– 82% royalty income growth over prior year period underscores transformative year –
– Announcing 2024 royalty income guidance of
– Increasing quarterly cash distribution –
"2023 marked a significant step forward for the growth of the Trust," said
Fourth Quarter Highlights
- Total Income of
US$75.8 million ; - Normalized Total Cash Receipts of
US$52.3 million 1; - Adjusted EBITDA of
US$46.5 million 1; - Comprehensive Earnings of
US$20.4 million ; - Basic and diluted Adjusted Cash Earnings per Unit of
US$1.03 andUS$1.02 , respectively1,2; - Net Earnings per Unit of
US$0.39 (basic and diluted)2; - Increased total credit available under our credit facility to
US$500.0 million ; and - Declared a special cash distribution of
US$0.2662 per unit, a special unit distribution ofUS$0.7640 per unit and a regular quarterly cash distribution ofUS$0.075 per unit to unitholders of record as atDecember 31, 2023 .
__________________________________ |
1 Normalized Total Cash Receipts and Adjusted EBITDA are non-GAAP financial measures. Adjusted Cash Earnings per Unit is a non-GAAP ratio. These measures are not standardized measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The reconciliation of these measures can be found later in this press release and in the Trust's MD&A. |
2 The weighted average number of basic and diluted units for the three months ended |
Fiscal 2023 Highlights
- Deployed
US$384.7 million in 5 royalty transactions; - Completed two follow-on public offerings of 18,653,000 units at
US$8.12 3 per unit for gross proceeds ofUS$151.5 million ; - Total Income of
US$166.3 million ; - Normalized Total Cash Receipts of
US$131.2 million 1; - Adjusted EBITDA of
US$113.2 million 1; - Comprehensive Earnings of
US$91.2 million ; - Basic and diluted Adjusted Cash Earnings per Unit of
US$2.53 andUS$2.52 , respectively1,4; - Basic and diluted Net Earnings per Unit of
US$2.08 andUS$2.07 , respectively4; and - Declared total distributions of
US$92.1 million , comprised of cash distributions ofUS$49.1 million and unit distributions ofUS$43.0 million .
__________________________________________ |
3 Represents the weighted average cost per unit issued. |
4 The weighted average number of basic and diluted units for the year ended |
Subsequent to Quarter End
- Deployed
US$115.0 million to expand interest in Omidria royalties by replacing previously agreed-upon annual royalty caps with a 30% royalty on allU.S. net sales; and - Declared a quarterly cash distribution of
US$0.085 per unit for the first quarter of 2024, payable onApril 19, 2024 to unitholders of record onMarch 31, 2024 .
Financial Highlights
Three months ended | Year ended | |||
(thousands of US dollars, except per unit amounts) |
|
|
|
|
Total income | 75,842 | 22,642 | 166,279 | 93,034 |
Management fees | 3,426 | 2,055 | 22,335 | 6,532 |
Performance fees | 5,918 | — | 24,534 | — |
Amortization of royalty assets | 24,719 | 19,078 | 87,076 | 59,266 |
Impairment of royalty assets | 9,216 | — | 9,216 | — |
Other expenses | 10,388 | 6,316 | 40,570 | 15,638 |
Net gain from sale of royalty asset | — | — | 109,756 | — |
Net earnings (loss) | 22,175 | (4,807) | 92,304 | 11,598 |
Net unrealized gain (loss) on derivative instruments | (1,741) | — | (1,089) | — |
Comprehensive earnings (loss) | 20,434 | (4,807) | 91,215 | 11,598 |
Net earnings (loss) per unit – basic | 0.39 | (0.13) | 2.08 | 0.30 |
Net earnings (loss) per unit – diluted | 0.39 | (0.13) | 2.07 | 0.30 |
Normalized Total Cash Receipts5 | 52,253 | 31,150 | 131,181 | 96,232 |
Adjusted EBITDA1 | 46,450 | 27,371 | 113,209 | 82,439 |
Adjusted EBITDA Margin1 | 89 % | 88 % | 86 % | 86 % |
Adjusted Cash Earnings per Unit – Basic1 | 1.03 | 0.39 | 2.53 | 1.87 |
Adjusted Cash Earnings per Unit – Diluted1 | 1.02 | 0.39 | 2.52 | 1.87 |
Weighted average number of Units – Basic | 56,332,607 | 38,231,059 | 44,479,802 | 38,570,499 |
Weighted average number of Units – Diluted | 56,464,102 | 38,270,508 | 44,622,811 | 38,591,392 |
Asset Performance
As at
_____________________________________ |
5 Normalized Total Cash Receipts, Total Cash Royalty Receipts and Adjusted EBITDA are non-GAAP financial measures. Adjusted EBITDA Margin and Adjusted Cash Earnings per Unit are non-GAAP ratios. These measures and ratios are not standardized measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The reconciliation of these measures can be found later in this press release and in the Trust's MD&A. |
