Episode Details

Royalty Pharma plc (RPRX) Q2 2026 — Q2 2026 (ended June 30): Portfolio Receipts $773M, +6%; Royalty Receipts $768M, +14%; milestones $5M vs $56M, -91%. Net cash from operations $728M, +100%. Adjusted EBITDA $736M, +16%. Portfolio Cash Flow $736M, +15%. GAAP diluted EPS $0.04 (net income to RPRX plc $18M vs $32M) after a $472M non-cash swing in the provision for changes in expected cash flows: $268M charge vs a $204M credit. FY26 Portfolio Receipts guidance RAISED for the second time, to $3,400-3,500M, with Royalty Receipts growth of 7-10%. The 8-K was accepted 7:33am ET Wednesday Aug 5, before the open, so Aug 5 is the reaction session: +0.47% to $57.75. Last close Aug 7: $56.77, BELOW the $57.48 pre-print close. Royalty Pharma reported Q2 2026 before the open on Wednesday August 5 and the headline was strong: Royalty Receipts +14% to $768M, operating cash flow doubled to $728M, and full-year guidance raised a second time. The stock rose 0.47% and by Friday was $56.77 - below where it closed the day BEFORE the print. Three findings the coverage missed. One: the cystic fibrosis franchise, 25% of Royalty Receipts, collected $194M against $194M - zero growth - and RPRX booked a $109M provision charge on it BECAUSE the Alyftrek sales forecast went UP, since Vertex is moving patients onto a product RPRX says it is not being fully paid on. Two: the '$1.32 EPS beat' is not EPS - GAAP EPS was $0.04. Three: RPRX marks its whole portfolio at $24.6B in its own 10-Q while the market pays a $41.05B enterprise value. THE CALL: HOLD (3/5, FAIR VALUE $43 vs $56.77 IS 24% OF DOWNSIDE - A GREAT BUSINESS, AND OUR BULL CASE IS ALREADY THE SHARE PRICE) — base-case value ~$43.0 vs ~$56.77 today. KEY METRICS: - CALL: HOLD 3/5, fair value $43 vs the $56.77 Aug 7 close = 24% downside. Bull $56, bear $35. Buy under $44. EV $41.05B = 12.7x FY26E Adjusted EBITDA of $3.24B; 11.3x Portfolio Cash Flow per share of $5.02. - Street: Buy, 11 analysts (11 buy / 0 hold / 0 sell), avg target $59.50 (high $66, low $50). After the print: Citi $66 from $50, TD Cowen $65 from $50, Morgan Stanley $64, JPMorgan $58. What to watch: UP: Royalty Receipts $768M, +14%, with Tremfya +53%, Voranigo +72%, Evrysdi +42%, Tysabri +19%; operating cash flow doubled to $728M; Adjusted EBITDA $736M, +16%, as costs fell from 12.9% of receipts to 4.8% after the May 2025 internalisation (we stripped stock comp from both years and the +16% survives); FY26 guidance raised a second time to $3,400-3,500M; $1.7B of announced deals and $1.1B deployed YTD, including up to $425M for AstraZeneca's cliramitug; net debt only 2.59x; 19 development-stage candidates at $1.6B of cost, including daraxonrasib. DOWN: Portfolio Receipts grew just 6% because milestones fell to $5M from $56M; the CF franchise, $4.7B of carrying value, grew 0% amid a dispute with Vertex over whether Alyftrek's deuterated ivacaftor component is royalty-bearing; a $268M provision charge driven by Adstiladrin (-$130M) and the CF franchise (-$109M); GAAP EPS $0.04; buybacks cut 90% to $96M in H1; $107M of quarterly share comp sits outside Adjusted EBITDA; and the shares are up 53% in twelve months. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.