10-Q – 2026-08-05 – rprx-20260630.htm

For the Three Months Ended June 30, Change For the Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
Cystic fibrosis franchise $ 214,309  $ 203,466  10,843  5.3  $ 426,290  $ 398,581  27,709  7.0 
Evrysdi 58,817  48,584  10,233  21.1  114,532  100,361  14,171  14.1 
Tremfya 65,780  35,923  29,857  83.1  112,470  74,048  38,422  51.9 
Voranigo 44,487  39,190  5,297  13.5  88,278  69,716  18,562  26.6 
Trelegy 40,674  38,629  2,045  5.3  79,745  73,406  6,339  8.6 
Tysabri 28,680  29,818  (1,138) (3.8) 55,648  61,145  (5,497) (9.0)
Other products 185,280  154,808  30,472  19.7  356,056  312,651  43,405  13.9 
Total income from financial royalty assets $ 638,027   $ 550,418   87,609   15.9  $ 1,233,019   $ 1,089,908   143,111   13.1 

Three months ended June 30, 2026 and 2025

Income from financial royalty assets increased by $87.6 million, or 15.9%, in the second quarter of 2026 as compared to the second quarter of 2025, primarily driven by an increase in interest income from Tremfya and the cystic fibrosis franchise, as well as $27.6 million of interest income from Imdelltra, which was acquired in the third quarter of 2025 and is reflected within other products in the table above. The increase in income from Tremfya was primarily driven by an increase in sell-side equity research analysts’ consensus sales forecasts. The increase in income from the cystic fibrosis franchise was primarily driven by higher interest income following the reversal of the allowance for changes in expected cash flows related to the FDA approval of Alyftrek in the fourth quarter of 2024.

Six months ended June 30, 2026 and 2025

Income from financial royalty assets increased by $143.1 million, or 13.1%, in the first six months of 2026 as compared to the first six months of 2025, primarily driven by $46.9 million of interest income from Imdelltra, which was acquired in the third quarter of 2025 and is reflected within other products in the table above, as well as increases in interest income from Tremfya and the cystic fibrosis franchise. The increase in income from Tremfya was primarily driven by an increase in sell-side equity research analysts’ consensus sales forecasts. The increase in income from the cystic fibrosis franchise was primarily driven by higher interest income following the reversal of the allowance for changes in expected cash flows related to the FDA approval of Alyftrek in the fourth quarter of 2024.

Other royalty income and revenues

Three months ended June 30, 2026 and 2025

Other royalty income and revenues increased by $7.9 million or 27.9% in the second quarter of 2026 as compared to the second quarter of 2025, primarily driven by the growth in Trodelvy sales.

Six months ended June 30, 2026 and 2025

Other royalty income and revenues increased by $14.7 million, or 25.8%, in the first six months of 2026 as compared to the first six months of 2025, primarily driven by the growth in Trodelvy sales.

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Provision for changes in expected cash flows from financial royalty assets

Provision activity is a combination of income and expense items. The provision breakdown by royalty asset (exclusive of the provision for current expected credit losses) based on the largest contributors to each period’s provision income or expense (in thousands) is as follows:

For the Three Months Ended June 30, 2026 For the Three Months Ended June 30, 2025
Royalty Royalty
Adstiladrin $ 130,005  Evrysdi $ (170,534)
Cystic fibrosis franchise 109,059  Xtandi (37,609)
Orladeyo 36,775  Tremfya (25,114)
Xtandi 19,180  Tysabri 30,466 
Tysabri (63,160) Promacta 46,187 
Other 28,395  Other (39,423)
Total provision, exclusive of provision for credit losses 260,254   Total provision, exclusive of provision for credit losses (196,027)
Provision for current expected credit losses 7,962  Provision for current expected credit losses (7,911)
Total provision $ 268,216   Total provision $ (203,938)

For the Six Months Ended June 30, 2026 For the Six Months Ended June 30, 2025
Royalty Royalty
Adstiladrin $ 186,231  Cystic fibrosis franchise $ (259,353)
Cystic fibrosis franchise 109,059  Trelegy (66,647)
Orladeyo 36,775  Xtandi (58,408)
Evrysdi (89,080) Evrysdi (48,233)
Tysabri (154,548) Tysabri 49,033 
Other (18,616) Other 73,947 
Total provision, exclusive of provision for credit losses 69,821   Total provision, exclusive of provision for credit losses (309,661)
Provision for current expected credit losses 911  Provision for current expected credit losses (21,417)
Total provision $ 70,732   Total provision $ (331,078)

Three months ended June 30, 2026 and 2025

In the second quarter of 2026, we recorded provision expense of $268.2 million, comprised of $260.3 million in provision expense for changes in expected cash flows and $8.0 million in provision expense for current expected credit losses. We recorded provision expense for changes in expected cash flows primarily related to Adstiladrin, due to a decline in its sales forecast. In addition, we recorded provision expenses related to the cystic fibrosis franchise, due to an increase in the estimated sales forecast attributable to Alyftrek based on consensus estimates and the conservative assumption that royalties will only be collected on the tezacaftor component of Alyftrek and not on the deuterated ivacaftor component. Although we believe that the deuterated ivacaftor component of Alyftrek is the same as ivacaftor and is therefore royalty-bearing, beginning in the second quarter of 2025, we did not receive from Vertex the full amount of royalty receipts on Alyftrek net sales to which we believe that we are contractually entitled. If deuterated ivacaftor is determined to be royalty-bearing, we may recognize provision income in our results of operations at that time. The provision expense was partially offset by provision income related to Tysabri due to an increase in sell-side equity research analysts’ consensus sales forecasts.

In the second quarter of 2025, we recorded provision income of $203.9 million, comprised of $196.0 million in provision income for changes in expected cash flows and $7.9 million in provision income for current expected credit losses. We recorded provision income for changes in expected cash flows primarily related to Evrysdi and Xtandi due to increases in sell-side equity research analysts’ consensus sales forecasts.

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Six months ended June 30, 2026 and 2025

In the first six months of 2026, we recorded provision expense of $70.7 million, comprised of $69.8 million in provision expense for changes in expected cash flows and $0.9 million in provision expense for current expected credit losses. We recorded provision expense for changes in expected cash flows primarily related to Adstiladrin due to decline in its sales forecast. In addition, we recorded provision expenses related to the cystic fibrosis franchise, due to an increase in the estimated sales forecast attributable to Alyftrek based on consensus estimates and the conservative assumption that royalties will only be collected on the tezacaftor component of Alyftrek and not on the deuterated ivacaftor component. Although we believe that the deuterated ivacaftor component of Alyftrek is the same as ivacaftor and is therefore royalty-bearing, beginning in the second quarter of 2025, we did not receive from Vertex the full amount of royalty receipts on Alyftrek net sales to which we believe that we are contractually entitled. If deuterated ivacaftor is determined to be royalty-bearing, we may recognize provision income in our results of operations at that time. The provision expense was partially offset by provision income related to Tysabri and Evrysdi due to increases in sell-side equity research analysts’ consensus sales forecasts.

In the first six months of 2025, we recorded provision income of $331.1 million, comprised of $309.7 million in provision income for changes in expected cash flows and $21.4 million in provision income for current expected credit losses. We recorded provision income for changes in expected cash flows primarily related to the cystic fibrosis franchise and Trelegy due to increases in sell-side equity research analysts’ consensus sales forecasts. The provision income for changes in expected cash flows was partially offset by provision expense related to Tysabri due to declines in sell-side equity research analysts’ consensus sales forecasts.

Provision for credit losses on unfunded commitments

Three months ended June 30, 2026 and 2025

Provision for credit losses on unfunded commitments decreased by $79.5 million, or 85.9%, in the second quarter of 2026 as compared to the second quarter of 2025. In the second quarter of 2025, we entered into a funding arrangement with Revolution Medicines and recognized provision expense for credit losses of $92.5 million related to the unfunded portions of the arrangement. In the second quarter of 2026, we did not enter into any new funding arrangement that required a provision for credit losses on the unfunded portions.

Six months ended June 30, 2026 and 2025

Provision for credit losses on unfunded commitments decreased by $83.2 million, or 89.9% in the first six months of 2026 as compared to the first six months of 2025. In the first six months of 2025, we entered into a funding arrangement with Revolution Medicines and recognized provision expense for credit losses of $92.5 million related to the unfunded portions of the arrangement. In the first six months of 2026, we did not enter into any new funding arrangement that required a provision for credit losses on the unfunded portions.

R&D funding expense

Three months ended June 30, 2026 and 2025

R&D funding expense decreased by $202.6 million, or 67.4%, in the second quarter of 2026 as compared to the second quarter of 2025, primarily driven by R&D funding of $250.0 million related to daraxonrasib recorded in the second quarter of 2025.

Six months ended June 30, 2026 and 2025

R&D funding expense decreased by $213.4 million, or 60.8%, in the first six months of 2026 as compared to the first six months of 2025, primarily driven by R&D funding of $250.0 million related to daraxonrasib recorded in the second quarter of 2025.

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G&A expenses

Three months ended June 30, 2026 and 2025

G&A expenses decreased by $17.9 million, or 9.9%, in the second quarter of 2026 as compared to the second quarter of 2025. In the second quarter of 2025, G&A expenses were higher, primarily driven by $15.0 million of acquisition-related costs for the Internalization and $23.8 million of cash-based Management Fees recognized prior to the Internalization, which was completed in May 2025. The decrease in period-over-period G&A expenses was partially offset by higher share-based compensation expense that began to be recognized following the Internalization.

In the second quarter of 2026, we recognized $123.3 million of employee compensation expense, which included $106.5 million of share-based compensation expense and $16.7 million of cash-based compensation expense. In the second quarter of 2025, prior to the Internalization, we recognized $23.8 million of cash-based Management Fees, and following the Internalization, we recognized $108.5 million of employee compensation expense, which included $90.1 million of share-based compensation expense and $18.3 million of cash-based compensation expense. See Note 4–Share-Based Compensation for additional information.

Six months ended June 30, 2026 and 2025

G&A expenses increased by $30.9 million, or 10.6%, in the first six months of 2026 as compared to the first six months of 2025, primarily driven by higher share-based compensation expense recognized following the Internalization, which was completed in May 2025. The increase in period-over-period G&A expenses was partially offset by the absence of $28.7 million of acquisition-related costs for the Internalization in the prior period and the elimination of Management Fees following the Internalization.

In the first six months of 2026, we recognized $261.4 million of employee compensation expense, which included $227.9 million of share-based compensation expense and $33.6 million of cash-based compensation expense. In the first six months of 2025, prior to the Internalization, we recognized $113.6 million of cash-based Management Fees, and following the Internalization, we recognized $108.5 million of employee compensation expense, which included $90.1 million of share-based compensation expense and $18.3 million of cash-based compensation expense. See Note 4–Share-Based Compensation for additional information.

Financial royalty asset impairment

Three months ended June 30, 2026 and 2025

We did not recognize impairment charges in the second quarter of 2026 or 2025.

Six months ended June 30, 2026 and 2025

We recognized a financial royalty asset impairment charge of $69.4 million in the first six months of 2026 related to Tazverik following announcements by Ipsen and Eisai in March 2026 of the voluntary withdrawal of Tazverik across all indications and markets. We did not recognize impairment charges in the first six months of 2025.

Equity in earnings of equity method investees

Three months ended June 30, 2026 and 2025

Equity in earnings of equity method investees was relatively flat in the second quarter of 2026 as compared to the second quarter of 2025.

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Six months ended June 30, 2026 and 2025

Equity in earnings of equity method investees increased by $16.7 million, or 182.8%, in the first six months of 2026 as compared to the first six months of 2025. Equity in earnings of equity method investees in the first six months of 2026 was primarily driven by a $15.2 million gain related to our portion of the Airsupra sales-based milestone that the Avillion Entities received from AstraZeneca. Equity in earnings of equity method investees in the first six months of 2025 was primarily driven by an income allocation from the Legacy SLP Interest of $10.6 million.

Interest expense

Three months ended June 30, 2026 and 2025

Interest expense increased by $24.9 million, or 36.3%, in the second quarter of 2026 as compared to the second quarter of 2025, primarily driven by the issuance of $2.0 billion of senior unsecured notes in September 2025.

Six months ended June 30, 2026 and 2025

Interest expense increased by $53.4 million, or 39.9%, in the first six months of 2026 as compared to the first six months of 2025, primarily driven by the issuance of $2.0 billion of senior unsecured notes in September 2025 and the $380 million term loan that we assumed as part of the Internalization. The weighted average coupon rate on our senior unsecured notes outstanding as of June 30, 2026 and 2025 was 3.75% and 3.06%, respectively.

Refer to the “Liquidity and Capital Resources” section for additional discussion of our debt financing arrangements.

Other (income)/expense, net

Three months ended June 30, 2026 and 2025

Other income, net of $37.9 million in the second quarter of 2026 was primarily comprised of $69.2 million of gains on equity securities and $5.1 million of interest income earned on cash and cash equivalents, partially offset by $34.9 million of losses on available for sale debt securities due to changes in fair value of the Cytokinetics Funding Arrangements.

Other expense, net of $51.2 million in the second quarter of 2025 was primarily comprised of $30.6 million of losses on equity securities and $27.4 million of losses on available for sale debt securities due to changes in fair value of the Cytokinetics Funding Arrangements, partially offset by $8.3 million of interest income earned on cash and cash equivalents.

Six months ended June 30, 2026 and 2025

Other income, net of $15.1 million in the first six months of 2026 was primarily comprised of $49.0 million of gains on equity securities and $11.4 million of interest income earned on cash and cash equivalents, partially offset by $41.6 million of losses on available for sale debt securities due to changes in fair value of the Cytokinetics Funding Arrangements.

Other expense, net of $92.1 million in the first six months of 2025 was primarily comprised of $76.4 million of losses on equity securities and $30.7 million of losses on available for sale debt securities primarily driven by the changes in the fair value of the Cytokinetics Funding Arrangements, partially offset by $19.6 million of interest income on cash and cash equivalents.

Net income attributable to non-controlling interests

Three months ended June 30, 2026 and 2025

Net income attributable to Legacy Investors Partnerships was relatively flat in the second quarter of 2026 as compared to the second quarter of 2025.

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Net income attributable to Continuing Investors Partnerships decreased by $5.5 million, or 56.4% in the second quarter of 2026 as compared to the second quarter of 2025, primarily driven by lower net income attributable to RP Holdings as a result of provision expense recognized in 2026 as compared to provision income recognized in 2025.

Net income attributable to Founder’s Equity increased by $7.0 million in the second quarter of 2026 as compared to the second quarter of 2025, driven by an increase in EPAs attributable to Founder’s Equity as a result of higher Net Economic Profit, reflecting higher cash receipts from portfolio investments.

Net income attributable to RP Holdings Class E Interests was relatively flat in the second quarter of 2026 as compared to the second quarter of 2025. We issued 24.5 million RP Holdings Class E Interests in connection with the Internalization in the second quarter of 2025.

Six months ended June 30, 2026 and 2025

Net income attributable to Legacy Investors Partnerships decreased by $12.1 million, or 9.6% in the first six months of 2026 as compared to the first six months of 2025, primarily driven by lower net income attributable to Old RPI as a result of impairment charges related to Tazverik.