Portfolio
(thousands of US dollars) | Cash Receipts | |||||
Three months ended | Year ended | |||||
Product | Therapeutic Area | Marketer(s) |
|
|
|
|
Empaveli/Syfovre1 | Hematology/Ophthalmology | Apellis, Sobi | 1,438 | 269 | 1,876 | 269 |
Eylea I | Ophthalmology | Regeneron, Bayer, | 1,456 | 1,290 | 5,511 | 5,399 |
Eylea II | Ophthalmology | Regeneron, Bayer, | 317 | 1,407 | 2,022 | 5,881 |
FluMist | Influenza | AstraZeneca | 944 | 734 | 2,423 | 2,952 |
Natpara | Endocrinology | Takeda | 635 | 575 | 2,441 | 2,625 |
Omidria | Ophthalmology | 3,250 | 1,670 | 13,000 | 1,670 | |
Oracea | Dermatology | Galderma | 2,267 | 1,845 | 8,319 | 7,662 |
Orserdu I2 | Oncology | Menarini | 8,633 | — | 12,086 | — |
Orserdu II2 | Oncology | Menarini | 14,521 | — | 14,521 | — |
Rydapt | Oncology | Novartis | 1,698 | 2,226 | 8,242 | 10,102 |
Spinraza | Neurology | Biogen | 4,426 | 3,879 | 16,784 | 16,466 |
Stelara, Simponi and Ilaris3 | Immunology | Johnson & Johnson, | 278 | 597 | 1,300 | 3,704 |
Vonjo I | Hematology | Sobi | 3,079 | 1,751 | 10,134 | 3,155 |
Vonjo II | Hematology | Sobi | 642 | — | 1,038 | — |
Xenpozyme | Lysosomal Storage Disorder | Sanofi | 427 | — | 674 | — |
Xolair | Immunology | Roche, Novartis | 3,198 | 3,019 | 9,945 | 9,646 |
Zejula | Oncology | GSK | 867 | 692 | 3,126 | 692 |
Zytiga | Oncology | Johnson & Johnson | 3,691 | 9,101 | 12,234 | 18,059 |
Other Products4 | Various | Various | 486 | 562 | 2,241 | 2,563 |
Total Cash Royalty Receipts5 | 52,253 | 29,617 | 127,917 | 90,845 | ||
Interest receipts from loan receivable6 | — | 1,533 | 3,264 | 5,387 | ||
Principal repayment of loan receivable6,7 | — | — | 50,000 | — | ||
Exit fee received for loan receivable6,7 | — | — | 1,000 | — | ||
Premiums for prepayment6,7 | — | — | 2,140 | — | ||
Proceeds from sale of royalty assets7,8 | — | — | 210,000 | — | ||
Total Cash Receipts5 | 52,253 | 31,150 | 394,321 | 96,232 | ||
Principal repayment of loan receivable6,7 | — | — | (50,000) | — | ||
Exit fee received for loan receivable6,7 | — | — | (1,000) | — | ||
Premiums for prepayment6,7 | — | — | (2,140) | — | ||
Proceeds from sale of royalty assets7,8 | — | — | (210,000) | — | ||
Normalized Total Cash Receipts5 | 52,253 | 31,150 | 131,181 | 96,232 |
____________________________________ |
1 Per the royalty agreement, Empaveli/Syfovre royalty cash receipts are to be received on a three-quarter lag. During the fourth quarter of 2023, the Trust received royalty cash receipts related to sales from the first quarter of 2023, on a three-quarter lag. Prior to the fourth quarter, royalties had been received on a two-quarter lag. |
2 Includes milestone royalty receipts of |
3 Stelara, Simponi and Ilaris include two royalty streams on each product, for a total of six royalty streams. |
4 Other Products includes royalty income from certain other royalty assets as well as royalty assets which are fully amortized and, where applicable, the entitlements to which have generally expired. |
5 Total Cash Receipts, Total Cash Royalty Receipts and Normalized Total Cash Receipts are non-GAAP financial measures. These measures are not standardized measures under IFRS and might not be comparable to similar financial measures disclosed by other issuers. The reconciliation of these measures can be found later in this press release and in the Trust's MD&A. |
6 Interest receipts from loan receivable relates to the loan receivable, which was repaid in full on |
7 This item represents cash received by the Trust in the quarter that is not expected to recur in the normal course of our operations. As such, this item is not included in Normalized Total Cash Receipts. |
8 The Trust completed a transaction in respect of Tzield during the first quarter of 2023. On |
Liquidity and Capital
On
The Trust had 56,358,240 units issued and outstanding on
Distributions
On
The Trust also announced today that its board of trustees has declared an increased quarterly cash distribution in the amount of
Normal Course Issuer Bid
During the year, the Trust repurchased and cancelled 325,653 of its own units under its normal course issuer bid ("NCIB") for an aggregate amount of
Omidria Royalty Amendment
On
Omidria was approved by the
2023 Highlights
In addition to the strong performance of the asset portfolio during the year, the Trust took a number of steps to execute on the strategy outlined to its unitholders since its initial public offering.
