Royalty Pharma ‘on track’ to deliver portfolio receipts of $4.7B by 2030

Royalty Pharma (RPRX) will host an Investor Day in New York City. Senior executives will provide an update on the company’s plans to drive shareholder value creation through its unique business model and capabilities in the large and growing market for funding biopharma innovation with royalties. Royalty Pharma has delivered on its strategic and financial priorities since its 2020 IPO and its inaugural Investor Day in 2022. Based on its full year 2025 guidance, the company expects to deliver a top-line compound annual growth rate over the 2020 to 2025 period of approximately 12%, as measured by Portfolio Receipts. Based on its current plans, the company’s goal is to deliver at least $4.7B of Portfolio Receipts in 2030, consistent with the target announced in 2022, which represents double-digit growth from 2020 to 2030. This is expected to result in Portfolio Cash Flow, a non-GAAP liquidity measure, of approximately $4B in 2030. The company’s Portfolio Receipts and Portfolio Cash Flow outlook for 2030 are both more than 10% ahead of the current analyst consensus. The company is also on track to meet or exceed its five-year Capital Deployment target of $10B to $12B, with announced transactions to date of $14B and capital deployed of $9B. Royalty Pharma expects to achieve an unlevered IRR on its post-IPO investments in the mid-teens. These return figures do not take into account the benefit of leverage. Since 2020, returns on approved products have trended to the low double-digit range, at the high end of the company’s stated target, while returns on development-stage products have continued to be in the teens. Royalty Pharma expects to sustain attractive returns well above its cost of capital. Royalty Pharma is also reporting for the first time its historical performance on two additional financial measures – Return on Invested Capital and Return on Invested Equity. These measures reflect the cash generated by the business relative to the active capital invested and complement unlevered IRRs on investments. Based on the company’s financial performance since 2019, Royalty Pharma has achieved an ROIC of approximately 15% and an ROIE of approximately 21%, with a high level of year-to-year consistency. In the five years from 2020 to 2024, the biopharma royalty market has averaged $6.2B in announced transaction value per year, more than double the average of $2.7B over the preceding five years. This rapid expansion reflects growing recognition in the life sciences industry of the benefits of royalty funding. During its Investor Day, Royalty Pharma will share the findings of a royalty funding market study conducted by Deloitte which supports continued strong growth in the market. For example, the Deloitte market study report found that of the biopharma executives surveyed, 54% had increased interest in royalty funding, 87% would consider royalties for at least some of their capital needs and that executives were increasingly recognizing the benefits associated with royalties. Royalty Pharma has scaled its business to match the significant royalty opportunity ahead, increasing its headcount approximately three-fold since IPO and adding powerful new capabilities, notably in data and analytics, to strengthen its diligence process and add value to its partners’ development and launch strategies. Royalty Pharma’s goal is to be the premier capital allocator in life sciences with consistent, compounding growth. The company is confident in its ability to build on its competitive moats and to fund biopharma innovation at scale. Alongside its growth goals, the company may also pursue share buybacks in line with its dynamic capital allocation framework, complementing its commitment to grow its dividend by a mid-single digit percentage annually. As a result, Royalty Pharma expects to deliver at least a mid-teens average total shareholder return over the period from 2025-2030, driven by double-digit growth in Portfolio Cash Flow and its growing dividend. Furthermore, Royalty Pharma sees the potential for significant upside beyond a mid-teens total shareholder return as the value of its unique intellectual capital and investment platform are recognized following the completion of the Manager internalization.