DRI Healthcare Trust (DHTUN) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to DRI Healthcare's 2026 second quarter earnings call. Listeners are reminded that certain statements made in this earnings call presentation, including responses to questions, may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors and actual results to differ materially from expectations and about material factors or assumptions applied in making forward statements, please consult the MD&A for this quarter, the risk factors section of the Annual Information Form and DRI Healthcare's other filings with Canadian securities regulators. DRI Healthcare does not undertake to update any forward-looking statements. Such statements speak only as of the date made. Today's presentation also references non-GAAP measures. The definitions of these measures and reconciliations to measures recognized under IFRS are included in our earnings news release as well as in our MD&A for this quarter, both which are available on our website and our SEDAR+. Unless otherwise specified, all dollar amounts discussed today are in U.S. dollars. I want to remind everyone that this conference call is being recorded today, Monday, August 10. DRI's quarterly results news release and the slides from today's call will be available in the investor page of the company's website at drihealthcare.com. I would now like to introduce Mr. Ali Hedayat, CEO of DRI Healthcare. Please go ahead, Mr. Hedayat.

Thank you, Operator, and good morning, everyone, and thank you for taking the time to join us today. With me on the call are Naveen Jacob, our Chief Investment Officer, and Zahid Mawani, our Chief Financial Officer. On the call today, I will provide a recap of our second quarter highlights. Naveen will then discuss our portfolio assets and share insights into our market outlook, and Zahid will cover off our key financial highlights for the second quarter before moving on to Q&A. We are pleased to have delivered another solid quarter, posting record financial performance with double-digit growth across total income, cash receipts, and adjusted EBITDA. We continue to see a validation of DRI's approach to pre-approval assets over the past months with the monetization of our Ocaliva investment and the approval of veligrotug, to the payoff of our thought leadership in structuring attractive risk return outcomes in that segment. From a top-line perspective, we delivered royalty income growth of 8%, contributing to our total income of $50.1 million, which was up 13% year over year. Royalty income growth was led by the inclusion of Ocaliva, as well as strong performances from Vonjo, Omidria, and Xolair, partially offset by slightly softer results from Orserdu and Rydapt. Notably, our royalty income also included a $450,000 milestone payment from Xenpozyme this quarter. Ex-milestones, our royalty income growth was 7% year over year and total income was up 12%. I also think it's worth stepping back to look at the 2-year stack. Our focus over the past 8 quarters has been on optimizing our operating model for durable compounding growth. Over this time horizon, royalty income has grown from $41 million in Q2 of 2024 to $48.2 million this quarter, up nearly 18% cumulatively. Income has grown even faster, up more than 20% over the same comparative period. Our expense structure generated strong operating leverage in the quarter as we continue to execute and realize our expected internalization synergies while operating with cost management discipline. Our adjusted EBITDA margin is tracking slightly above our internal expectations due to the high incremental margin from the adjusted cash receipt outperformance we are showing versus our internal expectations this quarter. I would like to touch on interest expense for a moment, as it's higher year over year on a reported basis, and I don't want that to be misread against the refinancing work we completed in the first quarter of this year. In Q2, a reported total interest expense of $9.3 million reflects a 2.5% increase year over year. However, this increase includes transaction costs related to our recent financing initiatives. Excluding these costs, our interest expense would have been $7.9 million in the quarter, representing an approximately 6% reduction year over year. Interest on our credit facility borrowings came down meaningfully quarter over quarter, reflecting the benefit of the lower cost, more diversified capital structure that we put in place with the senior notes private placement and the debenture issuance. That's the underlying trend I want to point you to. Closing out our operating performance, all in, our adjusted EBITDA margin for the quarter was 92%, up meaningfully from the 82% that we posted in the second quarter of last year on a normalized basis. Looking ahead, we maintain our view that adjusted EBITDA margins in the second half of the year are expected to be in the high 80s to 90% range. Operationally, I'd like to share the latest developments surrounding our Ocaliva investment. In June, Alfasigma completed the acquisition of Intercept Pharmaceuticals, which constitutes a change in control under our royalty agreement with Intercept. Subsequent to the quarter, we exercised our put option on Ocaliva for a total net repurchase price of approximately $178 million, creating a significant and immediate realized return of 1.5x and a high 20s IRR for unit holders. In the subject terms of the royalty agreement, we expect to receive payment by approximately mid-August. While the Ocaliva disposition may reduce our portfolio receipts in the near term, on a portfolio level, we expect to benefit from the compounding effects of bringing forward that capital for redeployment, meaningfully creating additional value for unit holders. Also in June, we were pleased to see the approval of Viridian's veligrotug, now named [ Lumvoa ], by the FDA. With [ Lumvoa ]'s approval, we made a milestone payment of $75 million to Viridian, which was partially funded via our acquisition credit facility. This marks an exciting milestone for us, and we will begin earning royalties in Q3, with receipts collected on a 1-quarter lag. Together, the Ocaliva and [ Lumvoa ] outcomes demonstrate our underwriting team's discipline and specialized expertise across the full cycle of an asset, from regulatory approval to realized returns for unit holders. Let me take a moment now to share some thoughts on where we stand strategically, because I think it speaks directly to the work this team has done over the past several quarters. As we've discussed on prior calls, we've been deliberate about optimizing our balance sheet and diversifying our sources of capital. That work has put us in a position of considerable strength today. We have a robust balance sheet and a strong liquidity position, and I want to be direct about what that means operationally. We are not constrained by cash at this time. That gives us real flexibility in how and when we deploy capital without being limited by our funding position. It also allows us to participate in meaningfully larger acquisitions than we have done historically. The second point I'd highlight is the composition of the portfolio itself. We currently have no Phase 3 approval risk anywhere in the book. Every pre-approval asset we have held has cleared that hurdle, which meaningfully de-risks our forward return profile and is a good reminder of the discipline and unique expertise behind how we structured these transactions from the outset. Taken together, a strong balance sheet, ample liquidity, and capacity to add pre-approval risk puts DRI in an advantageous position for new deployment. We're actively evaluating a range of assets across the market today, and based on what we're seeing in our pipeline, we expect to complete a transaction in the second half of this year. We'll continue to apply the same underwriting discipline that has served us well, but as we go into this next chapter of deployment, we're doing so from a position of real strength. To conclude my remarks, given we're at the midpoint of the fiscal year, we believe that we are on track to deliver towards the high end of our 2026 adjusted EBITDA guidance. Our financial performance year to date, together with the balance sheet work and portfolio de-risking, only reinforces our confidence in achieving our targets, as well as further buoying our confidence in the longer-term 2026 through 2030 financial aspirations. Before I hand the call over, I'd like to take a moment to thank our entire DRI team for delivering another outstanding quarter. Now let me pass the call over to our Chief Investment Officer, Naveen Jacob.

