Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DRI Healthcare Trust (DHTRF, Financial) completed two innovative transactions for Casgevy and Sebetralstat royalties, deploying $162 million with a potential deal size of up to $241 million.
- The trust expanded its credit facilities from $500 million to $632 million, with nearly $300 million still available, providing significant additional capital for future opportunities.
- The portfolio's cash royalty receipts increased by 54% year-over-year, driven by strong sales of Orserdu, Empaveli, and Omidria.
- The trust declared a quarterly distribution of $0.085 per unit, reflecting its commitment to returning value to unit holders.
- DRI Healthcare Trust has surpassed $1 billion in capital deployment, showcasing its growth and ability to execute on its investment strategy.
Negative Points
- The trust experienced a 10% decrease in cash royalty receipts from the previous quarter, reflecting normal volatility in biopharma sales cycles.
- Oracea royalty receipts decreased by 47% year-over-year due to litigation and generic competition, impacting cash flows.
- Spinraza receipts declined 8% year-over-year, with Biogen noting some weakness related to one-time events in Russia.
- The trust incurred additional legal and investigation-related costs of $2.2 million, impacting its adjusted EBITA margin.
- Eylea royalties are expected to continue trending downwards due to patent litigation and a large step down in royalty rates.
Q & A Highlights
Q: Can you elaborate on the shift in deal types, particularly the increased risk and portfolio duration?
A: Ali Hedayat, Acting CEO, explained that they are taking managed preapproval risks with transactions that are far along in the approval process. The core business will remain focused on cash-flowing royalties, but they will continue to innovate with structural considerations like equity components.
Q: What is the competitive landscape for the KalVista drug, especially considering competitors like Farm Barri?
A: Navin Jacob, CIO, noted that Sebetralstat will be the first oral medication for HAE attacks, offering significant convenience over injectables. While competitors like Farm Barri are developing similar treatments, they are years behind. DRI Healthcare has made conservative assumptions about competition in their forecasts.
Q: Are there any unexpected performances in your portfolio, and are you exploring other opportunities in HAE treatments?
A: Navin Jacob mentioned that Omidria and Vonjo are performing in line with expectations, with some recovery noted. DRI Healthcare is open to exploring opportunities across various therapeutic areas, focusing on assets that meet their investment criteria.
Q: What gives you confidence in the sales potential of the KalVista drug, given the market size?
A: Navin Jacob explained that historical data and market analysis suggest the branded market for HAE treatments could reach $1.2 billion to $1.5 billion. DRI Healthcare has made conservative assumptions about competition and structured the deal to ensure attractive returns.
Q: How are current market dynamics influencing your deal structures, and will you update your guidance?
A: Ali Hedayat stated that DRI Healthcare is exploring innovative deal structures like synthetic royalties and equity investments. They plan to update guidance periodically rather than with each transaction, reflecting the business's growth and scale.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
