAAP as of the end of such quarter (“Management Fees”). We also paid certain costs and expenses of RPM. After the Internalization, we no longer pay Management Fees or RPM’s costs and expenses.

Total operating and personnel payments incurred, including the amounts attributable to Old RPI, which is an obligation of Legacy Investors Partnerships, are recognized within General and administrative expenses in the consolidated statements of operations. During 2025, 2024 and 2023, total operating and personnel payments incurred were $ 115.7  million, $ 188.6  million and $ 204.6  million, respectively.

Payments from Legacy Manager

After the Internalization, we entered into an agreement with RPM to provide administrative services in exchange for a fee. In 2025, we did not recognize material income related to this agreement.

114

ROYALTY PHARMA PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Distributions Payable to Non-Controlling Interests

The Distributions to continuing non-controlling interests includes the contractual cash flows required to be distributed to the Legacy Investors Partnerships based on their non-controlling interest in Old RPI and the unpaid portion of the distributions for Equity Performance Awards attributable to the Founder’s Equity as of quarter end. Refer to Note 5-Shareholders’ Equity for additional discussion of the Equity Performance Awards. The distributions payable to non-controlling interests consists of the following (in thousands):

As of December 31, 2025 As of December 31, 2024
Payable to Founder
$ 6,733   $ —  
Payable to Legacy Investors Partnerships 66,092   75,811  
Total distributions payable to non-controlling interests
$ 72,825   $ 75,811  

Acquisition from Bristol Myers Squibb

In November 2017, RPI Acquisitions (Ireland), Limited (“RPI Acquisitions”) , a consolidated subsidiary, entered into a purchase agreement with Bristol Myers Squibb (“BMS”) to acquire from BMS a percentage of its future royalties on worldwide sales of Onglyza, Farxiga and related diabetes products marketed by AstraZeneca (the “BMS Purchase Agreement”). On December 8, 2017, RPI Acquisitions entered into a purchase, sale and assignment agreement (“Assignment Agreement”) with a wholly-owned subsidiary of BioPharma Credit PLC (“BPCR”), an entity related to us. Under the terms of the Assignment Agreement, RPI Acquisitions assigned the benefit of 50 % of the payment stream acquired from BMS to BPCR in consideration for BPCR meeting 50 % of the funding obligations owed to BMS under the BMS Purchase Agreement.

As of December 31, 2025 and 2024, the financial royalty asset of $ 9.4  million and $ 44.7  million, respectively, on the consolidated balance sheets represented only our right to the future payment streams acquired from BMS.

Other Transactions

In October 2025, we acquired preferred stock in Kailera Therapeutics Inc. (“Kailera”) which was recorded within Other Assets on the consolidated balance sheet as of December 31, 2025. Christopher Hite, our Executive Vice President & Vice Chairman, has served as a director of Kailera since June 2025. This acquisition was conducted in the ordinary course of business and Mr. Hite’s role as a director of Kailera is unrelated to this acquisition. No amounts were due from or to Kailera as of December 31, 2025.

In January 2024, we acquired a royalty interest in ecopipam which was previously owned by Psyadon Pharmaceuticals, Inc. (“Psyadon”). Errol De Souza, Ph.D., an independent director on our board of directors, was a shareholder of Psyadon. In connection with this transaction, Dr. De Souza received an upfront payment of $ 2.5  million and could receive milestone payments of up to $ 2.22  million in the future.

In connection with the Exchange Offer, we acquired the Legacy SLP Interest from the Continuing Investors Partnerships in exchange for issuing shares in our subsidiary. As a result, we became a special limited partner in the Legacy Investors Partnerships. The Legacy Investors Partnerships own a non-controlling interest in Old RPI. Refer to Note 10-Non-Consolidated Affiliates for additional discussion of the Legacy SLP Interest and our investments in other non-consolidated entities.

RPIFT owns 27,210 limited partnership interests in the Continuing Investors Partnerships, whose only substantive operations are their investment in our subsidiaries. The total investment of $ 4.3 million was recorded as treasury interests, of which $1.7 million and $ 1.6 million were held by non-controlling interests as of December 31, 2025 and 2024, respectively.

Each Continuing Investor Partnership and the Holders of RP Holdings Class E Interests is responsible for a pro rata portion based on its ownership percentage of RP Holdings of any costs and expenses in connection with the contemplation of, formation of, listing and ongoing operation of us and any of our subsidiaries, including any third-party expenses of managing us and any of our subsidiaries, such as accounting, audit, legal, reporting, compliance, administration (including directors’ fees), financial advisory, consulting, investor relations and insurance expenses relating to our affairs and those of any subsidiary.

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17. Subsequent Events

In January 2026, we entered into a funding agreement with Teva Pharmaceuticals, a U.S. affiliate of Teva Pharmaceutical Industries Ltd. (“Teva”) to fund up to $ 500  million to support the development of TEV-‘408, including $ 75  million to co-fund a Phase 2b study for vitiligo targeted to start in 2026 and, based on future results from Phase 2b in vitiligo, an option to fund an additional $ 425  million to co-fund the Phase 3 development program.
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Item 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

Item 9A.     CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective at the reasonable assurance level, subject to the exclusions described below under “Management’s Report on Internal Control over Financial Reporting.”

