FULLTEXT DEL 1 AV 3
10-Q – 2025-08-06 – rprx-20250630.htm
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2025-06-30 0001802768 us-gaap:RelatedPartyMember rprx:AcquisitionOfLimitedPartnershipInterestsInAffiliateMember us-gaap:NoncontrollingInterestMember 2024-12-31 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from_________ to __________ Commission file number 001-39329 Royalty Pharma plc (Exact name of registrant as specified in its charter) England and Wales 98-1535773 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 110 East 59 th Street New York , New York 10022 (Address of principal executive offices and zip code) ( 212 ) 883-0200 (Registrant ’ s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A ordinary shares, par value $0.0001 RPRX The Nasdaq Stock Market LLC Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of August 1, 2025, Royalty Pharma plc had 432,293,050 Class A ordinary shares outstanding and 150,881,248 Class B ordinary shares outstanding. ROYALTY PHARMA PLC INDEX PART I. FINANCIAL INFORMATION 1 Item 1. Condensed Consolidated Financial Statements 1 Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 (unaudited) 1 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (unaudited) 2 Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2025 and 2024 (unaudited) 3 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited) 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 3. Quantitative and Qualitative Disclosures About Market Risk 59 Item 4. Controls and Procedures 59 PART II. OTHER INFORMATION 59 Item 1. Legal Proceedings 59 Item 1A. Risk Factors 60 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 89 Item 3. Defaults Upon Senior Securities 90 Item 4. Mine Safety Disclosures 90 Item 5. Other Information 90 Item 6. Exhibits 91 Special Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “target,” “forecast,” “guidance,” “goal,” “predicts,” “project,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective assets, our industry, our beliefs and our assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of the numerous risks outlined in Part II under Item 1A. under “Risk Factors.” These risks and uncertainties include factors related to, among other topics: • sales risks of biopharmaceutical products on which we receive royalties; • uncertainties related to the acquisition of interests in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates to our product portfolio; • the assumptions underlying our business model; • our ability to successfully execute our royalty acquisition strategy; • our ability to leverage our competitive strengths; • our ability to attract and retain highly talented professionals; • our ability to achieve the benefits of internalizing our formerly external manager; • the effect of changes to tax legislation and our tax position; and • the risks, uncertainties and other factors we identify elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). Although we believe the expectations reflected in the forward-looking statements are reasonable, any of those expectations could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and business objectives will be achieved. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations. PART 1. FINANCIAL INFORMATION Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ROYALTY PHARMA PLC CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) (Unaudited) As of June 30, As of December 31, 2025 2024 Assets Current assets Cash and cash equivalents $ 631,908 $ 929,026 Financial royalty assets 842,938 783,770 Available for sale debt securities 13,200 58,200 Other royalty income receivable 27,743 26,956 Other current assets 4,452 4,187 Total current assets 1,520,241 1,802,139 Financial royalty assets, net 15,134,291 15,127,158 Equity securities 110,529 186,960 Available for sale debt securities 271,900 693,500 Equity method investments 275,914 379,424 Goodwill 924,634 — Other assets 85,491 33,534 Total assets $ 18,323,000 $ 18,222,715 Liabilities and shareholders’ equity Current liabilities Distributions payable to non-controlling interests $ 98,197 $ 75,811 Accounts payable and accrued liabilities 20,209 13,370 Interest payable 85,609 98,062 Current portion of long-term debt 999,436 997,773 Other current liabilities 3,075 68,600 Total current liabilities 1,206,526 1,253,616 Long-term debt 7,003,063 6,614,653 Accrued compensation liabilities 467,143 — Other liabilities 143,328 12,080 Total liabilities 8,820,060 7,880,349 Commitments and contingencies Shareholders’ equity Class A ordinary shares, $ 0.0001 par value; issued and outstanding: 2025– 432,288 and 2024– 445,985 44 45 Class B ordinary shares, $ 0.000001 par value; issued and outstanding: 2025– 150,881 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– 409,032 and 2024– 392,255 — — Additional paid-in capital 4,127,665 4,103,482 Retained earnings 2,222,750 2,845,653 Non-controlling interests 3,155,030 3,395,785 Treasury interests ( 2,612 ) ( 2,662 ) Total shareholders’ equity 9,502,940 10,342,366 Total liabilities and shareholders’ equity $ 18,323,000 $ 18,222,715 See accompanying notes to these unaudited condensed consolidated financial statements. 1 ROYALTY PHARMA PLC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Income and other revenues Income from financial royalty assets $ 550,418 $ 512,865 $ 1,089,908 $ 1,054,411 Other royalty income and revenues 28,247 24,402 57,004 50,834 Total income and other revenues 578,665 537,267 1,146,912 1,105,245 Operating (income)/expense Provision for changes in expected cash flows from financial royalty assets ( 203,938 ) 212,429 ( 331,078 ) 796,029 Provision for credit losses on unfunded commitments 92,535 — 92,535 — Research and development funding expense 300,500 500 351,000 1,000 General and administrative expenses 179,769 54,708 290,475 112,360 Total operating expense, net 368,866 267,637 402,932 909,389 Operating income 209,799 269,630 743,980 195,856 Other (income)/expense Equity in (earnings)/losses of equity method investees ( 2,693 ) ( 1,703 ) ( 9,136 ) 12,446 Interest expense 68,668 49,013 133,929 93,245 Losses on derivative financial instruments 2,000 — 3,000 — Losses/(gains) on equity securities 30,553 47,124 76,431 ( 30,606 ) Losses/(gains) on available for sale debt securities 27,420 200 30,701 ( 46,220 ) Interest income ( 8,327 ) ( 13,381 ) ( 19,617 ) ( 20,798 ) Other non-operating expenses/(income), net 1,543 ( 6,000 ) 4,604 ( 2,315 ) Total other expense, net 119,164 75,253 219,912 5,752 Consolidated net income before tax 90,635 194,377 524,068 190,104 Income tax expense — — — — Consolidated net income 90,635 194,377 524,068 190,104 Net income attributable to non-controlling interests 60,459 92,373 255,543 83,322 Net income attributable to Royalty Pharma plc $ 30,176 $ 102,004 $ 268,525 $ 106,782 Earnings per Class A ordinary share: Basic $ 0.07 $ 0.23 $ 0.63 $ 0.24 Diluted $ 0.07 $ 0.23 $ 0.62 $ 0.24 Weighted average Class A ordinary shares outstanding: Basic 423,514 451,020 429,464 449,822 Diluted 562,298 596,912 570,157 597,195 See accompanying notes to these unaudited condensed consolidated financial statements. 2 ROYALTY PHARMA PLC CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except per share amounts) (Unaudited) Class A Ordinary Shares Class B Ordinary Shares Class R Redeemable Shares Deferred 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 March 31, 2025 425,590 $ 43 140,870 $ — 50 $ 63 394,513 $ — $ 4,210,531 $ 2,480,664 $ 3,100,010 $ ( 2,654 ) $ 9,788,657 Contributions — — — — — — — — — — 5,298 — 5,298 Distributions — — — — — — — — — — ( 136,929 ) — ( 136,929 ) Dividends ($ 0.22 per Class A ordinary share) — — — — — — — — — ( 93,310 ) — — ( 93,310 ) Other exchanges 14,519 2 ( 14,519 ) — — — 14,519 — ( 25,186 ) — 25,142 42 — Share issuances for EPAs, Equity Incentive Plans and related share-based compensation 678 — — — — — — — 21,114 ( 418 ) 44,050 — 64,746 Shares and share-based awards issued for Internalization — — 24,530 — — — — — 3,778 — 57,000 — 60,778 Repurchases of Class A ordinary shares ( 8,499 ) ( 1 ) — — — — — — ( 82,572 ) ( 194,362 ) — — ( 276,935 ) Net income — — — — — — — — — 30,176 60,459 — 90,635 Balance at June 30, 2025 432,288 $ 44 150,881 $ — 50 $ 63 409,032 $ — $ 4,127,665 $ 2,222,750 $ 3,155,030 $ ( 2,612 ) $ 9,502,940 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 March 31, 2024 450,981 $ 45 146,456 $ — 50 $ 63 388,927 $ — $ 4,074,849 $ 2,427,448 $ 3,363,965 $ ( 2,654 ) $ 9,863,716 Contributions — — — — — — — — — — 2,141 — 2,141 Distributions — — — — — — — — — — ( 129,728 ) — ( 129,728 ) Dividends ($ 0.21 per Class A ordinary share) — — — — — — — — — ( 94,943 ) — — ( 94,943 ) Other exchanges 1,128 — ( 1,128 ) — — — 1,128 — 53,192 — ( 53,185 ) ( 7 ) — Share-based compensation and related issuances of Class A ordinary shares 73 — — — — — — — 681 — — — 681 Repurchases of Class A ordinary shares ( 3,117 ) — — — — — — — ( 28,168 ) ( 56,258 ) — — ( 84,426 ) Net income — — — — — — — — — 102,004 92,373 — 194,377 Balance at June 30, 2024 449,065 $ 45 145,328 $ — 50 $ 63 390,055 $ — $ 4,100,554 $ 2,378,251 $ 3,275,566 $ ( 2,661 ) $ 9,751,818 See accompanying notes to these unaudited condensed consolidated financial statements. 