Earnings call transcript: Royalty Pharma Q1 2026 shows robust growth

Royalty Pharma Plc reported strong financial performance in the first quarter of 2026, with portfolio receipts and royalty receipts showing double-digit growth. The company’s earnings per share (EPS) and revenue forecasts were not specified, but the stock price rose by 1.11% in pre-market trading, reflecting positive investor sentiment. The company remains confident in its long-term growth prospects, driven by a diversified portfolio and strategic investments.

Royalty Pharma’s performance in Q1 2026 was marked by significant growth across its key financial metrics. The company maintained a strong net margin of 78%, reflecting its efficient business model. The 10% year-over-year increase in portfolio receipts underscores the resilience of its diversified portfolio. Additionally, the company effectively managed its capital allocation, returning $186 million to shareholders through share repurchases and dividends.

Royalty Pharma’s stock price increased by 1.11% in pre-market trading, reaching $51. This movement reflects investor optimism following the company’s strong financial performance and strategic initiatives. The stock’s current price is near its 52-week high of $50.82, indicating positive market sentiment. The company’s shares have delivered impressive returns, with a 61% gain over the past year and a 31% year-to-date return, according to InvestingPro data. The stock currently trades at a P/E ratio of 28.4 with a market capitalization of $29.9 billion, though InvestingPro analysis suggests the stock may be overvalued at current levels. Investors can explore more valuation insights on the Most Overvalued stocks list.

Royalty Pharma remains optimistic about its future prospects, with EPS forecasts for upcoming quarters ranging from $1.55 to $2.00. Revenue projections for the remainder of 2026 and into 2027 suggest continued growth, with annual forecasts of $3.45 billion for 2026 and $3.63 billion for 2027. The company’s strategic investments in clinical and regulatory milestones, such as the FDA approval for Avlayah, are expected to drive future growth. InvestingPro Tips highlight that management has been aggressively buying back shares and has raised its dividend for 6 consecutive years, with the current dividend yield at 1.86% and dividend growth of 11.9%. These are just 2 of the 11 exclusive ProTips available to subscribers.

Royalty Pharma’s management expressed confidence in the company’s ability to achieve long-term growth targets. The CEO highlighted the importance of the company’s diversified portfolio and strategic investments in driving robust financial performance. Additionally, the CFO emphasized the company’s strong balance sheet and financial flexibility, which support ongoing capital allocation initiatives.

Royalty Pharma’s Q1 2026 earnings call highlighted the company’s strong financial performance and strategic initiatives, positioning it well for future growth. Investors responded positively, as evidenced by the stock’s pre-market gains. For deeper insights into Royalty Pharma’s valuation, financial health metrics, and growth prospects, investors can access the comprehensive Pro Research Report, available for this and 1,400+ other US equities on InvestingPro. These reports transform complex Wall Street data into clear, actionable intelligence through intuitive visuals and expert analysis.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Royalty Pharma First Quarter 2026 earnings conference call. I would like now to turn the conference over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir.

George Grofik, Senior Vice President, Head of Investor Relations and Communications, Royalty Pharma: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma’s first quarter results. You can find the press release with our earnings results and slides to this call on the investor’s page of our website at royaltypharma.com. On slide 2, I’d like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from these statements. We refer you to our most recent 10-K on file with the SEC for a description of these risks. All forward-looking statements are based on information currently available to Royalty Pharma. We assume no obligation to update any such forward-looking statements.

Non-GAAP liquidity measures will be used to help you understand our financial results and the reconciliation of these measures to our GAAP financials is provided in the earnings press release available on our website. With that, please advance to slide 3. Our speakers on the call today are Pablo Legorreta, Chief Executive Officer and Chairman of the Board, Chris Hite, Chairman, Partnering and Investments, Marshall Urist, EVP, Head of Research and Investments, and Terrance Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Chris will discuss the growing opportunity for R&D co-funding. Marshall will then provide a portfolio update, and Terrance will review the financials. Following concluding remarks from Pablo, we will hold the Q&A session. With that, I’d like to turn the call over to Pablo.

