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As filed with the Securities and Exchange Commission on August 2, 2021.

Registration No. 333-257590

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 4 TO

FORM S-1

REGISTRATION STATEMENT

UNDER
THE SECURITIES ACT OF 1933

Healthcare Royalty, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization)

2834
(Primary Standard Industrial
Classification Code Number)

86-3614695
(I.R.S. Employer
Identification Number)

300 Atlantic St, Suite 600
Stamford, Connecticut 06901
(203) 487-8300
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Clarke B. Futch
Chairman & Chief Executive Officer
300 Atlantic St, Suite 600
Stamford, Connecticut 06901
(203) 487-8300
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Jeffrey A. Letalien, Esq.
Andrew R. Mariniello, Esq.
Morgan, Lewis & Bockius LLP
1701 Market St.
Philadelphia, Pennsylvania 19103
(215) 963-5000

Richard C. Segal, Esq.
Eric Blanchard, Esq.
Charlie S. Kim, Esq.
Milson C. Yu, Esq.
Cooley LLP
55 Hudson Yards
New York, New York 10001
(212) 479-6000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer ☐			Accelerated filer ☐
	Non-accelerated filer ☒			Smaller reporting company ☐
				Emerging Growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated August 2, 2021

PRELIMINARY PROSPECTUS

46,875,000 Shares

Healthcare Royalty, Inc.

Class A Common Stock

This is the initial public offering of shares of Class A common stock by Healthcare Royalty, Inc.

We are offering 31,250,000 shares of Class A common stock, par value $0.01 per share. The selling stockholder identified in this prospectus is offering an additional 15,625,000 shares of Class A common stock. We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholder.

Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price per share will be between $15.00 and $17.00. Application has been made for the quotation of the Class A common stock on the Nasdaq Global Market (“Nasdaq”) under the symbol “HCRX”.

Upon the closing of this offering, we will have two classes of common stock: Class A common stock offered hereby and Class B common stock, par value $0.01 per share, each of which has one vote per share.

This offering is being conducted through what is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies undertaking an initial public offering. We are a holding company, and immediately after the consummation of the Reorganization Transactions (as defined under “Prospectus Summary — Our Structure”) and this offering, our principal asset will be our ownership interests in Healthcare Royalty Holdings, L.P. (“Holdings LP”). See “Organizational Structure”. Upon the closing of this offering and the Reorganization Transactions, we and the Continuing Investor Partnership (as defined under “Prospectus Summary — Our Structure”) will hold 21.8% and 78.2% of the units of Holdings LP, respectively (or 24.2% and 75.8% of the units of Holdings LP, respectively, assuming the underwriters exercise their option to purchase additional shares of Class A common stock in full). As a result of the Continuing Investor Partnership's ownership of the units of Holdings LP following this offering, we will be a “controlled company” within the meaning of the Nasdaq corporate governance standards. We do not intend to rely on the exemptions from the corporate governance requirements of the Nasdaq corporate governance standards. See “Management — Controlled Company Exemption” and “Principal Stockholders.”

We are an "emerging growth company" as defined under the federal securities laws. Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 25.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Per Share

Total

Public offering price

Underwriting discounts and commissions(1)

Proceeds, before expenses, to us

Proceeds, before expenses, to the selling stockholder

(1)

We have agreed to reimburse the underwriters for certain expenses in connection with the offering. See “Underwriting.”

To the extent that the underwriters sell more than 46,875,000 shares of Class A common stock, the underwriters have the option to purchase up to 7,031,250 additional shares, consisting of 3,515,625 shares from us and 3,515,625 shares from the selling stockholder, in each case at the initial public offering price less underwriting discounts and commissions.

The underwriters expect to deliver the shares against payment in New York, New York on , 2021.