Thank you, Ali. Touching first on our portfolio performance, slide 7 shows the individual royalty receipts for the second quarter of 2026 compared to the same period in the previous year and the previous quarter. Our portfolio generated total cash receipts of over $46 million, an increase of $6.3 million, or 16% versus Q2 '25. The increase was driven by several factors. First, the $3.7 million increase in Orserdu from growing sales in the European market. Second, over $2 million of receipts earned from Ocaliva, which as a reminder has no receipts in Q2 of last year. Third, the Xenpozyme milestone payment received in Q2 '26 triggered by the achievement of a certain performance threshold. These increases were partially offset by a $0.6 million decline in Omidria receipts due to declining sales volume, as well as a $0.5 million decline in Zytiga receipts due to the generic entry in the European market. To get into specific individual product performance, let me start with Casgevy. As a reminder, we already received our entitled annual license fee of $5 million in the first quarter. Our entitled sales base fee is earned when sales are over $1 billion, and as such, we do not anticipate any more receipts for Casgevy in 2026. Performance for the product is strong, and we see 2 sources of upside relative to our acquisition estimates. On the regulatory front, Casgevy received U.S. FDA approval on July 1st for pediatric patients 2 and older with severe sickle cell disease or transfusion-dependent beta thalassemia. This label expansion adds roughly 5,500 patients in the U.S. who are now eligible for Casgevy, with the first pediatric patient already having initiated therapy. Second, general performance of Casgevy has been better than our initial expectations. To date, there have been more Casgevy infusions in the first half of 2026 than in all of 2025, with the second quarter representing the third sequential quarter with over 100 patient initiations. Vertex reported Q2 '26 sales of $76 million for Casgevy. Overall, the product is launching between 1 to 2 years ahead of our expectations, and as such, we are now confident there is a decent probability of receiving at least 1 more sales-based payment versus our original underwriting. Looking now at Ocaliva, we recorded cash receipts of $2.2 million on Q2 '26, which is ahead of our acquisition forecast. To build on Ali's earlier comments, Ocaliva represented precisely the kind of asset that showcases the type of disciplined, high conviction investing DRI can deliver. From the outset, our research identified Ocaliva as a compelling opportunity, which at the time of our investment was a differentiated, non-consensus conclusion. A strong, realized outcome is a direct testament to the rigorous diligence process our investment team applies in every decision we make on behalf of our unit holders. The recent initiation of a put option allows DRI to crystallize an exceptional return on this investment, while providing us with significant flexibility and dry powder to pursue future opportunities with the same conviction. We're extremely proud to have partnered with Intercept and its outstanding management team throughout this journey, and we want to recognize the tremendous work they have done in bringing this novel drug to patients. As Ocaliva continues its next chapter under Alfasigma, we wish the entire Alfasigma team unlimited success in the years ahead. Omidria Q2 '26 royalty receipts declined by 7% from the previous year. As a reminder, Omidria is on a 60-day lag, and as such, our Q2 royalty receipts reflect a mix of Q1 and Q2 sales. Q2 receipts were in line with our previously discussed updated estimates. Q2 '26 Omidria sales, which exhibited year-over-year growth of positive 9% versus Q2 '25, was slightly ahead of our updated expectations. Even though we have now seen 2 quarters of sales growth in the mid to high single-digit range, we maintain our previously discussed expectation of flat or no growth for annual sales over mid-year over the next few years. Moving to Orserdu, DRI recorded royalty receipts of $16.6 million in Q2 '26, a robust 29% year-over-year increase versus Q2 '25 due to accelerating sales momentum in the European market. As we have stated before, our acquisition forecast assumes 2025 would represent peak sales given anticipated competitive pressures from other oral SERDs and novel PI3K inhibitors. The performance to date in 2026 has held up better than expected with Q2 '26 sales implying $17.6 million of royalties, which will be paid in Q3 '26. Q3 will be a pivotal marker for the investment, as this is when we will fully recoup our initial capital outlay for Orserdu 2, well ahead of our original expectations. Recall we already recouped