3 ROYALTY PHARMA PLC CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands, except per share amounts) (Unaudited) Class A Ordinary Shares Class B Ordinary Shares Class R Redeemable Shares Deferred 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, 2024 445,985 $ 45 143,128 $ — 50 $ 63 392,255 $ — $ 4,103,482 $ 2,845,653 $ 3,395,785 $ ( 2,662 ) $ 10,342,366 Contributions — — — — — — — — — — 7,551 — 7,551 Distributions — — — — — — — — — — ( 308,373 ) — ( 308,373 ) Dividends ($ 0.44 per Class A ordinary share) — — — — — — — — — ( 188,667 ) — — ( 188,667 ) Other exchanges 16,777 2 ( 16,777 ) — — — 16,777 — 296,474 — ( 296,526 ) 50 — Share issuances for EPAs, Equity Incentive Plans and related share-based compensation 680 — — — — — — — 21,629 ( 418 ) 44,050 — 65,261 Shares and share-based awards issued for Internalization — — 24,530 — — — — — 3,778 — 57,000 — 60,778 Repurchases of Class A ordinary shares ( 31,154 ) ( 3 ) — — — — — — ( 297,698 ) ( 702,343 ) — — ( 1,000,044 ) Net income — — — — — — — — — 268,525 255,543 — 524,068 Balance at June 30, 2025 432,288 $ 44 150,881 $ — 50 $ 63 409,032 $ — $ 4,127,665 $ 2,222,750 $ 3,155,030 $ ( 2,612 ) $ 9,502,940 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, 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 — — — — — — — — — — 4,553 — 4,553 Distributions — — — — — — — — — — ( 254,139 ) — ( 254,139 ) Dividends ($ 0.42 per Class A ordinary share) — — — — — — — — — ( 188,748 ) — — ( 188,748 ) Other exchanges 5,415 — ( 5,415 ) — — — 5,415 — 115,994 — ( 115,962 ) ( 32 ) — Share-based compensation and related issuances of Class A ordinary shares 75 — — — — — — — 1,293 — — — 1,293 Repurchases of Class A ordinary shares ( 3,117 ) — — — — — — — ( 28,168 ) ( 56,258 ) — — ( 84,426 ) Net income — — — — — — — — — 106,782 83,322 — 190,104 Purchase of non-controlling interest in RPCT — — — — — — — — — ( 1,108 ) — — ( 1,108 ) Balance at June 30, 2024 449,065 $ 45 145,328 $ — 50 $ 63 390,055 $ — $ 4,100,554 $ 2,378,251 $ 3,275,566 $ ( 2,661 ) $ 9,751,818 See accompanying notes to these unaudited condensed consolidated financial statements. 4 ROYALTY PHARMA PLC CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the Six Months Ended June 30, 2025 2024 Cash flows from operating activities: Cash collections from financial royalty assets $ 1,556,262 $ 1,414,324 Cash collections from intangible royalty assets 417 14,030 Other royalty cash collections 55,810 49,523 Distributions from equity method investees 13,396 13,396 Interest received 20,687 20,914 Development-stage funding payments ( 351,000 ) ( 1,000 ) Payments for operating and professional costs ( 195,721 ) ( 108,572 ) Payments for Employee EPAs ( 173 ) — Interest paid ( 139,618 ) ( 79,768 ) Net cash provided by operating activities 960,060 1,322,847 Cash flows from investing activities: Acquisition of businesses, net of cash acquired ( 74,190 ) — Distributions from equity method investees 99,250 8,908 Investments in equity method investees — ( 10,955 ) Purchases of equity securities ( 4,427 ) ( 50,000 ) Proceeds from equity securities — 98,575 Purchases of available for sale debt securities ( 75,000 ) ( 150,000 ) Proceeds from available for sale debt securities 15,466 4,320 Proceeds from sales of available for sale debt securities 510,553 — Acquisitions of financial royalty assets ( 2,171 ) ( 814,712 ) Acquisitions of other financial assets — ( 18,000 ) Milestone payments ( 268,600 ) ( 50,000 ) Other ( 8,946 ) 2,038 Net cash provided by/(used in) investing activities 191,935 ( 979,826 ) Cash flows from financing activities: Distributions to legacy non-controlling interests - Portfolio Receipts ( 173,845 ) ( 179,523 ) Distributions to continuing non-controlling interests ( 92,438 ) ( 62,693 ) Dividends to shareholders ( 188,598 ) ( 188,748 ) Repurchases of Class A ordinary shares ( 1,000,353 ) ( 79,999 ) Contributions from legacy non-controlling interests - R&D 439 308 Contributions from non-controlling interests - other 5,682 2,288 Proceeds from issuance of long-term debt, net of discount — 1,471,235 Debt issuance costs and other — ( 9,228 ) Other — ( 9,027 ) Net cash (used in)/provided by financing activities ( 1,449,113 ) 944,613 Net change in cash and cash equivalents ( 297,118 ) 1,287,634 Cash and cash equivalents, beginning of period 929,026 477,010 Cash and cash equivalents, end of period $ 631,908 $ 1,764,644 See accompanying notes to these unaudited condensed consolidated financial statements. 5 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Purpose Royalty Pharma plc is a public limited company that is incorporated under the laws of England and Wales and is a holding company. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis. 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. We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators. 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 “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 unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments considered necessary to present fairly the results of the interim periods have been included and consist of normal and recurring adjustments. Certain information and footnote disclosures have been condensed or omitted as permitted under GAAP. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2024 included in our Annual Report on Form 10-K. The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of income, revenues and expenses during the reporting period. Actual results may differ from those estimates. The results for the interim periods are not necessarily indicative of results for the full year. Basis of Consolidation The unaudited condensed consolidated financial statements include the accounts of Royalty Pharma and all majority-owned and controlled subsidiaries, as well as variable interest entities, where we are the primary beneficiary. We consolidate based upon evaluation of our power, through voting rights or similar rights, to direct the activities of another entity that most significantly impact the entity’s economic performance. For consolidated entities where we own or are exposed to less than 100% of the economics, we record Net income attributable to non-controlling interests in our condensed consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling parties. RP Holdings is owned by Royalty Pharma plc and, indirectly, by various partnerships (the “Continuing Investors Partnerships”) and, in addition, 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”). 6 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) We consummated an exchange offer on February 11, 2020 (the “Exchange Offer”) to facilitate 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 subsidiary 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”). 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”) as part of the transaction considerations. 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 available for sale debt securities, financial royalty assets, derivatives 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, Roche, Johnson & Johnson, Biogen, Servier, AbbVie, Astellas, Pfizer and Gilead. As of June 30, 2025 and December 31, 2024, Vertex, as the marketer and payor of our royalties on the cystic fibrosis franchise, accounted for 31 % 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 cash on our royalty assets. 7 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Segment Information We operate as one reportable segment. The measure of segment profit or loss that is most consistent with our condensed consolidated financial statements is consolidated net income. The accounting policies of our single reportable segment are the same as those for the condensed consolidated financial statements. The level of disaggregation and amounts of significant segment expenses that are regularly provided to the chief operating decision maker are the same as those presented in the condensed consolidated statements of operations. Likewise, the measure of segment assets is reported on the condensed consolidated balance sheets as total assets. Significant Accounting Policies There have been no material changes to our significant accounting policies from our Annual Report on Form 10-K for the year ended December 31, 2024 except for the following policy related to 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. 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 (as defined below). 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 (such transaction, the “Internalization”). The Sellers include 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 wholly-owned subsidiary of RP Holdings, in connection with the Internalization. We completed the acquisition of RP Manager on May 16, 2025. We accounted for the acquisition 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 are subject to vesting, with related share-based compensation expense to be recognized over the vesting period post-Internalization. The announced transaction value also reflected the assumption of a $ 380 million term loan. In accordance with ASC 805, the $ 380 million term loan was not included in the purchase price. Instead, it is reflected as a liability acquired in the preliminary allocation of purchase price below. 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, as of the closing of the Internalization, we included the portions of each of these components that are attributable to the pre-Internalization service period 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 8 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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, a wholly-owned subsidiary of RP Holdings, 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 condensed consolidated statement of cash flows. As a result of the Internalization, the fair value of approximately $ 422.5 million of the Employee EPAs 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 condensed consolidated balance sheet and is estimated using a Monte Carlo simulation methodology. See Note 7–Fair Value Measurements and Financial Instruments for additional discussion. 