Net income attributable to Continuing Investors Partnerships decreased by $4.2 million, or 4.8% in the first six months of 2026 as compared to the first six months of 2025, primarily driven by a decline in the Continuing Investors Partnerships’ ownership of RP Holding due to the ongoing exchanges by investors in the Continuing Investors Partnerships who indirectly own RP Holdings Class B Interests for our Class A ordinary shares.

Net income attributable to Founder’s Equity decreased by $18.6 million, or 43.9%, in the first six months of 2026 as compared to the first six months of 2025, primarily driven by the Internalization completed in May 2025. Prior to the Internalization, net income attributable to Founder’s Equity included both Mr. Legorreta’s retained EPAs and employee participation in the EPAs. In the first six months of 2026, Founder’s Equity includes only Mr. Legorreta’s retained EPAs.

Net income attributable to RP Holdings Class E Interests increased by $16.5 million in the first six months of 2026 as compared to the first six months of 2025. We issued 24.5 million RP Holdings Class E Interests in connection with the Internalization in the second quarter of 2025.

Portfolio Overview

Our business model is different from that of traditional operating companies in the biopharmaceutical industry. Our operating performance is a function of our liquidity as our operations have historically been financed primarily with cash flows generated by our royalties. We use the cash generated by our existing royalties to fund investments in new royalties. We consider a variety of metrics in assessing the performance of our business. Portfolio Receipts is a key performance metric that represents our ability to generate cash from our portfolio investments, the primary source of capital that we can deploy to make new portfolio investments. Portfolio Receipts also enables management to better analyze our liquidity and long-term growth prospects by providing a more granular product-by-product presentation of the underlying cash generation of our royalty investments.

Portfolio Receipts is defined as the sum of royalty receipts and milestones and other contractual receipts. Royalty receipts include variable payments based on sales of products, net of contractual payments to the legacy non-controlling interests, that are attributed to us (“Royalty Receipts”). Milestones and other contractual receipts include sales-based or regulatory milestone payments and other fixed contractual receipts, net of contractual payments to the legacy non-controlling interests, that are attributed to us. Portfolio Receipts does not include royalty receipts and milestones and other contractual receipts that were received on an accelerated basis under the terms of the agreement governing the receipt or payment. Portfolio Receipts also does not include proceeds from equity securities or proceeds from purchases and sales of marketable securities, both of which are not central to our fundamental business strategy.

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Portfolio Receipts is calculated as the sum of the following line items from our GAAP condensed consolidated statements of cash flows: Cash collections from financial royalty assets , Cash collections from intangible royalty assets , Other royalty cash collections , Proceeds from available for sale debt securities and Distributions from equity method investees less Distributions to legacy non-controlling interests - Portfolio Receipts , which represent contractual distributions of Royalty Receipts, milestones and other contractual receipts to the Legacy Investors Partnerships.

Our portfolio consists of royalties on more than 35 marketed therapies and 19 development-stage product candidates. The therapies in our portfolio address therapeutic areas such as rare diseases, neuroscience, oncology, hematology, immunology, respiratory and diabetes, and are delivered to patients across both primary and specialty care settings. The table below shows Portfolio Receipts, including Royalty Receipts by product and milestones and other contractual receipts, in order of contribution to total Royalty Receipts for the first six months of 2026 (in thousands):

Products
Marketer(s) Therapeutic Area For the Three Months Ended June 30, Change For the Six Months Ended June 30, Change
2026 2025 $ % 2026 2025 $ %
Cystic fibrosis franchise (1)
Vertex Rare disease $ 193,941  $ 193,818  123  0.1  $ 447,195  $ 443,548  3,647  0.8 
Trelegy GSK Respiratory 58,232  56,618  1,614  2.9  155,913  141,853  14,060  9.9 
Evrysdi Roche Rare disease 46,644  32,895  13,749  41.8  126,301  85,550  40,751  47.6 
Tysabri Biogen Neuroscience 66,527  55,844  10,683  19.1  125,865  116,910  8,955  7.7 
Tremfya Johnson & Johnson Immunology 56,667  36,958  19,709  53.3  120,651  72,606  48,045  66.2 
Xtandi Pfizer, Astellas Oncology 44,495  41,861  2,634  6.3  95,523  94,339  1,184  1.3 
Voranigo Servier Oncology 45,602  26,495  19,107  72.1  92,441  46,036  46,405  100.8 
Imbruvica AbbVie, Johnson & Johnson Oncology 36,408  43,583  (7,175) (16.5) 74,320  89,435  (15,115) (16.9)
Cabometyx/Cometriq Exelixis, Ipsen, Takeda Oncology 22,895  20,365  2,530  12.4  45,488  41,033  4,455  10.9 
Imdelltra Amgen Oncology 16,582  —  16,582  n/a 33,318  —  33,318  n/a
Trodelvy Gilead Oncology 13,513  9,952  3,561  35.8  26,943  22,557  4,386  19.4 
Promacta Novartis Hematology 8,050  32,639  (24,589) (75.3) 25,233  76,828  (51,595) (67.2)
Spinraza Biogen Rare disease 10,697  12,002  (1,305) (10.9) 22,387  24,894  (2,507) (10.1)
Amvuttra Alnylam Rare disease 8,899  —  8,899  n/a 17,165  —  17,165  n/a
Other products (2)
138,777  108,675  30,102  27.7  246,363  204,395  41,968  20.5 
Royalty Receipts
$ 767,929  $ 671,705  96,224  14.3  $ 1,655,106  $ 1,459,984  195,122  13.4 
Milestones and other contractual receipts
5,047  55,759  (50,712) (90.9) 43,234  106,772  (63,538) (59.5)
Portfolio Receipts (3)
$ 772,976   $ 727,464   45,512   6.3  $ 1,698,340   $ 1,566,756   131,584   8.4 

(1) The cystic fibrosis franchise includes the following approved products: Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek.
(2) Other products primarily include Royalty Receipts on the following products: Crysvita, Erleada, Farxiga/Onglyza, IDHIFA, Nesina, Niktimvo, Nurtec ODT, Orladeyo, Prevymis, Soliqua and distributions from the Legacy SLP Interest, which are presented as Distributions from equity method investees on the condensed consolidated statements of cash flows.
(3) Portfolio Receipts for 2025 does not include the $511 million of proceeds from our sale of the MorphoSys Development Funding Bonds because it was treated as an asset sale.

Analysis of Portfolio Receipts

The key drivers of Portfolio Receipts are discussed below:

• Cystic fibrosis franchise – Royalty Receipts from the cystic fibrosis franchise, including Kalydeco, Orkambi, Symdeko/Symkevi, Trikafta/Kaftrio and Alyftrek, which is marketed by Vertex for the treatment of cystic fibrosis, increased by $3.6 million in the first six months of 2026 as compared to the first six months of 2025. Performance was relatively consistent versus the prior year period, as growth in overall cystic fibrosis franchise sales reflected a mix shift toward Alyftrek, resulting in a lower blended royalty rate.
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• Trelegy – Royalty Receipts from Trelegy, which is marketed by GSK for the maintenance treatment of chronic obstructive pulmonary disease and asthma, increased by $14.1 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by continued volume growth across all regions, reflecting patient demand, single inhaler triple therapy class growth and increased market share.

• Evrysdi – Royalty Receipts from Evrysdi, which is marketed by Roche for the treatment of spinal muscular atrophy, increased by $40.8 million in the first six months of 2026 as compared to the first six months of 2025, attributable to continued growth in Europe and tender-related buying in international markets. Additionally, Royalty Receipts benefited from the incremental royalties we acquired in the fourth quarter of 2025.

• Tysabri – Royalty Receipts from Tysabri, which is marketed by Biogen for the treatment of multiple sclerosis, increased by $9.0 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by favorable channel dynamics globally and pricing adjustments in the United States, partially offset by increased competition in the rest of world.

• Tremfya – Royalty Receipts from Tremfya, which is marketed by Johnson & Johnson for the treatment of plaque psoriasis, active psoriatic arthritis and inflammatory bowel disease, increased by $48.0 million in the first six months of 2026 as compared to the first six months of 2025, driven by market share gains and market growth, including strong uptake across recently launched inflammatory bowel disease indications.

• Xtandi – Royalty Receipts from Xtandi, which is marketed by Pfizer and Astellas for the treatment of prostate cancer, increased by $1.2 million in the first six months of 2026 as compared to the first six months of 2025, relatively consistent with the prior year period.

• Voranigo – Royalty Receipts from Voranigo, which is marketed by Servier for the treatment of low-grade glioma, increased by $46.4 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by its strong launch in the United States.

• Imbruvica – Royalty Receipts from Imbruvica, which is marketed by AbbVie and Johnson & Johnson for the treatment of blood cancers and chronic graft versus host disease, decreased by $15.1 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by continued competitive pressures.

• Cabometyx/Cometriq – Royalty Receipts from Cabometyx/Cometriq, which is marketed by Exelixis, Ipsen and Takeda, primarily for the treatment of advanced renal cell carcinoma, hepatocellular carcinoma and neuroendocrine tumors, increased by $4.5 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by continued demand growth from uptake in combination with Opdivo in first-line renal cell carcinoma and previously treated advanced neuroendocrine tumors.

• Imdelltra – Royalty Receipts from Imdelltra, which is marketed by Amgen for the treatment of extensive-stage small cell lung cancer were $33.3 million in the first six months of 2026, primarily driven by its strong global launch as it establishes a new standard of care in second-line extensive stage small cell lung cancer. We acquired the Imdelltra royalty in the third quarter of 2025 and began receiving Royalty Receipts in the fourth quarter of 2025.

• Trodelvy – Royalty Receipts from Trodelvy, which is marketed by Gilead for the treatment of metastatic triple-negative breast cancer and pre-treated hormone receptor-positive, human epidermal growth factor receptor 2 (“HER2”)-negative metastatic breast cancer, increased by $4.4 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by higher demand.

• Promacta – Royalty Receipts from Promacta, which is marketed by Novartis for the treatment of chronic immune thrombocytopenia purpura and aplastic anemia, decreased by $51.6 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by generic competition.

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• Spinraza – Royalty Receipts from Spinraza, which is marketed by Biogen for the treatment of spinal muscular atrophy, decreased by $2.5 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by lower U.S. demand and the timing of shipments in certain international markets, as well as Spinraza achieving the $1.5 billion sales cap earlier in 2025 than in the prior year.

• Amvuttra – Royalty Receipts from Amvuttra, which is marketed by Alnylam for the treatment of transthyretin (“TTR”) amyloidosis with cardiomyopathy and for hereditary TTR amyloidosis with polyneuropathy were $17.2 million in the first six months of 2026, primarily driven by continued growth in U.S. patient demand following its second quarter 2025 launch in TTR amyloidosis cardiomyopathy. We acquired the Amvuttra royalty in the fourth quarter of 2025 and began receiving Royalty Receipts in the first quarter of 2026.

• Other products – Royalty Receipts from other products increased by $42.0 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by strong contributions from Niktimvo and Yorvipath, partially offset by the expiration of the Farxiga and Soliqua royalties.

• Milestones and other contractual receipts decreased by $63.5 million in the first six months of 2026 as compared to the first six months of 2025, primarily attributable to a one-time distribution related to the Legacy SLP Interest and the quarterly repayment on the MorphoSys Development Funding Bonds, both received in the prior year period. Current period Milestones and other contractual receipts include payments for Airsupra, Bosulif and Cytokinetics.

Key Developments Relating to Our Portfolio

Recent key developments related to products in our portfolio are discussed below:

Commercial Products

• Jideytro. In July 2026, GSK announced that the FDA approved Jideytro (formerly known as zidesamtinib), a ROS proto-oncogene 1 (“ROS1”)-selective inhibitor, for the treatment of adult patients with locally advanced or metastatic ROS1-positive non-small cell lung cancer who have received a prior ROS1 kinase inhibitor.

• Trodelvy. In June 2026, Gilead announced that the FDA approved Trodelvy for the first-line treatment of certain patients with metastatic triple-negative breast cancer.

In June 2026, Gilead announced that the European Commission (“EC”) approved Trodelvy as a first-line treatment for certain patients with metastatic triple-negative breast cancer who are not candidates for PD-L1 inhibitors.

In June 2026, Gilead announced the discontinuation of the Phase 3 KEYNOTE-D46/EVOKE-03 study evaluating Trodelvy in combination with Keytruda for patients with previously untreated metastatic non-small cell lung cancer.

• Imdelltra. In June 2026, the EC approved Imdelltra for the treatment of adult patients with extensive-stage small cell lung cancer.

• Erleada. In May 2026, Johnson & Johnson announced that the Phase 3 PROTEUS study evaluating Erleada in combination with androgen deprivation therapy before and after radical prostatectomy, in patients with high-risk localized or locally advanced prostate cancer, met its primary endpoints.

• Tremfya. In May 2026, Johnson & Johnson announced that the FDA approved a supplemental Biologics License Application (“BLA”) for Tremfya to include the inhibition of progression of structural joint damage in adults with active psoriatic arthritis.

• Myqorzo. In May 2026, Cytokinetics announced positive topline results from ACACIA-HCM, the pivotal Phase 3 clinical trial of Myqorzo in patients with non-obstructive hypertrophic cardiomyopathy. The study met both dual primary endpoints, demonstrating statistically significant improvements from baseline to week 36 versus placebo.

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• Ziihera. In April 2026, Jazz Pharmaceuticals announced that the FDA accepted for filing a supplemental BLA for Ziihera, in combination regimens for the first‑line treatment of adult patients with HER2‑positive metastatic gastroesophageal adenocarcinoma, and granted Priority Review, with a Prescription Drug User Fee Act (“PDUFA”) date of August 25, 2026.

Development-Stage Product Candidates

• Daraxonrasib. In July 2026, Revolution Medicines announced that the FDA accepted for review the company’s New Drug Application (“NDA”) for daraxonrasib, an oral RAS(ON) multi-selective inhibitor, for previously treated metastatic pancreatic ductal adenocarcinoma.

In July 2026, Revolution Medicines announced that the European Medicines Agency (“EMA”) started an accelerated assessment of daraxonrasib.

In April 2026, Revolution Medicines announced positive Phase 3 results from the RASolute-302 trial evaluating daraxonrasib in patients with previously treated metastatic pancreatic cancer.

• Neladalkib. In July 2026, GSK announced that it completed the acquisition of Nuvalent for approximately $10.6 billion, including neladalkib and Jideytro (formerly known as zidesamtinib), two highly selective ROS1 and anaplastic lymphoma kinase inhibitors for the treatment of non-small cell lung cancer.

In May 2026, Nuvalent announced the FDA accepted its NDA for neladalkib for filing and granted the application Priority Review with a PDUFA date of November 27, 2026.

• TEV-’408. In July 2026, Teva Pharmaceuticals (“Teva”) announced plans to advance TEV-’408 into a Phase 2b study in patients with non-segmental vitiligo, following positive Phase 1b results.

• Deucrictibant. In July 2026, Pharvaris announced that the FDA accepted its NDA for deucrictibant immediate-release for the on-demand treatment of hereditary angioedema attacks and assigned a PDUFA date of April 23, 2027.