On
On
On
On
On
Our manager is entitled to performance fees determined on a portfolio-by-portfolio basis pursuant to the terms of a management agreement. As a result of the Trust selling its royalty interest in Tzield for
Throughout 2023, the Trust declared and subsequently paid cash distributions totaling
Fourth Quarter and Fiscal 2023 Conference Call & Webcast
As previously announced, management will hold a conference call on
A live webcast of the conference call, including a slide presentation, will be available at https://app.webinar.net/09MwQ3j7DLE. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on the Trust's website following the call date.
Non-GAAP Financial Measures
The reconciliations of non-GAAP financial measures and non-GAAP ratios for the three months and years ended
Total Cash Royalty Receipts, Total Cash Receipts and Normalized Total Cash Receipts
Total Cash Receipts refers to Total Cash Royalty Receipts plus cash receipts from all products. Total Cash Receipts includes cash receipts from interest as well as non-recurring cash receipts such as the principal payments related to the Trust's loan receivable, fees and premiums related thereto and proceeds from the sale of royalty assets which consist of the proceeds from the sale of the Tzield royalty. Total Cash Royalty Receipts refers to aggregate cash royalty receipts from the Trust's portfolio of royalty assets and forms part of Total Cash Receipts. Because of the lag between when the Trust records royalty income and receives the corresponding cash payments on its royalties, management believes Total Cash Receipts and Total Cash Royalty Receipts are useful measures when evaluating the Trust's operations, as they represent actual cash generated in respect of all royalty assets held during a period. The Trust also presents Normalized Total Cash Receipts, which refers to Total Cash Receipts adjusted to remove cash receipts that are not expected to recur in the normal course of its operations. Management believes that Normalized Total Cash Receipts will assist readers in evaluating the period over period performance of the Trust's royalty portfolio since Normalized Total Cash Receipts only includes cash receipts generated by royalties and other amounts payable pursuant to the terms of the Trust's royalty assets and interest on the Trust's loan receivable.
Three months ended | Year ended | |||
(thousands of US dollars) |
|
|
|
|
Total income | 75,842 | 22,642 | 166,279 | 93,034 |
[-] Other interest income | (393) | (50) | (861) | (83) |
[+] Royalties receivable, beginning of period | 40,886 | 36,386 | 27,748 | 30,148 |
[-] Royalties receivable, end of period | (64,082) | (27,748) | (64,082) | (27,748) |
[+] Acquired royalties receivable1 | — | — | 5,343 | 1,366 |
[-] Non-cash royalty income2 | — | (4) | (4) | (194) |
[-] Non-cash interest and other income on loan receivable3 | — | (76) | (1,102) | (291) |
[+] Principal repayment of loan receivable | — | — | 50,000 | — |
[+] Exit fee3 | — | — | 1,000 | — |
[+] Proceeds from sale of royalty assets | — | — | 210,000 | — |
Total Cash Receipts | 52,253 | 31,150 | 394,321 | 96,232 |
[-] Principal repayment of loan receivable4 | — | — | (50,000) | — |
[-] Exit fee received for loan receivable3,4 | — | — | (1,000) | — |
[-] Premiums for prepayment of loan receivable4 | — | — | (2,140) | — |
[-] Proceeds from sale of royalty assets4 | — | — | (210,000) | — |
Normalized Total Cash Receipts | 52,253 | 31,150 | 131,181 | 96,232 |
[-] Interest and other income on loan receivable | — | (1,609) | (6,506) | (5,678) |
[+] Non-cash interest and other income on loan receivable3 | — | 76 | 1,102 | 291 |
[+] Premiums for prepayment of loan receivable4 | — | — | 2,140 | — |
Total Cash Royalty Receipts | 52,253 | 29,617 | 127,917 | 90,845 |
___________________________________ |
1 Acquired royalties receivable represent the Trust's royalty entitlements prior to the completion of the royalty transactions they relate to, as described under the Transactions Completed section of the MD&A. Acquired royalties receivable of |
2 Non-cash royalty income is related to excess royalty payments received in prior periods in which the Trust has an obligation to the royalty payers. Royalty income for the three months and year ended |
3 For the three months and year ended |
4 This item represents cash received by the Trust that is not expected to recur in the normal course of its operations. As such, this item is not included in Normalized Total Cash Receipts. |
Adjusted EBITDA and Adjusted EBITDA Margin
Management believes Adjusted EBITDA provides meaningful information about the Trust's operating cash flows as it eliminates the effects of other non-cash expenses and accruals and income and expenses that are not expected to recur, that have been recorded on the statement of net earnings and comprehensive earnings. The Trust refers to EBITDA when reconciling its comprehensive earnings (loss) to Adjusted EBITDA but does not use EBITDA as a measure of its performance. Management believes that Adjusted EBITDA Margin is a useful supplemental measure to demonstrate the operating efficiency of the Trust's business on a cash basis.
