Good morning, everyone. Welcome to DRI Healthcare Trust 2025 Fourth Quarter and Full Year 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 provincial securities laws. Forward-looking statements involve risks and uncertainties. Undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements. Actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter. The Risk Factors section of annual information form in DRI Healthcare's other filings with Canadian securities regulators. DRI 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 press release as well as in our MD&A for this quarter, both of which are available on our website and on SEDAR+. Unless otherwise specified, all dollar amounts discussed today are in US dollars. I want to remind everyone that this conference call is being recorded today, Wednesday, March 4th, 2026. DRI's quarterly results press release and the slides of today's call will be available on 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, good morning, everyone, and thank you for taking the time to join us today. Joining me here on the call are Navin Jacob, our Chief Investment Officer, and Zaheed Mawani, our Chief Financial Officer. On the call today, I will provide a recap of our 2025 highlights, followed by financial performance for the full year. Navin will then discuss our portfolio assets and share insights into our market outlook. Zaheed will cover off our key financial highlights for the fourth quarter, and I will close out the prepared remarks with our 2026 financial outlook and share some thoughts on our longer term growth framework before moving on to Q&A. Looking back on 2025, we worked through a year of exceptional change for the company while executing at a high level across the organization.
Our investment team continued to deliver on innovative and well-structured transactions, leading us to exceed our five-year deployment goal of $1.25 billion with the upfront and committed capital deployments in our Viridian and Ekterly deals. Beyond the capital deployed, these deals demonstrate DRI's leading capacity to structure win-win solutions that advance the needs of our counterparties and provide our unitholders with great returns. On the operational side, we continue to execute at a similarly high level. The internalization of our manager was a large and complex step for the organization, but a critical one to align both our governance and incentives with unitholders and to achieve a meaningful uplift to our economic returns. This year has already demonstrated significant gains from that process, and we feel better about the pace and magnitude of benefits than we did when we first presented the transaction.
We optimized our cost structure, leading to our highest ever margins on a normalized basis, and made improvements across processes in every functional area. One achievement I'm particularly proud of is the establishment of our proprietary risk assessment framework introduced this year. This data-driven framework helps us to evaluate risks across our royalty assets, the broader royalty market, our balance sheet, and the overall backdrop for our business. It guides our decisions on where to invest, which deals to pursue, how to price them, and how to manage sizing in our portfolio. Lastly, we continue to lead the sector on the integration of AI into our workflows with two dedicated team members and internal compute now working to make our execution better in speed and in quality.
I would also like to take a moment to discuss the investments we are making internally to strengthen our bench and fuel our growth agenda. In early January, we welcomed Wesley Nurss as our new SVP, Head of Research. Wes brings a deep investment background in the biotech space and will lead our commercial and pre-commercial diligence efforts as part of Navin's investment team. On the balance sheet side, we also took steps to increase unitholder value through a series of meaningful transactions. We repurchased and canceled roughly 1.4 million units, reducing our unit count by nearly 3%. This comes in addition to our regular dividend of $0.10 per quarter, which we are increasing to $0.11 per quarter starting in the first quarter of 2026. Between these two, we have returned in excess of $36 million to unitholders over the year.
We reduced the number of preferred shares outstanding in the second quarter by redeeming and canceling $10 million of face value of our Series C preferred securities for $9.5 million, along with outstanding and accrued interest. Subsequent to the end of the fiscal year, the trust entered into an agreement with a private placement investor to partially redeem and cancel an additional $9.9 million face value of preferred securities for $9.8 million plus accrued interest. You have seen in Monday's press release, we've also reached an agreement with two of our preferred holders to swap the vast majority of the remaining preferred share balance into a convert at attractive terms that further reduces both our coupon payments and extends our maturities.
We expect that the small residual preferred share balance will be paid down at or before its call date in 2029 with cash on hand. Turning to our credit lines, we have further amended them in the fourth quarter to allow greater flexibility and to unlock the remaining gap between our effective capacity and the headline size of the overall facility. Lastly, we're pleased to announce that we have priced a private placement debt transaction with large institutional investors that terms out a portion of our bank facility to five and seven-year maturities with attractive costs and greater flexibility for the trust. We expect the private placement to have broadly similar covenants as the bank facility, but the terming of our financing allows us to invest more flexibly and provides us with more diversified sources of funding.
Coming out of 2025, we continue to be well-positioned to capitalize on the opportunities ahead of us. Turning to our full-year financial performance, we delivered record performance across all our financial metrics. Total income of $198.6 million grew 6% over last year, and together with disciplined expense management and internalization synergies led to an Adjusted EBITDA margin of 84%. Normalized for non-recurring costs, that Adjusted EBITDA margin was 88%, which is the highest annual margin in our history as a public company. These outcomes are underpinned by our resilient portfolio with several assets delivering double-digit cash receipt growth, including our Orserdu, Xenpozyme, and XOLAIR franchises. Notably, as of the fourth quarter, we have now fully returned our investment on Orserdu I. Partially offsetting these strong comps, we had softer performance from OMIDRIA, Oracea, and ZYTIGA.