Pablo Legorreta, Chief Executive Officer and Chairman of the Board, Royalty Pharma: Thank you, George, welcome to everyone on the call. I am happy to report a strong start to 2026 as we execute towards our goal to be the premier capital allocator in life sciences with consistent compounding growth. Slide 5 summarizes our strong business momentum in the first quarter. Starting with the financials, we delivered 10% growth in portfolio receipts, our top line, and 13% growth in royalty receipts, which are our recurring cash flows. This sustained double-digit momentum was driven by strength of our diversified portfolio. We also maintained strong returns in our business with returns on invested capital of around 14% and returns on invested equity of around 20%. By combining strong growth and attractive returns, we’re confident that we have a clear path to drive shareholder value creation.

Turning to capital allocation, we had a busy quarter with $1.25 billion of announced transactions on three attractive therapies, while capital deployed was in excess of half a billion dollars. We also repurchased 1 million shares for $50 million in the quarter and increased our dividend by 7%. Moving to our portfolio, we’re thrilled to see a number of positive clinical and regulatory updates, including the extraordinary phase III results for Revolution Medicines’ daraxonrasib in pancreatic cancer and FDA approval of Denali’s Avlayah in Hunter syndrome. We also expanded our portfolio through R&D co-funding agreements with Teva, which we discussed on our previous earnings call, and recently with J&J for their autoimmune therapy JNJ-4804. Chris will highlight the growing market opportunity for R&D co-funding with Global Biopharma.

Lastly, we were pleased to acquire a royalty on Ziihera, an approved cancer therapy with blockbuster potential. Looking ahead, we’re increasing our 2026 full year guidance based on the strong business momentum I just highlighted. Slide 6 is one that I keep coming back to each quarter as it demonstrates our consistent double-digit growth on average since our IPO. We have delivered this impressive record year in, year out, regardless of the market backdrop. This speaks to the quality of our investment selection and our unique business model. In the first quarter, we also took major steps to strengthen our global platform and capabilities in partnering the Asia-Pacific region and artificial intelligence. We have brought in exceptional new leaders to our team with Greg Butz, Ken Sun, and Lucas Glass.

Their expertise will support our long-term growth ambitions and help to strengthen our competitive moats as the undisputed leader in the biopharma royalty market. Chris Hite, who has served as our vice chairman throughout our journey as a public company, has moved into a new role as Chairman, Partnering and Investments. In this role, we will continue to expand our global relationship network and play a central role in transactions. Chris has been an incredible partner, and I am delighted that he will continue to provide strong leadership and leverage his relationships in this role. With that, I will hand it over to Chris.

Chris Hite, Chairman, Partnering and Investments, Royalty Pharma: Thanks, Pablo. I’m genuinely excited about the new capabilities we’re building and the opportunity to forge even stronger, more meaningful relationships across the biopharma ecosystem. For my section today, I want to focus on the major opportunity we see for R&D co-funding with Global Biopharma. Beginning on slide 9, we see R&D co-funding as a win-win solution for Global Biopharma and for Royalty Pharma. This market has enormous potential with over $1 trillion of cumulative projected R&D spend by Global Biopharma in the next five years. Co-funding arrangements allow biopharma to share risk at scale, to enhance program return on investment, to expand R&D capacity, and to diversify pipelines. From Royalty Pharma’s perspective, we see multiple potential benefits.

These include unlocking a new market opportunity, gaining access to high-priority clinical programs, leveraging our partners’ global development and commercialization expertise, and the ability to conduct deep diligence to drive high conviction in our investments. Slide 10 illustrates the strong momentum for this funding modality. The demand by biopharma was impacted by accounting uncertainty last decade, but over the last several years, more clarity around contract R&D accounting treatment has resulted in a surge for co-funding deals. As an example, in the first quarter alone, we si