Goldman Sachs & Co. LLC

Citigroup

Credit Suisse

Jefferies

Cowen

SVB Leerink

Truist Securities

BMO Capital Markets

Stifel

Raymond James

Siebert Williams Shank

Cabrera Capital Markets LLC

Drexel Hamilton

Prospectus dated , 2021

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We, the underwriters and the selling stockholder have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We, the underwriters and the selling stockholder take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

For investors outside the United States: None of us, the selling stockholder nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of shares of Class A common stock and the distribution of this prospectus outside the United States. See “Underwriting”.

BASIS OF PRESENTATION

Prior to the consummation of the Reorganization Transactions described under “Organizational Structure — Reorganization Transactions”, in this prospectus, “Healthcare Royalty”, “HCR”, the “Company”, “we”, “us” and “our” refer to the royalty acquiring and financing business of multiple private closed end investment fund limited partnerships individually managed directly or indirectly by HealthCare Royalty Management, LLC (the “Legacy Manager”), which funds will all be combined into a subsidiary of Holdings LP as part of the Reorganization Transactions. After the consummation of the Reorganization Transactions described in this prospectus, “Healthcare Royalty”, “HCR”, the “Company”, “we”, “us” and “our” refer to Healthcare Royalty, Inc., a Delaware corporation, and its subsidiaries on a consolidated basis, as they exist upon the closing of this offering, and references to the “Manager” refer to HCRX Management, LLC, who will be our manager upon the closing of this offering.

HCR was founded in 2006 by three individuals, including our Chairman and Chief Executive Officer, Clarke B. Futch, our Senior Advisor, Gregory B. Brown, M.D., and a third individual who is no longer affiliated with the company, who we refer to as “our founders”.

Unless the context otherwise requires, “our royalties”, “our product portfolio” and “our interests in products” refer to our contractual interests in revenue streams from the sale of biopharmaceutical products. “Royalty-Related Transactions” refer to royalty acquisitions, royalty notes, SYNTHETIC ROYALTY™ financings, and structured debt, each as described further under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

When we refer to the “Royalty Receipts” generated by our portfolio, we are referring to the summation of the following line items from our Statement of Cash Flows in our historical combined financial statements included elsewhere in this prospectus: (i) Cash collections from royalty interests, (ii) Cash collections from notes and (iii) Proceeds from sale of investments.

In this prospectus, we reference projected Royalty Receipts as of June 30, 2021. In each such instance, these projected Royalty Receipts represent preliminary projections and financial data that are subject to change as the Legacy Manager finalizes its valuation work in connection with the quarter close. The preliminary financial data included in this prospectus has been prepared by, and is the responsibility of, the Legacy Manager. PricewaterhouseCoopers LLP has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to the preliminary financial data. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.

Prior to this offering, acquisitions of royalties have typically been accounted for as financial assets measured at fair value. We acquire royalties on both approved products and development-stage product candidates.

Following this offering, we will no longer prepare our consolidated financial statements on an investment company basis and will instead prepare our consolidated financial statements as an operating company, and we expect to measure the majority of our assets using the amortized cost

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accounting methodology (the “New Methodology”). As an operating company, the royalty interests and notes that we hold as of March 31, 2021 and will acquire in the future will be treated as investments in cash flow streams and classified as financial assets. For more information regarding our change in accounting methodology, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Understanding our Financial Reporting”.

Certain monetary amounts, percentages and other figures included elsewhere in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

MARKET AND INDUSTRY DATA

This prospectus includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys, and filings of public companies in our industry, unless otherwise expressly stated. These sources include government and industry sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we are responsible for all of the disclosure in this prospectus and believe the industry and market data to be reliable as of the date of this prospectus, we have not independently verified the accuracy or completeness of this third-party data. Industry and market data are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including because the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties, including those described in “Risk Factors”. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein.

TRADEMARKS AND TRADE NAMES

This prospectus contains trademarks, service marks and trade names of third parties or their products, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and trade names.

NON-GAAP FINANCIAL MEASURES

In this prospectus, we have included financial measures that are compiled in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) as well as certain non-GAAP financial measures. These non-GAAP financial measures include Adjusted EBITDA and Adjusted Cash Flow, which are each presented as supplemental measures to our GAAP financial performance.