Regarding OMIDRIA, we have been closely monitoring the structural challenges affecting the asset's performance throughout the year. We believe it was prudent for us at this point to take an impairment in the fourth quarter of $9.7 million. While this is always disappointing, it is important that we adjust the performance expectations going into 2026 given the sequential softness throughout 2025. Navin will provide more color on this shortly. As a reminder, our policy is to never write up assets, our balance sheet adjustments will only reflect negative revisions, while our outperformance is only captured at the level of receipts and EBITDA. We made big strides this year operationally, financially, in our investment strategy. I will come back shortly to talk more about how that feeds through to our 2026 outlook and our longer-term growth agenda.
For now, I will turn the call over to Navin Jacob, our Chief Investment Officer.
Thank you, Ali. Touching first on our portfolio performance, slide eight shows the individual royalty receipts for the fourth quarter and full year 2025 compared to the same periods in the previous year and the previous quarter. For the full year, our portfolio generated total cash receipts of more than $196 million, an increase of $6.5 million or 3.4% growth versus 2024. The increase was driven by several factors, including, one, strong Orserdu sales and removal of certain deductions previously incurred on the Orserdu II transaction. Two, growth from the additional Xenpozyme 2 royalty stream. Three, growth of XOLAIR following its launch for the food allergy indication. Four, additional receipts earned from the CASGEVY and Ekterly assets, which both earned their first receipts in 2025. These increases were partially offset by the following items.
One, the timing of EMPAVELI payments. Two, weaker than expected OMIDRIA royalty receipts. Three, a non-occurring milestone of $5 million from VONJO received in 2024 that makes for a tough year-over-year comparison. Four, increased competition and generic entry impacting the sales of Oracea and ZYTIGA. Finally, five, Rydapt, which is nearing the end of its royalty term and has an expected step-down in its royalty rate. Turning to specific individual product performance, let me start with OMIDRIA, which was, as we have indicated before, has been performing below our expectations for several quarters now. As we have previously communicated, OMIDRIA has been the subject of continued impact from the Merit-based Incentive Payment System, or MIPS. Consequently, there has been a resetting of the demand by physicians as they calibrate their demand such that they're not penalized by the MIPS program.
The MIPS program is the basis for physicians receiving reimbursement from cataract surgeries. Through the first three quarters of 2025, we experienced cash receipt declines from OMIDRIA. While we have seen some stabilization, what we're not seeing is a significant amount of growth in the HOPD or hospital setting. Our original forecast, driven by payer and physician feedback, was that new Medicare reimbursement in 2025 would generate growth in the HOPD setting, thus far, we're not seeing material growth. Rayner is actively taking steps to improve the performance by continuing to leverage the OMIDRIA sales force to maximize the number of surgeons and market access coverage within each account. Importantly, Rayner is looking to re-negotiate payer contracts to ensure inclusion of separate reimbursement associated with the HOPD Medicare re-reimbursement.
While these steps are encouraging, we are taking a conservative stance with our updated forecast, which now predicts flat sales or no growth for OMIDRIA over the next few years. This has led to a $9.7 million impairment, which was booked in Q4 2025. Vertex reported Q4 2025 sales of $54 million for CASGEVY. Recall we are paid in two ways for CASGEVY. Firstly, DRI is entitled to an annual license fee, for which we will record $5 million in Q1 2026. Secondly, we may be eligible in the future for annual sales-based performance fees if annual sales are over $1 billion. CASGEVY uptake to date is roughly one year faster than we anticipated, and as such, DRI may be eligible for one more sales-based payment than we had built into our acquisition forecast.
Looking now at Ekterly, we began earning royalties in the third quarter of 2025 and recorded our first cash receipt of $0.8 million in Q4 2025. Since its approval, Ekterly has shown strong performance, with KalVista's U.S. business receiving 1,318 patient start forms as of December 31st, 2025. KalVista reported Q4 2025's Ekterly sales of $35 million, which results in DRI receiving cash royalties of $1.8 million in Q1 2026. Q4 2025 sales imply an annual run- rate over $140 million, which is above our acquisition forecast for 2026. As of February 2026, KalVista has received regulatory approval for Ekterly in several key markets outside the U.S., including the United Kingdom, European Union, Australia, Singapore, and Japan.
Orserdu continues to outperform our expectations, with royalty receipts reaching $19 million in Q4 2025, a 38% year-over-year increase versus Q4 2024. Q4 2025 sales were also strong, we anticipate receiving approximately $22 million in royalty receipts in Q1 2026. Furthermore, Q4 2025 sales were so strong it triggered a milestone payment to DRI of $5 million, which will be received in Q1 2026. In total, for Q1 2026, we anticipate receiving approximately $27 million of cash receipts for Orserdu, consisting of $22 million of royalties and $5 million from the milestone payment. Despite the continued outperformance, we maintain our view that 2025 is a peak year for Orserdu due to competition from other oral SERDs, as well as other mechanisms such as novel PI3K inhibitors.
