Royalty Pharma : Q4 2020 Pre-Quarterly Results Communication

PRE-QUARTERLY RESULTS COMMUNICATION

NEW YORK, NY, January 15, 2021 - Royalty Pharma plc (Nasdaq: RPRX) intends to announce its financial results for the fourth quarter of 2020 on February 17, 2021. An invitation for the results webcast will follow shortly. To assist in the financial modeling of its fourth quarter 2020 results, the company has compiled the following items.

Non-GAAP Financial Measures

Royalty Pharma focuses on certain non-GAAP financial measures to manage its business. These measures, which are presented as supplemental measures to GAAP financial performance, include Adjusted Cash Receipts, Adjusted EBITDA and Adjusted Cash Flow.

Royalty Pharma believes these non-GAAP financial measures provide meaningful information on the Company's ability to generate cash from operations and on its liquidity. In addition, they can help to identify underlying trends in the business and permit investors to more fully understand how management assesses the performance of the company, including planning and forecasting for future periods (see section 'Use of Non-GAAP Financial Measures').

2021 Guidance

Royalty Pharma intends to introduce full-year 2021 guidance, including guidance for Adjusted Cash Receipts, at the time of the announcement of its fourth quarter 2020 results. Consistent with the company's practice, full-year guidance excludes the contribution from any transactions announced subsequent to the date of its earnings release.

Fourth quarter 2019 Non-GAAP Financial Data

Table 1 sets out historical non-GAAP financial data for the fourth quarter of 2019, which will form the basis for comparison of the fourth quarter 2020 non-GAAP financial results. To aid in comparability, the figures are presented on an unaudited pro forma basis, which adjusts certain cash flow line items as if Royalty Pharma's Reorganization Transactions (as described in the Company's final prospectus filed with the SEC on June 17, 2020 ('Prospectus')) and its Initial Public Offering (IPO) had taken place on January 1, 2019. The most significant difference between the pro forma and reported figures is the new non- controlling interest that resulted from the Reorganization Transactions. This new contractual non- controlling interest results in a higher distribution to non-controlling interests on a pro forma basis as compared to prior historical periods. Less material differences also arise in the Royalty Receipts line as well as payments for operating and professional costs, net interest paid, and in the payments associated with our former interest rate swap contracts.

Additional historical non-GAAP financial measures and the respective GAAP to non-GAAP reconciliations for the fourth quarter of 2019 can be found under the section 'Historical Non-GAAP Financials'.

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Table 1 - Fourth quarter 2019 Non-GAAP Financial Measures (unaudited)

($ in millions)	Fourth quarter of 2019
	Pro forma(3)
Net cash provided by Operating activities (GAAP)	478
Royalty Receipts
Cystic fibrosis franchise	116
Tysabri	85
Imbruvica	76
HIV franchise	71
Januvia, Janumet, Other DPP-IVs	36
Xtandi	34
Promacta	36
Farxiga/Onglyza	-
Erleada	1
Emgality	1
Lyrica	31
Letairis	22
Other Products(4)	67
Total Royalty Receipts	576
Distributions to non-controlling interests	(131)
Adjusted Cash Receipts (non-GAAP)(1)	446
Payments for operating and professional costs	(32)
Adjusted EBITDA (non-GAAP)(5)	413
Development-stage funding payments - ongoing	(16)
Interest paid, net	(50)
Swap collateral (posted) or received, net	-
Investment in non-consolidated affiliates	(4)
Contributions from non-controlling interest- R&D	4
Adjusted Cash Flow (non-GAAP)(2)	$347

Amounts shown in the table may not add due to rounding. For footnote references, see 'Notes' on page 9.

Net cash provided by operating activities (GAAP)

Net cash provided by operating activities (GAAP) is a subtotal directly from our Statement of Cash Flows. Table 4 under 'Historical Non-GAAP Financials' provides reconciliations of our non-GAAP financial measures to their most comparable GAAP financial measures for the fourth quarter of 2019 on a pro forma basis, in each case being net cash provided by operating activities.

Adjusted Cash Receipts (non-GAAP)(1)

Adjusted Cash Receipts comprise the cash royalties received from the marketers of products in which the Company holds royalty rights, less distributions to non-controlling interests:

• Royalty receipts lag product performance by one quarter and can be estimated by applying the company's publicly disclosed royalty rate to the preceding quarter's marketer-announced net revenues on a product-by-product basis. For example, the royalty received by Royalty Pharma on Imbruvica in the fourth quarter of 2020 will reflect worldwide net sales of the product in the third quarter of 2020 ($1,700 million based on reported results from AbbVie and Johnson &

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Johnson) and the tiered mid-single digit royalty rate on worldwide net sales. Tables 2 and 3 set out the reported performance of key products in the third quarter of 2020 and the royalty rates, where disclosed.

• In instances where royalty rates are tiered, royalty rates typically reset at the beginning of the year and lower royalty rates may apply in the earlier quarters of the year until pre-specified sales thresholds have been reached. As a result, royalty rates for certain products or franchises (such as HIV, Promacta and Cystic Fibrosis) have the potential to increase during the course of the calendar year, with second quarter royalty receipts often including royalties on sales at the lowest royalty tier and the fourth quarter royalty receipts including sales at a higher royalty tier.
• Non-controllinginterests represent the share of royalties from substantially all pre-IPO investments which will be paid out to legacy investors. Further detail is provided under the section 'Non-controlling interests.' In the 2019 financial year, distributions to non-controlling interests were $154 million on an as reported basis and $526 million on a pro forma basis. In the third quarter of 2020, distributions to non-controlling interests amounted to $116 million on an as reported basis.

