Royalty Pharma NASDAQ: RPRX reported what executives described as a “strong start” to 2026, driven by double-digit growth in cash receipts, active capital deployment and a series of clinical and regulatory developments across its portfolio, according to management’s remarks on the company’s first-quarter earnings call.
First-quarter performance and capital allocation
Chief Executive Officer and Chairman Pablo Legorreta said the company delivered “10% growth in portfolio receipts” and “13% growth in royalty receipts,” which he characterized as Royalty Pharma’s recurring cash flows. Legorreta added that performance was supported by the “strength of our diversified portfolio,” and said the company maintained “returns on invested capital of around 14% and returns on invested equity of around 20%.”
Legorreta also highlighted capital deployment during the quarter, citing “$1.25 billion of announced transactions on three attractive therapies,” with capital deployed “in excess of $0.5 billion dollars.” He said Royalty Pharma repurchased 1 million shares for $50 million and increased its dividend by 7% during the quarter.
Chief Financial Officer Terry Coyne said royalty receipts grew 13% in the quarter and portfolio receipts grew 10% “considering a sizable year-over-year decline in milestones and other contractual receipts.” He noted operating and professional costs were 3.9% of portfolio receipts in the quarter, which he attributed to cash savings from the company’s internalization transaction completed last May.
Coyne reported net interest paid of $167 million, reflecting the company’s “semi-annual timing” of interest payments. Portfolio cash flow—defined as adjusted EBITDA less net interest paid—was $722 million for the quarter, and Coyne said net margin of “around 78%” demonstrated the business’s cash conversion.
Deal activity and portfolio updates
Marshall Urist, executive vice president and head of research and investments, detailed a strategic funding agreement signed in March with Zymeworks. Under the deal, Royalty Pharma provided $250 million upfront in exchange for 30% of Zymeworks’ royalty on Jazz and BeOne’s Ziihera, which Urist said translates into a “low-to-mid single-digit royalty” for Royalty Pharma.
Urist said Ziihera, a HER2-targeted bispecific antibody, is FDA-approved for metastatic biliary tract cancer and was recently submitted for approval in gastric cancer. He called the gastric cancer pivotal study results “impressive,” citing a “five to seven-month or nearly 40% overall survival advantage” over existing therapies. Urist said consensus models include Ziihera peak sales of “greater than $2 billion,” and the company expects the transaction to generate “an unlevered IRR in the low double digits.”
Urist also discussed Revolution Medicines’ daraxonrasib, pointing to “unprecedented results” from the RASolute phase III trial in second-line pancreatic cancer. He said daraxonrasib “nearly doubled overall survival from just under seven months with chemotherapy to over 13 months.” Revolution Medicines plans to submit for approval to global regulators, including the FDA, he said.
As a reminder of Royalty Pharma’s exposure, Urist said the company agreed in 2025 to provide up to $2 billion in long-term funding to Revolution Medicines. With the new data, Royalty Pharma has invested $500 million for a synthetic royalty starting at 4.55% on sales up to $2 billion with tiering beyond that. Based on consensus peak annual sales of “greater than $10 billion,” Urist said Royalty Pharma expects peak potential annual royalties of approximately $180 million on the currently funded amount, and “up to $340 million” if Revolution Medicines draws an additional $750 million tranche.
Urist highlighted multiple portfolio catalysts and updates discussed during the quarter and after quarter end, including positive top-line results for MYQORZO in non-obstructive hypertrophic cardiomyopathy, positive results for Zenas’ obexelimab in IgG4-related disease, positive phase II results for Biogen’s litifilimab in cutaneous lupus, FDA approval of Denali’s Avlayah in Hunter syndrome, and Nuvalent’s filing of neladalkib in ALK-positive non-small cell lung cancer. He also noted Teva’s announced acquisition of Emalex for up to $900 million, with a planned second-half regulatory submission for ecopipam in Tourette’s syndrome, and reiterated Royalty Pharma’s tiered royalty terms on ecopipam.
R&D co-funding and strategic positioning
Chris Hite, now Chairman, Partnering and Investments, centered his remarks on Royalty Pharma’s view of “a major opportunity” in R&D co-funding with global biopharma companies. He said the company estimates “over $1 trillion of cumulative projected R&D spend” by global biopharma over the next five years, and described co-funding arrangements as a way for biopharma to “share risk at scale,” enhance ROI, expand R&D capacity and diversify pipelines.
