What DRI Healthcare Trust (DHT.UN) Said on Its Q3 Earnings Call

Key Points

• DRI expects to exceed its 2026 adjusted EBITDA guidance of $157 million to $162 million without needing additional transactions this year. Third-quarter adjusted EBITDA rose 9% year over year to $40 million, and normalized cash receipts increased 9% to $47.5 million.
• After receiving $176.2 million from selling its EKTERLY interest, DRI reinvested the proceeds and borrowed funds in JUVMO, its largest transaction to date. Management said JUVMO supports its adjusted EBITDA aspirations through 2030, while four fixed annual payments beginning in 2027 help offset the product’s slower expected launch.
• Portfolio performance was mixed: ZEJULA receipts fell 59% to $500,000, prompting a $14.6 million noncash impairment, while ORSERDU receipts rose 4% to $17.6 million. DRI said its actionable investment pipeline has expanded to about $4.5 billion and another deal is most likely in the first half of 2027.

DRI Healthcare Trust TSE: DHT.UN said it is tracking above the high end of its 2026 adjusted EBITDA guidance after third-quarter cash receipts rose and the company reinvested proceeds from its EKTERLY sale into its largest transaction to date.

The pharmaceutical royalty investor reported adjusted EBITDA of $40 million for the quarter, up 9% from a year earlier, while normalized total cash receipts also increased 9% to $47.5 million. Total income fell 4% to $46.9 million. Unless otherwise specified, dollar amounts are in U.S. currency.

CEO Ali Hedayat said the company expects to exceed its existing full-year adjusted EBITDA guidance range of $157 million to $162 million, without assuming further transactions this year. DRI plans to provide updated long-term targets on its fourth-quarter call.

EKTERLY proceeds fund JUVMO investment

DRI exercised its put option on EKTERLY in July and recorded $176.2 million in proceeds, producing a $59.9 million gain on the sale. The gain was excluded from adjusted EBITDA and adjusted cash earnings, CFO Zaheed Mawani said.

In September, DRI used the proceeds and additional borrowing capacity to fund its investment in JUVMO. The transaction closed four days after the product received U.S. Food and Drug Administration approval on Sept. 25, and the first royalty receipt is expected in the first quarter of 2027.

Chief Investment Officer Navin Jacob said JUVMO missed the window for 2027 Medicare formulary placement, and that AbbVie expects a slower initial launch. DRI had anticipated that in its acquisition forecast, he said. Four fixed annual payments totaling $93.75 million, beginning in September 2027, reduce the company’s dependence on a fast first-year launch.

Hedayat said JUVMO alone allows DRI to meet or exceed its previously announced adjusted EBITDA aspirations through 2030, before any additional deals. He also said the company expects growth over that period to meaningfully exceed its prior ranges once further deployment is considered.

Portfolio results and ZEJULA impairment

Third-quarter royalty income declined 2%, partly because the company was comparing against a favorable one-time XOLAIR adjustment in the prior year. Hedayat also cited weakness in ZEJULA and the early-quarter disposition of EKTERLY. The first $1.85 million of LUMVOA royalty income partly offset those pressures.

DRI recorded a $14.6 million noncash impairment on ZEJULA following FDA label restrictions and increased competition. Jacob said the restrictions narrowed the eligible patient population more than DRI had forecast, and the company now expects declining receipts over the remainder of the royalty term. Third-quarter ZEJULA receipts fell 59% to $500,000.

Among other portfolio assets, ORSERDU generated $17.6 million in third-quarter receipts, up 4% year over year. DRI has now recouped its initial capital outlay on both ORSERDU investments, Jacob said. He added that Menarini’s third-quarter sales imply approximately $19 million in royalties payable to DRI in the fourth quarter.

Jacob said ORSERDU sales have held up better in 2026 than DRI’s acquisition forecast assumed, but the company still expects declines from 2027 as competition increases. He also said LUMVOA’s first quarter was stronger than expected, while cautioning against drawing conclusions from a single data point.

Margins, distributions and investment capacity

DRI’s third-quarter adjusted EBITDA margin was 84%, compared with 89% for the first nine months of 2026. Management attributed the quarterly result partly to seasonal receipts and higher incentive-compensation accruals. Mawani said the incentive accrual accounted for roughly two percentage points of margin.

Hedayat maintained the company’s longer-term margin target in the high 80% to low 90% range, while noting that timing of receipts, expenses and investment in staff can cause quarterly fluctuations.

Net earnings were $46.5 million, or $0.85 per unit, including the EKTERLY gain. Adjusted cash earnings per unit declined to $0.53 from $0.55 a year earlier. DRI declared a quarterly distribution of $0.11 per unit, payable Jan. 20, 2027, to unitholders of record on Dec. 31, 2026.

As of Sept. 30, DRI had $41.1 million in cash and cash equivalents and $349 million of available credit. Mawani said availability reflected a $271 million draw to fund JUVMO, net of a $150 million repayment made with EKTERLY proceeds.

DRI has deployed roughly $400 million this year, including JUVMO and LUMVOA, but Hedayat said its remaining investment capacity through 2030 is roughly unchanged from its earlier $800 million to $1 billion deployment aspiration because of JUVMO cash flows and the EKTERLY proceeds.

The company plans to focus over the next 12 months on longer-duration, pre-approval assets. Jacob said the actionable pipeline has expanded to approximately $4.5 billion from $3 billion as balance-sheet capacity and investment-team resources have increased. He said another transaction is most likely in the first half of 2027, closer to the second quarter, though one could occur sooner.

About DRI Healthcare Trust (TSE:DHT.UN)

DRI Healthcare is a pioneer in global pharmaceutical royalty monetization. Since our founding in 1989, we have deployed more than $3 billion, acquiring more than 75 royalties on 50-plus drugs, including Eylea, Keytruda, Lumvoa, Orserdu, Remicade, Spinraza, Stelara, Vonjo and Zytiga. DRI Healthcare's units are listed and trade on the TSX in Canadian dollars under the symbol 'DHT.UN' and in U.S. dollars under the symbol 'DHT.U'. To learn more, visit drihealthcare.com or follow us on LinkedIn.

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