our initial outlay on Orserdu 1 a couple quarters ago. As we've discussed before, we are closely monitoring several ongoing Orserdu lifecycle management studies that, if successful, could unlock substantial upside beyond our original acquisition thesis, extending the growth run rate for this asset even further into the future. Spinraza Q2 '26 cash receipts were down 2% year over year, mainly due to shipping issues impacting inventory to certain international markets. Biogen reported worldwide Spinraza Q2 '26 sales of $402 million, a modest increase of 2% year over year versus Q2 '25, and was in line with our expectations. Q2 '26 sales should translate to approximately $3.7 million of royalty receipts in Q3 '26. Vonjo Q2 '26 cash receipts, which reflect Q1 '26 sales, rose 11% year over year, driven by stocking in the U.S., partly offset by order phasing in the international region. Sobi recently reported Q2 '26 sales of approximately $34 million, which should translate into royalty receipts of approximately $3.9 million in Q3 '26. As a reminder, we revised our expectations downward on Vonjo in Q3 '25, and this quarter's results track in line with the updated forecast, reinforcing our confidence in the reforecast trajectory for the asset. There will be several life cycle management opportunities for Vonjo, including the PACIFICA Phase 3 confirmatory study in myelofibrosis with severe thrombocytopenia. Sobi has confirmed that PACIFICA completed enrollment in April, which if successful could be used for regulatory submissions of pacritinib Vonjo in the EU and Japan. Sobi has also indicated that the [ Paxos ] Phase 2 trial evaluating Vonjo in VEXAS syndrome is also progressing. This indication was not contemplated in the original acquisition forecast. On Xenpozyme, we recorded $3.3 million of royalty receipts for Q2 '26, which is a marked increase versus the prior year, driven largely by strong overall growth and milestone income as previously discussed. Sanofi reported worldwide Xenpozyme sales of $74 million in Q2 '26, which is ahead of our expectations. Turning to slide 8. As we announced, [ Lumvoa ], formerly known as veligrotug, received FDA approval on June 26, 2026. This milestone triggered a $75 million payment which we paid to Viridian in Q3 '26. [ Lumvoa ] pricing is set at parity with the current market leader, Tepezza, on a per-course basis. The pitch to physicians and patients rests on clinical strength and convenience. Based on key opinion leader feedback, we are confident [ Lumvoa ]'s launch will be built on real clinical differentiation. It is the first approved therapy with both active and chronic thyroid disease data in its label. Furthermore, it has shown rapid proptosis and diplopia responses in both settings. The [ Lumvoa ] treatment is also shorter and more convenient. 5 infusions over 12 weeks versus a longer, more burdensome regimen for Tepezza. Viridian expects it will take 6 to 9 months for [ Lumvoa ] to reach broad access for U.S. patients, with revenue becoming more meaningful as they enter 2027, once a permanent J-code is in place, which is expected to be available by Q1 '27. On [ Eligrobar ], recall Viridian released top-line data from REVEAL-1, a study in patients with active thyroid eye disease, also known as TED. During Q2, Viridian released positive top-line results on REVEAL-2 in patients with chronic TED. The chronic TED data were slightly better than our expectations and perhaps a more relevant data set when considering the potential for [ Eligrobar ]. [ proptosis ] is a highly under-penetrated market, thus REVEAL-2 provides Viridian the opportunity to fully maximize [ Eligrobar ]'s potential as the first true subcutaneous autoinjector in the market. In summary, our outlook for [ Eligrobar ], and of course, [ Lumvoa ] remains very positive. Closing, I'd like to touch on thoughts regarding the market and our positioning for 2026. It has been DRI's strong belief that royalty financing would become a more common or mainstay method of raising capital. Our thesis appears to be materializing. During the second quarter of 2026, despite more than 60 equity deals across the United States and Europe for a total of $16 billion raised by biopharma companies, we tracked at least 8 royalty deals for a total of approximately $1.7 billion in announced value. On a trailing 12-month basis, the size of royalty deals is at least $5.3 billion, roughly flat versus the same period ending in Q2 2025, despite a robust rebound in the biotech equity capital markets. Biopharma boards and management teams are recognizing the value creation that royalty financing can provide to the ecosystem. I will now turn the call over to Zahid Mawani to review our second quarter financial performance.