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. 9 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following is a summary of a preliminary allocation of the purchase price (in thousands): Preliminary allocation of purchase price Location on Condensed 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 liabilities 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 Operating and Personnel Payments (as defined in Note 16–Related Party Transactions). The Internalization did not result in the recognition of gains or losses in the condensed consolidated statements of operations. For the second quarter and first six months of 2025, we recorded approximately $ 15.0 million and $ 28.7 million of acquisition-related costs within General and administrative expenses in the condensed consolidated statements of operations, respectively. Of the $ 28.7 million in acquisition-related costs for the first six months of 2025, $ 26.6 million was paid and included within Payments for operating and professional costs on the condensed consolidated statement of cash flows. These costs are primarily related to legal, advisory and professional services. For the second quarter and first six months of 2025, approximately 63 % and 39 % of the total General and administrative expenses were related to costs incurred by the RP Manager and its subsidiaries, respectively. 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): For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Pro forma revenue $ 578,665 $ 537,267 $ 1,146,912 $ 1,105,245 Pro forma net income (1) 130,987 154,581 593,231 52,307 (1) For the first six months of 2024, pro forma net income includes $ 28.7 million related to a pro-forma adjustment for non-recurring acquisition costs incurred. 10 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 condensed consolidated statements of operations. We have elected to account for forfeitures as they occur. In the second quarter and first six months of 2024, we did not recognize material share-based compensation expense. Our share-based compensation expense for the second quarter and first six months of 2025 is comprised of the following (in thousands): For the Three Months Ended June 30, 2025 For the Six Months Ended June 30, 2025 RP Holdings Class E Interests $ 44,050 $ 44,050 Employee EPAs 45,732 45,732 Employee and Director RSUs 1,262 1,965 Total Share-Based Compensation $ 91,044 $ 91,747 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 the second quarter and first six months of 2025, we recorded $ 44.0 million of share-based compensation expense related to the RP Holdings Class E Interests. As of June 30, 2025, we had $ 711.4 million of unrecognized compensation expense related to 21.5 million RP Holdings Class E Interests that is expected to vest over a weighted average period of 6.0 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). As a result of the Internalization, the fair value of approximately $ 422.5 million of the Employee EPAs is attributable to service rendered pre-Internalization and recognized as a liability within Accrued compensation liabilities on the condensed consolidated balance sheet. 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. In the second quarter and first six months of 2025, we recorded $ 45.7 million of share-based compensation expense related to the Employee EPAs. As of June 30, 2025, we had $ 103.5 million of unrecognized expense related to the Employee EPAs which is expected to vest over a weighted average period of 2.1 years. 2025 Equity Incentive Plan On May 16, 2025, in connection with the Internalization, the Royalty Pharma plc 2025 Equity Incentive Plan became effective and 2 million Class A ordinary shares were authorized for issuance to employees and consultants. RSUs granted under the plan generally vest over a period of up to four years . In the second quarter and first six months of 2025, we did not recognize material share-based compensation expense related to the RSUs. 11 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 2020 Independent Directors Equity Incentive Plan On June 15, 2020, our 2020 Independent Director Equity Incentive Plan was approved and became effective, whereby 800 thousand Class A ordinary shares were authorized for issuance in the form of RSUs to our independent directors. RSUs granted under the plan generally vest over one year . In the second quarter and first six months of 2025 and 2024, we did not recognize material share-based compensation expense related to the RSUs. 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 June 30, 2025, Royalty Pharma plc has 432,288 thousand Class A ordinary shares and 150,881 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 June 30, 2025, Royalty Pharma plc has 409,032 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 approved in March 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 authorization for the new share repurchase program expires June 23, 2027. In the first six months of 2025, we repurchased 31.2 million shares at a cost of approximately $ 1.0 billion. In the first six months of 2024, we repurchased 3.1 million shares at a cost of approximately $ 84.4 million. As of June 30, 2025, approximately $ 2.0 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 condensed consolidated statements of shareholders’ equity. 12 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Non-Controlling Interests The changes in the balances of our non-controlling interests are as follows (in thousands): Legacy Investors Partnerships Continuing Investors Partnerships Founder’s Equity RP Holdings Class E Interests Holders Total March 31, 2025 $ 1,168,548 $ 1,931,462 $ — $ — $ 3,100,010 Contributions 4,050 1,248 — — 5,298 Distributions ( 97,517 ) ( 33,052 ) ( 963 ) ( 5,397 ) ( 136,929 ) Other exchanges — ( 208,523 ) — 233,665 25,142 Internalization — — — 57,000 57,000 Share-based compensation — — — 44,050 44,050 Net income 48,943 9,671 963 882 60,459 June 30, 2025 $ 1,124,024 $ 1,700,806 $ — $ 330,200 $ 3,155,030 Legacy Investors Partnerships Continuing Investors Partnerships Founder’s Equity Total March 31, 2024 $ 1,238,019 $ 2,125,946 $ — $ 3,363,965 Contributions 1,279 862 — 2,141 Distributions ( 99,046 ) ( 30,682 ) — ( 129,728 ) Other exchanges — ( 53,185 ) — ( 53,185 ) Net income 59,467 32,906 — 92,373 June 30, 2024 $ 1,199,719 $ 2,075,847 $ — $ 3,275,566 Legacy Investors Partnerships Continuing Investors Partnerships Founder’s Equity (1) RP Holdings Class E Interests Holders Total December 31, 2024 $ 1,188,340 $ 2,207,445 $ — $ — $ 3,395,785 Contributions 5,314 2,237 — — 7,551 Distributions ( 195,422 ) ( 65,114 ) ( 42,440 ) ( 5,397 ) ( 308,373 ) Other exchanges — ( 530,191 ) — 233,665 ( 296,526 ) Internalization — — — 57,000 57,000 Share-based compensation — — — 44,050 44,050 Net income 125,792 86,429 42,440 882 255,543 June 30, 2025 $ 1,124,024 $ 1,700,806 $ — $ 330,200 $ 3,155,030 (1) Amounts represent the entirety of the EPAs prior to the Internalization and only the Founder’s Equity portion after the Internalization. Legacy Investors Partnerships Continuing Investors Partnerships Founder’s Equity Total December 31, 2023 $ 1,339,716 $ 2,218,076 $ — $ 3,557,792 Contributions 2,572 1,981 — 4,553 Distributions ( 191,446 ) ( 62,693 ) — ( 254,139 ) Other exchanges — ( 115,962 ) — ( 115,962 ) Net income 48,877 34,445 — 83,322 June 30, 2024 $ 1,199,719 $ 2,075,847 $ — $ 3,275,566 13 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. 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”). Equity Performance Awards (“EPAs”) represent 20 % of the Net Economic Profit (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 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 a non-controlling interest. Post-Internalization, Founder’s Equity only included Mr. Legorreta’s retained EPAs which was accounted for as a non-controlling interest. In the second quarter and first six months of 2025, we recognized $ 1.0 million and $ 42.4 million of distributions related to Founder’s Equity and recorded a corresponding amount as net income allocated to non-controlling interests, respectively. Out of the $ 42.4 million in the first six months of 2025, $ 21.9 million was distributed in cash as a tax advance and presented as a financing activity in the condensed consolidated statement of cash flows, $ 19.7 million was settled in shares in the second quarter of 2025 and the remaining of $ 0.8 million is expected to be settled in shares in the third quarter of 2025. The unsettled portion as of June 30, 2025 is recorded within Distributions payable to non-controlling interests on the condensed consolidated balance sheet. 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 are outstanding as of June 30, 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 tables and in our condensed 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. 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 June 30, 2025, 718.8 thousand of RP Holdings Class E Interests are vested. 14 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 condensed 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 June 30, 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 June 30, 2024, the ownership of RP Holdings was as follows: 24 % by the Continuing Investors Partnerships and 76 % 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. In the first six months of 2025, we declared and paid two quarterly cash dividend of $ 0.22 per Class A ordinary share in an aggregate amount of $ 188.7 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 $ 175 million under tranches one, four, and six as of June 30, 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. Tranches five and seven , which provide for draws up to $ 100 million and $ 175 million, respectively, are available for draw upon the occurrence of certain regulatory and clinical development milestones (“Cytokinetics Funding Commitments”) and have a one-year draw period from the date when such contingency is met. The fifth tranche became available in the fourth quarter of 2024 after the contingency was met and will remain available through the fourth quarter of 2025. The contingency for tranche seven has not been met as of June 30, 2025. 