These non-GAAP financial measures exclude the impact of certain items and therefore have not been calculated in accordance with GAAP. In each case, because our operating performance is a function of our liquidity, the non-GAAP financial measures used by management are presented and defined as supplemental liquidity measures. We caution readers that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted Cash Flow may not be the same as similar measures used by other companies. Not all companies and analysts calculate the non-GAAP financial measures we use in the same manner. We compensate for these limitations by using non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures, in each case being net cash provided by operating activities.

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Management relies on Adjusted EBITDA and Adjusted Cash Flow as indicators of our cash flow and operating performance. We believe that Adjusted Cash Flow provides meaningful information about our liquidity and operating performance because our business is heavily reliant on our ability to generate consistent cash flows and this measure reflects the core cash collections and cash charges comprising our operating results. Management believes that our significant operating cash flow is one of the attributes that attracts potential investors to our business. We also anticipate that Adjusted EBITDA will be used by our potential lenders to assess our ability to meet our financial covenants. If we cannot satisfy these financial covenants, we would be prohibited under our credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying dividends, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to the assessment of our liquidity.

Adjusted EBITDA is intended to show our Royalty Receipts less operating expenses. Our Royalty Receipts represent our total cash inflows from our Royalty-Related Transactions and include repayments of amounts related to acquisitions from prior periods in the current period. Adjusted EBITDA gives effect to investments for new Royalty-Related Transactions for the current period to the extent cash flows are received from such investments during the current period.

In addition, we believe that Adjusted Cash Flow helps identify underlying trends in our business and permits investors to more fully understand how management assesses our performance, including planning and forecasting for future periods. Management uses Adjusted Cash Flow to evaluate our ability to generate cash, to evaluate the performance of the business and to evaluate our performance as compared to our peer group. Such measure is an indication of our financial strength and the performance of our business. Management uses Adjusted Cash Flow when considering available cash, including for decision-making purposes related to funding of acquisitions, voluntary debt repayments, dividends and other discretionary investments. Further, we believe this non-GAAP financial measure helps management and investors evaluate our ability to generate liquidity from operating activities.

Management also uses Adjusted Cash Flow to compare its performance against non-GAAP financial measures used by many companies in the biopharmaceutical industry, even though each company may customize its own calculation and therefore one company’s metric may not be directly comparable to another’s. We believe that non-GAAP financial measures, including Adjusted Cash Flow, are frequently used by sell-side research analysts, investors and other interested parties to evaluate companies in our industry.

The non-GAAP financial measures used in this prospectus have limitations as analytical tools, and you should not consider them in isolation or as a substitute for the analysis of our results as reported under GAAP. For more information regarding these non-GAAP financial measures and a reconciliation of such measures to comparable GAAP financial measures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures”.

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PROSPECTUS SUMMARY

This summary highlights some of the information in this prospectus. This summary may not contain all of the information that you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, including the “Risk Factors” section and the combined financial statements and the notes to those statements.

Overview

We are the leading mid-market royalty acquisition company, based upon the number of transactions and aggregate value of capital deployed since 2016. We focus on growth assets and emerging companies driving innovation in the biopharmaceutical industry. We consider “mid-market” to comprise royalty acquisitions for transaction sizes between $20 million and $250 million. Our founders have been pioneers in the healthcare royalty and debt financing markets since 2001, and formed HCR in 2006 to build on their leadership in collaborating with inventors, academic institutions, small and mid-cap biotechnology companies and leading global pharmaceutical companies. Our in-house scientific, regulatory and transactional capabilities differentiate us from other industry participants and are the basis for our reputation among potential partners as knowledgeable, creative, and able to solve complex and potentially significant financing needs. Our senior team’s acquisition and financing approach, which has been honed over two decades to be both scalable and repeatable, has resulted in a long history of acquiring interests in both pre-approval and approved innovative therapies targeting large unmet or underserved medical needs. We have purposefully built a diverse portfolio across the therapeutic spectrum, including blockbuster assets such as Shingrix, innovative growth products such as Krystexxa, and recently launched products such as Xpovio. We believe that our (i) proprietary internal research and regulatory capabilities, (ii) mid-market focus, (iii) structuring flexibility, (iv) refined process designed to enable repeatable results and (v) regional sourcing model enable us to participate in the compounding growth seen in the biopharmaceutical sector and will cement our leadership position.