Thank you, Naveen. Turning to the second quarter results, our total income was $50.1 million, an increase of $5.9 million, or 13% year over year, primarily driven by higher royalty income led by Ocaliva, improved performance from Vonjo, Omidria, Xolair, and the receipt of the milestone income from Xenpozyme, partially offset by Orserdu as well as Rydapt due to an expected step down in sales. Turning to expenses, our total expenses were $40.9 million, approximately $2 million lower versus last year. This was primarily driven by internalization synergies, including the elimination of performance fees, lower compensation, as well as lower deal investigation and research expenses, lower unit-based compensation, and lower other operating expenses. These were partially offset by higher amortization of intangible royalty assets, higher interest expense, outlined earlier in Ali's comments in higher G&A. We also recorded $3 million of income tax expense in the quarter. When we internalized our management function last July, some of our subsidiaries became subject to income tax for the first time. So 2026 is our first full year carrying tax through the P&L. Quarterly amounts will move as we settle our full year position. Notably, there's no impact to adjusted EBITDA, cash receipts, or our distribution. All in, our adjusted EBITDA for the quarter was $42.6 million, which increased $12.2 million, or 40%, over the second quarter last year. On a rate basis, our adjusted EBITDA margin was 92% versus 76% in the second quarter of 2025. Cash receipts for the quarter were $46.5 million, an increase of 16% year over year. Increased receipts from Orserdu due to growing sales in the European market, inclusion of royalties from Ocaliva and the Xenpozyme milestone. Increase in cash receipts was partially offset by a decline in Omidria cash receipts due to lower sales volume and lower Zytiga receipts due to generic entrance deteriorating market share in the European market. We generated adjusted cash earnings per unit of $0.56, and we announced last Friday our quarterly distribution of $0.11 per unit, which will be paid on October 20th, 2026 to unit holders of record on September 30th, 2026. We continue to generate strong cash flows from our assets. Over the last 12 months, ending June 30th, 2026, we recorded total income of $209.2 million. After adjusting for receivables, net unrealized and realized gains, the net change in financial royalty asset and other non-cash items, we achieved normalized total cash receipts of $199.1 million. After adjusting for all other operating expenses, adjusted EBITDA was $178.3 million, with a trailing 12-month adjusted EBITDA margin of 90%. We also generated adjusted cash earnings per unit of $2.56. Moving to slide 13. As of June 30th, we had $55.2 million of cash and cash equivalents. We also had $54.7 million of royalties receivables and $520 million of credit availability from our bank facilities. We continue to be well capitalized and well positioned to fulfill any prospective milestone commitments as well as continue to invest in new assets. We continue to allocate a portion of our capital towards unit buybacks. We will retain discretion whether to make any purchases under the new NCIB and to determine the timing, amount, and acceptable price of any such purchases subject at all times to TSX and other regulatory requirements. All units purchased by the trust under the new NCIB will be canceled. During the 3 months ended June 30, 2026, the Trust acquired and cancelled approximately 90,000 units at an average price of $11.65, totaling $1 million. As of June 30, 2026, in aggregate, we have acquired and canceled 4.8 million units at an average price per unit of $7.23, totaling $34.6 million under all current and previous NCIB plans. From July 1st, 2026 to August 7th, 2026, there were no units acquired under the May 2026 NCIB plan under the ASPP. That concludes our prepared remarks, and with that, let's open the call to questions. Thank you.