Hite said demand for co-funding increased after “more clarity around contract R&D accounting treatment,” and cited first-quarter deals with J&J and Teva totaling $1 billion in announced value. He also said the number of global biopharma companies using the funding modality has “doubled since 2020.”
In response to a question about how the portfolio mix might evolve, Hite said Royalty Pharma has invested in development-stage products since 2012 and is “expanding the opportunity” through large-pharma co-funding. He referenced an appendix slide indicating roughly 85% of capital at work is in approved products, roughly 10% in development-stage products, and about 3% of development-stage capital has already had positive pivotal results.
Guidance raised; leverage and arbitration timing discussed
Coyne said the company is raising full-year 2026 guidance. Royalty Pharma now expects portfolio receipts of $3.325 billion to $3.45 billion, up from $3.275 billion to $3.425 billion previously. The updated outlook assumes royalty receipts growth of around 4% to 8% and incorporates headwinds including Promacta loss of exclusivity, the launch of a U.S. biosimilar for Tysabri, and “the potential impact of IRA,” Coyne said.
He also said the company expects milestones and other contractual receipts to decrease from $128 million in 2025 to approximately $60 million in 2026. For the second quarter, Royalty Pharma guided to portfolio receipts of $740 million to $760 million, citing the seasonal impact of upward-tiering royalties that reset to a lower rate in the first quarter and flow through to Royalty Pharma’s receipts with a one-quarter lag.
On the balance sheet, Coyne reported cash and equivalents of $586 million at the end of March 2026, investment-grade debt outstanding of $9.2 billion with a weighted average duration of around 12 years, and leverage of 2.9x total debt to adjusted EBITDA (2.7x net). Coyne noted Fitch upgraded the company’s credit rating to BBB from BBB- and said the company’s $1.8 billion revolver was undrawn. In Q&A, Coyne told analysts Royalty Pharma had “quite low leverage right now” and “a lot of financial flexibility” if deal flow increases.
Coyne also provided an update on the company’s arbitration with Vertex, saying that based on the arbitration panel’s schedule, Royalty Pharma now expects the dispute to be resolved “by around the middle of 2027.” In response to an analyst question on the delay, Coyne said the timing change was “simply based on the availability of the arbitration panel.”
Q&A highlights: MYQORZO, competition, China and data/AI
On MYQORZO, Urist said the company did not assume success in the non-obstructive hypertrophic cardiomyopathy trial when it made its investment thesis, which was “premised on the obstructive” indication. He said adding non-obstructive to the label “can only be helpful” and represents upside relative to original estimates, and later added the broader label should be “a tailwind” as Cytokinetics launches aficamten.
Asked about consolidation among smaller royalty players, Legorreta said it could reduce competition and argued Royalty Pharma has advantages including scale, an efficient tax structure, and access to capital at a lower cost.
On China, Hite pointed to last year’s transaction with BeOne and said the company is monitoring out-licensing activity from China to Western multinationals. He also said Ken Sun, former head of Asia at Morgan Stanley, is starting soon and will help “catalyze” the effort.
Legorreta addressed how the company uses data and artificial intelligence, saying Royalty Pharma has invested in data for “many years, decades” and cited claims data for 200 million Americans and electronic medical records for 44 million Americans with nine years of longitudinal data. He said the company uses data to improve investment decisions and to share insights with partners, which in some cases “has led to…better terms on transactions.” He also highlighted the recent hire of Lucas Glass as head of AI, saying Glass will work on implementing AI across the business, including automating diligence processes and strengthening evaluation capabilities.
Legorreta closed by reiterating confidence in Royalty Pharma’s positioning, citing leadership in the expanding biopharma royalty market, a platform to invest in transformative products, expectations for “strong low volatility” growth through 2030 and beyond, and a track record of attractive returns.
About Royalty Pharma NASDAQ: RPRX
Royalty Pharma plc is a specialty finance company that acquires biopharmaceutical royalty interests and provides non-dilutive financing to drug developers and rights holders. The firm purchases future royalty streams, milestone-contingent payments and other revenue rights linked to approved and late-stage pharmaceutical and biotechnology products. By paying upfront consideration for these rights, Royalty Pharma seeks to generate long-term cash flows tied to the commercial performance of a diversified portfolio of medicines.
The company's transaction structures include outright royalty purchases, structured financings and milestone arrangements tailored to the needs of innovator companies, academic institutions and investors.
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