Our mission is to facilitate innovation by deploying capital consistently and reliably in products that serve unmet or underserved medical needs. We intend to achieve this mission by expanding our portfolio of approved and pre-approval products using cash flow generated by our existing portfolio as well as capital raised in the public equity market and debt raised in the public and private markets. Our process for evaluating acquisition and financing opportunities has been optimized through decades of experience and is designed to efficiently assess opportunities, identify risks and establish appropriate Royalty-Related Transaction structures. Although each Royalty-Related Transaction is different, the approach for internal vetting remains consistent to ensure each opportunity fits our overall selection criteria and appropriately balances risk and reward. In addition, our ongoing active portfolio management serves as a feedback loop designed to ensure our screening is resulting in the performance and asset exposure we desire. At the core of our time-tested process is a culture of transparency and dissent as well as an efficient and rigorous diligence process focused on asset quality, scientific and clinical differentiation, commercial profile and intellectual property protection. We believe our existing portfolio, strong cash flow and differentiated approach position us well to execute on our mission.

From 2006 through June 30, 2021, we and our founders have deployed approximately $4.7 billion across 76 Royalty-Related Transactions involving 79 products. In addition, prior to 2006, our founders deployed approximately $532 million across 14 Royalty-Related Transactions involving 14 products. Our portfolio today provides curated exposure to a wide range of medically necessary products across multiple therapeutic categories. As of June 30, 2021, our portfolio consisted of 35 products that span the therapeutic spectrum, including neurology, gastroenterology, vaccines and anti-infectives, oncology, hematology and rare genetic disorders. In 2020, products in our current portfolio generated approximately $12 billion of sales, and we generated Royalty Receipts of approximately $405 million, compared to Royalty Receipts of approximately $253 million in 2019. For the three months ended March 31, 2021, products in our current portfolio generated approximately $151 million in Royalty Receipts, compared to Royalty Receipts of approximately $88 million in the three months ended March 31, 2020. When we refer to the “Royalty Receipts” generated by our portfolio, we are referring to the summation of the following line items from our combined Statement of Cash Flows in our historical combined financial statements included elsewhere in this prospectus: (i) Cash collections from royalty interests, (ii) Cash

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collections from notes and (iii) Proceeds from sale of investments. The growth in Royalty Receipts was primarily through the acquisition of new products (92% of such growth), with the remainder of such growth resulting from increased Royalty Receipts from pre-existing products. Over the past three fiscal years (2018 to 2020) the growth in Royalty Receipts was split almost evenly between existing products (49%) and new acquisitions (51%). For the three months ended March 31, 2021, net cash provided by operating activities was approximately $5.7 million, compared to net cash used in operating activities of approximately $204.7 million in the three months ended March 31, 2020. For the three months ended March 31, 2021, we generated Adjusted EBITDA of approximately $141 million, compared to Adjusted EBITDA of approximately $76 million in the three months ended March 31, 2020. Adjusted EBITDA is calculated as Royalty Receipts less Payments for operating costs and professional services from the combined Statements of Cash Flows. In the three months ended March 31, 2021, we generated Adjusted Cash Flow of approximately $138 million, compared to Adjusted Cash Flow of approximately $75 million in the three months ended March 31, 2020. Adjusted Cash Flow is defined as Adjusted EBITDA less Interest paid from the combined Statements of Cash Flows. In 2020, net cash used in operating activities was approximately $649.5 million, compared to net cash used in operating activities of approximately $174.2 million in 2019. In 2020, we generated Adjusted EBITDA of approximately $371 million, compared to Adjusted EBITDA of approximately $224 million in 2019, and Adjusted Cash Flow of approximately $364 million in 2020, compared to Adjusted Cash Flow of approximately $223 million in 2019. Over the past three fiscal years, we grew our Royalty Receipts, Adjusted EBITDA and Adjusted Cash Flow at compound annual growth rates of 50%, 53% and 52%, respectively.