With that said, we note that the outperformance has led to the Orserdu transaction breaking even on an earned basis in Q4 2025, which is near record speed for DRI. The oral SERD market has been receiving meaningful attention over the past few months, driven by data generated by Roche and AstraZeneca. There is increasingly a belief among industry experts and analysts that this market could be significantly larger than initial expectations. Roche recently noted that its oral SERD, giredestrant, could be its largest drug ever, which implies giredestrant peak sales of over $8 billion. This is driven by giredestrant's data in the adjuvant setting of HER2-negative, HR-positive breast cancer and by its data in combination with everolimus in all comer second-line HER2-negative, HR-positive breast cancer. As a reminder, Menarini is running studies of Orserdu in similar settings and combinations as Roche.
ELEGANT is a phase III study of Orserdu versus standard endocrine therapy in patients with ER-positive, HER2-negative early breast cancer with high risk of recurrence. ADELA is a phase III trial of Orserdu in combination with everolimus in advanced breast cancer patients with ER-positive, HER2-negative ESR1 mutation. These studies, if positive, could re-represent substantial upside to our expectations. Turning to SPINRAZA. In the fourth quarter of 2025, this cash receipts were essentially flat year-over-year as SPINRAZA revenues were significantly impacted by the timing of shipments outside the US while increased competition from Roche's Evrysdi continued to impact SPINRAZA's market share. SPINRAZA's performance is in line with our expectations. Moving on to VONJO. Q4 2025 cash receipts were 11% lower versus the same period last year.
Sobi recently commented development work continues with the confirmatory phase III study, PACIFICA, which, if successful, is necessary for regulatory filing outside the U.S. Clinical trials to investigate the potential for VONJO in new indications are underway. These new indications were not included in our original acquisition forecast. Sobi reported Q4 2025 sales of $35 million, which should translate to royalty receipts of $3.7 million in Q1 2026. Recall during Q3 2025, we had lowered our expectations on VONJO, and the latest quarter's estimates are in line with our reforecast of the asset. Finally, on Xenpozyme, we recorded $2.5 million of royalty receipts for Q4 2025, which is a marked increase versus the prior year, driven largely by ex-U.S. launches that have been faster than our expectations.
Sanofi reported worldwide Xenpozyme sales of $71 million for Q4 2025 and over $250 million of sales for full year 2025, which is ahead of our expectations. Before I close, I'd like to touch on thoughts regarding the market and our positioning for 2026. Citing just the fourth quarter of 2025, there have been approximately 8 royalty deals for a total of $1.5 billion in announced value and at least 70 equity deals for a total of $13 billion raised by Biopharma companies. 2025 was a banner year for royalty deals, with a total value surpassing $8 billion. In closing, we expect the market to continue to grow, driven by favorable industry tailwinds and amplified by continued market awareness for royalties. We remain well-positioned to capitalize on the $3 billion pipeline.
Notably, we are experiencing significant volume of inbound calls, but we remain, as always, selective for the right opportunities. I will now turn the call over to Zaheed Mawani to review our fourth quarter financial performance.
Thank you, Navin. Turning to the fourth quarter results, we're pleased with our overall performance during the quarter. Our total income was $61.7 million for the quarter. On a reported basis, this was flat versus the fourth quarter last year. However, notably in the Q4 of 2024, our royalty income included a one-time $18.2 million back payment related to our Ursodiol asset. Of that $18.2 million, two and a half million was related to the fourth quarter of 2024, but the balance of $15.7 million was associated to prior quarters. Normalized for this one-time $15.7 million item from the fourth quarter of 2024, our total income in the quarter increased 35% year-over-year.
As Navin mentioned, royalty income in our fourth quarter also included a $5 million milestone related to Ursodiol, which will be received in Q1. Turning to expenses, our total expenses were $54 million, approximately half a million dollars lower year-over-year. This was primarily driven by internalization synergies, including the elimination of performance fees as well as lower compensation, being partially offset by higher unit-based compensation as a result of mark-to-market adjustments and higher other expenses. We're pleased with our progress on the internalization savings, which continue to pace ahead of our expectations. All in, our Adjusted EBITDA for the quarter was $46.2 million, which was a 25% increase over the fourth quarter last year. On a rate basis, our Adjusted EBITDA margin was 91% versus 83% in the fourth quarter of 2024.
Key drivers for this positive outcome, as mentioned, was our strong top-line performance, coupled with prudent expense management and a 14% increase in cash receipts. The increase in cash receipts was partly attributable to the one-time $15.7 million of cash receipt received in the first quarter of 2025 for the prior period catch up of Ursodiol, as referenced earlier. In addition, as mentioned by Navin, we also posted increases on XOLAIR, Xenpozyme, and Ekterly. We generated Adjusted Cash Earnings per Unit of $0.77, and we were pleased to announce yesterday an increase in our quarterly distribution to $0.11 per unit, payable on April 20th 2026 to unitholders of record on March 31st 2026. Turning to slide 12. We continue to generate strong cash flow from our assets.
Over the last 12 months, ending December 31st 2025, we recorded royalty income of $188.9 million, plus the change in the fair value of financial royalty assets and the unrealized and realized gains on marketable securities and other interest income for a total income of $198.6 million. After adjusting for receivables, the unrealized and realized gains on marketable securities, the net change in the financial royalty asset and other non-cash items, we achieved normalized total cash receipts of $196.4 million. After taking our operating expenses, management fees, and performance fees, which totaled $31.4 million net of performance fees payable into account, Adjusted EBITDA was $165 million, with a trailing 12-month Adjusted EBITDA margin of 84%.