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 of the funding date of each tranche. In the fourth quarter of 2023, we began receiving quarterly repayments on tranche one. 15 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 condensed consolidated balance sheets. We recognized the Cytokinetics Funding Commitments at fair value within Other liabilities on the condensed consolidated balance sheets. The changes in the fair value of the funded Cytokinetics Funding Arrangements and Cytokinetics Funding Commitments are recorded within Losses/(gains) on available for sale debt securities in the condensed 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, which is further described in Note 7–Fair Value Measurements and Financial Instruments. Lastly, the funding collaboration also included the restructuring of our royalty on aficamten. The table below summarizes the components of our funding collaboration with Cytokinetics, including the expanded funding collaboration in May 2024 and related funding status as of June 30, 2025 (in thousands): Funded Potential Future Draw Total Cytokinetics Commercial Launch Funding $ 175,000 $ 275,000 $ 450,000 Cytokinetics Development Funding 100,000 — 100,000 Cytokinetics R&D Funding Derivative (1) 50,000 150,000 200,000 Cytokinetics Common Stock 50,000 — 50,000 Total $ 375,000 $ 425,000 $ 800,000 (1) Related to our funding for the clinical trials of CK-586. We have the option to fund up to an additional $ 150 million. See Note 7–Fair Value Measurements and Financial Instruments for additional discussion. 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 condensed consolidated balance sheet. The changes in the fair value of the MorphoSys Development Funding Bonds were recorded within Losses/(gains) on available for sale debt securities in the condensed consolidated statement of operation. 16 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The table below summarizes our available for sale debt securities recorded at fair value (in thousands): Cost Unrealized Gains/(Losses) Fair Value Current Assets Non-Current Assets Non-Current Liabilities Total As of June 30, 2025 Debt securities (1) $ 283,715 $ 1,385 $ 285,100 $ 13,200 $ 271,900 $ — $ 285,100 Funding commitments (2) ( 16,600 ) ( 10,600 ) ( 27,200 ) — — ( 27,200 ) ( 27,200 ) Total $ 267,115 $ ( 9,215 ) $ 257,900 $ 13,200 $ 271,900 $ ( 27,200 ) $ 257,900 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 June 30, 2025 and December 31, 2024, the cost related to tranche four 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. 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 June 30, 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) $ 151,083 $ — $ — $ 151,083 $ 568,317 $ — $ — $ 568,317 Available for sale debt securities (2) — — 13,200 13,200 — — 58,200 58,200 Total current assets $ 151,083 $ — $ 13,200 $ 164,283 $ 568,317 $ — $ 58,200 $ 626,517 Equity securities (3) 108,288 — 2,241 110,529 184,719 — 2,241 186,960 Available for sale debt securities (2) — — 271,900 271,900 — — 693,500 693,500 Cytokinetics R&D Funding Derivative (4) — — 9,000 9,000 — — 12,000 12,000 Royalty at fair value (3) — — 5,323 5,323 — — 5,323 5,323 Total non-current assets $ 108,288 $ — $ 288,464 $ 396,752 $ 184,719 $ — $ 713,064 $ 897,783 Liabilities: Cytokinetics Funding Commitments — — ( 27,200 ) ( 27,200 ) — — ( 12,080 ) ( 12,080 ) Employee EPAs (5) — — ( 467,143 ) ( 467,143 ) — — — — Total non-current liabilities $ — $ — $ ( 494,343 ) $ ( 494,343 ) $ — $ — $ ( 12,080 ) $ ( 12,080 ) (1) Recorded within Cash and cash equivalents on the condensed 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 are related to equity securities and a revenue participation right acquired from ApiJect Holdings, Inc. (“ApiJect”), a private company. We estimated the fair values related to both instruments using a discounted cash flow with Level 3 inputs, including forecasted cash flows and the weighted average cost of capital. The revenue participation right was recorded within Other assets on the condensed consolidated balance sheets. See Note 10–Non-Consolidated Affiliates for additional discussion. (4) Recorded within Other assets on the condensed consolidated balance sheets. See definition below. (5) Recorded within Accrued compensation liabilities on the condensed consolidated balance sheet. See Note 4–Share-Based Compensation for additional discussion. 17 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) For the second quarter and first six months of 2025, we recognized losses of $ 30.6 million and $ 76.4 million, respectively, on equity securities still held as of June 30, 2025. For the second quarter and first six months of 2024, we recognized losses of $ 46.1 million and $ 15.0 million, respectively, on equity securities still held as of June 30, 2025. The tables presented below summarize the change in the combined fair value (current and non-current) of Level 3 financial instruments (in thousands): For the Three Months Ended June 30, 2025 Equity Securities Debt Securities Funding Commitments Derivative Instrument Royalty at Fair Value Employee EPAs Balance at the beginning of the period $ 2,241 $ 231,100 $ ( 17,900 ) $ 11,000 $ 5,323 $ — Purchases — 75,000 — — — — Initial recognition (1) — — — — — 422,479 Changes in fair value (2) — ( 18,120 ) ( 10,200 ) ( 2,000 ) — 38,457 Vested — — — — — 7,275 Settled (3) — — — — — ( 1,068 ) Settlement of forward (4) — — 900 — — — Redemption (5) — ( 2,880 ) — — — — Balance at the end of the period $ 2,241 $ 285,100 $ ( 27,200 ) $ 9,000 $ 5,323 $ 467,143 (1) Amount reflects the portion of the Employee EPAs attributable to service rendered prior to the Internalization, recognized in connection with the Internalization, see Note 3–Internalization for additional discussion. (2) Change in fair value of the Employee EPAs is recorded within General and administrative expenses in the condensed consolidated statement of operations. Changes in fair value of all other financial instruments are recorded within their respective financial statement line items in the Other (income)/expense section of the condensed consolidated statements of operations. (3) The Employee EPAs are generally settled partially in shares and partially through periodic cash distributions required for tax advances. (4) Amount reflects the fair value attributable to the required draw under tranche four of the Cytokinetics Commercial Launch Funding that was settled upon funding. (5) Amount relates to the quarterly repayment on the Cytokinetics Commercial Launch Funding. For the Three Months Ended June 30, 2024 Equity Securities Debt Securities Funding Commitments Derivative Instrument Royalty at Fair Value Balance at the beginning of the period $ — $ 502,700 $ ( 3,220 ) $ — $ — Purchases 46,500 150,000 — 18,000 — Gains/(losses) on initial recognition (1) — 5,000 ( 5,000 ) — — Changes in fair value (2) 5,822 13,580 ( 13,780 ) — 5,323 Redemptions (3) — ( 2,880 ) — — — Balance at the end of the period $ 52,322 $ 668,400 $ ( 22,000 ) $ 18,000 $ 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 condensed consolidated statements of operations. (3) Amount relates to the quarterly repayment on the Cytokinetics Commercial Launch Funding. 18 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) For the Six Months Ended June 30, 2025 Equity Securities Debt Securities Funding Commitments Derivative Instrument Royalty at Fair Value Employee EPAs Balance at the beginning of the period $ 2,241 $ 751,700 $ ( 12,080 ) $ 12,000 $ 5,323 $ — Purchases — 75,000 — — — — Initial recognition (1) — — — — — 422,479 Changes in fair value (2) — ( 15,581 ) ( 15,920 ) ( 3,000 ) — 38,457 Vested — — — — — 7,275 Settled (3) — — — — — ( 1,068 ) Sales (4) — ( 510,553 ) — — — — Settlement of forward (5) — — 800 — — — Redemptions (6) — ( 15,466 ) — — — — Balance at the end of the period $ 2,241 $ 285,100 $ ( 27,200 ) $ 9,000 $ 5,323 $ 467,143 (1) Amount reflects the Employee EPAs attributable to service rendered prior to the Internalization, recognized in connection with the Internalization, see Note 3–Internalization for additional discussion. (2) Change in fair value of the Employee EPAs is recorded within General and administrative expenses in the condensed consolidated statement of operations. Changes in the fair value of all other financial instruments are recorded within their respective financial statement line items in the Other (income)/expense section of the condensed consolidated statements of operations. (3) The Employee EPAs are generally settled partially in shares and partially through periodic cash distributions required for tax advances. (4) The MorphoSys Development Funding Bonds were sold in January 2025. (5) Amount reflects the fair value attributable to the required draw under tranche four of the Cytokinetics Commercial Launch Funding that was settled upon funding. (6) Amount relates to the quarterly repayments on the MorphoSys Development Funding Bonds prior to the sale and on the Cytokinetics Commercial Launch Funding. For the Six Months Ended June 30, 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) 5,525 62,320 ( 16,100 ) — 3,545 Redemptions (3) — ( 4,320 ) — — — Balance at the end of the period $ 52,322 $ 668,400 $ ( 22,000 ) $ 18,000 $ 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 condensed consolidated statement of operations. (3) Amount relates to the quarterly repayments on the Cytokinetics Commercial Launch Funding. Below is a discussion of the valuation inputs used for financial instruments classified as Level 3 measurement as of June 30, 2025 and December 31, 2024 in the fair value hierarchy. As of June 30, 2025 and December 31, 2024, we did not have any financial instruments recorded at fair value using Level 2 inputs. 