Three months ended | Year ended | |||
(thousands of US dollars) |
|
|
|
|
Comprehensive earnings (loss) | 20,434 | (4,807) | 91,215 | 11,598 |
[+] Amortization or royalty assets | 24,719 | 19,078 | 87,076 | 59,266 |
[+] Amortization of other current assets1 | — | 146 | 240 | 260 |
[+] Impairment of royalty assets | 9,216 | — | 9,216 | — |
[-] Other interest income | (393) | (50) | (861) | (83) |
[+] Interest expense | 6,336 | 4,013 | 26,503 | 6,630 |
EBITDA | 60,312 | 18,380 | 213,389 | 77,671 |
[+] Royalties receivable, beginning of period | 40,886 | 36,386 | 27,748 | 30,148 |
[-] Royalties receivable, end of period | (64,082) | (27,748) | (64,082) | (27,748) |
[-] Performance fees payable, beginning of period | — | — | — | — |
[+] Performance fees payable, end of period | 5,918 | — | 5,918 | — |
[+] Acquired royalties receivable2 | — | — | 5,343 | 1,366 |
[+] Unit-based compensation3 | 1,379 | 342 | 3,731 | 1,191 |
[+] Board of trustees unit-based compensation4 | 296 | 91 | 809 | 296 |
[-] Non-cash royalty income5 | — | (4) | (4) | (194) |
[-] Non-cash interest and other income on loan receivable6 | — | (76) | (1,102) | (291) |
[-] Premiums for prepayment of loan receivable7 | — | — | (2,140) | — |
[-] Net gain on sale of royalty asset8 | — | — | (109,756) | — |
[-] Net unrealized gain on derivative instruments | 1,741 | — | 1,089 | — |
[+] Management fees on sale of royalty asset9 | — | — | 13,650 | — |
[+] Performance fees on sale of royalty asset9 | — | — | 18,616 | — |
Adjusted EBITDA | 46,450 | 27,371 | 113,209 | 82,439 |
[÷] Normalized Total Cash Receipts | 52,253 | 31,150 | 131,181 | 96,232 |
Adjusted EBITDA Margin | 89 % | 88 % | 86 % | 86 % |
______________________________________ |
1 In connection with the Empaveli/Syfovre transaction completed in 2022, the Trust acquired other current assets, as described under the Empaveli Transaction section of the MD&A. The related amortization expense is recorded in other operating expenses. |
2 Acquired royalties receivable represent the Trust's royalty entitlements prior to the completion of the royalty transactions they relate to, as described under the Transactions Completed section of the MD&A. Acquired royalties receivable of |
3 For the year ended |
4 Certain members of the board of trustees elected to be compensated fully or partially in deferred units ("DUs") under the Trust's Omnibus Equity Incentive Plan. |
5 Non-cash royalty income is related to excess royalty payments received in prior periods in which the Trust has an obligation to the royalty payers. Royalty income for the three months and year ended |
6 For the three months and year ended |
7 The Trust received a prepayment premium for prepayment of the loan receivable, as described under the Loan receivable section of the MD&A. |
8 During the second quarter of 2023, the Trust sold its royalty interest in the worldwide sales of Tzield, as described under the Tzield Transactions section of the MD&A. |
9 During the year ended |
Adjusted Cash Earnings per Unit
Management believes that Adjusted Cash Earnings per Unit provides meaningful information about the Trust's performance as it provides a measure of the cash generated by the Trust's assets on a per unit basis, excluding cash earnings that are not expected to recur.