We also generated adjusted cash earnings per unit of $2.26. Moving to slide 13. As of December 31st, we had $42.4 million of cash and cash equivalents. We also had $59.7 million of royalties receivables and $239 million of credit availability from our bank facilities. We continue to be well-capitalized and well-positioned to fulfill any forthcoming milestone commitments, as well as continue to invest in new assets. During the year ended December 31st, 2025, the trust acquired and canceled 1.4 million units at an average price of $9.82, totaling $14.2 million.
As of December 31, 2025, in aggregate, we have acquired and canceled 4.6 million units at an average price per unit of $7.08, totaling $32.7 million under all current and previous NCIB plans. From December 31, 2025 to February 26, 2026, we acquired an additional 75,938 units under the May 2025 NCIB plan at an average price of $11.31, totaling $859,000 under the AUPP. As part of our overall capital allocation strategy, we expect to renew our NCIB program into 2026. We will provide an additional update on our Q1 conference call in May. With that, I will turn the call back to Ali Hedayat to discuss our 2026 guidance, longer term growth aspirations, and key priorities for 2026.
Thank you, Zaheed. Before I turn to our 2026 guidance and long-term view on the business, I would like to recap our 2025 performance against the targets we communicated. As I mentioned earlier in the call, inclusive of our Viridian commitments, we are pleased to achieve our deployment target of $1.25 billion over the last five years. Our royalty income target, as defined for 2025, was between $172 million and $182 million. We surpassed the high end of this target with our 2025 royalty income coming in at $188.7 million. Finally, we set out a CAGR guidance of high single-digit royalty income growth through 2030 off a 2022 base.
At the end of 2025, we are currently tracking well above this target with our current view indicating a 12% CAGR. I would like to take a few minutes to lay out how the work we have done over the course of 2025 lays the foundation for driving our investment capacity and the results in the years to come. First, we've achieved meaningful margin expansion after internalizing the manager. While we don't expect our current quarter's low nineties Adjusted EBITDA margin to be our baseline going forward, as we intend to reinvest in our team, we do expect our run rate EBITDA margins to be roughly 500 basis points higher than the low to mid-eighties margins of our pre-internalization model.
At our current scale, each % of EBITDA margin adds a little shy of $2 million to run rate cash flow and can be passed through our leverage covenants on a backwards looking basis, meaningfully increasing our credit capacity. Similarly, we have achieved significant reductions in our debt amortization payments and interest costs between the private placement I mentioned earlier and the cancellation of the preferred shares we retired. While these don't pass through our leverage ratios, they do add in excess of $25 million to our annual cash flow relative to last year's run rate. While some of this is offset by the reduction in OMIDRIA cash flows linked to our forecast revision, we will still exit the year in a substantially better cash flow position than we entered it.
These improvements help to drive our guidance for 2026 and our long-term 2030 aspirations on slide 16. The guidance for 2026 shows meaningful growth over our 2025 baseline. Turning to our 2030 aspirations. We aim to invest between $800 million and $1 billion in the 2026 to 2030 period, a number that is fully funded with our existing capital structure and cash flows. Based on our current expectations for deal mix and returns, we believe this should underwrite a low teens CAGR in Adjusted EBITDA from now through 2030, with sequential growth rates that accelerate through that period and beyond. Importantly, none of this requires any additional equity. Even in the absence of any further investment, we believe our portfolio, EBITDA, will grow organically through 2030 with the current perimeter of assets.
Slide 17 helps to bring this all down to a set of priorities. We intend to compound cash flow per share meaningfully over the coming years by focusing on a combination of best-in-class operational and financial execution, continuing to allocate capital in a disciplined and innovative way to further our mission of funding innovation in the industry. We can only do that because of the hard work our team has done. I want to take a moment to thank all of my colleagues at DRI for putting up a fantastic year in 2025 across all of our functional areas. We have great things ahead of us, and I couldn't be prouder of what we have done together this year. That concludes our prepared remarks. With that, let's open the call to questions.
Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift to answer before pressing any keys. One moment please for your first question. Your first question comes from Douglas Miehm with RBC Capital Markets. Your line is now open.
Thank you very much, and good morning, everyone. My first question just has to do with the new guidance. Management is typically quite conservative, and when you do look at what was spent on a per year basis versus what the guidance is, it is a bit lower. Would it be correct in characterizing the CapEx and overall expected investment as being conservative, or is this a function of changes within the market in terms of increased competition?
Hey, Doug, it's Ali. Thanks for the question. I think there's a few ways to put a lens on that. The first is really when you compare the current guidance on deployment to what we achieved over the past five years, I think one of the things that's worth keeping in mind is, you know, we started the prior five years with an under-leveraged balance sheet. In the middle of it, we had the Tzield transaction, which was essentially a round trip that added, you know, something on the order of $250 million-$300 million on a levered basis to our deployment. I think those two effects, you know, basically caused the backwards looking deployment numbers to be a little bit higher than what we're forecasting over the next five years.