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. Our funding arrangement on CK-586 is accounted for as a derivative instrument and is recorded at fair value (“Cytokinetics R&D Funding Derivative”). 19 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) We estimated the fair value of the Cytokinetics R&D Funding Derivative as of June 30, 2025 and 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. As of June 30, 2025 and December 31, 2024, we also assumed a risk-adjusted discount rate of 13.7 % and 11.1 %, respectively. 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 June 30, 2025 and December 31, 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 judgement. Our estimate of the risk-adjusted discount rate could reasonably be different than the discount rate selected by a market participant, which would mean that the estimated fair value could be significantly higher or lower. Our expectation of the probability and timing of the occurrence of a change of control event could reasonably be different than the timing of an actual change of control event, and if so, would mean that the estimated fair value could be significantly higher or lower than the fair value determined by management at any particular date. We estimated the fair value of the Cytokinetics Funding Commitments as of June 30, 2025 and December 31, 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 June 30, 2025 and December 31, 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 40.0 % as of each date and an assumed risk-adjusted discount rate of 13.7 % 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. Employee EPAs In connection with the Internalization, we recognized a liability related to the fair value of the Employee EPAs for the portion of the share-based compensation arrangement attributable to services rendered prior to the Internalization. We will increase the liability as we recognize share-based compensation for the remaining Employee EPAs attributable to the post-Internalization service-based vesting period. We remeasure the liability at fair value at each reporting date with changes recognized in share-based compensation expense. We estimated the fair value of the Employee EPAs as of the date of the Internalization and as of June 30, 2025 by using a Monte Carlo simulation under the option pricing framework, which is derived from the fair value of all of the underlying investments within the respective portfolio. The Monte-Carlo model also simulates the probability of satisfying the performance and return thresholds required for EPAs. See below for additional description of the Monte Carlo methodology. 20 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 condensed 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), (ii) expensed as ongoing R&D (e.g., our funding arrangement for litifilimab with Biogen) or (iii) treated as a derivative instrument (e.g., CK-586); 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 as of June 30, 2025 and December 31, 2024. In 2024, we refined our methodology to calculate the fair value given the growing 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 June 30, 2025, 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 June 30, 2025, approximately 11 % of the current portion and 8 % 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. 21 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The gross carrying value, cumulative allowance for changes in expected cash flows, exclusive of the allowance for credit losses, and net carrying value for the current and non-current portion of financial royalty assets are as follows (in thousands): As of June 30, 2025 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) $ 5,017,659 $ — $ 5,017,659 Evrysdi 2035-2036 2,100,662 ( 330,332 ) 1,770,330 Trelegy 2029-2030 1,053,534 — 1,053,534 Voranigo 2038 970,268 — 970,268 Tysabri (3) 1,238,602 ( 325,167 ) 913,435 Tremfya 2031-2032 936,511 ( 113,829 ) 822,682 Other 2025-2042 8,118,196 ( 2,472,170 ) 5,646,026 Total $ 19,435,432 $ ( 3,241,498 ) $ 16,193,934 Less: Cumulative allowance for credit losses (Note 9) ( 216,705 ) Total current and non-current financial royalty assets, net $ 15,977,229 (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) 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. As of June 30, 2025, the balance of $ 16.0 billion above for total current and non-current financial royalty assets, net included $ 1.2 billion in unapproved financial royalty assets held at cost related to frexalimab for $ 522.6 million and other assets, including primarily olpasiran, pelacarsen 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. 22 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 condensed 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 condensed consolidated balance sheets, and • the movement in the cumulative allowance for current expected credit losses, primarily associated with new financial royalty assets with limited protective rights and changes in the underlying cash flow forecasts of financial royalty assets with limited protective rights. The following table sets forth the activity in the cumulative allowance for changes in expected cash flows from financial royalty assets, inclusive of the cumulative allowance for credit losses (in thousands): Activity for the Period Balance at December 31, 2024 (1) $ ( 3,789,281 ) Increases to the cumulative allowance for changes in expected cash flows from financial royalty assets ( 358,493 ) Decreases to the cumulative allowance for changes in expected cash flows from financial royalty assets 668,154 Current period provision for credit losses, net 21,417 Balance at June 30, 2025 $ ( 3,458,203 ) (1) Includes $ 238.1 million related to cumulative allowance for credit losses. 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. ApiJect In April 2022, we acquired common stock and a revenue participation right from ApiJect. We elected the fair value option to account for our investments in ApiJect because it is more reflective of current values for such investments. We are also required to purchase additional common stock from ApiJect if certain milestones are achieved. The fair value of our equity investment in ApiJect is recorded within Equity securities and the change in fair value is recorded within Losses/(gains) on equity securities . The fair value of the revenue participation right is recorded within Other assets and the change in fair value is recorded within Other non-operating expenses/(income), net . No amounts were due from or to ApiJect related to the revenue participation right as of June 30, 2025 and December 31, 2024. The Legacy SLP Interest In connection with the Exchange Offer, we acquired a special limited partnership interest in the Legacy Investors Partnerships (the “Legacy SLP Interest”) from the Continuing Investors Partnerships for $ 303.7 million in exchange for issuing shares in our subsidiary. As a result, we became a special limited partner in the Legacy Investors Partnerships. The Legacy SLP Interest entitles us to the equivalent of performance distribution payments that would have been paid to the general partner of the Legacy Investors Partnerships and an income allocation on a similar basis. Our income allocation is equal to the general partner’s former contractual rights to the income of the Legacy Investors Partnerships, net of amortization of the basis difference. The Legacy SLP Interest is accounted for under the equity method as 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. 23 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The income allocation from the Legacy SLP Interest is based on an estimate as the Legacy Investors Partnerships are private partnerships that report on a lag. Management’s estimate of equity in earnings from the Legacy SLP Interest for the current period will be updated for historical results in the subsequent period. Equity in earnings from the Legacy SLP Interest is recorded within Equity in (earnings)/losses of equity method investees. We recorded an income allocation of $ 2.4 million and $ 10.6 million in the second quarter and first six months of 2025, respectively. We recorded an income allocation of $ 4.7 million and a loss allocation of $ 4.7 million in the second quarter and first six months of 2024, respectively. We collected cash receipts from the Legacy SLP Interest of $ 62.4 million and $ 70.7 million, both of which reflected a one-time distribution, in the second quarter and first six months of 2025, respectively. We collected cash receipts from the Legacy SLP Interest of $ 3.9 million and $ 8.9 million in the second quarter and first six months of 2024, 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)/losses of equity method investees. We recorded an income allocation of $ 0.3 million and a loss allocation of $ 1.5 million in the second quarter and first six months of 2025, respectively. We recorded loss allocations of $ 3.0 million and $ 7.8 million in the second quarter and first six months of 2024, respectively. On December 19, 2017, the FDA approved a supplemental New Drug Application for Pfizer’s Bosulif. Avillion I is eligible to receive fixed payments from Pfizer based on this approval under its co-development agreement with Pfizer. The only operations of Avillion I are the collection of cash and unwinding of the discount on the series of fixed annual payments due from Pfizer. We received distributions from Avillion I of $ 13.4 million in each of the first six months of 2025 and 2024, respectively. 