[Operator Instructions] Your first question comes from Doug Miehm with RBC Capital Markets. Please go ahead.

First question just obviously has to do with the pipeline capital deployment. Maybe you could walk us through, given the amount of capital that you have available to deploy now, could we see a larger deal than we've seen in the past, let's say plus $200 million, upfront and then added milestones and the second thing is with respect to that just as it relates to seller expectations, competitive landscape. Are you noticing any changes in that market today?

Thank you. Hey Doug, Ali Hedayat here. Look, I'll take it at a very high level and then I think Naveen will probably have some comments as well. You know, we don't think it's super productive to kind of discuss specific deals in the pipeline. I think what I would say at a high level is, you know, we still expect a transaction in the second half of the year. As it pertains to your question on the liquidity, it obviously does open up a range of options for us that were not available before. I think some of those options could be larger transactions. I think it could be sort of multiple transactions of the size that we had done in the past. I think if you sort of think of the sliding scale on that, on the larger ends, you know, we would be somewhat constrained on the financing side by cash flow generation. So, you know, the larger the transaction gets, you know, probably the more cash flowing it needs to be immediately, but, I think on the regular way side, the types of deals that you have seen us do over the past little bit with Viridian as the most recent example, we could certainly do more than 1 of those in the next 12 months and easily be able to fund it with the liquidity that we have right now. So I think directionally, we're looking at everything available to us, but I would certainly expect the cadence of deployment over the next, let's say 12 to 18 months to be higher than usual just given our liquidity position.

As a follow-up, we noticed in your disclosures, and with Ocaliva leaving the portfolio, that the expected royalty expiry for the Viridian asset has changed quite significantly from before 2042. Q2 2036 you perhaps walk us through that change was made and then also what that means for the overall duration of the portfolio having lost Ocaliva and then.

Change with respect to that? I'll break it up in 2 parts. I think Ocaliva in isolation is obviously a duration reducing effect, right? It's one of our longer duration assets. So just stating the obvious, losing one of your longer duration assets, albeit a very attractive outcome for unit holders, mechanically does reduce duration. I think really the story with Ocaliva is the fact that we're bringing forward this large amount of proceeds and we're able to compound it to redeployment, right? So I think when you think of the range of outcomes on that redeployment, they're all super accretive to us. We certainly are approaching it with a balance of an eye to duration as well as other characteristics, but at the same time, we don't feel sort of a need to target a certain duration like we did, let's say, 36 or 48 months ago when I think the portfolio duration was meaningfully lower and we were sort of chasing that endpoint a little bit harder. So I think we'll take a balanced approach to it, but what I would focus on with regards to the Ocaliva deal is really that compounding effect of bringing that money forward and redeploying it. With regards to Viridian and Naveen, I think you may want to jump in here. I think what you're seeing there is the veligrotug duration and not the VRDN-003 duration, which obviously we are not approved on yet. So I think probably that's the accounting twist, but I might be wrong there.