• Ecopipam. In June 2026, Teva announced the completion of its acquisition of Emalex Biosciences for up to $900 million, including $700 million at closing, which added ecopipam and other neuroscience therapies to its portfolio. Furthermore, Teva announced the submission of an NDA to the FDA for ecopipam for the treatment of pediatric Tourette syndrome.

• Obexelimab. In May 2026, Zenas BioPharma announced the submission of a BLA to the FDA for obexelimab for the treatment of Immunoglobulin G4-related disease.

• TEV-’749. In May 2026, Teva announced that the EMA accepted for review its Marketing Authorization Application for TEV-’749 for the treatment of schizophrenia in adults.

Investments Overview

Ongoing investment in new royalties is fundamental to the long-term prospects of our business. New investments provide a source of growth for our Royalty Receipts, supplementing growth within our existing portfolio and offsetting declines for royalties on products that have lost market exclusivity. We evaluate an array of royalty acquisition opportunities on a continuous basis and expect to continue to make acquisitions in the ordinary course of our business. We have established a strong track record of identifying, evaluating and investing in royalties tied to leading products across therapeutic areas and treatment modalities. We invest in approved products and development-stage product candidates that have generated robust proof of concept data. We invest in these therapies through the purchase of royalties, milestones and other contractual receipts by making hybrid investments and by acquiring businesses with significant existing royalty assets or the potential for the creation of such assets.

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During the first six months of 2026, we invested $876.7 million in royalties, milestones and other contractual receipts. While volatility exists in the funding of new acquisitions on a year-to-year basis due to the unpredictable timing of new investment opportunities, we have consistently deployed significant amounts of cash when measured over multi-year periods. Our approach is rooted in a highly disciplined evaluation process that is not dictated by a minimum annual investment threshold.

Summary of Acquisition Activities

• In July 2026, we acquired a portion of Neurimmune AG’s royalty interest in AstraZeneca’s cliramitug for up to $425 million, including $125 million upfront. Cliramitug is a Phase 3 first-in-class TTR-fibril-depleting antibody designed to remove amyloid deposits in patients with TTR amyloidosis with cardiomyopathy, a progressive, degenerative and fatal disease caused by misfolded proteins that accumulate in the heart.

• In March 2026, we acquired a royalty interest in Denali Therapeutics’ Avlayah upon FDA accelerated approval for $200 million. Avlayah is Denali’s lead investigational Transport Vehicle TM -enabled enzyme replacement therapy for the treatment of mucopolysaccharidosis type II (“MPS II, or Hunter syndrome”). We will make a $75 million payment upon European Medicines Agency approval if achieved by December 31, 2029.

• In March 2026, we entered into an R&D co-funding agreement with Johnson & Johnson to provide $500 million over two years for the development of JNJ‑4804, an investigational medicine for autoimmune diseases.

• In March 2026, we acquired a royalty interest in Ziihera from Zymeworks Inc. for $250 million. Ziihera, which is marketed by Jazz Pharmaceuticals and BeOne Medicines, is approved for HER2-positive metastatic biliary tract cancer and is in development for HER2-positive gastric cancer.

• In January 2026, we announced a funding agreement with Teva for TEV-’408 for up to $500 million. The agreement includes up to $75 million to co-fund a Phase 2b study for vitiligo targeted for 2026. Based on the results of this study, we have the option to provide up to an additional $425 million to co-fund the Phase 3 development program.

Liquidity and Capital Resources

Overview

Our primary source of liquidity is cash provided by operations. For the first six months of 2026 and 2025, we generated $1.4 billion and $960.1 million, respectively, in Net cash provided by operating activities . We believe that our existing capital resources, cash provided by operating activities and access to our Revolving Credit Facility (as defined below) will continue to allow us to meet our operating and working capital requirements, to fund planned strategic acquisitions and R&D funding agreements, and to meet our debt service obligations for the foreseeable future. We have historically operated at a low level of fixed operating costs. We no longer pay Management Fees following the Internalization, which comprised the majority of our cash G&A expenses historically. Our primary cash operating expenses, other than R&D funding commitments, include interest expense, employee personnel costs, rent expense and legal and professional fees.

We have access to substantial sources of funds in the capital markets and we may, from time to time, seek additional capital through a combination of additional debt or equity financings. As of June 30, 2026 and December 31, 2025, the par value of all of our outstanding borrowings was $9.2 billion, respectively. Additionally, we have up to $1.8 billion of available revolving commitments under our Revolving Credit Facility (as defined below) and up to $350.0 million of an uncommitted line of credit under our Uncommitted Credit Facility (as defined below). A summary of our borrowing activities, balances and compliance with certain debt covenants under various financing arrangements is included in Note 12–Borrowings of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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We have historically funded our investments through operating cash flows, equity contributions and debt. Our low operating costs coupled with a lack of capital expenditures and low taxes have contributed to our strong financial profile, resulting in high operating leverage and high cash flow conversion. We expect to continue funding our current and planned operating costs (excluding acquisitions) principally through our cash flow from operations and investments through cash flow and issuances of equity and debt. We have supplemented our available cash and cash equivalents on hand with attractive debt capital to fund certain strategic acquisitions.

Our ability to satisfy our working capital needs, debt service and other obligations, and to comply with the financial covenants under our financing agreements depends on our future operating performance and cash flow, which are in turn subject to prevailing economic conditions and other factors, many of which are beyond our control.

Cash Flows

The following table and analysis of cash flow changes presents a summary of our cash flow activities (in thousands):

For the Six Months Ended June 30,
2026 2025 Change
Cash provided by/(used in):

     Operating activities $ 1,446,694  $ 960,060  $ 486,634 
     Investing activities (707,587) 191,935  (899,522)
     Financing activities (545,817) (1,449,113) 903,296 

Analysis of Cash Flow Changes

Operating Activities

Cash provided by operating activities increased by $486.6 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by a decrease in development-stage funding payments, an increase in cash collections from financial royalty assets and a decrease in payments for operating and professional costs as a result of the Internalization, partially offset by higher interest payments.

Investing Activities

Cash used in investing activities in the first six months of 2026 was $707.6 million as compared to cash provided by investing activities of $191.9 million in the first six months of 2025. In the first six months of 2026, cash used in investing activities was primarily driven by cash used for acquisitions of financial royalty assets. In the first six months of 2025, cash provided by investing activities was primarily driven by proceeds from the sale of the MorphoSys Development Funding Bonds, partially offset by milestone payments and purchases of available for sale debt securities.

Financing Activities

Cash used in financing activities decreased by $903.3 million in the first six months of 2026 as compared to the first six months of 2025, primarily driven by decreases in repurchases of our Class A ordinary shares.

Sources of Capital

As of June 30, 2026 and December 31, 2025, our cash and cash equivalents totaled $812.0 million and $618.7 million, respectively. We intend to fund short-term and long-term financial obligations as they mature through cash and cash equivalents, future cash flows from operations or the issuance of additional debt. Our ability to generate cash flows from operations, issue debt or enter into financing arrangements on acceptable terms could be adversely affected if there is a material decline in the sales of the underlying pharmaceutical products in which we hold royalties, deterioration in our key financial ratios or credit ratings, or other material unfavorable changes in business conditions. Currently, we believe that we have sufficient financial flexibility to issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms to support our growth objectives.
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Borrowings

Our borrowings consisted of the following (in thousands):

Type of Borrowing
Date of Issuance Maturity As of June 30, 2026 As of December 31, 2025
Senior Unsecured Notes:
$1,000,000, 1.75% (issued at 98.284% of par) 9/2020 9/2027 $ 1,000,000  $ 1,000,000 
$500,000, 5.15% (issued at 98.758% of par) 6/2024 9/2029 500,000  500,000 
$1,000,000, 2.20% (issued at 97.760% of par) 9/2020 9/2030 1,000,000  1,000,000 
$600,000, 4.45% (issued at 98.909% of par) 9/2025 3/2031 600,000  600,000 
$600,000, 2.15% (issued at 98.263% of par) 7/2021 9/2031 600,000  600,000 
$500,000, 5.40% (issued at 97.872% of par) 6/2024 9/2034 500,000  500,000 
$900,000, 5.20% (issued at 97.989% of par) 9/2025 9/2035 900,000  900,000 
$1,000,000, 3.30% (issued at 95.556% of par) 9/2020 9/2040 1,000,000  1,000,000 
$1,000,000, 3.55% (issued at 95.306% of par) 9/2020 9/2050 1,000,000  1,000,000 
$700,000, 3.35% (issued at 97.565% of par) 7/2021 9/2051 700,000  700,000 
$500,000, 5.90% (issued at 97.617% of par) 6/2024 9/2054 500,000  500,000 
$500,000, 5.95% (issued at 95.824% of par) 9/2025 9/2055 500,000  500,000 
Term Loan See below 7/2026 380,000  380,000 
Total senior unsecured debt 9,180,000   9,180,000  
Unamortized debt discount and issuance costs (218,108) (229,083)
Total debt carrying value 8,961,892   8,950,917  
Less: Current portion of long-term debt (380,000) (380,000)
Total long-term debt $ 8,581,892   $ 8,570,917  

Senior Unsecured Notes

As of June 30, 2026, our total principal amount of senior unsecured notes outstanding was $8.8 billion (the “Notes”) with a weighted average coupon rate of 3.75%. The Notes require semi-annual interest payments. Indentures governing the Notes contain certain covenants with which w e w ere in compliance as of June 30, 2026.

Term Loan assumed from Internalization

In connection with the Internalization, RP Holdings and RP Manager were each joined as a borrower under RPM’s then existing $380 million term loan (the “Term Loan”) with Bank of America, N.A (as amended, the “Loan Agreement”). Pablo Legorreta, Legorreta Investments, LLC and Legorreta Investments II LLC are guarantors under the Term Loan. Upon the closing of the Internalization, RPM was released as a borrower under the Term Loan. In the third quarter of 2025, the Loan Agreement was amended to accelerate the maturity of the Term Loan to July 31, 2026 and decrease the applicable interest rate. Following the amendment, the Term Loan is subject to an interest rate, at our option, of either (i) the Daily SOFR plus 1.25% or (ii) Term SOFR plus 1.25%, each as defined in the Loan Agreement. Interest is payable in arrears quarterly. We made the first interest payment in the third quarter of 2025. 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. In July 2026, we repaid the Term Loan upon maturity.

Uncommitted Credit Facility

In August 2025, we entered into an uncommitted line of credit agreement with Société Générale (the “Uncommitted Credit Facility”) which provides for an aggregate borrowing capacity of up to $350.0 million for general corporate purposes within a quarter. As of June 30, 2026, there were no outstanding borrowings under the Uncommitted Credit Facility.

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Senior Unsecured Revolving Credit Facility

On May 22, 2026, RP Holdings, as borrower, entered into a Revolving Credit Agreement (the “Credit Agreement”), which refinanced and replaced in its entirety the Amended and Restated Revolving Credit Agreement, dated as of September 15, 2021, as amended. The Credit Agreement provides for a $1.8 billion unsecured revolving credit facility (the “Revolving Credit Facility”) for general corporate purposes and matures on May 22, 2031. As of June 30, 2026, we have a borrowing capacity of $1.8 billion under the Revolving Credit Facility.

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. We were in compliance with the financial covenants as of June 30, 2026.

Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that are key components of certain material covenants contained within the Credit Agreement. Noncompliance with the financial covenants under the Credit Agreement could result in our lenders requiring us to immediately repay all amounts borrowed. If we cannot satisfy these financial covenants, we would be prohibited under our Credit Agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments and acquiring and disposing of assets.

The table below presents Adjusted EBITDA and Portfolio Cash Flow, each as calculated according to its respective definition in our Credit Agreement (in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,
2026 2025 2026 2025
Portfolio Receipts $ 772,976   $ 727,464   $ 1,698,340   $ 1,566,756  
Payments for operating and professional costs (1)
(36,789) (94,026) (73,040) (195,721)
Adjusted EBITDA (non-GAAP) $ 736,187   $ 633,438   $ 1,625,300   $ 1,371,035  
Interest (paid)/received, net (369) 7,866  (167,398) (118,931)
Portfolio Cash Flow (non-GAAP) $ 735,818   $ 641,304   $ 1,457,902   $ 1,252,104  

(1) In the first six months of 2025, amount included a $33 million payment related to the Management Fees on the sale of the MorphoSys Development Funding Bonds.

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Adjusted EBITDA and Portfolio Cash Flow are non-GAAP liquidity measures that exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. We caution readers that amounts presented in accordance with our definitions of Adjusted EBITDA and Portfolio Cash Flow may not be the same as similar measures used by other companies or analysts. A reconciliation of Adjusted EBITDA and Portfolio Cash Flow to Net cash provided by operating activities , the closest GAAP measure, is presented below (in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,
2026 2025 2026 2025
Net cash provided by operating activities (GAAP) $ 728,459   $ 363,983   $ 1,446,694   $ 960,060  
Adjustments:
Proceeds from available for sale debt securities (1), (2)
4,320  2,880  8,640  15,466 
Distributions from equity method investees (2)
(13,214) 62,988  29,092  99,250 
Interest paid/(received), net (2)
369  (7,866) 167,398  118,931 
Development-stage funding payments
97,851  300,500  123,351  351,000 
Distributions to legacy non-controlling interests - Portfolio Receipts (2)
(86,147) (89,220) (164,120) (173,845)
Payments for Employee EPAs 4,549  173  14,245  173 
Adjusted EBITDA (non-GAAP) $ 736,187   $ 633,438   $ 1,625,300   $ 1,371,035  
Interest (paid)/received, net (2)
(369) 7,866  (167,398) (118,931)
Portfolio Cash Flow (non-GAAP)
$ 735,818   $ 641,304   $ 1,457,902   $ 1,252,104  

(1) Amounts include quarterly repayments on the Cytokinetics Commercial Launch Funding and a quarterly repayment on the MorphoSys Development Funding Bonds before they were sold in January 2025.
(2) The table below shows the line item for each adjustment and the direct location for such line item in the condensed consolidated statements of cash flows.

Reconciling Adjustment Statements of Cash Flows Classification
Interest (paid)/received, net Operating activities ( Interest paid less Interest received )

Distributions from equity method investees Investing activities

Proceeds from available for sale debt securities Investing activities
Distributions to legacy non-controlling interests - Portfolio Receipts
Financing activities

Uses of Capital

Acquisitions of Royalties

We acquire product royalties in ways that can be tailored to the needs of our partners through a variety of structures:

• Third-party Royalties – Existing royalties on approved or late-stage development therapies. A royalty is the contractual right to a percentage of top-line sales from a licensee’s use of a product, technology or intellectual property. The majority of our current portfolio consists of third-party royalties.

• Synthetic Royalties – Newly-created royalties on approved or late-stage development therapies with strong proof of concept. A synthetic royalty is the contractual right to a percentage of top-line sales by the developer or marketer of a therapy in exchange for funding.

• Other Funding Modalities – We may provide other forms of capital to our partners as a component within a royalty transaction, to increase the scale of our capital. This may include debt, direct equity investments and launch and development capital (in exchange for fixed long-term payments).

Additionally, we may identify additional opportunities, platforms or technologies that leverage our capabilities.