Management ’ s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act of 1934, as amended ). Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in its 2013 Internal Control-Integrated Framework. Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2025 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP .

In accordance with guidance issued by the U.S. Securities and Exchange Commission, companies are allowed to exclude acquired businesses from the assessment of internal control over financial reporting during the first year after completion of a purchase business combination. Accordingly, we excluded the portion of total general and administrative expenses attributable to cash employee compensation for personnel of Royalty Pharma Manager, LLC, a Delaware limited liability company, which was acquired in the second quarter of 2025. Amounts excluded were 7% of total general and administrative expenses for the year ended December 31, 2025. Given the commonality of controls across the Company and the Royalty Pharma Manager, LLC, all other aspects of the acquired entity’s controls have been included in management’s assessment.

Our independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on our internal control over financial reporting as of December 31, 2025 . Their report is included in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

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Item 9B.     OTHER INFORMATION

Rule 10b5-1 Trading Arrangements

During the fourth quarter of 2025, no director or Section 16 officer adopted , modified or terminated any Rule 10b5-1 plans or non-Rule 10b5-1 trading arrangements.

Item 9C.     DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

Item 10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item will be presented in our Proxy Statement to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference.

Item 11.     EXECUTIVE COMPENSATION

The information required by this Item will be presented in our Proxy Statement, to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference.

Item 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item will be presented in our Proxy Statement, to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference.

Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORS INDEPENDENCE

The information required by this Item will be presented in our Proxy Statement, to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference.

Item 14.      PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item will be presented in our Proxy Statement, to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference.

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PART IV

Item 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

15(a)(1) Financial Statements. The following documents are filed as part of this Form 10-K:
• Reports of Independent Registered Public Accounting Firm
• Consolidated Balance Sheets as of December 31, 2025 and 2024
• Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023
• Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2025, 2024 and 2023
• Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023
• Notes to the Consolidated Financial Statements

15(a)(2) Financial Statement Schedules. Schedules are omitted because they are not required or because the information is provided elsewhere in the financial statements.

15(a)(3) Exhibits.

Incorporated by Reference

Exhibit Number Exhibit Description Form Exhibit Filing Date/
Period End Date Filed or Furnished Herewith
2.1 Membership Interests Purchase Agreement, dated January 10, 2025, among Royalty Pharma, LLC, RP Management, LLC, the Sellers named therein and Royalty Pharma Holdings Ltd.
8-K
2.1 1/10/2025
2.2 Amendment No. 1 to the Membership Interests Purchase Agreement, dated April 11, 2025, among Royalty Pharma Holdings Ltd, Royalty Pharma plc and Pablo Legorreta.
8-K 1.1 4/11/2025
3.1 Articles of Association of Royalty Pharma plc
8-K 3.1 5/19/2025
3.2 Articles of Association of Royalty Pharma Holdings Ltd
8-K 3.2 5/19/2025
4.1 Form of Class A Ordinary Share Certificate
S-1/A 4.1 6/11/2020
4.2 Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934
x
10.3 Registration Rights Agreement dated June 18, 2020, among the Company and the Persons listed on Schedule A and Schedule B thereto
8-K 10.4 6/19/2020
10.4† Form of Deed of Indemnity
10-Q 10.4 6/30/2025
10.6# Amended and Restated Purchase and Sale Agreement, dated November 14, 2014, with the Cystic Fibrosis Foundation Therapeutics Incorporated
S-1/A 10.7 6/2/2020
10.7# Amendment No. 1 to the Amended and Restated Purchase and Sale Agreement, dated October 13, 2016 with the Cystic Fibrosis Foundation
S-1/A 10.8 6/2/2020
10.8# Research, Development and Commercialization Agreement, dated May 24, 2004, between the Cystic Fibrosis Foundation Therapeutics Incorporated and Vertex Pharmaceuticals Incorporated, as amended
S-1 10.9 5/22/2020
10.9# Amendment No. 1 to Research, Development and Commercialization Agreement, dated January 6, 2006 by and between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated
S-1 10.10 5/22/2020