Table 2 - Net Sales Performance of Key Products, third quarter 2020 (unaudited)

($ in millions)		Revenues
	Marketing Company	Third quarter of	% change year/year
		2020
Products
Cystic fibrosis franchise	Vertex	1,536	62
Tysabri	Biogen	516	7
Imbruvica	AbbVie, Johnson & Johnson	1,700(1)	12
HIV franchise	Gilead, others	4,547(2)	8
Januvia, Janumet, other DPP-IVs	Merck & Co., others	1,327(3)	1
Xtandi	Pfizer, Astellas	1,069(4)	15
Promacta	Novartis	442	16
Farxiga/Onglyza	AstraZeneca	634	17
Prevymis	Merck & Co.	77	72
Crysvita(5)	Ultragenyx, Kyowa Kirin	25(5)	50
Erleada	Johnson & Johnson	206	140
Emgality	Eli Lilly	92	92
Trodelvy	Gilead	53	n/a
Nurtec ODT	Biohaven	18	n/a
Tazverik	Epizyme	3	n/a
Evrysdi	Roche	9(6)	n/a

1. AbbVie reported US revenues of $1,119 million (+7.4% year/year); Johnson & Johnson reported International revenues of $581 million (+23% year/year).
2. HIV revenues shown for total Gilead HIV franchise; Royalty Pharma is entitled to royalties on products that contain emtricitabine
3. DPP-IVrevenues represented in this table include Merck's Januvia and Janumet revenues.
4. Xtandi revenues of 113.5 billion Japanese yen translated from Japanese yen at assumed average US dollar exchange rate of 106.1; year- over-year growth as reported by Astellas in Japanese yen. Xtandi growth rate in US dollars in third quarter of 2020 calculated to be 14% using the average US dollar to Japanese Yen exchange rate of 107.3 in the third quarter of 2019 and 106.1 in the third quarter of 2020.
5. Kyowa Kirin reported EMEA revenues of 2.7 billion Japanese yen translated from Japanese yen at average US dollar exchange rate of 106.1; year-over-year growth is in Japanese Yen.
6. Roche global revenues of 8 million swiss francs translated from swiss francs at average US dollar exchange rate of 1.09.

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Table 3 - Public Disclosures of Royalty Rates by Product

	Product			Estimated Royalty
			Expiration(1)
Cystic fibrosis franchise	2037(2)

Royalty Rate(5)

For combination therapies, sales are allocated equally to each of the active pharmaceutical ingredients; tiered royalties ranging from single digit to sub- teen percentages on annual worldwide net sales of ivacaftor, lumacaftor and tezacaftor, and mid-single digit percentages on annual worldwide net sales of elexacaftor

Tysabri	Perpetual	Contingent payments of 18% on annual worldwide net sales up to $2.0 billion
		and 25% on annual worldwide net sales above $2.0 billion
Imbruvica	2027-2029	Tiered royalties in the mid-single digits on annual worldwide net sales
HIV franchise	2021(3)	Royalties in the single digit percentages on annual worldwide net sales varying
		by product depending on contribution of emtricitabine to the total
Januvia and Janumet	2022	Royalties in the low single digit percentages on annual worldwide net sales
Xtandi	2027-2028	Royalties slightly less than 4% on annual worldwide net sales
Promacta	2025-2027	Tiered royalty ranging from 4.7% to 9.4% on annual worldwide net sales
Tazverik	2034-2036	Royalties in the mid-teen percentages on annual worldwide net sales, stepping
		down on annual worldwide net sales above certain sales thresholds
Crysvita	2033-2036(4)	10% royalty on EU, UK and Switzerland annual net sales
Trodelvy	Perpetual	4.15% royalty on annual worldwide net sales up to $2 billion, declining
		stepwise based on sales tiers to 1.75% on annual worldwide net sales above
		$6 billion
Nurtec ODT and	2034-2036	2.1% royalty on annual combined worldwide net sales up to $1.5 billion; 1.5%
zavegepant		on annual combined worldwide net sales above $1.5 billion. 0.4% incremental
		royalty on all Nurtec ODT worldwide net sales and up to 3.0% incremental
		royalty on zavegepant worldwide net sales
Prevymis	2029	Low double-digit royalty on annual worldwide net sales up to $300 million
Evrysdi	2034(6)	Tiered royalties ranging from 8% to 16% of worldwide net product sales;
		Royalty Pharma is entitled to approximately 43% of total royalties

Notes:

1. Dates shown represent management's estimates of when a royalty will substantially end, which may depend on patent expiration dates (which may include patent term extensions) or other factors and may vary by geography. Royalty expiration dates can change due to patent, regulatory, commercial or other developments. There can be no assurances that our royalties will expire when expected.
2. Royalty is perpetual; year shown represents Trikafta expected patent expiration and potential sales decline based on generic entry.
3. Represents patent expiration date in the US as patents in major jurisdictions outside the US have expired.
4. Royalties expire when we receive royalties equal to 1.9 times our purchase price if that happens prior to December 31, 2030, and otherwise when we receive aggregate royalties of 2.5 times our purchase price.
5. The royalties in our portfolio are subject to the underlying contractual agreements from which they arise and may be subject to reductions or other adjustments in accordance with the terms of such agreements.
6. Key patents on Evrysdi expire in 2034, though our royalty will cease when aggregate royalties to Royalty Pharma equal $1.3 billion.

Adjusted EBITDA (non-GAAP)(5)

Adjusted EBITDA is a non-GAAP measure used by Royalty Pharma which comprises Adjusted Cash Receipts less payments for operating and professional costs.

Adjusted Cash Flow (non-GAAP)(2)

Adjusted Cash Flow is a non-GAAP measure which is comprised of Adjusted EBITDA less ongoing development stage funding payments, net interest paid and miscellaneous other items relating to swap arrangements, investments in non-consolidated affiliates and contributions from non-controlling interests:

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