It's my pleasure to have with me today Marshall Urist, who is the EVP, or Executive Vice President, and Head of Research & Investments at the company. Let me start with an interesting anecdote, because I know I have big shoes to fill with respect to Greg leaving. He was the one that interviewed you last year. I covered my first royalty company actually in the late 1990s before it was taken over. It's interesting 'cause I cover a couple of them right now. You guys have done such an incredible job over the last decade and even more, you know, while you've been public. With that, how I'd like to start this conversation is, I want you to share your perspective on the outlook for royalty financing right now in the context of the current macro environment. Also, there's been a few things that have been going on in the market, the way I understand it, in the alt and private credit groups that have acquired some of these royalties and may not want them anymore. I'm just curious if that's something you'd look at, or is the duration simply too short and not of the quality that you're typically focused on? Sure. great to be here, Doug, and thanks to you and RBC for having us. The first part of your question was sort of on the outlook Yeah. For royalty financing. You know, we are really excited about where things stand today. I think we see our market and our TAM as expanding in sort of several directions at this point. You know, I'll loop in what you mentioned with the macro environment. You know, I think if you look back, our view is that on the synthetic royalty, and just a quick definition, that's where we create a royalty to directly fund a company where one didn't exist before, and we've done that with small companies and large companies. I think what we've seen over the last five years is that from a secular point of view, our kind of the biopharma world's view has kinda come to put royalties as kind of a core piece of how people fund companies, right? Right. We've been talking about it for a while, for a very long time. It's great to see it happening that, you know, royalties are becoming kind of a core part of the capital structure alongside equity, you know, various forms of debt, partnerships, whatever it takes, right? You know, our industry is so capital intensive that as it matures, the need for different forms of capital just has created a space, I think, where royalties have thrived, and we're super excited about that part of the market. You know, if we look at where we are today, our team put together You know, if you look at total capital raised by, you know, by biopharma over the last five years or so, royalties was only like 5% of that, right? You think about the headroom that we have is super exciting. There's just a lot of room to go. We're also expanding in other directions. We've talked a lot recently about how we can be a great partner to the biggest pharma companies in the world, right, by directly funding R&D, and we just announced a really exciting deal with J&J to fund one of their IBD programs. You know, we see that as another exciting direction that our business can grow. You know, we should also think globally. We've talked about China as another direction where things have expanded, right? We've seen just an amazing explosion of licensing deals. Every one of those licensing deals creates a royalty, right? Right. We've been paying attention. We've announced recently that, you know, just given the scale of what's happened there, we're building a team locally in China. To develop the kind of Asian royalty ecosystem, right? It doesn't exist before. you know, we, our team and, you know, our team and certainly our founder was kinda key to building the royalty market here. We see a really exciting opportunity to do that in Asia as well. We're there for the long term to build a business there. You know, you asked about macro. We don't think it's so much macro as it is. Sort of, as it is kinda just core that our form of funding is, you know, is kinda growing up in a way and having, you know, has become a core part of the way we do business. Okay. Perfect. When you think about the market share that royalties have as the whole construct, whether it be equity financing, debt, et cetera, et cetera, where do you think that number is right now, and where do you think it could do as a total amount of that funding for these types of companies? Yeah. You know, like I mentioned previously, you know, pinning it down exactly is difficult. Yeah. We're a single-digit number, right? Sort of probably that mid single-digits kinda range. Sure. We haven't said exactly where we think it could go. You just think about how the number of companies, the total capital need out there, the pie is still growing, right? I think that share will only increase as we look forward. Give an example of, you know, we did a very large exciting deal with Revolution Medicines last year. You know, that was a total of a $2 billion commitment over time, right? Yeah. You think about, you, as an example of how things are growing, right? When we think about that scale and looking to scale and be a long-term partner to companies, there's just so much headroom on the synthetic royalty side for us to grow. I do wanna talk about China and the co-funding with pharma, but I am curious about a couple other things first. When you think about the synthetic royalties, and risk, how should they be viewed? As an unsecured form of risk or a different type of risk? Yeah, you know, I think the way part of your question is what kind of asset is a synthetic- Yeah. Royalty, right? Sort of a technical question in a way. You know, the way we think about it is we're buying equity in a product, right? You know, that is a royalty. We own a slice of the future revenue of that product. If that product changes hands for any reason, you know, we travel with it. That's how we think about it. The other part of your question, I