Distributions to Shareholders

We paid dividends and distributions of $271.1 million and $259.3 million in the first six months of 2026 and 2025, respectively. We do not have a legal obligation to pay a quarterly dividend or dividends at any specified rate or at all.

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Class A Ordinary Share Repurchases

In January 2025, our board of directors authorized a share repurchase program 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 share repurchase program has been approved by our board of directors through June 2027 and shareholders have approved the terms of our share repurchase contracts and counterparties thereto through June 2031. In the first six months of 2026, we repurchased 2.0 million shares at a cost of approximately $95.6 million. As of June 30, 2026, approximately $1.7 billion remained available under the share repurchase program.

Other Funding Arrangements

In June 2025, we entered into a $2 billion funding arrangement with Revolution Medicines, consisting of a synthetic royalty of up to $1.25 billion on daraxonrasib in five $250 million tranches, of which tranches one and two have been funded, and senior secured term loans of up to $750 million. As of June 30, 2026, $1.5 billion of the funding commitment remained unfunded.

We have a long-term funding arrangement with Cytokinetics which is comprised of seven tranches of up to $525 million in total funding (“Cytokinetics Commercial Launch Funding”). As of June 30, 2026, $175 million remained available under the Cytokinetics Commercial Launch Funding.

We may enter into funding agreements where we are contractually obligated to fund R&D activities performed by our development partners. As of June 30, 2026, we have unfunded commitments of $502.6 million for JNJ-4804 and TEV-’408.

We also have certain milestones payable to our counterparties that are contingent on the successful achievement of certain development, regulatory approval or commercial milestones. These contingent milestone payments are not considered contractual obligations. In the first six months of 2026, we paid a $50 million sales-based milestone related to Trelegy. In the first six months of 2025, we paid a $200 million regulatory milestone following the FDA approval of a new manufacturing hub for Adstiladrin and sales-based milestones of $50 million and $18.6 million related to Trelegy and Erleada, respectively.

Guarantor Financial Information

Our obligations under the Notes are fully and unconditionally guaranteed by RP Holdings and RP Manager, our non-wholly owned subsidiaries (together, the “Guarantor Subsidiaries”). Our remaining subsidiaries (the “Non-Guarantor Subsidiaries”) do not guarantee the Notes.

Under the terms of the indenture governing the Notes, Royalty Pharma plc and the Guarantor Subsidiaries each fully and unconditionally, jointly and severally, guarantee the payment of interest, principal and premium, if any, on the Notes. As of June 30, 2026, the total outstanding and guaranteed Notes had a par value and carrying value was $8.8 billion and $8.6 billion, respectively.

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The following financial information presents summarized combined balance sheet information as of June 30, 2026 and December 31, 2025 and summarized combined statement of operations information for the first six months of 2026 for Royalty Pharma plc, RP Holdings and RP Manager. All intercompany balances and transactions between these entities are eliminated in the presentation of the combined financial statements. RP Holdings’ most significant asset is its investment in operating subsidiaries, which has been eliminated in the table below to exclude investments in Non-Guarantor Subsidiaries. Our operating subsidiaries hold the majority of our cash and cash equivalents, marketable securities and financial royalty assets. As a result, our ability to make required payments on the Notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us. There are no material restrictions on distributions from the operating subsidiaries. Amounts presented below do not represent our total consolidated amounts (in thousands):

Summarized Combined Balance Sheets
As of June 30, 2026 As of December 31, 2025
Current assets $ 36,403  $ 27,054 
Current interest receivable on intercompany notes due from Non-Guarantor Subsidiaries 61,497  26,932 

Non-current assets 927,120  926,732 
Non-current intercompany notes receivable due from Non-Guarantor Subsidiaries 2,952,133  3,011,820 

Current liabilities 515,676  515,312 
Current interest payable on intercompany notes due to Non-Guarantor Subsidiaries 23,264  26,932 

Non-current liabilities 9,294,242  9,147,894 
Non-current intercompany notes payable due to Non-Guarantor Subsidiaries 1,936,654  2,208,840 

Summarized Combined Statement of Operations For the Six Months Ended June 30, 2026

Interest income on intercompany notes receivable due from Non-Guarantor Subsidiaries $ 79,384 
Other intercompany income from Non-Guarantor Subsidiaries 54,139 
Other income 393 
Interest expense on intercompany notes due to Non-Guarantor Subsidiaries 41,151 
Other intercompany operating expenses with Non-Guarantor Subsidiaries 41,670 
Operating expenses 438,290 

Net loss 387,195 

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Certain of these policies are considered critical as they have the most significant impact on our financial condition and results of operations and require the most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of income and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Our most critical accounting policies relate to our financial royalty assets. Similarly, the most significant judgments and estimates applied by management are associated with the measurement of our financial royalty assets at amortized cost using the prospective effective interest method. The application of the prospective approach to calculate interest income from our financial royalty assets requires management’s judgment in forecasting the expected future cash flows of the underlying royalties. There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K.
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Item 3.         QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk exposures that affect the disclosures presented in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in the Annual Report on Form 10-K for the year ended December 31, 2025.

Item 4.         CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the second quarter of 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

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

PART II.     OTHER INFORMATION

Item 1.         LEGAL PROCEEDINGS

For a description of our legal proceedings, refer to Note 15–Commitments and Contingencies , which is incorporated herein by reference.

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Item 1A.    RISK FACTORS

Described below are certain risks that we believe apply to our business. You should carefully consider the following information about these risks, together with the other information contained in this Quarterly Report on Form 10-Q, including the section titled “Management ’ s Discussion and Analysis of Financial Condition and Results of Operations” and our condensed consolidated financial statements and related notes . Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business.

Summary of Risk Factors

Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition or results of operations. These risks are discussed more fully below and include, but are not limited to, risks related to:

Risks Relating to Our Business
• risks related to sales of biopharmaceutical products on which we receive royalties;
• risks related to the growth and dynamics of the royalty market;
• uncertainties related to acquiring interests in development-stage biopharmaceutical product candidates;
• potential strategic acquisitions of operating biopharmaceutical companies;
• our use of leverage in connection with our capital deployment;
• our ability to leverage our competitive strengths;
• our ability to generate increasing royalty receipts and to achieve attractive returns on our investments, including maintaining attractive internal rates of return and consistent returns on invested capital and returns on invested equity;
• marketers of products that generate our royalties are outside of our control;
• disputes with our partners or payors of our royalties;
• governmental regulation of the biopharmaceutical industry;
• interest rate risk, foreign exchange fluctuations and inflation;
• the assumptions underlying our business model;
• the competitive nature of the biopharmaceutical industry;
Risks Relating to Our Organization and Structure
• our organizational structure, including our status as a holding company;
• our ability to attract and retain highly talented professionals;
• we may not realize the anticipated benefits of the Internalization and we may be exposed to new risks and costs;
Risks Relating to Our Class A Ordinary Shares
• volatility of the market price of our Class A ordinary shares;
• our incorporation under English law;
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Risks Relating to Taxation
• the effect of changes to tax legislation and our tax position;
General Risk Factors
• cyber-attacks, data breaches or other failures in information technology systems; and
• legal claims and proceedings that could adversely affect our business, financial condition or results of operations.
Risks Relating to Our Business
Biopharmaceutical products are subject to sales risks.
Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures, insufficient demand, product competition, failure of clinical trials, delays or failures in obtaining marketing approval in one or more jurisdictions or for additional product indications, lack of market acceptance, changes in the marketer’s strategic priorities, obsolescence, lack of coverage or insufficient reimbursement by healthcare programs or insurance plans, loss of patent protection, government regulations and other factors. Development-stage product candidates may also fail to reach the market. Unexpected side effects, safety or efficacy concerns may arise leading to product recalls, withdrawals, diminishing prescribing by physicians, declining reimbursement rates or sales, or litigation. As a result, payments of our royalties may be reduced, delayed or ceased, which could adversely affect our near-term financial performance, internal rates of return, returns on invested capital and returns on invested equity or long-term outlook.
The royalty market may not grow at the same rate as it has in the past, or at all, and we may not be able to acquire sufficient royalties to sustain the growth of our business.
We have historically grown our business by primarily acquiring royalties. However, we may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, to invest the capital available to us at our targeted rate of capital deployment, which could prevent us from executing our growth strategy and negatively impact our business. Changes in the royalty market, including its structure, participants, growth rate, changes in preferred methods of financing and capital raising in the biopharmaceutical industry, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire royalties, fewer royalties (or fewer royalties of significant scale) being available, or increased competition for royalties. Even if we continue to acquire royalties, they generally will not generate a meaningful return for several years, if at all, due to transaction structures, circumstances relating to the underlying products or other factors. As a result, we may not be able to continue to acquire royalties or otherwise grow our business as we have in the past, or at all.
Acquisitions of royalties from our investments in development-stage biopharmaceutical product candidates are subject to additional risks and uncertainties.
We acquire royalties on development-stage product candidates that have not yet received marketing approval by any regulatory authority or been commercialized. There can be no assurance that the FDA, the Medicines and Healthcare products Regulatory Agency (“MHRA”), the EMA, Pharmaceuticals and Medical Devices Agency (“PMDA”) or other regulatory authorities will approve such products or that such products will be brought to market on a timely basis or at all, the pricing or reimbursement of such products, if approved, or that the market will be receptive to such products. We have previously acquired royalties on development-stage product candidates for which clinical development was stopped for a number of reasons, including clinical trials failing to meet their primary endpoints. These failures have resulted in, and future failures could lead to, non-cash impairment charges or other investment write downs.
If the FDA, MHRA, the EMA, PMDA or other regulatory authority approves a development-stage product candidate that generates our royalties, the labeling, packaging, manufacturing, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in marketing restrictions or withdrawal from the market.
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In addition, the developers of these development-stage product candidates may not be able to raise additional capital to continue their discovery, development and commercialization activities, which may cause them to delay, reduce the scope of, or eliminate one or more of their clinical trials or R&D programs. If other product developers introduce and market products that are more effective, safer or less expensive than the products that generate our royalties, or if such developers introduce their products prior to the competing products underlying our royalties, the products in which we have invested may not achieve commercial success and thereby result in diminished returns or reduced royalties for us, adversely affecting our business, financial condition or results of operations.
Further, the developers of such products may not have sales, marketing or distribution capabilities. If no sales, marketing or distribution arrangements can be made on acceptable terms or at all, the affected product may not be able to be successfully commercialized, which will result in a loss for us. Losses from such assets could adversely affect our business, financial condition or results of operations.
We intend to continue to provide capital to innovators to co-fund clinical development of a product candidate in exchange for a share of the future revenues of that asset and when we do so, we do not control its clinical development. In these situations, the innovators may not complete activities on schedule or in accordance with our expectations or in compliance with applicable laws and regulations, which could delay or prevent the development, approval, manufacturing or commercialization of the development-stage product candidate for which we have provided funding.
Uncertainty relating to development-stage product candidates makes it more difficult to develop accurate assumptions for our internal models, which may result in reduced royalties compared to our estimates. There can be no assurance that our assumptions around the likelihood of a development-stage product candidate’s approval, expected pricing or achieving our forecasted sales will prove correct, that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market on a timely basis or at all, or that such products will achieve commercial success or result in royalties consistent with our estimates.
We may undertake strategic acquisitions of operating biopharmaceutical companies or acquire securities of biopharmaceutical companies. Our failure to realize the expected benefits of such acquisitions could adversely affect our business, financial condition or results of operations.
We may acquire companies with significant royalty assets or where we believe we could create significant synthetic royalties. These acquired or created royalty assets may not perform as we project. Moreover, the acquisition of operating biopharmaceutical companies may expose us to liabilities not inherent in our other royalty acquisitions, such as direct exposure to product liability claims, high fixed costs or an expansion of our operations and expense structure, thereby potentially decreasing our profitability. The diversion of our management’s attention and any delay or difficulties encountered in connection with any future acquisitions could result in the disruption of our on-going business operations. Despite our business, financial and legal due diligence efforts, we have limited experience in assessing opportunities to acquire operating businesses, and we ultimately may be unsuccessful in ascertaining or evaluating all risks associated with such acquisitions. Moreover, we may need to raise additional funds through public or private debt or equity financing to acquire any businesses or products, which may result in dilution for shareholders or the incurrence of indebtedness. As a result, acquisitions of operating biopharmaceutical companies could adversely affect our business, financial condition or results of operations.
We may acquire securities issued by biopharmaceutical companies. Where we acquire equity securities as all or part of the consideration for business development activities, the value of those securities will fluctuate, and may depreciate. We will not control the companies in which we acquire securities, and we will have limited ability to determine management, operational decisions or policies. Further, such transactions may face risks and liabilities that due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess. In addition, we may receive material non-public information about other companies. Where such information relates to a company whose equity securities we hold, we may be delayed or prevented from selling such securities when we would otherwise choose to do so, and such delay or prohibition may result in a loss or reduced gain on such securities.
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We use leverage in connection with our capital deployment, which magnifies the potential for loss if the royalties we acquire do not generate sufficient income.
We finance a significant portion of our capital deployment with borrowed funds. The use of leverage creates an opportunity for an increased return but also increases the risk of loss if our assets do not generate sufficient cash flows. Our interest expense has increased in recent years. The interest expense and other costs associated with our borrowings may not be covered by our cash flow. In addition, leverage may inhibit our operating flexibility and reduce cash available for dividends or share repurchases.
Our level of indebtedness could limit our ability to respond to changing business conditions. The agreements governing our borrowings may impose operating and financial restrictions which could affect the number and size of the royalties that we may pursue. Therefore, no assurance can be given that we will be able to take advantage of favorable conditions or opportunities as a result of any restrictive covenants under our indebtedness. There can also be no assurance that additional debt financing, either to replace or increase existing debt financing, will be available when needed or on commercially reasonable terms.
Additional risks related to our leverage include:
• to the extent that interest rates at which we borrow increase, our borrowing costs will increase and our leveraging strategy will become more costly, which could lead to diminished Portfolio Cash Flow and net profits;
• we have to comply with various financial covenants in the agreements that govern our debt, including requirements to maintain certain leverage ratios and coverage ratios, which may affect our ability to achieve our business objectives;
• our ability to pay dividends or make share repurchases may be restricted;
• our royalties may be used as collateral for our borrowings; and
• in the event of a default under secured borrowings, if any, one or more of our creditors or their assignees could obtain control of our royalties and, in the event of a distressed sale, these creditors could dispose of these royalties for significantly less value than we could realize for them.
The success of our business depends on key members of our team.
We depend on the expertise, skill and network of business contacts of key members of our team, who evaluate, negotiate, structure, execute, monitor and service our assets. Our future success depends to a significant extent on the continued service and coordination of our team. Although our executives must devote substantially all of their business time to managing us, unless otherwise approved by the board of directors, key members of our team may have other demands on their time, and we cannot assure you that they will continue to be actively involved in our business. The departure of any of these individuals or competing demands on their time could adversely affect our business, financial condition or results of operations.
Our key professionals have relationships with participants in the biopharmaceutical industry, financial institutions and other professionals, which we rely upon to source potential asset acquisition opportunities. If our key professionals fail to maintain such relationships, or to develop new relationships with other sources, we may not be able to grow our portfolio. In addition, we can offer no assurance that these relationships, even if maintained, will generate royalty acquisition opportunities.
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There can be no assurance that the policies and procedures we have established to mitigate conflicts of interest will be effective.
There could be conflicts of interest between us and our personnel. Every senior executive is subject to a non-compete agreement that is effective for 18 months following termination of their employment for any reason. In addition, executives must devote substantially all of their time to us, unless otherwise approved by the board of directors. Despite this, the ability of our officers and employees to engage in other business activities may reduce the amount of time they spend working for us. For instance, Mr. Legorreta, our Chief Executive Officer, is also a co-founder of and has significant influence over Pharmakon Advisors, which manages BioPharma Credit PLC (LSE: BPCR) and other investment vehicles that collectively are leading providers of debt capital to the biopharmaceutical industry and he has a substantial investment in BioPharma Credit. In addition, Mr. Legorreta serves as the chairperson of ProKidney Corp.’s board of directors and he participates in foundations that receive and provide medical research funding. Even though he is involved with the companies and the foundations described above, among other organizations, Mr. Legorreta does not have any material constraints on the time he has available to devote to us. While Pharmakon may pursue similar investment opportunities, we believe that actual conflicts of interest are rare due to differing investment strategies, and the fact that royalty holders determine the type of transaction they seek. Under arrangements with Pharmakon, we may provide research, business development, legal, compliance, financial and administrative services to one another, and each party reimburses the other to the extent it provides materially more services than it receives.
To service our indebtedness and meet our other liquidity needs, we require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. If we cannot generate the required cash, we may be unable to make the required payments under our indebtedness.
As of June 30, 2026, our total principal amount of our senior unsecured notes and borrowings under our term loan was $9.2 billion. In addition to this indebtedness, we have up to $1.8 billion of available revolving commitments under our unsecured revolving credit facility (“Revolving Credit Facility”). Furthermore, on August 4, 2025, we entered into an uncommitted credit facility, which provides for borrowing capacity of up to $350 million at the discretion of the lender thereunder. Except for RP Holdings and RP Manager, our subsidiaries that do not guarantee our indebtedness will have no obligation, contingent or otherwise, to pay amounts due under our indebtedness or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. We cannot assure you that our business will generate sufficient cash flow from operations to enable us to pay our indebtedness or to fund our other liquidity needs.
Absent sufficient cash flow and the ability to refinance, we may be forced to sell assets to make up for any shortfall in our payment obligations. However, the agreements governing our outstanding indebtedness limit our and our subsidiaries’ ability to sell assets and also restrict the use of proceeds from such a sale. Accordingly, we may be unable to sell assets quickly enough or for sufficient amounts to meet our obligations on our indebtedness.
Our business is subject to interest rate, foreign exchange, inflation and banking industry risk.
We are subject to interest rate fluctuations through any borrowings under our Revolving Credit Facility, Term Loan and through investments in money market accounts and marketable securities, the majority of which bear variable interest rates. If interest rates were to increase, our borrowing costs may increase and our leverage strategy may become more costly, which could reduce Portfolio Cash Flow and net profits. If interest rates were to decrease, returns on our investments in money market accounts and marketable securities may decrease.
Certain products pay royalties in currencies other than U.S. dollars, which creates foreign currency risk primarily with respect to the Euro, Canadian dollar, British pound, Swiss franc and Japanese yen, as our functional and reporting currency is the U.S. dollar. In addition, our results of operations are subject to foreign currency exchange risk through transactional exposure resulting from movements in exchange rates between the time we recognize income on financial royalty assets and the time at which the transaction settles, or we receive the royalty payment. Because we are entitled to royalties on worldwide sales for various products, there is an underlying exposure to foreign currency as the marketer converts payment amounts from local currencies to U.S. dollars using a quarterly average exchange rate. Therefore, cash received may differ from the estimated amount we expected to receive based on fluctuations in currency.
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We are also subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to geopolitical events, including the Russia-Ukraine conflict, conflicts in the Middle East, tensions between China and Taiwan, trade and other international disputes, including new or increased tariffs and other barriers to trade, rising inflation and interest rates, monetary policy changes, financial services sector instability, recessions, global pandemics, significant natural disasters and foreign currency fluctuations. Changes in the value of currencies relative to the U.S. dollar, or high inflation in countries using a currency other than the U.S. dollar, can impact our revenues, costs and expenses and our financial guidance.
Information available to us about the biopharmaceutical products underlying the royalties we buy may be limited and therefore our ability to analyze each product and its potential future cash flow may be similarly limited.
We may have limited information concerning the products generating the royalties we are evaluating for acquisition. Often, the information we have regarding products following our acquisition of a royalty may be limited to the information that is available in the public domain. Therefore, there may be material information that relates to such products that we would like to know but do not have and may not be able to obtain. For example, we may not have access to the results of studies conducted by marketers of the products or others or the nature or amount of any complaints from doctors or users of such products. In addition, the market data that we obtain independently may also prove to be incomplete or incorrect. Due to these and other factors, the actual cash flow from a royalty may be significantly lower than the amounts we estimate, which could negatively impact our internal rates of return, return on invested capital and return on invested equity.
Our future income is dependent upon numerous royalty-specific assumptions and, if these assumptions prove not to be accurate, we may not achieve our expected rates of returns.
Our business model is based on multiple-year internal and external forecasts regarding product sales and numerous product-specific assumptions in connection with each royalty acquisition, including where we have limited information regarding the product. There can be no assurance that the assumptions underlying our financial models, including those regarding product pricing, reimbursement rates or sales, competition, patent expirations, exclusivity terms, license terms or license terminations for the products underlying our portfolio, are accurate. These assumptions involve a significant element of subjective judgment and may be, and in the past have been, adversely affected by post-acquisition changes in market conditions and other factors affecting the underlying product. The risks relating to these assumptions are exacerbated for development-stage product candidates due to the uncertainties around their development, labeling, regulatory approval, commercialization timing, anticipated pricing, manufacturing and supply, competing products or related factors. Our assumptions regarding the financial stability or operational or marketing capabilities of the partner obligated to pay us royalties may also prove, and in the past have proven, to be incorrect. Due to these and other factors, the assets in our current portfolio or future assets may not generate expected returns or returns in line with our historical financial performance or in the time periods we expect or at all, which could adversely affect our business, financial condition or results of operation.
We make assumptions regarding the royalty duration for terms that are not contractually fixed, and a shortened royalty term could result in a reduction in the effective interest rate, a decline in income from royalties, significant reductions in royalty payments compared to expectations, or a permanent impairment.
In accordance with generally accepted accounting principles in the United States (“GAAP”), we classify most royalty assets that we acquire as financial assets that are measured at amortized cost using the prospective effective interest method described in ASC 835-30. The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount, net of any purchased receivables. A critical component of such forecast is our assumptions regarding duration of the royalty.
The royalty duration is important for purposes of accurately measuring interest income over the life of a royalty. In making assumptions around the royalty duration for terms that are not contractually fixed, we consider the strength of existing patent protection, expected entry of generics, geographical exclusivity periods and potential patent term extensions tied to the underlying product.
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The duration of a royalty usually varies on a country-by-country basis and can be based on a number of factors, such as patent expiration dates, whether the product is sold singly or in combination, regulatory exclusivity, years from first commercial sale of the patent-protected product, the entry of competing generic or biosimilar products, or other terms set out in the contracts governing the royalty. It is common for royalty durations to expire earlier or later than anticipated due to unforeseen positive or negative developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, claims of patent misuse, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing for the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations.
If an unexpected shortening of a royalty term were to occur, it could result in a reduction in the effective interest rate for the asset, a decline in income from royalties, a significant reduction in royalty receipts compared to expectations, or a permanent impairment.
Most of our royalties are classified as financial assets that are measured at amortized cost using the effective interest method as a result of which our GAAP results of operations can be volatile and unpredictable.
In accordance with GAAP, most of the royalty assets we acquire are treated as investments in cash flow streams and are thus classified as financial assets. Under this classification, our financial royalty assets are treated as having a yield component that resembles loans measured at amortized cost under the effective interest accounting methodology. 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.
As a result of the non-cash charges associated with the application of the effective interest method accounting methodology, our income statement activity in respect of many of our royalties 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 our royalty on the cystic fibrosis franchise, which is classified as a financial royalty asset. Beginning in the second quarter of 2015, declines in near-term sales forecasts of sell-side equity research analysts caused us to recognize non-cash provision expense and build up a corresponding cumulative allowance which reduced the gross balance for this financial royalty asset. Over the course of the next 10 quarters, we recognized non-cash provision expense as a result of these changes in forecasts, including a non-cash expense of $743.2 million in 2016, ultimately reaching a peak cumulative allowance of $1.30 billion by September 30, 2017 related to this financial royalty asset. With the approval of the Vertex triple combination therapy, 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. While small reductions in the cumulative allowance for the cystic fibrosis franchise were recognized as provision income in 2017 and 2018, there remained a $1.10 billion cumulative allowance that was fully reduced by recognizing non-cash provision income of $1.10 billion in 2019 as a result of an increase in sell-side equity research analysts’ consensus sales forecasts associated with the Trikafta approval. Despite the growth in royalty receipts following the approval of Trikafta, the financial statement impact caused by the application of the effective interest accounting methodology could result in a negative perception of our results in a given period.
Our reliance on a limited number of products may adversely affect our business, financial condition and results of operation.
Although our current asset portfolio includes royalties relating to over 35 marketed products, the top five product franchises accounted for 59% of our Royalty Receipts in the first six months of 2026. In addition, our asset portfolio may not be fully diversified by geographic region or other factors. Any significant deterioration in the cash flows from the top products in our asset portfolio could negatively impact our internal rates of return, return on invested capital and return on invested equity, which could, in turn, adversely affect our business, financial condition or results of operations.
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We face competition in acquiring royalties and locating suitable royalties to acquire.
There are a limited number of suitable and attractive opportunities to acquire high-quality royalties. Competition to acquire such royalties is significant and may increase. We compete with a broad range of potential acquirers, including biopharmaceutical companies that market the products on which royalties are paid, investment vehicles and other pools of capital, financial institutions, institutional investors, including sovereign wealth and pension funds, and other market participants. These competitors may be able to access lower cost capital, may be larger than us, may have relationships that provide them access to opportunities before us, or may be willing to acquire royalties for lower projected returns than we are.
Biopharmaceutical products are subject to substantial competition.
The biopharmaceutical industry is a highly competitive and rapidly evolving industry. The length of any product’s commercial life cannot be predicted with certainty. One or more products on which we are entitled to a royalty may be rendered obsolete or non-competitive by new or alternate products or improvements made to existing products on which we are not entitled to a royalty, either by the current marketer of such products or by another marketer. Current marketers of products may undertake these development efforts in order to improve their products or to avoid paying our royalty. Competition, obsolescence or governmental and regulatory action or healthcare policy changes could significantly affect the revenues, including royalty-related revenues, of the products which generate our royalties.
Competitive factors affecting the market position and success of each product include:
• safety, side effect profile, effectiveness and market acceptance;
• price, including third-party insurance reimbursement policies;
• timing, introduction and marketer support of the product;
• efficacy and execution of marketing and commercialization strategy;
• manufacturing, supply and distribution;
• governmental regulation and policy, including price caps;
• availability of lower-cost generics or biosimilars or alternative treatments;
• intellectual property protection and exclusivity;
• treatment innovations that eliminate or minimize the need for a product; and
• product liability claims.
Products on which we have a royalty receivable or other interest may be rendered obsolete or non-competitive by new or alternate products, including generics or biosimilars, improvements on existing products, marketing or commercialization strategies, or governmental or regulatory action. In addition, as biopharmaceutical companies increasingly devote significant resources to innovate next-generation products and therapies, products on which we have a royalty may become unattractive to commercialize or obsolete. If a product’s market acceptance is diminished or it is withdrawn from the market, continuing payments with respect to biopharmaceutical products will decrease or potentially cease, which may affect our ability to realize the benefits of the royalty receivable or other interest in such product and may result in us incurring asset impairment charges. Further, any product for which we have a royalty receivable or other interest that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Many approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic or alternate products. Any of these developments could adversely affect products on which we have a royalty, and consequently could adversely affect our business, financial condition or results of operations.
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Marketers of products that generate our royalties are outside of our control.
In the case of our royalty receivables, our cash flow consists primarily of payments supported by royalties paid by marketers. These marketers may have interests that are different from our interests. For example, these marketers may be motivated to maximize their overall income by allocating resources to other products and, in the future, may decide to focus less attention on the products generating our royalties or by allocating resources to develop products that do not generate royalties to us. There can be no assurance that any marketer or person with whom the marketer has a working relationship has adequate resources or motivation to continue to produce, market and sell the products generating our royalties. Aside from any limited audit rights relating to the activities of the marketers that we may have in certain circumstances pursuant to the terms of our arrangements with the licensor, we do not have oversight rights with respect to the marketers’ operations and do not have rights allowing us to direct their operations or strategy nor do our agreements contain performance standards for their operations. The calculation of the royalty payments is subject to and dependent upon the adequacy and accuracy of our counterparties’ sales and accounting functions.
While we may be able to receive certain information relating to sales of products through the exercise of audit rights and review of royalty reports we receive from the licensor, such information may be received many months following our recognition of the royalty revenue, may require us to adjust our royalty revenues in later periods and may require expense on our part.
We have limited information on the marketers’ operations. We will not have the right to review or receive certain information relating to products that the marketers may have, including the results of any studies conducted by the marketers or others, or complaints from doctors or users of products. The market performance of the products generating our royalties may therefore be diminished by any number of factors relating to the marketers that are outside of our control.
The marketers of biopharmaceutical products are, generally, entirely responsible for the ongoing regulatory approval, commercialization, manufacturing and marketing of products.
Generally, the holders of royalties on products have granted exclusive regulatory approval, commercialization, manufacturing and marketing rights to the marketers of such products. The marketers generally have full control over those efforts and sole discretion to determine the extent and priority of the resources they will commit to their program for a product. Accordingly, the successful commercialization of a product depends on the marketer’s efforts and is beyond our control. If a marketer does not devote adequate resources to the ongoing development, regulatory approval, commercialization and manufacture of a product, or if a marketer engages in illegal or otherwise unauthorized practices, the product’s sales may not generate sufficient royalties, or the product’s sales may be suspended, and consequently, could adversely affect our business. In addition, if marketers of biopharmaceutical products decide to discontinue product programs or we believe the commercial prospects of assets have been reduced, we may recognize material non-cash impairment charges related to the financial royalty asset associated with those programs or assets.
License agreements relating to products may, in some instances, be unilaterally terminated or disputes may arise which may affect our royalties.
License agreements relating to the products generating our royalties may be terminated, which may adversely affect sales of such products and therefore the payments we receive. For example, under certain license agreements, marketers retain the right to unilaterally terminate the agreements with the licensors. When the last patent covering a product expires or is otherwise invalidated in a country, a marketer may be economically motivated to terminate its license agreement, either in whole or with respect to such country, in order to terminate its payment and other obligations. In the event of any such termination, a licensor may no longer receive all of the payments it expected to receive from the licensee and may also be unable to find another company to continue developing and commercializing the product on the same or similar terms as those under the license agreement that has been terminated.
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In addition, license agreements may fail to provide significant protection for the licensor in case of the licensee’s failure to perform or in the event of disputes. License agreements which relate to the products underlying our royalties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what the licensor believes to be the scope of its rights to the relevant intellectual property or technology, or decrease the licensee’s financial or other obligations under the relevant agreement, any of which could in turn impact the value of our royalties and adversely affect our business, financial condition or results of operations. If a marketer were to default on its obligations under a license agreement, the licensor’s remedy may be limited either to terminating certain licenses related to certain countries or to generally terminate the license agreement with respect to such country. In such cases, we may not have the right to seek to enforce the rights of the licensor and we may be required to rely on the resources and willingness of the licensor to enforce its rights against the licensee.
In any of these situations, if the expected payments under the license agreements do not materialize, this could result in a significant loss to us and adversely affect our business, financial condition or results of operations.
The insolvency of a marketer could adversely affect our receipt of cash flows on the related royalties that we hold.
If a marketer were to become insolvent and seek to reorganize under Chapter 11 of Title 11 of the U.S. Code, as amended, or the Bankruptcy Code, or liquidate under Chapter 7 of the Bankruptcy Code (or foreign equivalent), such event could delay or impede the payment of the amounts due under a license agreement, pending a resolution of the insolvency proceeding. Any unpaid royalty payments due for the period prior to the filing of the bankruptcy proceeding would be unsecured claims against the marketer, which might not be paid in full or at all. While royalty payments due for periods after the filing may qualify as administrative expenses entitled to a higher priority, the actual payment of such post-filing royalty payments could be delayed for a substantial period of time and might not be in the full amount due under the license agreement. The licensor would be prevented by the automatic stay in the bankruptcy proceeding from taking any action to enforce its rights without the permission of the bankruptcy court. In addition, the marketer could elect to reject the license agreement, which would require the licensor to undertake a new effort to market the applicable product with another distributor. Such proceedings could adversely affect the ability of a payor to make payments with respect to a royalty, and could consequently adversely affect our business, financial condition or results of operations.
Unsuccessful attempts to acquire new royalties could result in significant costs, divert management attention and adversely affect our ability to pursue other investment opportunities.
The evaluation of each potential royalty acquisition and the negotiation, drafting and execution of relevant agreements requires substantial management time and attention and results in substantial costs for accountants, attorneys, consultants and other advisors. If a decision is made not to complete a specific acquisition, the costs incurred for the proposed transaction would not be recoverable from a third party. Furthermore, even if an agreement is reached relating to a specific target asset, we may fail to consummate the acquisition for any number of reasons, including, in the case of an acquisition of a royalty through a business combination with a public company, approval by the target company’s public shareholders. Unsuccessful attempts to acquire new royalties could result in significant costs, inefficient use of management’s time and potential reputational harm. The diversion of management attention and financial resources could adversely affect our ability to evaluate or complete other investments.
The products that generate our royalties are subject to uncertainty related to healthcare reimbursement policies, managed care considerations, pricing pressures and the regulation of the healthcare industry.
In both U.S. and non-U.S. markets, sales of biopharmaceutical products, and the success of such products, depends in part on governmental regulation and the availability and extent of coverage and reimbursement from third-party payors, including government healthcare programs in addition to private insurance plans.
In the United States, pharmaceutical pricing is subject to increasing government regulation, public scrutiny and policy initiatives. For example, initiatives toward “most favored nation” (MFN) drug pricing in the United States could lead to decreased drug pricing or the drug pricing provisions of the Inflation Reduction Act (“IRA”) which require manufacturers of select drugs to engage in a process to establish negotiated Medicare prices. It is unknown what form any future changes or any law would take under the Trump administration. In addition, the U.S. Patient Protection and Affordable Care Act, as amended (the “ACA”) established a major expansion of healthcare coverage, financed in part by several new rebates, discounts and taxes that had a significant effect on the expenses and profitability on the companies that manufacture the products that generate our royalties.