The second one, which is relatively important, is also the mix of deals that we're doing. To the extent that we do a deal that is earlier stage, either immediately pre-approval or let's say early in the launch of a drug, you know, those deals obviously don't have backward-looking cash flows, and as a result, it's difficult to lever those transactions based on the way that our financing works. It's still attractive to do them given the higher returns and you know, the duration. It is, it's definitely something that sort of feeds through the capacity to deploy via the leverage covenants. I think when you put those two things together, you get a bit of a sense of where that number is coming out.
I think those bands reflect a bit the variance in the mix. To the extent that we do a higher number of approved deals, you should expect us to be sort of towards the higher end of those bands. To the extent that we do a higher number of pre-approved deals, we'll sort of be towards the lower end of those bands. That's the way to think about it.
Okay. When you think about those, the lower end and the pre-approved deals, you are anticipating higher returns. My follow-up question has to do with Orserdu. When I think about that product, you seem to be fairing quite well relative to the Lilly launch, but you're still contemplating a down year this year. Now I recognize that as we get into 2027, with what's coming from Roche and also Astra in the form of Cammy, we are gonna see definitely increased competition. Do you think there's a chance here, given the strength of the Lilly product relative to Orserdu that you might do a little better than anticipated? I'll leave it there. Thanks.
Yeah. Doug, I'll let Navin answer that one in detail, but one framing point, I think this feeds a little bit into our 26 numbers in terms of guidance, is look, we have obviously revised our OMIDRIA and our VONJO numbers over the course of the year and that's baked into our guidance numbers. When you think about the things that could be a positive variance for us over the year, we have been relatively conservative in the way that we assume the competitive environment for Orserdu evolves and, you know, despite excellent execution out of the gate by the KalVista management team on Ekterly, we have not really factored in that cadence into our guidance either.
I would say that the, you know, the range of things in terms of potential positive outcomes, those are the two biggest variables to think about. Navin, I don't know if you wanna dig into Orserdu in a bit more detail.
Sure. Thanks for the question, Doug. On Orserdu, remember that the asset has been almost from day one outperforming our expectations. It's easy to get excited by that and assume that it's gonna continue to outperform our expectations. Entirely possible, right? What we're confident about is that this is the year, this is sort of the dynamic year for Orserdu, for lack of a better term. The timelines of when we anticipated these competitor oral SERDs to come into the market are exactly what we anticipated at the time of the acquisition. While the launch has gone faster than expected, the competition and how heavy that is, how heavy that competition is exactly as we anticipated.
All of those start hitting this year. Well, Lilly's, this is gonna be their first full year, and it is Eli Lilly. Roche obviously, as you pointed out, is coming in 2027 and with very different data and differentiated data than we've seen thus far. I think it would be imprudent of us to change our outlook that this is gonna be a down year relative to 2026, to 2025, excuse me. Having said that, I think what we were trying to provide in our commentary is to suggest that, look, the Menarini has been performing quite well, both commercially but also with regards to their clinical strategy.
You can see the strategy that they've taken forward, which is different than Eli Lilly or, you know, AstraZeneca, is much more in line with Roche. Roche is now talking about giredestrant, being the largest drug they've ever had. From a risk/reward perspective, given that we've been conservative, that kind of level of upside is nowhere near close to any of the upside that we had anticipated for the product. All of that just speaks to the risk/reward that we try to build in for investors.
Your next question comes from Erin Kyle with CIBC. Your line is now open.
Hi, good morning. Thanks for taking the questions. I wanted to ask on the pipeline, and maybe if you can just dig into that $3 billion pipeline and how much of that, what the split is between pre-commercial and commercial deals in it? How many deals you're tracking in there and what the range is per transaction? Just whether you're near exclusivity on any deals would be helpful.
Hi, Erin. Thanks. On the pipeline, a large proportion of the deals are skewed towards pre-commercial. Having said that, I would argue that, you know, the nearer term pipeline, call it over the next six to eight months, is more skewed to post-approval drugs. I'd say that the deals in, you know, call it month eight and beyond that could come to fruition, are definitely skewed towards pre-commercial, but more near term, again, six to eight months, where the deal pipeline is shaken out, so it's closer to being commercial assets.
Okay, that's helpful. Just the sort of range of size in the pipeline. Is it kind of in line with your historical acquisition size?
Correct. It's in line with our acquisition, size of 50 to, you know, 150 has been the sort of sweet spot we've played in. I neglected to answer your question on exclusivity. We're not in exclusivity with someone. I'll just leave it there.
Okay. Thank you. Then I just wanted to ask another question on kind of the competitive environment. With AI fears kind of hitting nearly every industry here, I did wanna ask if whether you see, you know, any risk to your business from the possibility of it possibly being easier to build a database to track existing royalties or biopharma companies that are capital constrained? Yeah, I'll leave it there and ask the question. Thank you.
Erin, I'll take the AI one. I think, you know, we actually see AI as an opportunity. We spent a lot of time investing in that over the past year and a bit. As I mentioned on the call, we have, you know, two team members who are basically solely dedicated to improving throughput and efficiency of our various processes with AI. We actually have bought a number of GPUs and are using them to sort of run models that have been trained and modified to work on our own datasets. I think in terms of lowering the competitive barrier, I think there's probably areas in which that will be easier, if you will, so processing, you know, large amounts of patent filings and the like.