120

10.10 Amendment No. 2 to Research, Development and Commercialization Agreement, dated January 1, 2006, by and between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated
S-1 10.11 5/22/2020
10.11# Amendment No. 5 to Research, Development and Commercialization Agreement, dated April 1, 2011, by and between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated
S-1 10.12 5/22/2020
10.12# Amendment No. 7 to Research, Development and Commercialization Agreement, dated September 1, 2016, by and between Vertex Pharmaceuticals Incorporated and Cystic Fibrosis Foundation Therapeutics Incorporated
S-1 10.13 5/22/2020
10.15† Form of Independent Director Equity Incentive Plan
S-1/A 10.15 6/11/2020
10.16 Indenture, dated as of September 2, 2020, among Royalty Pharma plc, Royalty Pharma Holdings Ltd and Wilmington Trust, National Association, as Trustee
8-K 4.1 9/2/2020
10.17 First Supplemental Indenture, dated as of September 2, 2020, among Royalty Pharma plc, Royalty Pharma Holdings Ltd and Wilmington Trust, National Association, as Trustee
8-K 4.2 9/2/2020
10.18 Registration Rights Agreement, dated as of September 2, 2020, among Royalty Pharma plc, Royalty Pharma Holdings Ltd, BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC
8-K 4.9 9/2/2020
10.19# Amendment No. 2 to the Amended and Restated Purchase and Sale Agreement, dated October 30, 2020, by and among RPI Finance Trust, RPI 2019 Intermediate Finance Trust and Cystic Fibrosis Foundation
8-K 10.1 11/5/2020
10.20 Second Supplemental Indenture, dated as of July 26, 2021, Royalty Pharma plc, Royalty Pharma Holdings Ltd and Wilmington Trust, National Association, as Trustee
8-K 4.2 7/26/2021
10.22 Third Supplemental Indenture, dated as of June 10, 2024, Royalty Pharma plc, Royalty Pharma Holdings Ltd and Wilmington Trust, National Association, as Trustee
8-K 4.2 6/10/2024
10.23 Amended and Restated Revolving Credit Agreement, dated as of September 15, 2021, as amended by Amendment No. 1, dated as of October 31, 2022, as amended by Amendment No. 2, dated as of May 16, 2023, as amended by Amendment No. 3, dated as of December 22, 2023, as amended by Amendment No. 4, dated as of January 24, 2024, as amended by Amendment No.5, dated as of April 8,2025. among Royalty Pharma plc, Royalty Pharma Holdings Ltd., Bank of America, N.A., as Administrative Agent, the other parties thereto, and the lenders and issuing banks from time to time party thereto
10-Q
10.1 3/31/2025
10.24 Joinder, Release and First Amendment to Loan Agreement and Loan Documents
8-K
10.1 5/19/2025
10.25 Amended and Restated Exchange Agreement, dated as of May 16, 2025
8-K 10.2 5/19/2025
10.26 Form of Executive Offer Letter
10-Q
10.3 6/30/2025
10.28 Royalty Pharma plc 2025 Equity Incentive Plan
S-8
99.1 5/16/2025
10.29 Fourth Supplemental Indenture, dated as of June 9, 2025, Royalty Pharma plc, Royalty Pharma Holdings Ltd and Wilmington Trust, National Association, as Trustee
10-Q 10.6 6/30/2025
10.30 Fifth Supplemental Indenture, dated as of September 16, 2025, among Royalty Pharma plc, Royalty Pharma Holdings Ltd, Royalty Pharma Manager, LLC and Wilmington Trust, National Association, as Trustee.
8-K
4.3 9/16/2025

121

10.31 †
Off er Letter with George W. Lloyd
x
19.1 Insider Trading Policy
x
21.1 Subsidiaries of the Registrant
x
23.1 Consent of Independent Registered Public Accounting Firm
x
24.1 Power of Attorney (reference is made to the signature page hereto) x
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
x
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
x
32* Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
x
97.1 Financial Restatement Compensation Recoupment Policy
10-K 97.1 2/15/2024
101.INS XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
x
101.SCH XBRL Taxonomy Extension Schema Document
x
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
x
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
x
101.LAB XBRL Taxonomy Extension Label Linkbase Document
x
101.PRE XBRL Taxonomy Extension Presentation Linkbase
x
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
x

†     Management contract or compensatory plan or arrangement.
#     Certain information has been excluded from the exhibit because it both (i) is not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed.
*     The certifications furnished in Exhibit 32 hereto are deemed to accompany this Annual Report on Form 10-K and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of the Exchange Act.

Item 16.     FORM 10-K SUMMARY

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

ROYALTY PHARMA PLC
(Registrant)

Date: February 11, 2026
/s/ Pablo Legorreta
Pablo Legorreta
Chief Executive Officer

Date: February 11, 2026
/s/ Terrance Coyne
Terrance Coyne
Chief Financial Officer

122

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Terrance Coyne and Arthur McGivern, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

123

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date
/s/ Pablo Legorreta  Chairman of the Board, Director & Chief Executive Officer
( Principal Executive Officer and Royalty Pharma plc’s authorized representative in the United States )
February 11, 2026

Pablo Legorreta

/s/ Terrance Coyne Executive Vice President & Chief Financial Officer
( Principal Financial Officer and Principal Accounting Officer )
February 11, 2026

Terrance Coyne

/s/ Bonnie Bassler Director February 11, 2026

Bonnie Bassler

/s/ Vlad Coric
Director February 11, 2026

Vlad Coric

/s/ Errol De Souza Director February 11, 2026

Errol De Souza

/s/ Catherine Engelbert Director February 11, 2026

Catherine Engelbert

/s/ Carole Ho
Director February 11, 2026

 Carole Ho

/s/ David Hodgson Director February 11, 2026

David Hodgson

/s/ Ted Love Director February 11, 2026

Ted Love

/s/ Gregory Norden Director February 11, 2026

Gregory Norden

/s/ Elizabeth Weatherman
Director February 11, 2026

Elizabeth Weatherman

124