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Other U.S. federal or state legislative or regulatory action or policy efforts could adversely affect the healthcare industry, including, among others, additional transparency and limitations related to product pricing, review the relationship between pricing and manufacturer patient programs, general budget control actions, changes in patent laws, changing interpretations of competition law, exercise by the government of march-in rights in respect of government funded innovations, the importation of prescription drugs from outside the United States at prices that are regulated by governments of various foreign countries, revisions to reimbursement of biopharmaceutical products under government programs, restrictions on U.S. direct-to-consumer advertising or limitations on interactions with healthcare professionals. No assurances can be provided that these laws and regulations will not adversely affect our business, financial condition or results of operations.
Continued intense public scrutiny of the price of drugs, together with government and payor dynamics, may limit the ability of producers and marketers to set or adjust the price of products based on their value. There can be no assurance that new or proposed products will be considered cost-effective or that adequate third-party reimbursement will be available to enable the producer or marketer of such product to maintain price levels sufficient to realize an appropriate return. These pricing pressures may adversely affect our current royalties and the attractiveness of future acquisitions of royalties.
Outside the United States, numerous major markets, including the EU, UK, Japan and China, have pervasive government regulation of healthcare and government involvement in funding healthcare, and, in that regard, fix the pricing and reimbursement of pharmaceutical products. Consequently, in those markets, the products generating our royalties are subject to government decision-making and budgetary actions.
In addition, many of the products in our portfolio benefit from regulatory exclusivity. If, in an effort to regulate pricing, regulatory exclusivity is not maintained, our business, financial condition or results of operations may be adversely impacted.
The biopharmaceutical industry may be negatively affected by federal government deficit reduction policies, which could reduce the value of the royalties that we hold.
In an effort to contain the U.S. federal deficit, the biopharmaceutical industry could be considered a potential source of savings via legislative proposals. Government action to reduce U.S. federal spending on entitlement programs, including Medicare, Medicaid or other publicly funded or subsidized health programs, or to lower drug spending, may affect payment for the products that generate our royalties. These and any other cost controls or any significant additional taxes or fees that may be imposed on the biopharmaceutical industry as part of deficit reduction efforts could reduce cash flows from our royalties and therefore adversely affect our business, financial condition or results of operations.
Sales of products that generate our royalties are subject to regulatory approvals and actions in the United States and foreign jurisdictions that could harm our business.
The procedures to approve biopharmaceutical products for commercialization vary among countries and can involve additional testing and time. Such procedures may include on-site inspections by regulatory authorities at clinical trial sites or manufacturing facilities, which inspections may be delayed. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval and many include additional risks, such as pricing approval.
There can be no assurance that any of these regulatory approvals will be granted or not be revoked or restricted in a manner that would adversely affect the sales of such products and on the ability of payors to make payments with respect to such royalties to us.
The manufacture and distribution of a biopharmaceutical product may be interrupted by regulatory agencies or supplier deficiencies.
The manufacture of products generating our royalties is typically complex and is highly regulated. In particular, biopharmaceutical products are manufactured in specialized facilities that require the approval of, and ongoing regulation by, the FDA in the United States and, if manufactured outside of the United States, both the FDA and non-U.S. regulatory agencies, such as the MHRA and the EMA. With respect to a product, to the extent that operational standards set by such agencies are not adhered to, manufacturing facilities may be closed or production interrupted until such time as any deficiencies noted by such agencies are remedied. Any such closure or interruption may interrupt, for an indefinite period of time, the manufacture and distribution of a product and therefore the cash flows from the related biopharmaceutical asset may be significantly less than expected.
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In addition, manufacturers of a product may rely on third parties for selected aspects of product development, such as packaging or to supply bulk raw material used in the manufacture of such product. In the United States, the FDA requires that all suppliers of pharmaceutical bulk materials and all manufacturers of pharmaceuticals for sale in or from the United States adhere to the FDA’s current “Good Manufacturing Practice” regulations and guidelines and similar requirements that exist in jurisdictions outside the United States. Marketers of biopharmaceutical products generally rely on a small number of key, highly specialized suppliers, manufacturers and packagers. Any interruptions, however minimal, in the operation of these manufacturing and packaging facilities could adversely affect production and product sales and therefore adversely affect our business, financial condition or results of operations.
Product liability claims may diminish the returns on biopharmaceutical products.
The developer, manufacturer or marketer of a product could become subject to product liability claims. A product liability claim, regardless of its merits, could adversely affect the sales of the product and the amount of any related royalty payments and could even adversely affect the ability of a payor to make payments with respect to a royalty.
Although we believe that we will not bear responsibility in the event of a product liability claim against the developer, manufacturer, marketer or other seller of a product that generates our royalty, any such product liability claims against us could adversely affect our business, financial condition or results of operations.
We are typically not involved in maintaining, enforcing and defending patent rights on products that generate our royalties.
Our right to receive royalties generally depends on the existence of valid and enforceable claims of registered or issued patents in the United States and elsewhere in the world. The products on which we receive payments are dependent on patent protection and on the fact that the manufacturing, marketing and selling of such products do not infringe, misappropriate or otherwise violate intellectual property rights of third parties. Typically, we have no ability to control the prosecution, maintenance, enforcement or defense of patent rights, but must rely on the willingness and ability of our partners or their marketers to do so. There can be no assurance that these third parties will vigorously prosecute, maintain, enforce or defend such rights. Even if such third parties seek to prosecute, maintain, enforce or defend such rights, they may not be successful.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has been the subject of much litigation. Furthermore, changes in patent laws or interpretation of patent laws in the United States and in other jurisdictions could increase the uncertainties surrounding the successful prosecution of patent applications and the successful enforcement or defense of issued patents by our partners, all of which could diminish the value of patent protection relating to the biopharmaceutical assets. As a result, the issuance, scope, validity, enforceability and commercial value of the patent rights of our partners and their marketers are highly uncertain. In addition, such third parties’ pending and future patent applications may not result in patents being issued which protect their products, development-stage product candidates and technologies or which effectively prevent others from commercializing competitive products, development-stage product candidates and technologies. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.
Even if the patent applications our partners and their marketers license or own do issue as patents, they may not issue in a form that will provide them with any meaningful protection, prevent competitors or other third parties from competing with them or otherwise provide them with any competitive advantage. Competitors or other third parties may be able to circumvent patents of our partners and their marketers by developing similar or alternative products in a non-infringing manner. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit the ability of our partners and their marketers from preventing others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of their products, development-stage product candidates and technologies.
Any loss or reduction in the scope or duration of patent protection for any product that generates our royalties, or any failure to successfully prosecute, maintain, enforce or defend any patents that protect any such product may result in a decrease in the sales of such product and any associated royalties payable to us. Any such event would adversely affect the ability of the payor to make payments of royalties to us or may otherwise reduce the value of our royalties, and could consequently adversely affect our business, financial condition or results of operations. In cases where our contractual arrangements with our partner permit us to do so, we could participate in patent suits brought by third parties but this could result in substantial litigation costs, divert management’s attention from our core business and there can be no assurance that such suits would be successful.
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The existence of third-party patents in relation to products may result in additional costs for the marketer and reduce the amount of royalties paid to us.
The commercial success of a product depends, in part, on avoiding infringement, misappropriation or other violations of the intellectual property rights and proprietary technologies of others. Third-party issued patents or patent applications claiming subject matter necessary or useful to manufacture and market a product could exist or issue in the future. Such third-party patents or patent applications may include claims directed to the composition, manufacturing, mechanism of action, dosing or other unique features of a product. There can be no assurance that a license would be available to marketers for such subject matter if such infringement were to exist or, if offered, would be offered on reasonable or commercially feasible terms. Without such a license, it may be possible for third parties to assert infringement or other intellectual property claims against the marketer of such product based on such patents or other intellectual property rights.
Even if the marketer was able to obtain a license to the intellectual property rights and proprietary technologies of others, it could be non-exclusive, thereby giving its competitors and other third parties access to the same technologies. In addition, if a marketer of a product that generates our royalties is required to obtain a license from a third party, the marketer may, in some instances, have the right to offset the licensing and royalty payments to such third party against royalties that would be owed to our partner, which may ultimately reduce the value of our royalty interest. An adverse outcome in infringement or other intellectual property-related proceedings could subject a marketer to significant liabilities to third parties, require disputed rights to be licensed from third parties or require the marketer to cease or modify its manufacturing, marketing and distribution of any affected product, any of which could reduce the amount of cash flow generated by the affected products and any associated royalties payable to us and therefore adversely affect our business, financial condition or results of operations.
Disclosure of trade secrets of marketers of products could negatively affect the competitive position of the products underlying our biopharmaceutical assets.
The marketers of the products that generate our royalties depend, in part, on trade secrets, know-how and technology, which are not protected by patents, to maintain the products’ competitive position. This information is typically protected through confidentiality agreements with parties that have access to such information, such as collaborative partners, licensors, employees and consultants. Any of these parties may breach the agreements and disclose the confidential information or competitors might independently develop or learn of the information in some other way, which could harm the competitive position of the products and therefore reduce the amount of cash flow generated by our royalties.
Our board of directors may make decisions with respect to the cash generated from our operations that may result in our not paying dividends or not repurchasing our ordinary shares.
Our board of directors is under no obligation to pay dividends, make distributions or repurchase our ordinary shares and it may decide to use cash to fund asset acquisitions or operations in lieu of paying dividends, making distributions or repurchasing our ordinary shares. We will pay Equity Performance Awards to Mr. Legorreta and certain employees based on our Net Economic Profit regardless of whether any dividends are paid to our shareholders or any ordinary shares are repurchased. Our board of directors’ decisions with respect to our cash may result in our not paying dividends or not repurchasing our ordinary shares. Our board of directors’ decisions with respect to dividends or repurchases of ordinary shares may adversely affect the market price of our Class A ordinary shares. If we generate positive income, but pay limited or no dividends, holders of Class A ordinary shares may have tax liability on their income in excess of the actual cash dividends received by such holders.
The royalties that we acquire may fall outside the biopharmaceutical industry, and any such assets, and the cash flows therefrom, may not resemble the assets in our current portfolio.
We have discretion as to the types of assets that we may acquire. While we expect to acquire assets that primarily fall within the biopharmaceutical industry, we are not obligated to do so and may acquire other types of assets that are peripheral to or outside of the biopharmaceutical industry. Consequently, our asset acquisitions in the future, and the cash flows from such assets, may not resemble those of the assets in our current portfolio. We may have limited experience acquiring assets that are peripheral to or outside of the biopharmaceutical industry. There can be no assurance that assets acquired in the future will have returns similar to the returns expected of the assets in our current portfolio or be profitable at all.
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Risks Relating to Our Organization and Structure
We are a holding company and rely on cash generated by our subsidiaries to meet our financial obligations.
We are a holding company with no material direct operations. Our principal asset is our controlling equity interest in RP Holdings. As a result, we depend on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations and to pay dividends, make distributions to our shareholders and repurchase shares. Our subsidiaries are legally distinct from us and may be subject to contractual, legal, regulatory, financial or other restrictions that limit their ability to provide funds to us. If the cash we receive from our subsidiaries is insufficient to meet our financial obligations, we may be required to raise additional funds through the incurrence of debt, the issuance of equity or the sale of assets. However, there is no assurance that we would be able to obtain such financing on acceptable terms, or at all. Any limitation on the ability our subsidiaries to pay dividends or otherwise make funds available to us could adversely affect our business, financial condition and ability to pay dividends, make distributions to our shareholders or repurchase shares.
Our structure will result in tax distributions as a result of the RP Holdings Class C Special Interest.
RP Holdings is treated as a partnership for U.S. federal income tax purposes and has owners that are subject to U.S. federal income taxation. RP Holdings is required to make distributions of cash to the direct owner or beneficial owners of the RP Holdings Class C Special Interest to cover such owner’s taxes, calculated using an assumed tax rate that is generally uniform for all recipients regardless of their individual tax status. The cash used by RP Holdings to satisfy these tax distribution obligations will not be available for reinvestment in our business, dividends or share repurchases.
Our ability to pay periodic dividends to our shareholders or make share repurchases may be limited by applicable provisions of English law and contractual restrictions and obligations.
Under English law, we will only be able to declare dividends, make distributions or repurchase shares (other than out of the proceeds of a new issuance of shares for that purpose) out of profits available for distribution. Profits available for distribution are accumulated, realized profits, to the extent that they have not been previously utilized by distribution or capitalization, less its accumulated, realized losses, to the extent that they have not been previously written off in a reduction or reorganization of capital duly made. The amount of our distributable reserves is a cumulative calculation. We may be profitable in a single financial year but unable to pay a dividend or make share repurchases if our accumulated, realized profits do not offset all previous years’ accumulated, realized losses. Additionally, we may only make a distribution if our net assets are not less than the amount of our aggregate called-up share capital and undistributable reserves, and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.
Subject to the terms of our indebtedness or other contractual obligations, the approval and payment of any interim dividends are at the sole discretion of our board of directors, which may change our dividend policy at any time, and the payment of any final dividends will be subject to majority approval by holders of our Class A ordinary shares and Class B ordinary shares and in each case will be paid out of profits available for that purpose under English law. Our Articles of Association authorize the board of directors to approve interim dividends without shareholder approval to the extent that such dividends appear justified by profits available for such purpose. The board of directors may also recommend final dividends be approved and declared by shareholders at an annual general meeting. No such dividend may exceed the amount recommended by the board of directors.
There can be no assurance that any dividends, whether quarterly or otherwise, will or can be paid or that any shares will or can be repurchased. Whether we pay dividends to our shareholders or make share repurchases depends on a number of factors, including among other things, general economic and business conditions, our strategic plans and prospects, our business and acquisition opportunities, our financial condition or results of operations, working capital requirements and anticipated cash needs, contractual restrictions and obligations, including fulfilling our current and future capital commitments, legal, tax and regulatory restrictions, other restrictions and implications on the payment of dividends by us to our shareholders or making any share repurchases and such other factors as our board of directors may deem relevant.
A shareholder who receives a distribution under circumstances where he or she knows or has reasonable grounds for believing that the distribution is unlawful in the circumstances is obliged to repay such distribution (or that part of it, as the case may be) to us.
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If we were determined to be an investment company under the U.S. Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could adversely affect our business, financial condition or results of operations.
We intend to conduct our business so as not to become regulated as an investment company under the U.S. Investment Company Act. An entity generally will be determined to be an investment company for purposes of the U.S. Investment Company Act if, absent an applicable exemption, (i) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or (ii) it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the ICA 40% Test.
We do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities, and believe that we are not engaged primarily in the business of investing, reinvesting or trading in securities. We believe that, for U.S. Investment Company Act purposes, we are engaged primarily, through one or more of our subsidiaries, in the business of purchasing or otherwise acquiring certain obligations that represent part or all of the sales price of merchandise. Our subsidiaries that are so engaged rely on Section 3(c)(5)(A) of the U.S. Investment Company Act, which, as interpreted by the SEC staff, requires each such subsidiary to invest at least 55% of its assets in “notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services,” which we refer to as the ICA Exception Qualifying Assets.
In a no-action letter, dated August 13, 2010, to our predecessor, the SEC staff promulgated an interpretation that royalty interests that entitle an issuer to collect royalty receivables that are directly based on the sales price of specific biopharmaceutical assets that use intellectual property covered by specific license agreements are ICA Exception Qualifying Assets under Section 3(c)(5)(A). We rely on this no-action letter for the position that royalty receivables relating to biopharmaceutical assets that we hold are ICA Exception Qualifying Assets under Section 3(c)(5)(A) and Section 3(c)(6), which is described below.
To ensure that we are not obligated to register as an investment company, we must not exceed the thresholds provided by the ICA 40% Test. For purposes of the ICA 40% Test, the term investment securities does not include U.S. government securities or securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on Section 3(c)(1) or Section 3(c)(7) of the U.S. Investment Company Act, such as majority-owned subsidiaries that rely on Section 3(c)(5)(A). We also may rely on Section 3(c)(6), which, based on SEC staff interpretations, requires us to invest, either directly or through majority-owned subsidiaries, at least 55% of our assets in, as relevant here, businesses relying on Section 3(c)(5)(A). Therefore, the assets that we and our subsidiaries hold and acquire are limited by the provisions of the U.S. Investment Company Act and the rules and regulations promulgated thereunder.
If the SEC or its staff in the future adopts a contrary interpretation to that provided in the no-action letter to our predecessor or otherwise restricts the conclusions in the SEC staff’s no-action letter such that royalty interests are no longer treated as ICA Exception Qualifying Assets for purposes of Section 3(c)(5)(A) and Section 3(c)(6), or the SEC or its staff in the future determines that the no-action letter does not apply to some or all types of royalty receivables relating to biopharmaceutical assets, our business will be materially and adversely affected. In particular, we would be required either to convert to a corporation formed under the laws of the United States or a state thereof (which would likely result in our being subject to U.S. federal corporate income taxation) and to register as an investment company, or to stop all business activities in the United States until such time as the SEC grants an application to register us as an investment company formed under non-U.S. law. It is unlikely that such an application would be granted and, even if it were, requirements imposed by the Investment Company Act, including limitations on our capital structure, our ability to transact business with affiliates and our ability to compensate key employees, could make it impractical for us to continue our business as currently conducted. Our ceasing to qualify for an exemption from registration as an investment company could materially and adversely affect the value of our Class A ordinary shares and our ability to pay dividends in respect of our Class A ordinary shares.
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Equity Performance Awards may create incentives that are not fully aligned with the interests of our shareholders.