Beginning in 2014, we implemented a thoughtful expansion and institutionalization of our business. Our expansion included significant investment in the build-out of our regional offices, the in-sourcing of scientific and regulatory expertise, and adding more industry veterans to our team of Senior Advisors. During this period, we put in place a well-defined acquisition and financing strategy, as well as an acquisition process that ensured all Royalty-Related Transactions go through the same rigorous, well-defined approval framework. These acquisition and process improvements allowed for an accelerated pace of deployment, averaging more than $500 million annually over the past five years, and growing to $1 billion deployed in 2020. We also believe that the acquisition and process improvements have established a strong foundation for future growth.

We currently have dedicated personnel in Boston, London, the New York metro area and San Francisco — the key biopharmaceutical centers globally. Over 90% of U.S. biopharmaceutical IPOs from 2016 to March 31, 2021 (excluding offering size less than $50 million and U.S. IPOs of foreign issuers) and 95% of the top 20 large-cap pharmaceutical companies by net sales either are headquartered or have offices in our current regional coverage areas. Our regional sourcing strategy enables us to develop and maintain direct relationships with emerging biopharmaceutical companies and other constituents involved in the biopharmaceutical ecosystem.

The biopharmaceutical industry has experienced explosive growth and rapid innovation over the last several years fueled by dramatic acceleration in medical research. In 2019, an estimated $186 billion was invested in research and development and this amount is expected to increase to $233 billion by 2026, according to Evaluate Pharma. At the same time, the increasing cost of drug development has created a significant capital need for industry innovators. The dramatic acceleration of medical research in recent years has led to a better understanding of the molecular origins of disease and identification of potential targets for therapeutic intervention. In addition, global prescription pharmaceutical sales are projected to grow from approximately $965 billion in 2021 to approximately $1.2 trillion in 2024. On a broader scale, global and secular trends, including population growth, increasing life expectancy and growth of the middle classes in emerging markets are also contributing factors to the growth of the biopharmaceutical industry. The significant pace of biopharmaceutical innovation, the proliferation of new biotechnology companies and the increasing cost of drug development have created a significant need for capital over recent years that we believe will continue in the future and will provide a sustainable tailwind for our business.

Royalties play a fundamental and growing role in the biopharmaceutical industry. The increasing complexity and cost of drug development today typically involves a number of industry participants, resulting in an increased pipeline of royalties. Academia and other research institutions conduct basic

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research and license new technologies to industry for further development. Biotechnology companies typically in-license these new technologies or develop new technologies themselves, add value through applied research and early-stage clinical development, and then either out-license the resulting development-stage product candidates to large biopharmaceutical companies for late-stage clinical development and commercialization, or commercialize the products themselves. The persistent funding needs of royalty holders, primarily emerging biopharmaceutical companies, has led to a robust royalty acquisition and related debt financing market that we estimate reached a record $9.5 billion in 2020. Given our leadership position within the mid-market royalty acquisition sector, we are able to capitalize on the growing volumes of royalties that are created as new therapies are developed to address unmet or underserved medical needs. Our focus on mid-market transactions also fits the quantum of capital emerging biopharmaceutical companies are often seeking.

Portfolio Highlights

Our portfolio is diversified across therapeutic categories, treatment modalities, indications and marketers. As of June 30, 2021, no single asset accounted for more than 11% of our portfolio, the top three products accounted for 26% of our portfolio and the top three marketers represented 33% of our portfolio, in each case as measured by projected Royalty Receipts. As of June 30, 2021, the assets in our portfolio represented 12 therapeutic categories, with the top category representing 21% and the top three categories representing 49% of the portfolio as measured by projected Royalty Receipts. We also have meaningful exposure to drugs that have received special designation from the FDA, including, but not limited to, Orphan Drug Exclusivity.(1) These products comprise 41% of the portfolio as of June 30, 2021 (by projected Royalty Receipts). We believe special designation by the FDA is indicative of our asset criterion that products satisfy an unmet or underserved medical need. Also, orphan drugs receive market protection along with intellectual property protection. Under the Orphan Drug Act, the FDA may grant orphan designation to a product intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States.