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 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. We received our pro rata portion of the milestone of approximately $ 27.4 million from Avillion II in the first quarter of 2025. We received distributions of $ 0.6 million and $ 1.1 million from Avillion II related to the Airsupra royalty in the second quarter and first six months of 2025, 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 June 30, 2025 and December 31, 2024, we had unfunded commitments related to the Avillion Entities of $ 10.3 million. 11. Research and Development Funding Expense R&D funding expense consists of 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 ongoing R&D funding arrangements in 2024. We recognized R&D funding expense of $ 300.5 million and $ 351.0 million in the second quarter and first six months of 2025, respectively, primarily related to an upfront payment of $ 250.0 million to acquire royalties on daraxonrasib and the R&D funding arrangement for litifilimab. We recognized R&D funding expense of $ 0.5 million and $ 1.0 million in the second quarter and first six months of 2024, respectively, related to ongoing development-stage funding payments. As of June 30, 2025, we had an unfunded commitment of $ 150 million related to the R&D funding arrangement with Biogen for litifilimab. 24 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 12. Borrowings Our borrowings consisted of the following (in thousands): Type of Borrowing Date of Issuance Maturity As of June 30, 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 $ 1,000,000 , 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 , 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 $ 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 Term Loan See below 7/2027 380,000 — Unamortized debt discount and issuance costs ( 177,501 ) ( 187,574 ) Total debt carrying value 8,002,499 7,612,426 Less: Current portion of long-term debt ( 999,436 ) ( 997,773 ) Total long-term debt $ 7,003,063 $ 6,614,653 Senior Unsecured Notes 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. 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” and “2024 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. In September 2023, we repaid $ 1.0 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 on March 2 and September 2 of each year. 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 June 30, 2025, we were in compliance with all applicable covenants. 25 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) As of June 30, 2025 and December 31, 2024, the fair value of our outstanding Notes using Level 2 inputs was approximately $ 6.7 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. The Term Loan is subject to an interest rate, at our option, of either (i) the Daily SOFR plus 1.60 % or (ii) Term SOFR plus 1.60 %, each as defined in the Loan Agreement. Interest is payable in arrears quarterly. We made the first interest payment in July 2025. As of June 30, 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 June 30, 2025 and December 31, 2024, there were no outstanding borrowings under the Revolving Credit Facility. The Revolving Credit Facility is subject to an interest rate, at our option, of either (a) a base rate determined by reference to the highest of (1) the administrative agent’s prime rate, (2) the federal funds rate plus 0.5 % and (3) Term SOFR plus 1 % or (b) Daily SOFR, Term SOFR, the Alternative Currency Term Rate or the Alternative Currency Daily Rate (each as defined in the Credit Agreement), plus in each case, the applicable margin. The applicable margin for the Revolving Credit Facility varies based on our public debt rating. Accordingly, the interest rates for the Revolving Credit Facility fluctuate during the term of the facility based on changes in the applicable interest rate and future changes in our public debt rating. The Credit Agreement that governs the Revolving Credit Facility 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 June 30, 2025. 26 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Principal Payments on the Borrowings The future principal payments for our borrowings as of June 30, 2025 are as follows (in thousands): Year Principal Payments Remainder of 2025 $ 1,000,000 2026 — 2027 1,380,000 2028 — 2029 500,000 Thereafter 5,300,000 Total (1) $ 8,180,000 (1) Excludes unamortized debt discount and issuance costs of $ 177.5 million as of June 30, 2025, which are amortized through interest expense over the remaining life of the underlying debt obligations. 13. Earnings per Share In the second quarter and first six months of 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 the second quarter and first six months of 2024, Class B ordinary shares contingently issuable for the Equity Performance Awards 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 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. 27 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table sets forth reconciliations of the numerators and denominators used to calculate basic and diluted earnings per Class A ordinary share (in thousands, except per share amounts): For the Three Months Ended June 30, For the Six Months Ended June 30, 2025 2024 2025 2024 Numerator Consolidated net income $ 90,635 $ 194,377 $ 524,068 $ 190,104 Less: Net income attributable to the Continuing Investors Partnerships 9,671 32,906 86,429 34,445 Less: Net income attributable to the Legacy Investors Partnerships 48,943 59,467 125,792 48,877 Less: Net income attributable to the Founder’s Equity (1) 963 — 42,440 — Less: Net income attributable to the RP Holdings Class E Interests Holders 882 — 882 — Net income attributable to Royalty Pharma plc - basic 30,176 102,004 268,525 106,782 Add: Reallocation of net income attributable to Continuing Investors Partnerships from the assumed exchanges of Class B ordinary shares 9,671 32,906 86,429 34,445 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 26 — 26 — Net income attributable to Royalty Pharma plc - diluted $ 39,873 $ 134,910 $ 354,980 $ 141,227 Denominator Weighted average Class A ordinary shares outstanding - basic 423,514 451,020 429,464 449,822 Add: Dilutive effects as shown separately below Assumed exchanges of Class B ordinary shares by Continuing Investors Partnerships 138,348 145,849 140,151 147,330 Unvested RSUs 25 43 36 43 Shares contingently issuable for the Equity Performance Awards 48 — 323 — Assumed exchanges of eligible Class B ordinary shares by Holders of RP Holdings Class E Interests 363 — 183 — Weighted average Class A ordinary shares outstanding - diluted 562,298 596,912 570,157 597,195 Earnings per Class A ordinary share - basic $ 0.07 $ 0.23 $ 0.63 $ 0.24 Earnings per Class A ordinary share - diluted $ 0.07 $ 0.23 $ 0.62 $ 0.24 (1) Amounts represent the entirety of the EPAs prior to the Internalization and only the Founder’s Equity portion after the Internalization. 28 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 14. Indirect Cash Flow Adjustments to reconcile consolidated net income to net cash provided by operating activities are summarized below (in thousands): For the Six Months Ended June 30, 2025 2024 Cash flow from operating activities: Consolidated net income $ 524,068 $ 190,104 Adjustments to reconcile consolidated net income to net cash provided by operating activities: Income from financial royalty assets ( 1,089,908 ) ( 1,054,411 ) Provision for changes in expected cash flows from financial royalty assets ( 331,078 ) 796,029 Provision for credit losses on unfunded commitments 92,535 — Share-based compensation 91,284 1,293 Amortization of debt discount and issuance costs 10,586 8,908 Losses on derivative financial instruments 3,000 — Losses/(gains) on equity securities 76,431 ( 30,606 ) Equity in (earnings)/losses of equity method investees ( 9,136 ) 12,446 Distributions from equity method investees 13,396 13,396 Amortization of prepaid expenses 2,665 — Losses/(gains) on available for sale debt securities 30,701 ( 46,220 ) Depreciation 1,379 — Other 2,658 ( 3,004 ) Changes in operating assets and liabilities: Cash collected on financial royalty assets 1,556,262 1,414,324 Other royalty income receivable ( 787 ) ( 1,175 ) Other current assets ( 1,467 ) 15,772 Other assets 381 — Accounts payable and accrued liabilities 3,697 ( 3,620 ) Interest payable ( 16,275 ) 4,570 Other liabilities ( 332 ) 5,041 Net cash provided by operating activities $ 960,060 $ 1,322,847 Non-cash investing and financing activities are summarized below (in thousands): For the Six Months Ended June 30, 2025 2024 Accrued purchase obligation - frexalimab (1) $ — $ 97,493 (1) Related to transaction costs from the acquisition of frexalimab that were unpaid as of June 30, 2024. 15. Commitments and Contingencies Cytokinetics Funding Commitments As of June 30, 2025, $ 275 million remained available under the Cytokinetics Funding Commitments. 29 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. 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. 