Subject to certain conditions, at the end of each fiscal quarter, Mr. Legorreta and certain employees are entitled to a distribution in the form of equity from RP Holdings in respect of each portfolio equal to 20% of the Net Economic Profit (defined as the aggregate cash receipts for all new portfolio investments in such portfolio less Total Expenses (defined as interest expense, operating expense and recovery of acquisition cost in respect of such portfolio)) for such portfolio for the applicable measuring period (the “Equity Performance Awards”). The right to Equity Performance Awards may create an incentive to make riskier or more speculative asset acquisitions. In addition, we may incur more debt, finance additional asset acquisitions or otherwise use more leverage in connection with asset acquisitions, as generally the use of leverage can increase the rate of return on an investment and therefore our profits. Under certain circumstances, the use of borrowed money may pose higher risks for our business or increase the likelihood of default, which would disfavor our shareholders. In addition, there is no correlation between our profits and the obligation of our board of directors to pay dividends to shareholders. Consequently, shareholders may receive limited or no dividends while Mr. Legorreta and certain employees remain entitled to Equity Performance Awards that may be substantial. Further, even though Equity Performance Awards are payable on a portfolio-by-portfolio basis (with portfolios comprised of investments made during sequential two-year periods) in order to reduce the risks that we will pay Equity Performance Awards on individual investments even though our overall portfolio of investments is not performing well, Equity Performance Awards may nevertheless be payable when our overall portfolio of investments is not performing as well as the individual portfolios that are used as the basis for measuring the Equity Performance Awards.
Operational risks may disrupt our businesses, result in losses or limit our growth.
We rely heavily on financial, accounting, information technology and data processing systems, including systems operated by our current and future collaborators, contractors or consultants. Such systems are vulnerable to damage or interruption from computer viruses, data corruption, cybersecurity incidents, unauthorized access, natural disasters, pandemics, terrorism, war and telecommunication and electrical failures. If any of these events occur and such systems do not operate properly or are disabled or if there is any unauthorized disclosure of data, whether as a result of tampering, a breach of network security systems, a cybersecurity vulnerability or attack or otherwise, we could suffer substantial financial loss, increased costs, a disruption of our business, loss of trade secrets or other proprietary information, liability to us, regulatory intervention or reputational damage.
Furthermore, federal, state and international laws and regulations relating to data privacy and protection, such as the European Union’s General Data Protection Regulation and the California Consumer Privacy Act, can expose us to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties and significant legal liability, if our information technology security efforts or data privacy and protection compliance efforts fail. In addition, we operate a business that is highly dependent on information systems and technology. Our information systems and technology may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase. Such a failure to accommodate growth, or an increase in costs related to such information systems, could adversely affect our business, financial condition or results of operations.
A disaster or a disruption in the public infrastructure that supports our business, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, could adversely affect our ability to continue to operate our business without interruption. Our disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.
In addition, sustaining our growth may require us to commit additional management, operational and financial resources to identify new professionals to join the team and to maintain appropriate operational and financial systems to adequately support expansion. Since the market for hiring talented professionals is competitive, we may not be able to grow at the pace we desire.
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We are subject to the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.
Our operations are subject to anti-corruption laws, including the U.K. Bribery Act 2010 (“Bribery Act”), the U.S. Foreign Corrupt Practices Act of 1977, as amended the (“FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, and other anti-corruption laws that apply in countries where we do business. The Bribery Act, the FCPA and these other laws generally prohibit us and our employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage. Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense. We and the marketers of products that generate our royalties operate in a number of jurisdictions that pose a high risk of potential Bribery Act or FCPA violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the Bribery Act, FCPA or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the United Kingdom and the United States, and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the “Trade Control laws.”
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the Bribery Act, the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the Bribery Act, the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity. Likewise, any investigation of any potential violations of the Bribery Act, the FCPA, other anti-corruption laws or Trade Control laws by the United Kingdom, United States or other authorities could adversely affect our reputation, our business, financial condition or results of operations.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities or our business arrangements with third parties could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude that our business practices or the business practices of the marketers of products that generate our royalties may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations or the operations of the marketers of products that generate are royalties are found to be in violation of any of these laws or any other governmental regulations, we or marketers of products that generate our royalties may be subject to significant criminal, civil and administrative sanctions, including monetary penalties, damages, fines, disgorgement, individual imprisonment and exclusion from participation in government-funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we or marketers of products that generate our royalties become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we or marketers of products that generate our royalties may be required to curtail or restructure operations, any of which could adversely affect our ability to operate our business and our results of operations.
The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.
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The EU directive on alternative investment fund managers (the “AIFM Directive”) may significantly increase our compliance costs.
The AIFM Directive has been implemented into the national law of the majority of member states of the European Economic Area and the United Kingdom (each an “AIFM state”). The AIFM Directive sets out minimum conditions related to the marketing of interests in alternative investment funds (such as our Class A ordinary shares) in the AIFM states and may impact our ability to attract investors in the AIFM states and may significantly increase our compliance costs. Such conditions include requirements for us to register with the competent authority in the relevant AIFM state in order to market the Class A ordinary shares to investors, requirements to file periodic reports with the competent authority in the relevant AIFM state and requirements to comply with disclosure and reporting obligations in respect of investors in the relevant AIFM state. Such reports and disclosures may become publicly available. While such conditions are met in relation to the AIFM states where our Class A ordinary shares will be marketed, there can be no guarantee that this will continue to be the case.
In each AIFM state, our Class A ordinary shares may only be offered to investors in accordance with local measures implementing the AIFM Directive. Investors, together with any person making or assisting in the decision to invest in us, who are situated, domiciled or who have a registered office, in an AIFM state where our Class A ordinary shares are not being offered pursuant to private placement rules implementing the AIFM Directive may invest, or effect an investment in our Class A ordinary shares, but only in circumstances where they do so at their own initiative. Any investor acquiring our Class A ordinary shares at their own initiative in such AIFM state should note that as we have not been registered for marketing in that AIFM state, no reports will be filed with the competent authority in the relevant AIFM state by or in respect of us and no investor shall be entitled to receive any disclosure or report that is mandated in respect of an alternative investment fund being marketed pursuant to the AIFM Directive.
The United Kingdom implemented the AIFM Directive through the Alternative Investment Managers Regulations 2013 and the Financial Conduct Authority’s Handbook. Following the United Kingdom’s withdrawal the European Union and the expiration of the transitional period, the rules applicable to the marketing of interests in alternative investment funds in the United Kingdom and the other AIFM states remained largely aligned. However, there are now areas of divergence which may make it more time consuming and complex for us to market our Class A ordinary shares to investors in the United Kingdom and other AIFM states which, in turn, may significantly increase compliance costs.
We may not realize the anticipated benefits of the Internalization or we may be exposed to new risks and costs.
We may not realize the anticipated benefits of the Internalization, such as cash savings, enhanced alignment with shareholders, increased investment returns, management continuity, transparency and governance, or greater structure simplification. Since our Internalization on May 16, 2025, we have become exposed to new costs and risks. Although we no longer pay a management fee, our direct overhead has increased because we are responsible for all compensation and benefits of our employees and other operating expenses. As an employer, we are subject to the liabilities and risks commonly faced by employers, such as workers’ compensation claims, labor disputes and other employee-related grievances, and the costs of employee benefit plans. Our overhead may increase further in the future as a result of our becoming internally managed as the responsibility for overhead relating to management of our business has become our own responsibility. In addition, while Mr. Legorreta has agreed to provide the board of directors with a reasonable opportunity to review and comment on future awards or modifications of Equity Performance Awards, Equity Performance Awards on existing and future investments will continue on their current terms and are ultimately controlled by Mr. Legorreta.
Risks Relating to Our Ordinary Shares
The market price of our Class A ordinary shares has been and may in the future be volatile, which could cause the value of our shareholders’ investment to decline.
The market price of our Class A ordinary shares has been and may be volatile and subject to wide fluctuations. During the year ended December 31, 2025, the per share trading price of our Class A ordinary shares ranged from a low of $25.75 to a high of $40.78. Market volatility, as well as general economic, market or political conditions, particularly those that relate to the biopharmaceutical industry, could reduce the market price of our Class A ordinary shares regardless of our operating performance. In addition to the other factors discussed in this Annual Report on Form 10-K, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including:
• market conditions in the broader stock market in general, or in our industry in particular;
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• variations in our quarterly operating results or dividends to shareholders or share repurchases or exchanges for our Class A ordinary shares;
• future sales of our Class A ordinary shares by our affiliates;
• additions or departures of key management personnel;
• timing and rate of capital deployment, including relative to estimates;
• changes in our portfolio mix or acquisition strategy;
• failure to meet analysts’ earnings estimates;
• analyst or media reports or other adverse publicity about us, our industry or related sectors;
• third-party healthcare reimbursement policies and practices;
• litigation and government investigations;
• changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof;
• results, or projected results, from marketers of products that generate our royalties;
• results from, and any delays to, the clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets or other issues relating to such products, including regulatory approval or commercialization;
• adverse market reaction to any indebtedness that we may incur or securities we may issue in the future;
• changes in market valuations of similar companies or speculation in the press or investment community;
• announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments; and
• economic or political developments, such as pandemics, inflation and interest rate volatility and geopolitical conflicts.
These and other factors may cause significant fluctuations in the market price or trading volume of our Class A ordinary shares, which may limit our shareholders’ ability to sell their Class A ordinary shares at prices they consider satisfactory or at all.
Stock markets from time to time experience extreme price and volume volatility, including in recent periods. Following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against public companies. If such litigation is instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources.
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Our Articles of Association provide that the courts of England and Wales will be the exclusive forum for the resolution of all shareholder complaints other than complaints asserting a cause of action arising under the Securities Act and the Exchange Act, and that the U.S. federal district courts will be the exclusive forum for the resolution of any shareholder complaint asserting a cause of action arising under the Securities Act and the Exchange Act.
Our Articles of Association provide that the courts of England and Wales will be the exclusive forum for resolving all shareholder complaints other than shareholder complaints asserting a cause of action arising under the Securities Act and the Exchange Act, and that the U.S. federal district courts will be the exclusive forum for resolving any shareholder complaint asserting a cause of action arising under the Securities Act and the Exchange Act. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that such shareholder finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits. If a court were to find either choice of forum provision contained in our Articles of Association to be inapplicable or unenforceable, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our results of operations and financial condition.
U.S. investors may have difficulty enforcing civil liabilities against our company, our directors or members of senior management.
We are a public limited company with our registered office in England and our subsidiaries are incorporated in various jurisdictions, including jurisdictions outside the United States. As a result, it may be difficult for investors to enforce judgments obtained in U.S. courts against us based on the civil liability provisions of the U.S. securities laws or otherwise. Even if shareholders are successful in bringing civil action against us, our directors or executive officers, the laws of England may render shareholders unable to enforce a judgment against our assets or the assets of our directors and executive officers. In addition, it is doubtful whether English courts would enforce certain civil liabilities under U.S. securities laws in original actions or judgments of U.S. courts based upon the civil liability provisions of the U.S. securities laws or otherwise. In addition, awards of punitive damages in actions brought in the United States or elsewhere may be unenforceable in the United Kingdom. An award for monetary damages under the U.S. securities laws would likely be considered punitive if it does not seek to compensate the claimant for loss or damage suffered and is intended to punish the defendant. The enforceability of any judgment in the United Kingdom will depend on the particular facts of the case as well as the laws and treaties in effect at the time. The United States and the United Kingdom do not currently have a treaty providing for recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. As a result of the above, shareholders may have more difficulty in protecting their interest through actions against our management, directors or other shareholders than they would as shareholders of a U.S. public company.
The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S. corporation.
We are incorporated under English law. The rights of our shareholders are governed by English law, including the provisions of the Companies Act 2006 (the “U.K. Companies Act”), and by our Articles of Association. These rights differ in certain respects from the rights of shareholders in typical U.S. corporations.
The U.K. City Code on Takeovers and Mergers (the “Takeover Code”) applies, among other things, to an offer for a public company whose registered office is in the United Kingdom (and the Channel Islands and the Isle of Man) and whose securities are not admitted to trading on a regulated market in the United Kingdom (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (the “Takeover Panel”) to have its place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man). This is known as the “residency test.” Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the United Kingdom by looking at various factors, including the structure of our board of directors, the functions of the directors and where they are resident.
Given that our central management and control is situated outside the United Kingdom (or the Channel Islands or the Isle of Man), we do not anticipate that we will be subject to the Takeover Code. However, if at the time of a takeover offer, the Takeover Panel determines that we have our place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man), we would be subject to a number of rules and restrictions, including but not limited to the following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide competing bidders.
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As a result of updates to the Takeover Code, any change in our place of central management and control will cease to be relevant after February 2, 2027, and therefore, on the assumption that our securities remain admitted to trading on the NASDAQ (or another regulated market outside the United Kingdom, the Channel Islands or the Isle of Man), the Takeover Code will not be applicable to us.
Under English law, and whether or not we are subject to the Takeover Code, an offeror for us that has acquired (i) 90% in value of; and (ii) 90% of the voting rights carried by the shares to which the offer relates may exercise statutory squeeze-out rights to compulsorily acquire the shares of the non-assenting minority. However, if an offer for us is conducted by way of a scheme of arrangement the threshold for the offeror obtaining 100% of Company shares comprises two components (i) approval by a majority in number of each class of Company shareholders present and voting at the shareholder meeting; and (ii) approval of Company shareholders representing 75% or more in value of each class of Company shareholders present and voting at that meeting.
As an English public limited company, certain capital structure decisions will require shareholder approval, which may limit our flexibility to manage our capital structure.
We are a public limited company incorporated under the laws of England and Wales. English law provides that a board of directors may only allot shares (or rights to subscribe for or convert into shares) with the prior authorization of shareholders, such authorization stating the aggregate nominal amount of shares that it covers and valid for a maximum period of five years, each as specified in the articles of association or relevant shareholder resolution. We obtained shareholder authority to allot additional shares until the end of the next annual general meeting of the Company or, if earlier, September 4, 2027, the date that is 15 months after June 4, 2026. We intend to seek renewal of this authorization at each year’s annual general meeting of shareholders.
English law also generally provides shareholders with preemptive rights when new shares are issued for cash. However, it is possible for the articles of association, or for shareholders to pass a special resolution at a general meeting, being a resolution passed by at least 75% of the votes cast, to disapply preemptive rights. Such a disapplication of preemptive rights may be for a maximum period of up to five years from the date of adoption of the articles of association, if the disapplication is contained in the articles of association, or from the date of the shareholder special resolution, if the disapplication is by shareholder special resolution. In either case, this disapplication would need to be renewed by our shareholders upon its expiration (i.e., at least every five years). We have obtained authority from our shareholders to disapply preemptive rights until the end of the next annual general meeting of the Company or, if earlier, September 4, 2027, which is the date that is 15 months after June 4, 2026, which disapplication will need to be renewed upon expiration to remain effective, but may be sought more frequently for additional five-year terms (or any shorter period). We intend to seek renewal of this authorization at each year’s annual general meeting of shareholders.
English law prohibits us from repurchasing our shares by way of “off market purchases” without the prior approval of shareholders by ordinary resolution (i.e., majority of votes cast by our shareholders), and other formalities. Such approval may be for a maximum period of up to five years but may be sought more frequently. English law prohibits us from conducting “on market purchases” as our shares are listed on the NASDAQ and will not be traded on a recognized investment exchange in the United Kingdom.
Our shareholders approved the authorization of certain “off market purchases” that will expire five years from June 4, 2026 unless renewed by our shareholders prior to the expiration date. We cannot assure shareholders that situations will not arise where such shareholder approval requirements for any of these actions would deprive our shareholders of substantial capital management benefits.
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If our Class A ordinary shares are not eligible for continued deposit and clearing within the facilities of DTC, then transactions in our securities may be disrupted.
The facilities of The Depository Trust Company (“DTC”) are a widely-used mechanism that allow for rapid electronic transfers of securities between the participants in the DTC system, which include many banks and brokerage firms. While our Class A ordinary shares are eligible for deposit and clearing within the DTC system, DTC has discretion to cease to act as a depository and clearing agency for our Class A ordinary shares, including to the extent that any changes in U.K. law change the stamp duty or stamp duty reserve tax position in relation to the Class A ordinary shares. If DTC determined that the Class A ordinary shares were not eligible for continued deposit and clearance within its facilities, our Class A ordinary shares may not be eligible for continued listing on the NASDAQ and trading in the Class A ordinary shares would be disrupted. While we would pursue alternative arrangements to preserve our listing and maintain trading, any such disruption could adversely affect the market price of our Class A ordinary shares and our access to the capital markets.
Risks Relating to Taxation
Our structure involves complex provisions of tax law for which no clear precedent or authority may be available. Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.
Our tax treatment, including Irish, U.K. and U.S. federal income tax treatment, depends in some instances on determinations of fact and interpretations of complex provisions of applicable tax law for which no clear precedent or authority may be available. You should be aware that our tax position is not free from doubt, and that applicable tax rules are generally subject to ongoing review by legislative and administrative bodies and relevant tax authorities, as well as by the Organization for Economic Co-operation and Development (“OECD”), which is continuously considering recommendations for changes to existing tax rules. Furthermore, over 140 member jurisdictions of the G20/OECD Inclusive Framework have joined the Two-Pillar Solution to Address the Tax Challenges of the Digitalization of the Economy as part of the OECD’s base erosion and profit sharing project (“BEPS”), which includes a reallocation of taxing rights among market jurisdictions and model rules for a global minimum tax rate of 15% (“Pillar Two”).

