Great, thanks so much for joining us, everybody. I'm Terence Flynn, the U.S. biopharma analyst here at Morgan Stanley, and very pleased to be hosting Royalty Pharma today. Joining us from the company, we have Pablo Legorreta, who is the company's founder and CEO, and Terry Coyne, the company's CFO. Thank you both so much for being here. Before we get started, for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. Thanks so much both for being here. Really appreciate the time today. Maybe, Pablo, I just thought just to share a little bit of background on the company and the business model, because it is somewhat unique for those who are new to the story, and then we can dive into some of the more, detailed questions. Well, first of all, thank you very much for the invitation to join you today in this great conference, and it's great to see many of our investors in the public, and others that may be hearing us, and also new investors to Royalty Pharma. We're at a stage of our business where as a young biotech company, young public company, sorry, having gone public in June of 2020. We really wanna make a big effort of cultivating new investors for Royalty Pharma and really reaching out to investors all around the world to explain how unique an investment proposition Royalty Pharma is. We often say that we're an N of one, and the business model is really simple. Really, really simple. What we have been able to assemble is a portfolio of royalty streams in some of the best drugs, top drugs, marketed by some of the top companies in life sciences. We do that over and over again. We've been doing this for 27 years and have been able, through almost each wave of innovation in life sciences, been able to have investment in the most exciting products that each wave of innovation has brought to patients. We do that by initially, when I started this business, acquiring royalties from the original innovators, which were universities, research hospital foundations, some biotechs that ended up owning a royalty because they had licensed their first or second drug to a big pharma and would reinvest that in the third, fourth drug. For a long period of time, our business was based on that idea of just monetizing royalties, essentially acquiring royalties in approved products for the most part, and where the license already existed. It was a license in the hands of Memorial Sloan Kettering, or Amgen, Amgen drug, or UCLA, which had a royalty in Xtandi, a Pfizer drug, the Cystic Fibrosis Foundation, which funded, you know, a company, Aurora Biosciences, that was acquired by Vertex, and they had this about 10% royalty in what has become an enormous franchise in cystic fibrosis. That was sort of the beginnings of Royalty Pharma. In 2012, we made the conscious decision of also funding research, funding R&D, funding clinical trials. And we said, you know, we understand how to price, how to assess commercial potential for a drug, how big is it gonna be, and we have been doing that very successfully from 1996 to 2012, and deploying many $ billion of capital and acquiring royalties in some of the most exciting drugs like Humira, Remicade, Rituxan. But then in 2012, we said: We also believe we can assess approval risk. Why don't we go out and fund the biotech industry, fund late-stage trials, and create a royalty? And that's why we call them synthetic royalties. So in this case, the product is not approved. We're taking the binary risk of approval, non-approval, also the commercial risk, and we're giving a company, you know, $200 to $300 million, you know, $500 million in the case of Merck, $425 million in the case of a deal we did with Merck last year, where we're funding a schizophrenia drug. And in those cases, what we're doing is we're creating royalties. And what that really did for our business, and that's why it's so exciting for us, is that it made the entire pipeline of the entire ecosystem in life sciences, our pipeline. Because we can go to one of 8,000 biotech companies that are out there and propose to fund their late-stage trials. One of, you know, 20-25 big pharma, you know, big biotech companies that are out there, and also propose to fund their clinical trials and create a royalty. Now, we're super, super selective because we wanna continue with this record that we have of investing in the top drugs marketed by the top companies. And if you look at what happened last year at Royalty Pharma, we started with a funnel where we looked at 350 opportunities that came. A lot of them, actually, a very significant portion of these opportunities are deals that we generate. We go out and talk to companies. They're not brought to us, and many of them end up being sort of one-on-one discussions, not even competitive. But it was 350. Of those we not discarded, we actually decided to pass on about 250 of the 300, where we told the company, "Maybe it's early stage. Let's talk in a year or two." Maybe we just couldn't get comfortable with the IP or the, you know, phase 1, phase 2 data, the market opportunity. But many of them, we just said: Let's talk in a year or two. And then what we did is we signed about 80 CDAs. We did about 70 deep dives, where we, you know, spent a month, sometimes even longer than that, you know, doing deep diligence on the product, the clinical trials, everything, the IP, the design of the trial we're funding, the phase 3. And then we made 35 proposals to companies, and of those 35, we did 9 deals last year, and we deployed $3.5 billion of capital. And And we have a track record now of this deployment growing. It was $3 billion in 2021, $3.5 billion last year, and if we go back a little further, was in the $2 billion+ range. And what's really happened with our business, Terence, is that we are becoming probably in a, you know, capital markets obviously provide billions of dollars, hundreds of billions of dollars of capital to the industry. But