Below are key characteristics regarding the diversity and duration of our current portfolio.

Diversification (as of June 30, 2021 unless otherwise indicated and based on projected Royalty Receipts)

•

35 products, with the largest product (Shingrix) expected to represent less than 11% of projected Royalty Receipts

•

13 drugs that have received FDA special designation (Fast Track and/or Breakthrough Therapy, Accelerated Approval Pathway, Priority Review, Orphan Drug, and Qualified Infectious Disease Product designations)

•

12 therapeutic categories, with the largest therapeutic category (neurology) representing 21% of projected Royalty Receipts

•

Most therapeutic categories have subcategories; for instance, neurology includes several sub-categories such as epilepsy, sleep management, migraine and Parkinson’s disease

•

Nevertheless, Royalty Receipts to date have been concentrated among a limited number of products, with our top 10 products accounting for 86% of Royalty Receipts for the three months ended March 31, 2021 and 81% and 82% of our Royalty Receipts for the years ended December 31 2020 and 2019, respectively.

Projected Duration (as of June 30, 2021 and weighted by projected Royalty Receipts)

•

10.0 years of projected duration (the projected period of time during which we expect to receive Royalty Receipts from the specific asset) from the time of acquisition (certain transactions have a limit on proceeds to us (referred to as “multiple cap”) resulting in an earlier projected terminal date relative to the contractual royalty maturity date)

(1)

Special designations include Fast Track and/or Breakthrough Therapy, Accelerated Approval Pathway, Priority Review, Orphan Drug, and Qualified Infectious Disease Product designations.

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•

11.5 years of maximum duration from the time of acquisition (excludes impact of multiple caps and uses the contractual royalty maturity date as terminal date)

•

In several cases, patent updates following our acquisition have resulted in a longer projected duration and/or a higher royalty rate over a longer time period; select examples include:

•

Myozyme — patent assumptions enhanced by 1.4 years due to resolution of a patent challenge

•

Brineura — patent term extension provided an additional 1.8 years at a higher royalty rate

•

Projected duration detail for our top 20 portfolio holdings is provided in the section titled “Business — Portfolio Highlights”.

The following table provides further detail on our top 20 portfolio holdings as of June 30, 2021, based on projected Royalty Receipts.

[MISSING IMAGE: tm2113163d16-tbl_approv4c.jpg]

Multiple cap refers to applicable acquisitions in which a maximum amount of potential proceeds to HCR is effectuated based on projected Royalty Receipts.

Novel Drug are defined by the FDA as innovative products that serve previously unmet medical needs or otherwise significantly help to advance patient treatments.

Special designations include Fast Track and/or Breakthrough Therapy, Accelerated Approval Pathway, Priority Review, (collectively defined as ‘Expedited Programs for Serious Conditions’), Orphan Drug, and Qualified Infectious Disease Product designations. These designations are awarded by the FDA based on a comprehensive review process.

The Movantik acquisition represents two distinct transactions with two separate counterparties in February 2020 (RedHill) and December 2020 (Nektar).

Represents two transactions with Coherus, a convertible debt investment that comes due in 2022 and a senior debt investment that comes due in 2025.

Gocovri projected Royalty Receipts include a small portion of royalties from Namzaric, acquired from Adamas and marketed by AbbVie.

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Adynovate is an additional royalty interest that was acquired in the Nektar transaction referenced in footnote 4.