As part of the implementation of the Pillar Two rules by various jurisdictions, the United Kingdom has adopted the Pillar Two income inclusion rule, including a multinational top-up tax and a domestic top-up tax to the minimum effective tax rate of 15% for relevant accounting periods. In addition, the United Kingdom has introduced the Pillar Two undertaxed profits rule, a protective measure that requires subsidiaries to collect top-up taxes where a parent jurisdiction has not implemented the Pillar Two income inclusion rule. Similar legislation has been enacted in Ireland. While we do not expect to be subject to material tax charges under the Pillar Two rules, there remains a risk that tax authorities in any relevant jurisdiction implementing Pillar Two could adopt or interpret legislation, administrative guidance or related statements in a manner that is inconsistent with our understanding of the Pillar Two model rules and associated commentary.

The United States has taken the position that BEPS has no force or effect in the United States absent action by the U.S. Congress. The U.S. Department of Treasury and U.S. Congress have explored potential protective or retaliatory measures against non-U.S. companies and investors if their home jurisdictions impose discriminatory or extraterritorial taxes on U.S. companies, potentially including Pillar Two. We cannot predict whether the United States will adopt any such protective measures or whether any such legislation will be adopted, or whether or how any non-U.S. countries may change their tax laws, including with respect to taxes imposed under Pillar Two. It is possible that any changes in U.S. or non-U.S. tax law could adversely affect our future tax liabilities and our effective tax rate.

As proposals to change tax laws and implement the BEPS framework remain subject to further negotiation, we are currently unable to predict the extent to which any changes to tax laws, statutes, rules, regulations or ordinances will occur and, if so, the ultimate impact on our business. These review processes could result in revised interpretations of established concepts, statutory changes, revisions to regulations and other modifications and interpretations. No ruling will be sought from the relevant tax authority regarding any of the tax issues discussed herein, and no assurance can be given that the relevant tax authorities will not challenge any of our tax positions and that such challenge would not succeed. If any such position is successfully challenged, our tax reporting or tax liabilities could materially increase, which would adversely affect our profitability and cash flows.

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There have been significant changes both made and proposed to international tax laws that increase the complexity, burden and cost of tax compliance for all multinational companies. We expect to continue to monitor these and other developments in international tax law.

We could be liable for significant taxes due to changes in our eligibility for certain income tax treaty benefits or challenges to our tax positions with respect to the application of income tax treaties.
Our subsidiaries expect to receive revenues from both U.S. and non-U.S. sources. We expect that our subsidiaries generally will be eligible for benefits under the applicable income tax treaties between Ireland and the jurisdictions where income is sourced. However, no assurances can be provided in this regard, and it is possible that a taxing authority could successfully assert that any of our subsidiaries does not qualify for treaty benefits as a result of its failure to satisfy the applicable requirements to be eligible to claim treaty benefits. If a taxing authority were to challenge our position regarding the application of an applicable income tax treaty, we could become subject to increased withholding taxes, and such taxes could be significant.
Specifically, with respect to certain U.S.-source income, we expect that our subsidiaries will be eligible for benefits under the U.S.-Ireland income tax treaty (the “Treaty”), and, under that Treaty, will not be subject to any U.S. withholding taxes on such U.S.-source payments. Our current treaty position with respect to U.S.-source payments relies in part on U.S. citizens or tax residents (as defined for purposes of the Treaty) owning, directly or indirectly, at least 50% of the beneficial interest in, or at least 50% of the aggregate vote and value of, each of our subsidiaries that earns U.S.-source income. Our treaty position is based on the current U.S. status of the majority of the existing indirect investors in RP Holdings and Royalty Pharma Investments 2011 ICAV (“RPI 2011 ICAV”). Subject to certain exceptions, the existing indirect U.S. investors in RP Holdings have the right to exchange their interests for our publicly traded Class A ordinary shares. Such publicly traded Class A ordinary shares could be further transferred on the public market to other persons. Therefore, it is possible that over time U.S. persons will own indirectly in the aggregate less than 50% of the interests in our subsidiaries. We currently expect that our Class A ordinary shares and other existing indirect interests in RP Holdings and RPI 2011 ICAV in the aggregate will continue to be owned in sufficient amount by U.S. citizens or tax residents, and that we will be able to establish such ownership, for purposes of satisfying the 50% ownership requirement under the Treaty. However, there is no assurance that RP Holdings and RPI 2011 ICAV will continue to be owned directly or indirectly by sufficient U.S. citizens or residents or that we will be able to establish to the IRS’ satisfaction such ownership for purposes of satisfying the 50% U.S. ownership requirement under the Treaty. It is possible that if the indirect U.S. ownership in our subsidiaries becomes lower than 50% (or we cannot establish such ownership) we may in the future be able to qualify for another applicable exemption from U.S. withholding under the Treaty, but there can be no assurance in this regard. A substantial portion of our revenue is, and is expected to continue to be, derived from U.S.-sourced income, such as royalties, interest or “other income” for Treaty purposes. Therefore, if our subsidiaries failed to qualify for an exemption from U.S. withholding tax under the Treaty (by satisfying either the 50% U.S. ownership requirement or an alternative Treaty exemption) and such types of income were subject to a 30% U.S. withholding tax, our financial position, profitability and cash flows could be adversely affected.
The Irish Department of Finance has engaged in discussions with the U.S. Treasury on updating certain elements of the Treaty. It is at this time not clear what elements of the Treaty may be updated, or when any such updates would go into effect. However, certain elements of the revised U.S. Model Income Tax Convention could, if included in an update to the Treaty, result in our subsidiaries being unable to qualify for the benefits of the Treaty or eliminate or reduce the benefits of the Treaty that otherwise would have been available to us. If our subsidiaries are unable to qualify for the benefits of the Treaty, or if any benefits of the Treaty that otherwise would have been available to us are eliminated or reduced, then all or a portion of our income may become subject to increased withholding taxes, and such taxes could be very significant and materially and adversely affect our financial position, profitability and cash flows.
In addition, U.S. authorities have from time to time reviewed whether non-U.S. jurisdictions are acting inconsistently with U.S. tax treaties or have implemented or are likely to implement tax rules that are viewed as extraterritorial or as disproportionately affecting U.S. companies and have considered potential protective measures or retaliatory measures in response. It is unclear whether the Treaty could be implicated in any such review or whether any measures that may be adopted could affect our ability to qualify for Treaty benefits or reduce or eliminate those benefits. We cannot know at this time whether or when the United States will adopt any such protective measures, or whether or how Ireland may change its interpretation or enforcement of the Treaty or other tax laws in response to any action taken by U.S. authorities. It is possible that any changes in U.S. or non-U.S. tax law could adversely affect our eligibility for benefits under the Treaty.

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