the way we do it is very unusual. It's very complementary to equity, and we are becoming probably the biggest funder of innovation and life sciences in very unique ways that are very long-term, very flexible, and complementary to equity. Management teams love this, and they come back and do more business with us. We had a record of doing several deals with Biohaven, with Cytokinetics, with... Anyway, but I'll stop there and maybe get into some Q&A. No, that's great. Great. I appreciate all the, the background. The, you know, the one question, you know, we get a lot is just the type of returns, and so, you know, maybe just frame that for us, where you have been historically. You've announced this pivot also, not announced, you talked about the pivot towards doing the, you know, the synthetic royalty deals. So maybe just walk us through kind of how you think about returns and the confidence in being able to generate those same returns on the forward year. So, yeah. So to answer your question, and I'm gonna just before I talk about the returns, talk about another very unique aspect of Royalty Pharma. When you look at our business, just think, how many businesses out there in life sciences give an investor the possibility of investing in a diversified portfolio of blockbuster drugs? We have more blockbusters than the typical big pharma company, about one and a half to two times more blockbusters in our portfolio than in any one of the big pharma companies. So very unique from that perspective. And, you know, talking about returns, and I think just maybe briefly, what's also very unique about Royalty Pharma, when you look at the top line, so we are capturing the most exciting things of this industry, which is the access to a product, and we have a share of the top line, just like any big pharma. So, you know, what drives the performance of Royalty Pharma is sales of pharmaceutical products, just like any big pharma, any big biotech, but it's diversified. And we are not exposed to the challenges that this industry faces. There are very significant expenditures in sales and marketing, in manufacturing, in R&D. So that's very unique, the risk-reward. But going to your question about returns, we have a very consistent track record of generating double-digit returns, very predictably, over more than two decades. If I look at, you know, the last 10 years, and we had a chart in our investor day last year, where it showed the returns, how they've been double digits consistently. And when we look at things that are approved, our target return is high single digit, low double digit, unlevered returns. And then we can add leverage to those investments that take the returns to high teens, sometimes even low twenties, because a lot of the assets that we have invested in have had this history of outperformance. Even recent investments we did in Tremfya, Trelegy, they're doing much better than what we forecasted when we made the investment, what analysts had for those products at the time. Why? Because of the unique attributes that these assets have. They're the top drugs marketed by the top companies, and they have had a consistent history of outperformance. So these returns that are start with a high single digit, low double digit, become, you know, high teens, low twenties. Tell me what companies are out there that have a consistent track record of investing in things that are highly predictable, approved products that are doing billions of dollars, where you can lock in returns that are high single digit, low double digit, unlevered for the next 10, 15 years? Very unusual. When we look at unapproved assets, the late stage part of our business, which is... So if I, if I maybe touch on that also, if I look at when we started this in 2012, we've deployed about $24 billion of capital. About 60% is in approved products, 40% in late stage products. If I look at the last 3 years since we went public in 2020, looking at 2020, 2021, 2022, we're up to about $11 billion of capital deployed, and again, it's about 60/40. 60% in approved products, 40% in unapproved. When we look at the unapproved, which is about 40% of the capital we're deploying, 40-45, the returns we're targeting are high teens. Those returns are not levered, because obviously those assets cannot be levered. But if they get approved, and we have a track record there of about 85%-90% of the investments we have made in late stage products getting approved, which is higher than the two-thirds track record of the entire industry. In our case, it's higher. Why? Again, we're selective, and we're trying to really cherry-pick the best assets in late stage. But when they get approved, then we can add leverage, and the returns of those then get into much higher, in the 20s, even 30s. So that's the answer to your question about returns. Okay, great. Maybe let's talk about a couple of the recent deals that you've announced. You guys have been busy here over the last month or so. And again, as you always tell me, you know, the business can kind of be chunky in terms of how these deals come to fruition. But maybe just talk through both Skytrofa, which was the most recent one, and then Adstiladrin, which again, I don't know if I pronounced that correctly, which is a gene therapy for bladder cancer, and maybe just why those were attractive opportunities and where they fit in kind of the spectrum. Why don't I pass it on to Terry so that I stop doing all the talking and talk about the- We're really excited about those investments. I think, you know, at a high level, one of the things that's really exciting about them is that those really show us tapping into this synthetic royalty market that we've talked a lot about. And we feel like we're really starting to get some momentum there. And that's a huge growth opportunity for our business, is funding the industry by creating these synthetic royalties. Both of these