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 June 30, 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 June 30, 2025,$ 750 million of the term loan remained unfunded. We recorded an allowance for credit losses on the unfunded tranches of the funding arrangement based on our estimate of probability of future funding as we have limited protective rights with respect to each tranche once the funding is provided. We estimated the credit loss allowance using the probability of default and loss given default method. Accordingly, we recorded an allowance for credit losses of $ 92.5 million within Other liabilities on the condensed consolidated balance sheet and a provision for credit losses of the same amount in the second quarter and first six months of 2025 within Provision for credit losses on unfunded commitments in the condensed consolidated statements of operations. We will reassess our estimate as of each reporting date and any subsequent change to such allowance, which can be income or expense, is reflected within Provision for credit losses on unfunded commitments in the condensed consolidated statements of operations. Leases In connection with the Internalization, we entered into an operating lease agreement for office spaces. 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 assets and lease liabilities. As of June 30, 2025, we recorded $ 20.6 million of right of use assets within Other assets and $ 17.7 million of lease liabilities within Other liabilities on the condensed consolidated balance sheet. As of June 30, 2025, the future minimum lease payments under the non-cancelable operating lease are as follows (in thousands): Year Payments Remainder of 2025 $ 2,018 2026 4,053 2027 3,776 2028 3,721 2029 3,726 Thereafter 6,884 Total lease payments 24,178 Less: imputed interest ( 3,410 ) Present value of lease liabilities $ 20,768 30 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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. 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. 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 are contractually entitled. Accordingly, we have commenced the dispute resolution procedures contemplated by the agreements relating to our royalties on Vertex’s cystic fibrosis products. 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 condensed consolidated balance sheets as of June 30, 2025 and December 31, 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. 16. Related Party Transactions Internalization On May 16, 2025, we acquired from the Sellers all of the equity interests in RP Manager. The Sellers include Pablo Legorreta, RPM I, LLC and RP MIP Holdings. Pablo Legorreta is a 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 Management Agreement equal to 6.5 % of the cash receipts from Royalty Investments (as defined in the Management Agreement) for such quarter and 0.25 % of the value of our security investments under GAAP as of the end of such quarter (“Operating and Personnel Payments”). We also paid certain costs and expenses of RPM. After the Internalization, we no longer pay Operating and Personnel Payments 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 condensed consolidated statements of operations. Total operating and personnel payments recognized in the second quarter and first six months of 2025 were $ 23.8 million and $ 113.6 million, respectively. Total operating and personnel payments recognized in the second quarter and first six months of 2024 were $ 41.1 million and $ 89.4 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 the second quarter and first six months of 2025, we did not recognize material income related to this agreement. 31 ROYALTY PHARMA PLC NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Distributions Payable to Non-Controlling Interests The Distributions payable to 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 June 30, 2025 As of December 31, 2024 Payable to Founder $ 808 $ — Payable to Legacy Investors Partnerships 97,389 75,811 Total distributions payable to non-controlling interests $ 98,197 $ 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 June 30, 2025 and December 31, 2024, the financial royalty asset of $ 27.6 million and $ 44.7 million, respectively, on the condensed consolidated balance sheets represented only our right to the future payment streams acquired from BMS. Other Transactions 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. Henry Fernandez, the lead independent director of our board of directors, serves as the chairman and chief executive officer of MSCI. On April 16, 2021, we entered into an agreement with MSCI with an initial term of seven years to develop thematic life sciences indexes. In return, we will receive a percentage of MSCI’s revenues from those indexes. No amounts were due from MSCI as of June 30, 2025 and December 31, 2024. The financial impact associated with this transaction has not been material to date. 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 June 30, 2025 and December 31, 2024, respectively. Each Continuing Investor Partnership pays 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. 32 Item 2. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations, cash flows, other changes in financial condition and business performance. MD&A is provided as a supplement to, and should be read in conjunction with, our 2024 Annual Report on Form 10-K and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Special Note Regarding Forward-Looking Statements included elsewhere in this Quarterly Report on Form 10-Q and in Part II, Item 1A. Risk Factors. Royalty Pharma plc is a public limited company that is incorporated under the laws of England and Wales and is a holding company. “Royalty Pharma,” the “Company,” “we,” “us” and “our” refer to Royalty Pharma plc and its subsidiaries on a consolidated basis. 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. Business Overview We are the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. Since our founding in 1996, we have been pioneers in the royalty market, collaborating with innovators from academic institutions, research hospitals and not-for-profits through small and mid-cap biotechnology companies to leading global pharmaceutical companies. We have assembled a portfolio of royalties which entitles us to payments based directly on the top-line sales of many of the industry’s leading therapies, which includes royalties on more than 35 commercial products, including Vertex’s Trikafta, GSK’s Trelegy, Roche’s Evrysdi, Johnson & Johnson’s Tremfya, Biogen’s Tysabri and Spinraza, Servier’s Voranigo, AbbVie and Johnson & Johnson’s Imbruvica, Astellas and Pfizer’s Xtandi, Pfizer’s Nurtec ODT, Gilead’s Trodelvy, among others, and 16 development-stage product candidates. We fund innovation in the biopharmaceutical industry both directly and indirectly - directly when we partner with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties, and indirectly when we acquire existing royalties from the original innovators. Background and Format of Presentation RP Holdings is owned by Royalty Pharma plc and, indirectly, by various partnerships (the “Continuing Investors Partnerships”) and, in addition, post-Internalization (as defined below), 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 subsidiary 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”). 33 Prior to Internalization (as defined below), 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 “Management Agreement”). 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 (as defined below). 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 (such transaction, the “Internalization”). The Sellers include 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 wholly-owned subsidiary of RP Holdings, in connection with the Internalization. We completed the acquisition of RP Manager on May 16, 2025. Understanding Our Financial Reporting Our portfolio of investments contains royalties and royalty-like terms held through different forms or instruments. Most of the royalties we acquire are treated as investments in cash flow streams and are classified as financial assets measured under the effective interest method in accordance with generally accepted accounting principles in the United States (“GAAP”). Under this accounting methodology, we calculate the effective interest rate on each financial royalty asset using a forecast of the expected cash flows to be received over the life of the financial royalty asset relative to the initial acquisition price. The yield, which is calculated at the end of each reporting period and applied prospectively, is then recognized via accretion into our income at the effective rate of return over the expected life of the financial royalty asset. The measurement of income from our financial royalty assets requires significant judgments and estimates, including management’s judgment in forecasting the expected future cash flows of the underlying royalties and the expected duration of each financial royalty asset. Our cash flow forecasts are updated each reporting period primarily using sell-side equity research analysts’ consensus sales estimates. We then calculate our expected royalty receipts by applying our royalty terms to these consensus sales forecasts. As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the condensed consolidated statements of operations as non-cash provision expense. If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a non-cash credit to the provision, or provision income. As a result of the non-cash charges associated with applying the effective interest method accounting methodology to our financial royalty assets, our condensed consolidated statements of operations activity can