think, you know, highlights an important aspect of synthetic royalties and why, another reason why I think it's grown, is the flexibility to structure is basically infinite, right? Right. We can, you know, to your question about, you know, where does the risk lie, you know, we work with our partners all the time to say, you know, let's develop a structure that works for both of us. The core of that conversation is always how do we kind of balance and share the upside, and how do we balance and share the downside risks as well, right? That's- Yeah. Why you see often those deals have structure where if things go really well, there's one set of kind of structures around that, and if things don't go so well, right, we can marry that with things which might mitigate our, you know, mitigate our downside in underperformance scenarios. That's based on the structure of- Exactly Royalty at the outset. Exactly. You know. Yeah. There's no, you know, we, when we go to our partners, you know, our Founder and CEO likes to say that we approach everything with a blank sheet of paper. Yeah. That is absolutely true, right? We come in and it's really a conversation. It's not a one size fits all by any stretch. We say, what's important to you? We have a view of the product, you know, and we sort of bring that together, and I think something we've gotten really good at over time is how do we, you know, be a really good partner and find something that's fair, that's a win-win for both us and our partner. Perfect. I wanna spend a second on the competitive environment because when I think of most companies, yeah, they have a defined competitive marketplace. This is a really a new business. You could call it a couple decades old. You are so dominant, I'd say, in this space. How do you see competition? Yeah. No, it's a good question. You know, there's a couple different ways to sort of give you some insight. You know, number one is as we think about where do we spend our time and what do we worry about, c ompetition is not like a defining thing that we sit around worrying about all the time, right? You know, where do we spend our time? We spend our time trying to grow the pie and make our market bigger, right? Right. Yeah. That is where our time is best spent. You know, we exist in a competitive marketplace. There are competitors out there, and I think, you know, and I think this is misunderstood by some of our investors sometimes. From our point of view, competition has without question been a good thing, right? Sure. It makes markets bigger. It makes partners be more confident in selling. Having other people out there is a good thing, right? Right. There's more people talking about royalties, right? All those things. It's like when in drugs, like same concept all the time- Yeah. Right? You have two companies investing in a in a market, it makes that market bigger. You know, all that being said, I'll just finish by saying, look, we have built our business and our team to compete, right? Right. You know, we feel like we have, you know, we have the lowest cost of capital in this space. We are the sort of, we are completely focused on this one market. You know, I think we have the, you know, the best sort of diligence and execution and business development team out there. We don't ignore the competition, but we're more focused on, you know, on us making the market bigger, and ultimately that's how we've been able to build the portfolio that we have. Perfect. I do wanna spend some time now on the R&D co-funding. Yeah. Cause I thought that was really unique. We've seen $1 billion in Q1, 55% of the global industry is focusing on this now. There could be a few other companies, but certainly yourselves, you're the only one that can really service those types of large pharma companies. Can you talk about the opportunity there? Like I just think it's absolutely enormous relative to how people originally thought of royalties, n ot the synthetic type, your traditional types. Yeah. Look, there, we do have, there are a couple of our competitors in this space, but you're right, it's a pretty narrow set. Yeah. Of people who can do it. You know, what's exciting there, you know, it's a sort of a cliche, but this is like, it feels like an overnight success that took 15 years, you know, 'cause we've been talking about these deals for a long time, right, with pharma. We had done them over the years, right? We sort of did a handful of them over the years. I think a couple things have changed and sort of brought it together. where we really feel like it's reached critical mass. I think one is sort of macro in the current drug development environment, right? You know, there is more competition, there's more pressure in any given therapeutic area to move faster and do more in parallel. Companies have been doing more M&A, right? Right. All of that puts a lot of pressure on capital allocation within, on the P&L, right? That's the core question is these companies have so much cash flow, why do they need you, right? What's actually going on is that's true, they have tons of cash flow, but they don't have infinite P&L bandwidth. Bandwidth, yeah. Right? That's where we are a great partner to pharma is, you know, we can help to kind of expand that R&D bandwidth and allow them to invest in more things in parallel. We're able to do that because, look, we have scale to kind of act like a partner, but we're more of like a financial partner in that way. We have a cost of capital that is competitive with the biggest pharma companies in the world. You know, this is a really exciting opportunity. You know, we spent some time talking about this on our last quarterly call and, you know, that this is another aspect of our market which, you know, we're really optimistic about, and you've seen some big transactions, you know, in the past year by us and others. You know, I think this is another we talked about how our market is