products are approved. I guess I'll start with Skytrofa, long-acting growth hormone. It's a very well-established market. The product has had a really great launch, and we think there's, you know, a lot of nice growth ahead of it. There's a lot of reasons why, as you can imagine, moving from a once-daily injection to a once-weekly injection should make a lot of sense for patients. And so we think that this is gonna be, you know, an important evolution in that market. From a returns perspective, we're excited about the returns that we think we're gonna get on that investment. Well, you know, right in the range of what we've described historically, for approved investments in that high single digit, low double-digit range, I think we're, you know, cautiously optimistic that it can be at the high end of that range. And then, similarly, with Adstiladrin too, it's a— So we've been public for three years, got a lot of questions. We've always got questions, "When are you gonna ever make a gene therapy investment? Yeah. What we said is we're, you know, we're gonna be patient there. We want—there's a lot that we still need to understand. But this opportunity came along. The data is really remarkable. It's very differentiated from a safety, from a convenience perspective. And this is our first gene therapy investment, and we're very excited about it. Again, so that was a $300 million investment. Skytrofa was a $150 million. $300 million for Adstiladrin as an upfront, plus we expect to pay a $200 million manufacturing milestone. And again, in terms of the returns that we're targeting, we think we'd be really attractive there, in, you know, that high single, low double. Again, you know, we're hoping that we can get at the higher end of that range. So I think maybe just very quickly adding a couple of things about Adstiladrin, because I'm very excited about that investment, gene therapy, but also sort of under the radar. You know, private company, this asset that not a lot of people knew about. We see so many things, 350 deals, that at the end, we sort of see probably everything that's out there. And we were able to negotiate this very attractive deal with a very unique company, private, with certain characteristics that are, you know, unique to a private company, where it was a win-win. But, you know, this, this gene therapy, it's not like many gene therapies, where, you know, there's a ton of patients that are gonna get on it, and you have to go through a growth phase and then maybe at the time. This will grow for a long period of time because it's gonna treat 15,000 patients every year that are, that are diagnosed. It's a big funnel. But, you know, so what's very interesting is the differentiation. When you look at just certain, you know, a few metrics, you know, compared to Keytruda, more efficacious, which is just great. But when you look at the side effect profile, superior in many ways. So it's gonna do, we think, really well, multi-billion-dollar plus potential and potentially multi-billion-dollar potential if it eventually gets into the intermediate risk population, which another 15... It, it'll double the number of patients from 15 to 30,000. So, you know, we're very excited about this, great investment. You know, I see it as a $500 investment because that milestone of $200 is very likely to get paid, and very exciting. Great. What, maybe, Terry, you alluded to this, but this is—you're seeing a lot of momentum on the synthetic side. So maybe just any way you could help us put some numbers around that in terms of, like, how many, you know, synthetic deals have you guys done, or what gives you the comments that you're seeing like an inflection here? Yeah, I just think it's- The number of inbounds you're getting, like, what's driving that, I guess? So we, you know, we're looking at things every week. We, as things move later stage, our research team is bringing this senior management more into the loop on what we're looking at, and, you know, we're just feeling it, that there's a lot of, you know, that there's a lot of momentum behind the synthetic royalties. The exciting thing is that in terms of the... Public talks a lot about the funding needs of the industry, and there's no secret that they're significant. But synthetic royalties historically have been low single-digit% of that market. Yeah. We're feeling that, you know, it really is. We don't know if it gets to, you know, mid-single digit, high single digit, double digit, but the momentum is there, and that's what we're excited about. The companies like Ferring, Ascendis, they had other options, and they chose this as the preferred method to fund themselves, and we think that's really encouraging for the long term. To give you a sense of the scale, so the biotech industry over the last five years raised about $260 billion between, you know, IPOs, follow-ons. Of that, $4 billion of $260 billion was the synthetics, about 2%. Over the next ten years, we've come up with some estimates of how much money the biotech side of the industry requires, which is about $1 trillion to fund the pipeline. And we think it's about maybe $450 billion to $500 billion over the next five years. If the synthetics become 4% to 8% of that, you know, $500 billion, it's a $20 billion+ opportunity. We have guided our investors for Royalty Pharma deploying $10 billion to $12 billion of capital over five years. We're way ahead. I think we're gonna exceed that. But when you look at the opportunity in synthetics, if it really becomes, you know, $220 billion+, then, you know, it could for sure, you know, I mean, the $10 billion to $12 billion that we have forecasted would be short, you know, a small fraction of that. Okay, great. One other question is just on the IRA. We've been talking with a lot of companies this week about IRA impact now that we have the initial list that was published here. I know you guys provided some detail