I never really viewed those things as something that were, you know, a material edge for us. They were just hard in the sense that you required dedicated people to go through large amounts of paper. I think the edge is really a combination of relationships, industry expertise, deal structuring capacities and the like, which I don't think really will be, you know, particularly impacted by AI. If you will, the velocity and sort of speed of processing through a deal will be impacted by AI. I would say we are probably at this point doing a better job than most in terms of adapting our processes to that. You know, I think in terms of the pipeline, I'll let Navin take the question. Or the competitive environment, rather.
I'll let Navin take the question.
Yeah. The with regards to how that affects our ability to compete, we have not thus far seen anything remotely close to affecting our ability to compete with regards to AI. If anything, Ali has been well ahead of I'd say most folks on the AI front, him and the management team writ large. Prior management had been investing in this space. We've been working on this for a couple years, so if anything, we're ahead.
Okay, that's very helpful. Thank you. I'll pass the line.
Your next question comes from Michael Freeman with Raymond James. Your line is now open.
Hey, good morning, Ali, Navin, Zaheed. Congratulations on the year. Wanted to maybe following on Erin's question, I wonder if you could dive into the risk assessment framework that you discussed, Ali. Maybe give some examples of how you're using the tool, and what areas maybe in the current pipeline you're looking at. Areas that you're seeing this tool, you know, steer you toward investing and maybe areas that it's steering you away from.
Yeah. Thanks for the question. I think the right way to look at this is if you think about the business and you think about the various range of degrees of freedom that we have in terms of our balance sheet and, you know, leverage covenants and the like, that range will always be bigger than, let's say, what we should do. What we should do, I think, is defined by a combination of thinking through risk, thinking through cash flow dynamics, portfolio construction and the like. Really the purpose of the risk framework is to say, all right, yes, we could, let's say, this year, deploy another $150 million into pre-approval deals. Should we do that?
Because we already have one large pre-approval asset on the portfolio right now, even though we could technically, let's say, do more, is that the right decision? The answer to that, I think, depends on where we are in terms of our leverage ratios and our current exposures, where we are in terms of the ability to unlock our balance sheet based on trailing 12-month cash flows and feeding through our debt covenants and various things like that.
What the risk framework does is it pulls all of that together and says, "All right, you know, here's the current parameters in terms of various risks to the business," and that could be, you know, approval, it could be things like regulatory risk, pricing risk for the various drugs given what's going on in the world. It could be, you know, some bigger picture factors, performance of our specific assets. It says, you know, given all of that and given what we have on deck in terms of potential, you know, avenues of future deals, which ones should we be chasing? How should we be sizing them? How should we be structuring them?
It's sort of an overlay, that I think takes our degrees of freedom and focuses them down on two or three things that, we think will be the best risk-adjusted decisions to make for the portfolio overall.
Okay. All right. Thank you very much for that. Maybe this one could be for Navin. Looking at the Viridian assets, I wonder if you just give us a view of the pipeline dynamics in this space. You know, in December, we saw the failure of argenx Thyroid Eye Disease asset. I wonder how that and maybe other action in this space adjusts your market share expectations for Veligrotug.
Well, to be honest, we had built in a fair amount of competition, including Roche's satralizumab into our expectations. That asset has played out not particularly well. One trial was successful, one trial was not. That's the Anti-IL-6. There is potential upside to our expectations. With that said, given the changes with the FDA moving towards one phase III trial being enough for approval, perhaps the satralizumab gets approved. With that said, the data there for that drug was not good, not as good as veligrotug, and we don't anticipate will be close to elegrobart, which is the new asset that we also have a stake in that was formerly called VRDN-003.
All this to say that there is certainly upside to our acquisition forecast, with the failure or weak data, let's put it, of the Roche asset and what looks to be like mediocre assets as well in the rest of the pipeline.
Thanks, Navin. I'll pass it on.
Your next question comes from Nate Poe with National Bank Capital Markets. Your line is now open.
Hi, guys. Thanks for taking my question. You spoke to record margins this year, and if your prior aspirations for high single-digit royalty income growth still stand, and you pair that with your new aspirations for low teens EBITDA growth, can you expand on where you see incremental margin accretion opportunities coming from?
Hi, Nate. Like I said on the prepared remarks, you know, our objective really isn't to grow margins meaningfully beyond where we're at right now. If anything, I think we'll probably, you know, relative to sort of this low 90s number that you're seeing now, we'll probably reinvest a bit into the business on the team side. I think when you think about that low teens aspiration out to 2030, I think that's really being driven by the top line. We probably have a little bit of both operating leverage and one or two remaining bits of low-hanging fruit. I think what you're really seeing there in that longer term aspiration is confidence around the top line rather than further margin expansion.
Great color. Thank you. You mentioned reinvesting in your team as well. To support the deployment aspirations you guys have, how do you see your current deal team's capacity? Or if you're investing in other places, could you just expand on that?