growing, you know, a new TAM. You know, this is certainly an example of that. Okay. Excellent. I thought I'd switch now to more on the R&D side. Sure. We can talk about a few products and things like that. You know, you have [dara], you have Myqorzo, you have Avlayah that just got approved recently. When you think of those products, can you comment on what peak royalties could be from that group of products there, let's say simply based on what consensus numbers are or something like that? Sure. It's a great question, and I think it, maybe to help frame it a little bit. Yeah. Of why it's important is, you know, is that our top line this year is gonna be, you know, over $3 billion, right? Yeah. We are the biggest player in the space, but we're certainly not massive from a revenue point of view at this point in time. What's so exciting about some of these that have happened is, you know, it sort of gives everyone a sense of scale of how we can continue to really grow. Right. The business from some of these individual products even. Talked about our deal with Revolution Medicines. They obviously had some, you know, you couldn't miss it in our space, some very exciting data recently that we're gonna see here in a couple weeks. You know, we did a $2 billion deal with them. A billion and a quarter of that was synthetic royalty. Of that, sorry for all the numbers to everyone here, of that, $500 million of it was the company had to take, and we've now made that investment. It was $250 at the time we closed the deal, and another $250 based on the positive outcome from this trial. Right now, on that piece of it alone, we have a royalty that starts at a 4.55% and then tiers down, and then our royalty is zero over $8 billion. Based on consensus sales, that piece alone will be $180 million of royalties to Royalty Pharma once you get to $8 billion. I think given where that product is and the momentum that it has, you know, we certainly think it's gonna get there. Consensus is well north of that, right? Yeah. That's gonna be a really nice contributor. Now, if Revolution Medicines draws more of that, and that will become available to them. Do you have a deal with them? Yeah. Do you think they will draw? You know, look, I think, you know, we'll see. I think it was designed, it's important to keep that in mind because I think we talked about structuring flexibility, right? Yeah. It was designed to give them Flexibility. Flexibility, right? You know, again, that concept of fairness, right, you know, of sort of a win-win. We've, you know, our minimum investment there was $500 million. I think we're thrilled with that investment. That's great. You know, our the remaining $750 is available to them. You know, it was, I think it was an important transaction for them because it gives them kind of a long-term runway of- Sure. Potential access to that. The nice thing is, look, you know, they can make that capital allocation decision at the time and decide the cost of capital of that versus equity versus their other options. We'll see. I think the structure though is, the structure of that is kind of functioning completely as intended. Perfect. You know, if they were to draw the whole thing, that would be $340 million of royalties to us. Yeah. You know, look, based on what we have, you know, I think that, I think really nice to, you know, add a really important, meaningful product like that that's also really meaningful to our top line as well. Okay. Perfect. You know, you asked about Myqorzo and Cytokinetics, another company that we funded in phase III, and we've been really thrilled to see what they've done, both in terms of the current approval, and then very recently, we got some good news on a label expansion trial into non-obstructive hypertrophic cardiomyopathy. That one, consensus sales for that I think are a little over $5 billion. That would give us a royalty of, call it, you know, $230 million or so, as well. Again, like another sort of really exciting partnership in a way that we're using these, you know, using synthetic royalties to really continue to refresh and build our portfolio. Now, Denali was a smaller deal for us. Yeah. You know, but look, such exciting technology, right, with being able to put, get drugs into the central nervous system, you know. You know, what we really liked there was, look, you have a product that really addresses the unmet need in a horrible orphan disease. Right. Now, that's smaller for us, probably $50-ish million of royalties, but it was a $200 million investment, right? Yeah. In relation to how much we invested. You know, and it does give you some insight through all of these into how we select products, right? Right. Which is, you know, we really want drugs that we feel like are important in their respective diseases, right? You know, daraxonrasib goes without saying, right? Sure. You know, Denali like novel target, novel chemistry gets to the one of the drivers of the disease. Say the same thing about Denali, right? Yeah. You know, can finally get the drug where, you know, that causes the major symptom complex of that disease. You know, Cytokinetics is the same. Same thing. Three great examples. Thanks for asking about three good ones. There you go. Three great examples that, you know, shows how we build the portfolio. Another deal you did recently, which was a little unusual, was the Zymeworks deal. Can you tell me why that was attractive to Royalty Pharma? Yeah, you know, The way I think about it is, it was a completely normal deal. Yeah. Down the middle for us, and a slightly different structure. Right Right? That sort of helped our partner. you know, just so everyone knows, we bought a slice of Zymeworks' royalty on Jazz's Ziihera, which the same theme, right? You know, gastric cancer, horrible disease. This is a product that, you know, has, when added on to the current standard of care, continues to push out survival and add value to patients