about, you know, the impact on the business from some of your drugs. Now that the list is out, maybe just give us kind of the mark-to-market for kind of impact. But then what are you doing as you think about future investments? More importantly, how is this shaping, you know, the diseases you're looking at, the, you know, structure of drugs? Like, what is it doing in terms of how you go about your business from an operational strategic advice? Yes. So when that long-awaited list was finally published, it was actually an upside surprise for us. We thought that we would have two drugs on there, Imbruvica and Xtandi, and only Imbruvica was on there. And Imbruvica has faced some commercial headwinds that are pretty well understood at this point, and it's becoming a smaller and smaller portion of our overall portfolio. So at our second quarter earnings call, we said low single-digit percentage, you know, I think 2% to 3% potential impact. In the 2026 timeframe. And what we're seeing now, you know, with just Imbruvica, it's even smaller than that, 1%, totally de minimis. Okay. So that was, you know, a positive development. But we have products in the portfolio that will be on the list in later years. Trelstar is one that we would think will probably be on there in 2027. That's a unique asset in that it's already highly discounted, and there could be some potential for some volume offsets with improved access to a product like Trelstar. So, overall, though, we feel like we're very well positioned from a portfolio perspective. We have very little exposure. And then from a new, our business is to deploy capital. And when we're making new investments, we're assessing the IRA risk, and we're taking a scenario-based approach, but we try to be pretty thoughtful and pretty conservative in terms of what that will look like. And so we're not paying for, you know, we're not paying for beyond—like, we can really assess that risk, and that factors into the prices that we pay for investments. It's more factoring the price as opposed to, like, where you're looking in terms of therapeutic area or something like that? Yeah, exactly. I mean, we're looking at everything, and there's a lot of opportunities across, you know, a lot of different therapeutic areas. We might take a view that, you know, for this specific asset, it's clear sailing for the next X number of years, 8, 9, whatever. Then after that, there's more risk, and we tend to be much more conservative, you know, with the back end. But that doesn't mean that we won't have any potential additional cash flow or upside on the back end. Maybe we do. Okay, understood. I think there's, you know, two upcoming catalysts in the pipeline, well, maybe in a derivative one that we can talk about. But Tremfya in Crohn's disease, there's a head-to-head study versus Stelara. I know that that was a big underpinning of the MorphoSys deal. So maybe just give us your latest outlook on how to think about, you know, why this trial matters as a catalyst. And the second is the aficamten phase III HCM data from Cytokinetics. Mm-hmm. And again, maybe just walk us through why that is an important readout for the company. Yeah. So, so Tremfya has been one of those investments that's off to a really strong start for us. We invested in the summer of 2021, and consensus assessments for that product, peak sales are probably up 40%+. And so, you know, I- Exceeding our forecast and analyst forecast by about 40%, just to put that in perspective. Yeah. And so, the next leg of growth, we think, is gonna come from those from those IBD Crohn's indications, and we're very optimistic that you know, those will read out positively and that that will drive future growth. In terms of aficamten, again, we think that that's an exciting opportunity, and we're very you know, optimistic about the phase III readout later this year there. Okay. We have... Obviously, there's precedent with mavacamten. No reason to think that, you know, this wouldn't be similarly successful from an efficacy perspective. And then, you know, hopefully, maybe there's a little differentiation. Okay. What's the confidence level in that differentiation, I guess? Because I think that's one of the more investor debates, is just the extent of differentiation. Yeah. I mean, look, it's a growing market, and we don't need it to be differentiated for it to be a really good investment for us. But we looked at a range of scenarios, and if it does end up being differentiated, then it, you know, could be even better than we—than, you know, maybe we—our conservative estimates would have implied. Okay. Okay, great. Maybe moving on to the CF franchise. Obviously, you know, one of the bigger franchises for the company. It's been a great investment. There's obviously a lot of debate about, you know, how... Number one, how the market plays out as we have potentially a next-gen triple coming from Vertex with vanzacaftor. I know you guys talked a lot about this on the second quarter call, so maybe just walk us through your thoughts on that, you know, market evolution, if there is, you know, another option. And then the corollary is just, you know, the implications on your royalty stream- Mm-hmm ... on, you know, the business, if vanzacaftor is, you know, successfully reaches the market, I guess. So, Terry, before he became our CFO, worked on that deal and knows it extremely well, so you should just share your views. Yeah, we've talked a lot about this. So high level, Trikafta, we know that this drug has totally transformed the treatment of CF, and it's been an amazing drug for those patients that suffer with that devastating disease. Vertex is in development with a next generation triple combination therapy. They're going to announce data in early 2024. We don't know anything that the rest of the markets know. We have the same information that everyone else has. So far, you know, there's nothing