That and plus potential for achieving the cap associated with the deal. With regards to, I'll just go back to, and this touches on both your first question and your second question, Doug, but it speaks to the pipeline, our ability to redeploy, the cash coming in. You're right obviously we're losing a revenue stream with Ocaliva but it was done in a value accretive way obviously to unit holders given the 100% realized return that we got on Ocaliva at an annualized IRR of high 20s. And the cash coming in as we redeploy that, that compounding effect can be quite a dramatic impact for unit holders. One very clear example of that, that DRI has conducted already was at Tzield, obviously that was a great outcome for unit holders. We took those proceeds and invested it into Orserdu twice with Orserdu 1 and 2, and both those have now recouped their initial investments in record time. And so obviously that product is doing extremely well. So that compounded effect that unit holders are anticipating enjoying as a result of us taking in the capital and redeploying it into a high quality asset is very powerful and we hope to do the same again here with the sale of Ocaliva and value accretion there.

Great. Thank you.

The next question comes from Louise Chen with Scotiabank. Please go ahead.

I wanted to ask you, when it comes to deals, are there any therapeutic areas that really interest you the most? And then secondly, we always get asked this question, so I thought I would pose it to you, which is what are the competitive advantages that you have when it comes to deal sourcing and diligence. Thank you.

I think on the buildup of what therapeutic areas we look at, it's really a function of our overall criteria rather than, let's say, selecting a therapeutic area per se. So, we're really focused on therapies that have a meaningful impact on patient well-being, on extension of life, on quality of life. We really try to avoid areas that might have a cyclical component to them or discretionary component to them. We're very conscious of certain aspects of regulatory risk and competitive risk. And when you start to Venn diagram the types of things that we're looking at or try to avoid and build up the overlaps there, it naturally leads you to certain therapeutic areas. It naturally leads you towards areas like oncology or autoimmune or some of the other areas that we've been involved in in the past. But it's not that we're necessarily selecting for those. It's that, you know, those areas are sort of an outcome of the overall guidelines that we put on the investment process. I think on your second question, I don't know, Naveen, if you have a strong view there, I'll probably turn that one over to you.

With regards to research and sourcing, Louise, we are a research-driven organization. That is how we've always acted, and sourcing is a function of that. It touches a little bit on your first question, actually, which is that the research drives assets that we're interested in and then that turns into sourcing. And when we, as part of the sourcing effort that we then make, there's almost a feedback loop into, not sort of a, there is absolutely a feedback into our research, which then feeds into sourcing. And what do I mean by that? So as we're conducting our research, we do a broad landscape, which is a combination of sourcing and research. We find therapeutic areas, assets that we're interested in. We dig a little deeper, and sometimes we cast out assets we're interested in, more often than not, we're casting out assets we're interested in, but we may stay in the area that we found interesting and then that will feed more research which will then feed the sourcing and we make outreaches to the various parties that we're interested in working with. And so it's always research driven. What that leads to then from a therapeutic area standpoint and what areas we go into versus not is then what often happens is we are somewhat allergic to sort of a consensus view and what the hottest trend is. So we're consistently asked about GLP-1s and GLP-2s, GIP agonists and that's an area that is obviously white hot and we tend to stay away from those areas. 1, because they're super competitive, 2, because valuation expectations are probably outsized and in particularly amongst the type of players we would be working with. And so we tend to focus on areas that are a little bit less under the microscope of the general public. One key example is Tzield and another is Ocaliva at the time. If you go back and read the analyst reports on Intercept Ocaliva, there was a lot of let's call it non-belief in the peak sales of Ocaliva and that launch and that team. And we had a very counter consensus view there. And we were very excited about it. We went all in there. And same exact thing for Tzield, very limited expectations around type 1 diabetes. Everyone was focused on type 2. Both those outcomes ended up well. So we've historically done well when we're focusing on areas that are outside of consensus view.