be volatile and unpredictable. Small declines in sell-side equity research analysts’ consensus sales forecasts over a long time horizon can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future. For example, in late 2014 we acquired the cystic fibrosis franchise and shortly after, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expense in our condensed consolidated statements of operations. Over the course of the next 10 quarters, we continued to recognize non-cash provision expense because of these changes in sales forecasts, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017. With the approval of Vertex’s Trikafta, in October 2019, sell-side equity research analysts’ consensus sales forecasts increased to reflect the larger addressable market and the extension of the expected duration of the Trikafta royalty, resulting in the reversal of the remaining $1.10 billion cumulative allowance. The recognition of the associated non-cash provision income of $1.10 billion in 2019 was not tied to royalty receipts, but rather to the increase in sales forecasts due to the U.S. Food and Drug Administration (“FDA”) approval of Trikafta. This example illustrates the volatility caused by our accounting model in our condensed consolidated statements of operations. We believe there is no direct correlation between income from financial royalty assets and royalty receipts due to the nature of the accounting methodology applied for financial royalty assets. Further, income from financial royalty assets and the provision for changes in expected cash flows related to these financial royalty assets can be volatile and unpredictable. 34 Our operations have historically been financed primarily with cash flows generated by our royalties. Given the importance of cash flows and their predictability to management’s operation of the business, management uses Portfolio Receipts (as defined below) as a primary measure of our operating performance. See “ — Portfolio Overview” for additional discussion regarding Portfolio Receipts. Understanding Our Results of Operations We report non-controlling interests related to the portion of ownership interests of consolidated subsidiaries not owned by us and which are attributable to: 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. The value of this non-controlling interest will continue to decline over time as the assets in Old RPI expire. The Legacy Investors Partnerships are referred to as the “legacy non-controlling interests.” 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”). RP Holdings Class B Interests are exchangeable into our Class A ordinary shares. As the Continuing Investors Partnerships conduct exchanges, the Continuing Investors Partnerships’ ownership in RP Holdings decreases and the value of this non-controlling interest decreases. 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 (“Founder’s Equity”). Equity Performance Awards (“EPAs”) represent 20% of the Net Economic Profit (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 portfolio 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”). Prior to the Internalization, Founder’s Equity, which included the Employee EPAs, was accounted for as an equity transaction and recorded as non-controlling interest. Following the Internalization, Founder’s Equity continues to be accounted as non-controlling interest. 4. The Sellers’ 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, which are subject to vesting conditions, to Sellers (the “Holders of RP Holdings Class E Interests”) as part of the transaction considerations. Upon vesting, the RP Holdings Class E Interests are exchangeable on a one-for-one basis for Class A ordinary shares. Once exchanged, the value of this non-controlling interest decreases. The Continuing Investors Partnerships, Founder’s Equity and Holders of RP Holdings Class E Interests, collectively are referred to as the “continuing non-controlling interests.” Total income and other revenues Total income and other revenues is primarily comprised of interest income from our financial royalty assets and royalty income generally arising from successful commercialization of products developed through research and development (“R&D”) funding arrangements. Most of our royalties are classified as financial assets as our ownership rights are generally protective and passive in nature. In certain instances, we may acquire a royalty that includes more substantial rights or ownership of the underlying intellectual property, we classify such royalties as intangible assets and recognize revenue from these intangible royalty assets. 35 The royalty payors that accounted for greater than 10% of our total income and other revenues are shown in the table below: For the Three Months Ended June 30, For the Six Months Ended June 30, Royalty Payor Royalty 2025 2024 2025 2024 Vertex Cystic fibrosis franchise 35 % 36 % 35 % 37 % Roche Evrysdi, Mircera * 10 % * 10 % *Represents less than 10%. Income from financial royalty assets Our financial royalty assets represent investments in cash flow streams with yield components that most closely resemble loans measured at amortized cost under the effective interest method. We calculate the effective interest rate using forecasted expected cash flows to be received over the life of the royalty asset relative to the initial acquisition price. Interest income is recognized at the effective rate of return over the expected life of the asset, which is calculated at the end of each reporting period and applied prospectively. As changes in sell-side equity research analysts’ consensus sales estimates are updated on a quarterly basis, the effective rate of return changes. For example, if sell-side equity research analysts’ consensus sales forecasts increase, the yield to derive income on a financial royalty asset will increase and result in higher income for subsequent periods. Variables affecting the recognition of interest income from financial royalty assets under the prospective effective interest method include any one of the following: (1) additional acquisitions, (2) changes in expected cash flows of the underlying pharmaceutical products, derived primarily from sell-side equity research analysts’ consensus sales forecasts, (3) regulatory approval of additional indications which leads to new cash flow streams, (4) changes to the estimated duration of the royalty (e.g., patent expiration date), (5) changes in amounts and timing of projected royalty receipts and milestone payments and (6) changes in the portion of sales that are subject to the royalty, which is referred to as royalty bearing sales. Our financial royalty assets are directly linked to sales of underlying pharmaceutical products whose life cycle typically peaks at a point in time, followed frequently by declining sales trends due to the entry of generic competition, resulting in natural declines in the asset balance and periodic interest income over the life of our royalties. The recognition of interest income from royalties requires management to make estimates and assumptions around many factors, including those impacting the variables noted above. Other royalty income and revenues Other royalty income and revenues primarily includes income from financial royalty assets that have been fully amortized and income from synthetic royalties and milestones arising out of R&D funding arrangements. Occasionally, a royalty asset may be amortized on an accelerated basis due to collectability concerns, which, if resolved, may result in future cash collections when no financial royalty asset remains. Similarly, we may continue to collect royalties on a fully amortized financial royalty asset beyond the estimated duration. In each scenario where a financial royalty asset has been fully amortized, income from such royalty is recognized as Other royalty income and revenues . Other royalty income and revenues also includes revenues from intangible royalty assets and income from royalties that are recorded at fair value. Provision for changes in expected cash flows from financial royalty assets The Provision for changes in expected cash flows from financial royalty assets includes the following: • non-cash expense or income related to the current period activity resulting from adjustments to the cumulative allowance for changes in expected cash flows; and • non-cash expense or income related to the provision for current expected credit losses, which reflects the activity for the period, primarily due to new financial royalty assets with limited protective rights and changes to cash flow estimates for financial royalty assets with limited protective rights. 36 As discussed above, income is accreted on our financial royalty assets using the effective interest method. As we update our forecasted cash flows on a periodic basis and recalculate the present value of the remaining future cash flows, any shortfall when compared to the carrying value of the financial royalty asset is recorded directly in the condensed consolidated statements of operations through the line item Provision for changes in expected cash flows from financial royalty assets . If, in a subsequent period, there is an increase in expected cash flows or if actual cash flows are greater than cash flows previously expected, we reverse the provision expense previously recorded in part or in full by recording a credit to the provision, or provision income. The same variables and management’s estimates affecting the recognition of interest income on our financial royalty assets noted above also directly impact the provision. Provision for credit losses on unfunded commitments