I think, you know, the deal team capacity is pretty well matched to the balance sheet capacity. I think one of the things that we're thinking about a lot is, A, in a, you know, AI-centric world, what the mix of people on the team should be. As these tools expand our capacity to do things, for example, do we need more vertical domain expertise and the ability to assess pre-approval assets, for example, or do we need, you know, other areas of vertical expertise? I think what you'll see us do is maybe, you know, fill in various areas of the deal team to match where we're trying to take the business.
I think that will be very much with a mind of, you know, to use the great Gretzky expression, skating where the puck is going in terms of AI, expanding our capacity to do things.
Your next question comes from Louise Chen with Scotiabank. Your line is now open.
Hi. Congratulations on all the progress this quarter. Thanks for taking my questions here. I wanted to ask you first on Viridian's product and if the veligrotug, if it gets approved this year, will there be upside to your Adjusted EBITDA guidance, or is it already incorporated into there? Then on the VRDN-003 product, just curious what you think might be a clinically meaningful outcome. Do you expect to have efficacy advantage over a drug like TEPEZZA, or is it more the convenience? Thank you.
I think in terms of thinking about our guidance, you know, we don't tend to price in things where we don't have a lot of visibility, right? As I mentioned earlier on the call, you know, even areas like the launch of Ekterly, which, you know, the execution there has been superb out of the gate. Without getting a few quarters behind us that really feed into a well-grounded set of assumptions, it's pretty hard for us to sort of tweak things up.
I think when you, when you put a lens on the Viridian portfolio or any of our earlier stage assets or assets that are sort of early in their launch curve, you know, you should assume that we're, you know, we're not sort of taking a very dynamic pricing up or, you know, revising up of our forecast based on things coming out of the gate a little bit stronger until we get some data behind us to justify that. Louise, on elegrobart, which is the new name for VRDN-003, our expectation is that. Listen, if it achieves what TEPEZZA has achieved in the active TED setting, it's a home run, right?
But we don't necessarily need it to achieve that for this to be a very big drug because of the convenience factor. Veligrotug, just to be clear, we think is a superior product to TEPEZZA, given both its activity in active TED and in chronic TED. As a reminder, both trials were static positive, while with regards to the Amgen trial, the chronic trial had mixed results. Furthermore, there you have diplopia data with veligrotug, which you don't have very clear efficacy on with TEPEZZA. Elegrobart, if it comes even close to that, it will be a fantastic product given a significant convenience advantages.
Thank you.
Your next question comes from Justin Keywood with Stifel. Your line is now open.
Thanks. Good morning. Nice to see the results. My question is around some of the initiatives for the business model improvement and capital structure refinement. It appears to be leading to somewhat better valuation in the shares, but still lagging certain peers, including the largest one out there. Depending on what metric you look at, DRI could be valued at half that peer. I am wondering if there's any remaining initiatives that could help bridge the valuation gap. Is a Nasdaq listing a potential in the future as well?
Hey, thanks for the question. Look, we're constantly thinking about things that could help to bridge that valuation gap and, you know, I personally agree with your assessment there in terms of where we sit in terms of valuation. I think in terms of a Nasdaq listing, I think the scale of the business probably needs to reach a point that will attract more attention from the U.S. Investor base, and I think we're not quite there yet. I think we're well on track to get there. But, you know, I think we don't wanna put ourselves in a position where we're sort of orphaned as a smaller and less focused on equity in the U.S. market because it's just not productive to be there.
I think we have good support across all aspects of the capital markets in Canada, whether it's sort of debt or equity. I think our financing partners here have been fantastic across the spectrum. I'm really happy to see the reception that we got for the private placement. Those are all, you know, top-tier, big U.S. institutional investors, and I think we'll continue to sort of penetrate that market on the debt side as we grow the business. You know, that's a very encouraging step for us in terms of broadening our capital base.
Thank you very much. That's helpful.
Your next question comes from Leszek Sulewski with Truist Securities. Your line is now open.
Thank you, and congrats on the progress. Ali, maybe on the near-term pipeline, where are you seeing the better risk-adjusted spreads right now as it relates to categories of assets and perhaps indication areas?
How would you rate the quality of the assets from what you framed as increasing inbounds? Then as a follow-up, to the extent that you can share, can you provide or walk us to where you are standing on the early stage versus late stage due diligence process, and what have been some of the gating factors on closing a transaction? Thank you.
Yeah. I'll let Navin take those. I'd broadly say in terms of return and risk characteristics, I don't think we have seen a significant move one way or the other. I think, you know, the business, you know, the inbounds of the business remain very attractive from a risk-adjusted return perspective. I think the need for capital, as Navin addressed in the call earlier, is still very significant. We've seen, you know, the royalty market grow in terms of penetration pretty meaningfully over last year, right? Like, we exited at, you know, something around $8 billion of deals in the sector. We're pretty happy with what we see out there in terms of pipeline.
I don't know, Navin, if you wanna get into some of the granular aspects.
No. I would characterize this as mid stage on a couple of potential deals. Everything else I would characterize as somewhat early stage. You know, for the reasons that Ali pointed out, our pace of deployment over the next one, two years may be a little bit slower than what we had been conducting for the past three, four years. Largely because of being, as I'll just reiterate, we were highly under-levered before at the start of that four or five- year period. We benefited from Tzield, which gave us more capacity.