there. it's a pretty exciting drug from, you know, from that point of view, and the data's great, we bought a slice of a kind of preexisting royalty from Zymeworks, you know, sort of normal course for us. It was structured in a slightly different way, again. That, you know, helped our partner out for a whole host of reasons. The theme, I think, here would be, look, we, despite doing this for decades, right, we will, you know, we want to find structures that work for our partners, and we are set up to be, like, total flexibility that way. That's a good example of how we needed to do a slightly different flavor, structured as a royalty-backed note. Again, we can, you know, we're sort of, you know, that's what we do and what we've shown we can do to work with our partners. Okay. Another exciting area, I see anyway, is the lipoprotein(a) class. You've got interest in two products. Can you give me your thoughts there, and what the opportunity might be, and how successful not successful, the odds of seeing some good results out of these trials later this year? Yeah. We have made investments in the number 1 and number 2 Lp(a) products out there. The Novartis product, which I think we're going to see data here in, you know, the second half of this year, and then we also own a royalty in Amgen's product, which, you know, is a year and a half behind. You know, one of the things we're obviously out to do strategically is identify targets and drugs that have potential to be the next big thing in a large market. Right. You know, I think cardiovascular disease, particularly cholesterol management, is a, you know, is an area where, yeah, there's been some innovation, PCSK9, y eah, w e've been, like, banging on LDL for a long time. Lp(a) is kind of a whole new concept. It's a form of cholesterol, but it's a genetically driven form of cholesterol, so you have a population of patients who, you know, have a really well-established risk factor. I think the kind of question at this point is lowering this form of cholesterol going to lead to an outcomes benefit? Obviously we think it will. You know, there is lots of questions about effect size and, you know, what is the right population of patients to treat in terms of baseline levels of Lp(a). I think you take a step back, right? This is a, you know, this is a target that affects millions of people around the world, it's in the hands of two of the kinda premier cardiovascular marketers out there, and it's example of how, you know, we can have things in our portfolio that admittedly are, you know, maybe a little bit, you know, have a little bit higher clinical risk, but, you know, give us the potential opportunity to have, you know, meaningful interest in a, you know, multi-blockbuster class. This is one example of that. You know, we will certainly continue to add things like this to our portfolio over time, but in the context of, you know, in the context of the scale of Royalty Pharma, you know, it's great to have, you know, two exciting potential opportunities like this. Okay. Couple questions to wrap up on the scale side of things. Yes. You've indicated you've got $30 billion projected capital capacity ahead of you, and you're thinking about $2 billion-$2.5 billion of investment annually. Could you be meaningfully above that if the right deals came along? Yeah, it's a good question. You know, the answer to that is yes. You know, we've talked about doing, you know, $2 billion-$2.5 billion a year of new, on average that in terms of new investments. The way to think about that is, we just wanted to give the market and people something to anchor around. Sure. Because it's obviously new investments is kind of the core, one of the core parts of, you know, of our business. you know, it's not like we wake up on January 1st and say, okay, we have to find a path to $2 billion-$2.5 billion a year, right? We're looking t o make the best investments we can every year in great products. You know, so could we be meaningfully above that? Absolutely, right? It's not like we stop every year 'cause we get to $2 billion-$2.5 billion, right? Exactly. You know, it is really about, you know, finding great products, and if we find those great products that have attractive returns for our shareholders, we're gonna make those investments. What I wanna wrap up with is sort of how the market sees this company from a valuation standpoint. Right now I'd say that, you know, you internalize the external manager. I think a lot of people like that, attractive, attracted new investors. This company, the way it's structured, trades at a discount to almost everything out there, and yet it has some of the best, I'd say properties, let's call it that. Yep. Using a real estate term. I'm just curious if people could start to wake up to the fact that this is a very well-diversified company that has access to a number of these attractive products. When are people gonna start to even wake up more? Yeah. I know it's doubled, but come on. Yeah. No, no, good. I Yes. Appreciate you, appreciate the question, and it's an important one. You know, I think that the key message is that we really see ourselves as being one of the premier capital allocators in life sciences that is the and we have the true ability to compound growth, right? Okay. Because we're constantly reinvesting. Sure. Yeah. I think we, you know, from our point of view, we are an N of 1. There is no one else like us out there. I think certainly people are starting to understand our story, but, you know, we are just at the beginning, we are really excited and, you know, really excited about the future. You know, please, everyone, watch us execute and, you know, hope that we're gonna, you know, that we'll create a lot of value for shareholders along the way. Well, Marshall, thank you for coming back again this year. Yeah. Doug, Yeah. Doug, thank you. Appreciate it. It was a pleasure. Great, great questions. Thank you.