Louise, I just throw in one last thing there, which is, you know, I think one of the things that is, you know, as important as, you know, what we source in terms of the individual opportunities is how we structure it. And I think that's another area where the team really has extraordinary edge, you see all that play out and actually, I think, you know, the structure is a similar example to that. So when you think about sourcing edge, really that intersection between the research capacity of the team and the ability to structure solutions that are really super well suited both to our needs and to the counterparty needs is something that we think is relatively unique about our platform.

Thank you.

The next question comes from Michael Freeman with Raymond James. Please go ahead.

I wanted to ask about Orserdu, and this is such a key part of the portfolio, at least right now. I wonder if you could help us set the landscape for key inflection that we might be looking out for, either from Menarini Group or from competitors, on-market competitors, for us to look for key trial readouts that we should be monitoring.

I was on mute there, apologies. It's a good question, Michael. There are several trials that are in the space from other oral SERDs. Obviously, lidERA from Roche with giredestrant has played out that was positive. There are 3 other competitor trials, the CAMBRIA-1 study of camizestrant from AstraZeneca, the CAMBRIA-2 study of camizestrant also from AstraZeneca, and then the EMBER-4 study of imlunestrant from Eli Lilly, and then obviously ELEVATE, which has been Menarini's trial of elacestrant or Orserdu. The Orserdu study reads out in 2028, 2029, right around that timeframe, but before then, you will see data from CAMBRIA-2 likely next year. CAMBRIA-2 in our opinion is probably the most similar to, sorry excuse me, CAMBRIA-1 which is most similar to ELEVATE. So again, just to be clear, the CAMBRIA-1 study of camizestrant run by AstraZeneca, which reads out in 2027 is most likely and most similar rather to the study being run by Menarini called ELEVATE of Orserdu. So what is CAMBRIA-1? CAMBRIA-1 is a study in the extended adjuvant therapy for ER-positive, HER2-negative early breast cancer with intermediate or high recurrence risk in patients who have received roughly 2 to 5 years of standard adjuvant therapy, endocrine therapy. In that with ELEVATE and elacestrant, they are focused on the same exact policy population as CAMBRIA-1. With a slight twist, it is only focused on the high recurrence and not the intermediate recurrence patients. Now, what that means is they are basically, it's a smaller population. However, there are more events in that population, and so it allows for a better chance of an efficacy signal being seen in terms of the statistical plan. And so based on the outcome of CAMBRIA-1, if you look within a sub portion of CAMBRIA-1, probably roughly half of the CAMBRIA-1 patients, you should look at the forest plots and look at the efficacy signal in the high recurrence patients. You will have a very good view of what ELEVATE might look like for Orserdu. So, and that CAMBRIA-1 study again reads out in 2027 so that gives you an early peek into how the ELEVATE study may read out and so there's almost a semi-catalyst next year for Orserdu through the CAMBRIA-1 study. And obviously we at the time of our acquisition had built in 0 for adjuvant because it was an untested hypothesis of oral SERDs in that adjuvant setting. It's a different biology. And so, but we have some signal in the adjuvant setting through the lidERA study. So let's see CAMBRIA-1 in 2027, that'll give us an idea of what ELEVATE might look like.

Thank you, Naveen. That is exactly what I was looking for. Okay. Next, I wonder, you know, on Ocaliva and the return of that royalty, you know, the payment is looking to come, I guess, by the end of this month. I wonder at what point would you undertake to do this? Oh, you just received this morning. Yes. Well, congratulations. At what point would you undertake to adjust your fiscal '26 guidance, especially on EBITDA, just given the removal of the receipt of these royalties?

Look, I think we're tracking, as I said on my earlier remarks on the call, we're tracking really well against our '26 guidance so we think even inclusive of the removal of these royalties we're going to be at or above the higher end of what we got it to at this point.

Okay, excellent. If I could just move 1 more in. On the deal sourcing workflow, I wonder if you could give us a sense of what proportion of deals in your pipeline resulted from inbound requests to DRI versus outbound requests to the counterparties.

I think we're just going to, it's just not particularly, that particular metric is not necessarily helpful. We get a lot of inbounds, particularly in the mid-term for some reason in the summer. And so we do have a lot of inbounds. We have a lot of outbounds. I'm not sure it's particularly productive to go into that breakdown at this moment.