While the capacity exists, as we today, because we're going through this transition of taking on a greater proportion of pre-approval deals, that's not to say, just to be very clear, that we're not gonna be doing approved drug deals, we are. As I noted, our near-term deals are more weighted towards approved drugs. There is a bit of a transition going on, and as that transition goes on, because of the shape of the cash flows associated with the pre-approval drugs versus approved drugs and the subsequent leverage capabilities, there is sort of a one- to 12-month to 24-month period where we have slightly slower deployment pace than we have historically seen.
Then after that, it'll be back to normal as these pre-approval drugs kick in as we're seeing with KalVista and with what will hopefully be veligrotug in the second half of this year. You know, you can understand why there's a slight bit of a change in pace for the next 12 to 24 months.
I think one thing just to round out the color there, when you look at that $8 billion of deals last year, it was actually while it was significantly higher dollar value of deals, it was a lower number of deals, right. That's kind of interesting and you see that migration in deal size, which is something that we've consistently seen over the past two or three years to bigger deals. I think that feeds in a little bit to Navin's comments, which is, you know, I think the kind of TikTok cadence of a small to medium sized deal every six months or something like that is, you know, probably while still possible, a bit less likely.
I think what you'll see is, you know, larger transactions with a bit more spread out timelines from us because I think that's really what we're seeing in the market.
Your next question comes from David Martin with Bloom Burton. Your line is now open.
Good morning. First question. Does Sobi have any upcoming new program initiatives to reverse the VONJO weakness, excluding any new indications?
Excluding new indications, I would argue that the new indications are the largest driver of growth on a go-forward basis. They do have some lifecycle management programs where they expand beyond not just new indications, as in true new indications, new therapeutic areas which they're working on. There are some lifecycle management programs that, for instance, you know, ensuring that physicians understand the value of the product in the anemic setting, which we would argue is as good as momelotinib. However, GSK took full advantage of the profile of momelotinib, and that penetrated there.
We firmly believe VONJO has a similar product profile as that product in the anemic setting. There is work that's being done by Sobi to ensure that physicians understand the strength of the asset in that setting.
Thanks. Second question. You're doing some pre-commercial deals, and they're relatively new for you. Are your competitors following that as well, or are you seeing them chasing those same types of deals?
We've-
Our competitor...
Sorry, go ahead, Navin.
Go ahead.
No. Our competitors have been in that space, for some time in varying ways, right? I think there are some competitors who operate in more sort of fixed income adjacent spaces who don't do that. The ones that have operated in what I would say are more equity-like in philosophy, they have been reasonably active in that space to varying degrees. I don't think our exposure or direction stands out in any way there. If anything, we are sort of reasonably conservative in our pre-approval exposure as a percentage of assets. It's nothing sort of hugely new for the industry and frankly nothing new for us, right?
We have had implicit exposure to new indications and in many of our prior deals, it has been combined with some existing cash flows from, potentially those same assets. A lot of our prior deals, the economics have been driven in no small part by a broadening of the indications for a given therapy. I would say it's not a, you know, huge divergence from the industry or even from our history in many ways.
Okay, great. Thank you.
Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Ash Verma with UBS. Your line is now open.
Hey, guys. Thanks for taking my question. I would just like trying to understand the top line. I see a lot of these assets, the cash receipts, when you look at slide 8 are declining and bulk of the growth is coming from a handful of key products. As you think about 2026 just on a product basis, is it continuation of the same trend? Just like when you are talking about the 2026 outlook, how much of your EBITDA growth is coming from the internalization savings as opposed to top line growth? Thanks.
Ash, I think it's a mix of things. I think, you know, naturally our seed portfolio, as we've stated many times, was always, you know, going to decline at some point, and you're seeing, you know, some degree of that as we work through the next couple of years. We obviously have two very early stage assets that we're very excited about, you know, the strong out of the gate performance you're seeing from Ekterly and what we view as a tremendous potential in the Viridian portfolio. I think Orserdu is probably a big potential variable there, in terms of, you know, rate of decline. We don't have, you know, full visibility on that, but we think we've been relatively conservative in the way that we're looking at it.
I would say when you think about 2025 through 2026, the role there is going to be, you know, probably a mix of top line and margin expansion. I think the year-on-year margin expansion, you know, probably will account for, let's say something in the region of half or maybe a little bit more than the EBITDA growth and a little bit of top line will account for the rest. That accelerates sequentially through the rest of our sort of aspirational guidance horizon. As you get into, you know, 2027, 2028, especially that sort of, you know, 2027 to 2030 period, you're really seeing a lot of top line expansion.
Got it. Thank you.
Sorry, as I mentioned on the call as well, even in the absence of any further investments, we do believe we can grow EBITDA through 2030. I mean, obviously not at the rates that we laid out because those imply reinvestment, but we do think the current perimeter of the business is growing.
There are no further questions at this time. I will now turn the call over to Ali for closing remarks.
Thank you all for joining us. Thank you again to the DRI team for a great year, and we look forward to speaking to you on our next call in May.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and as always, please disconnect your lines.