Royalty Pharma shareholders have overwhelmingly approved the company's plan to acquire its external manager, marking a significant milestone in the company's 29-year history. The proposal received 99.9% support at Royalty Pharma's 2025 Annual General Meeting and Special Meeting of Shareholders held on May 12.
"We are pleased to announce shareholder approval of our manager internalization, an important step that strengthens our corporate governance, enhances transparency, and further aligns our leadership team with shareholder interests," said Pablo Legorreta, founder and Chief Executive Officer of Royalty Pharma. "We are grateful for the strong support from our shareholders, and remain focused on delivering long-term value through our differentiated, innovation-focused business model."
Transaction Structure and Financial Impact
The $1.1 billion acquisition will be primarily funded through equity, with Royalty Pharma issuing approximately 24.5 million shares that will vest over 5 to 9 years. The company will also pay approximately $100 million in cash and assume $380 million of existing Manager debt.
The transaction represents a strategic financial decision for Royalty Pharma, with projected cash savings of more than $100 million in 2026, increasing to over $175 million by 2030. Over a ten-year period, the company expects cumulative savings to exceed $1.6 billion, more than offsetting the acquisition cost.
The equity component will represent approximately 4% of shares outstanding upon full vesting, with management (excluding Pablo Legorreta) receiving approximately 50% of the equity issued. Notably, Legorreta has agreed to a five-year vesting schedule for his equity, despite having no prior vesting requirement.
Strategic Rationale and Governance Benefits
Since its founding in 1996, Royalty Pharma has operated under an external management model, with a separate Manager entity owned by Legorreta and other senior executives handling all operations and personnel. Under this arrangement, Royalty Pharma paid quarterly fees to the Manager equal to 6.5% of Portfolio Receipts and 0.25% of the value of security investments.
The internalization transaction addresses several key governance considerations:
- Enhanced shareholder alignment by directly employing the management team
- Improved corporate governance and transparency
- Management continuity assurance
- Maximized employee retention through long-term equity vesting
- Simplified corporate structure
Industry analysts suggest the move could also expand Royalty Pharma's shareholder base and potentially enhance the company's valuation over time by removing the complexity and potential conflicts associated with external management structures.
Background on Management Structure
Prior to 2024, Pablo Legorreta was the sole owner of the Manager. In early 2024, equity interests were granted to 35 team members to support long-term succession planning and enhance alignment, with these shares vesting over 10 years.
Following the internalization, all employees of the Manager will become direct employees of Royalty Pharma, eliminating the external management fees and creating a more streamlined organizational structure.
Closing Timeline and Conditions
The transaction remains subject to customary closing conditions, including required regulatory approvals. Royalty Pharma anticipates the transaction will close in May 2025.
About Royalty Pharma
Founded in 1996, Royalty Pharma is the largest buyer of biopharmaceutical royalties and a leading funder of innovation across the biopharmaceutical industry. The company collaborates with innovators ranging from academic institutions and research hospitals to biotechnology companies and global pharmaceutical corporations.
Royalty Pharma's current portfolio includes royalties on more than 35 commercial products, including Vertex's Trikafta, GSK's Trelegy, Roche's Evrysdi, Johnson & Johnson's Tremfya, Biogen's Tysabri and Spinraza, AbbVie and Johnson & Johnson's Imbruvica, Astellas and Pfizer's Xtandi, Novartis' Promacta, Pfizer's Nurtec ODT, and Gilead's Trodelvy. The company also has stakes in 15 development-stage product candidates.
The company funds innovation both directly—by partnering with companies to co-fund late-stage clinical trials and new product launches in exchange for future royalties—and indirectly by acquiring existing royalties from original innovators.