Three months ended | Year ended | |||
(thousands of US dollars, except per unit amounts) |
|
|
|
|
Comprehensive earnings (loss) | 20,434 | (4,807) | 91,215 | 11,598 |
[+] Amortization or royalty assets | 24,719 | 19,078 | 87,076 | 59,266 |
[+] Amortization of other current assets1 | — | 146 | 240 | 260 |
[+] Impairment of royalty assets | 9,216 | — | 9,216 | — |
[+] Unit-based compensation2 | 1,379 | 342 | 3,731 | 1,191 |
[+] Board of trustees unit-based compensation3 | 296 | 91 | 809 | 296 |
[-] Non-cash royalty income4 | — | (4) | (4) | (194) |
[-] Non-cash interest and other income on loan receivable5 | — | (76) | (1,102) | (291) |
[-] Premiums for prepayment of loan receivable6 | — | — | (2,140) | — |
[-] Net gain on sale of royalty assets7 | — | — | (109,756) | — |
[-] Net unrealized gain on derivative instruments | 1,741 | — | 1,089 | — |
[+] Management fee on sale of royalty asset8 | — | — | 13,650 | — |
[+] Performance fee on sale of royalty asset8 | — | — | 18,616 | — |
Adjusted Cash Earnings | 57,785 | 14,770 | 112,640 | 72,126 |
Adjusted Cash Earnings per Basic Unit | 1.03 | 0.39 | 2.53 | 1.87 |
Adjusted Cash Earnings per Fully Diluted Unit | 1.02 | 0.39 | 2.52 | 1.87 |
Weighted average number of Units – Basic | 56,332,607 | 38,231,059 | 44,479,802 | 38,570,499 |
Weighted average number of Units – Diluted | 56,464,102 | 38,270,508 | 44,622,811 | 38,591,392 |
__________________________________ |
1 In connection with the Empaveli/Syfovre transaction completed in 2022, the Trust acquired other current assets, as described under the Empaveli Transaction section of the MD&A. The related amortization expense is recorded in other operating expenses. |
2 For the year ended |
3 Certain members of the board of trustees elected to be compensated fully or partially in deferred units ("DUs") under the Trust's Omnibus Equity Incentive Plan. |
4 Non-cash royalty income is related to excess royalty payments received in prior periods in which the Trust has an obligation to the royalty payers. Royalty income for the three months and year ended |
5 For the three months and year ended |
6 The Trust received a prepayment premium for prepayment of the loan receivable, as described under the Loan receivable section of the MD&A. |
7 During the second quarter of 2023, the Trust sold its royalty interest in the worldwide sales of Tzield, as described under the Tzield Transactions section of the MD&A. |
8 During the year ended |
About
Caution concerning forward-looking statements
This news release may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking information generally can be identified by the use of words such as "expect", "continue", "anticipate", "intend", "aim", "plan", "believe", "budget", "estimate", "forecast", "foresee", "close to", "target", "guidance" or negative versions thereof and similar expressions. Some of the specific forward-looking information in this news release may include, among other things, statements regarding our deployment target and capacity available for deployment, portfolio, royalty cash receipts, the timing of royalty payments, growth in royalty income, anticipated royalty income, anticipated sales of the products underlying our royalties and our ability to execute on our strategy and reach our targets. Forward-looking information is based on a number of assumptions, including, but not limited to: statements regarding potential royalty transactions which we reasonably expect to complete are based on our historical track record, statements regarding the terms and conditions of our transactions are based on the transaction documentation, statements with respect to royalty income, total income and future sales of the products underlying our existing royalties are based on assumptions with respect to timing of generic drugs entering the market, competitor drugs receiving approval and entering the market, and regulatory measures under the Inflation Reduction Act. These risks and uncertainties include, but are not limited to, those that are disclosed in the Trust's most recent annual information form. The anticipated royalty terms for products in our portfolio may be shorter than the period of patent protection for the applicable product, depending on many factors, including the entry of generic drugs into the marketplace and competition, all of which are outside our control. No assurance can be given that these are all the factors that could cause actual results to vary materially from the forward-looking statements in this press release. You should not put undue reliance on forward-looking statements. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, the actual results, performance or achievements of the Trust could differ materially from the results expressed in, or implied by, any forward-looking statements. All forward-looking information in this news release speaks as of the date of this news release. The Trust does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise except as required by law. Additional information about these assumptions and risks and uncertainties is contained in the Trust's filings with securities regulators, including its latest annual information form and Management's Discussion and Analysis. These filings are also available at the Trust's website at drihealthcare.com.
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