that tells us that this new product is clearly differentiated, but we'll have to wait and see. It's been an area of investor interest for Royalty Pharma, particularly as it relates to the royalty rate. So right now, with Trikafta, we're entitled to royalty on all three components. With the new triple, we know we're entitled to a royalty on the tezacaftor component, so one third of it is royalty-bearing. The area of debate is around the deuterated ivacaftor portion. Our position is that deuterated ivacaftor is the same thing as ivacaftor, and it should have the same royalty rate. But there, you know, there's clearly a difference of opinion on that. And so, what we did on our second quarter earnings call is we tried to just lay out the scenarios for investors. Bookend, this is where Trikafta is today. Consensus has it getting to about $11.5 billion by 2030. If you add in this new triple combination therapy, where they should be able to access patients that have dropped off of Trikafta, that's around 6,000 patients, we think that the total franchise can grow to $13 billion or more. And so using that as sort of the sales case, then we look at the royalties. If we're right, and we're entitled to royalties on the tezacaftor and the deuterated ivacaftor component, then our royalty would be around 8%. That compares to around 9% for Trikafta. And that would take our royalties, what we call adjusted cash receipts, to $900 million to $950 million, depending on what percent of patients switch to the new triple. So and we looked at a 50% switch to 75% switch. We think that in order for it to have that 75% switch, it would really need to truly be differentiated from an efficacy perspective, with meaningful improvement in lung function as well. That's our assumption in order to get to that number. But we just thought it made sense to sort of frame the extreme downside scenarios. And then if we're wrong, and we're only entitled to a royalty on the tezacaftor component, then our royalty rate would be around 4%, and our adjusted cash receipts would be in the $600 to $700 million range. And so what we've said is that the downside to our, you know, our top line by 2030 is a couple hundred million dollars, and that's the math behind it. We still feel really good about our position, that deuterated Kalydeco is simply Kalydeco. But we thought, let's lay out all the numbers for investors. They can plug in their own numbers, but we feel like that's, you know, that's, that's the range of scenarios. It's $200 million in a business that should have, you know, $4.5 billion to $5 billion of revenue just with the sort of, you know, growth that we've had historically. So it becomes relatively small. Yeah. It's really very insignificant, you know, at that point. Either way, it's gonna be a teeny percentage of our overall portfolio by then, and, you know, no matter what the scenario is, we feel very comfortable. Yeah. When do you think we'll have visibility on the... I know when we'll get the Vertex data, but on the royalty rate, et cetera, is that a 2024 event, do you think? We just can't really get into any of those specifics, but we're obviously excited. You know, we're interested to see the data- Yeah ... to see if there's, if this drug is safe and efficacious, so. Yeah. Great. Maybe going back to the pipeline, I know, you know, we talked a lot, and you mentioned this area, like gene therapy. When would the company move into that space? The other one, obviously, that's, you know, coming to the forefront now is obesity and metabolic. So just as we think through that, I mean, where does that fall in the spectrum of interest? Obviously, just given the size of that market, I'm sure you guys must be exploring it, but maybe just help us think through how you're thinking about that market. Yeah. So we've looked at the existing products that are out there growing very fast, and there's no royalties on those. Unfortunately. Yeah. But, you know, the question is, can we find some of the newer things that are being developed? We're actively looking there, and maybe there could be an opportunity there. Okay. Maybe the last couple of seconds, any other therapeutic areas or platforms that you guys think are interesting or up and coming, just at a high level? Yeah, I think we look at absolutely everything, and cell therapy, gene therapy. But then there's, you know, other areas of the industry where there is so much focus on things like oncology, that there's other areas, you know, therapeutic areas that are sort of forgotten, and there's different ways of potentially, you know, developing therapies, right? So, you know, we're excited about what we're seeing. Yeah. Great. Well, thank you both so much for the time. So maybe just very quickly in closing, you know, I'd just like to say thank you for the invitation, but also we have a business with an incredibly simple business model, where we're able to capture the most attractive aspects of this industry and where we are highly confident that we're gonna be able to deliver really predictable double-digit growth. And a business where myself and the management team have a very, very high ownership. As a group, we own more than 20% equity in this business, and we, as a group, also decided to lock up our equity 80% for five years. No company does that after our IPO instead of a six-month lockup. But we are fellow shareholders, like every one of you out there. This is not a business where, in many others, we've looked a bit, where management owns less than 1% in many of the big pharmas, or 1, 2% in some biotechs, maybe, you know, single digit. It's a business where we, as a group, own 20% of this company, and we care a lot. Obviously, for me and for the team, what happens to this business long term is critical, so we're totally focused on making this a very successful outcome for us and for all of you over the next 5 to 10 years, and thank you.