Projections of Projected Duration and Royalty Receipts are based upon forecasts by the Legacy Manager of future sales and cash flows anticipated to be generated by each asset determined through the use of internal models prepared by the Legacy Manager in the ordinary course of business in order to evaluate the performance of existing investments. The Legacy Manager is controlled by affiliates of HCR and has its own employees who provide services for HCR, but are not employees of HCR. The employees of the Legacy Manager will become employees of the Manager in connection with this offering. The Manager will be operated by the same personnel as currently operate the Legacy Manager and certain newly hired individuals engaged as a result of our growth and transition to operating as a public company. Such projections are based on certain assumptions and subject to various uncertainties relating to the performance of such products, including the impact of competition by new products and governmental or regulatory action.

Our Strengths

We believe that the following elements of our platform have enabled us to build a foundational product portfolio and will allow us to add to the portfolio in the future.

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We employ a refined, efficient process to evaluate Royalty-Related Transaction opportunities that has been honed by our senior team over two decades and has delivered consistent results. Our process for evaluating Royalty-Related Transaction opportunities has been optimized through decades of experience and is designed to efficiently assess opportunities, identify risks and establish appropriate Royalty-Related Transaction structures. Although each Royalty-Related Transaction is different, the approach for internal vetting remains consistent to ensure each opportunity fits our overall asset selection criteria and appropriately balances risk and reward.

•

Clearly defined asset selection criteria enable us to efficiently assess opportunities and leverage the expertise of our platform. Our disciplined approach towards Royalty-Related Transactions is based on clearly established criteria. By focusing on assets that largely adhere to these fundamental criteria, we are able to more efficiently apply our investment process and maximize our resources, resulting in a robust product portfolio.

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Our well-established business model and thoughtful expansion strategy has enabled the formation of deep industry relationships and differentiated sourcing capabilities. Our investment in a robust regional presence has broadened our landscape of actionable opportunities and has accelerated our pace of Royalty-Related Transactions (averaging approximately $500 million of annual Royalty-Related Transactions since 2016, the initial stages of our regional sourcing model). From 2016 to 2020, more than 50% of our Royalty-Related Transactions were sourced on a proprietary and/or non-intermediated basis. Additionally, in 2020, all four regional offices generated an asset acquisition or financing, and three of our four regional offices have generated an asset acquisition as of the first half of 2021.

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We have an established and consistent history of success driven by our deep, relevant experience. Members of our team have more than an aggregate of 500 years of relevant healthcare experience. Since 2001, members of our senior team have executed on 90 Royalty-Related Transactions comprising 93 products. Our overall pace and rate of deployment have steadily increased since inception, particularly since the start of our expansion period in 2014. As we have grown, we have continued to refine and hone our process, methodically expanding our team’s capabilities and geographic presence to facilitate our pace of growth. Through our planned expansion, we have maintained a consistent process based on a high level of rigor and selectivity when evaluating acquisitions or financings. Over this same period, we have consistently generated, on average, unlevered mid teen gross returns at the asset level in our core focus on biopharmaceuticals.

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Our creativity and ability to design flexible solutions enables us to create synergistic relationships with our partners. To best serve potential partners, we often create a menu of customizable solutions across a wide range of transaction structures that are often more

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tailored than traditional options. We have executed bespoke transactions in royalty, SYNTHETIC ROYALTY™ financings, and debt structures across stages of development, therapeutic areas, geographies and risk/reward parameters.

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Our extensive, diversified portfolio provides the foundation for future growth and serves as validation to future partners. Our process, experience and flexibility have enabled us to create a portfolio of assets that we believe would be difficult to replicate, having been assembled largely over a seven-year period and consisting of 35 assets. In 2020, products in our current portfolio generated approximately $12 billion of sales, and we generated Royalty Receipts of $405 million, compared to Royalty Receipts of $253 million in 2019. Our portfolio is diversified across therapeutic categories, treatment modalities, indications and marketers. We also have meaningful exposure to drugs that have received special designation from the FDA, including but not limited Orphan Drug Exclusivity.(1) These products comprise 41% of the portfolio as of June 30, 2021 (by projected Royalty Receipts). We believe special designation by the FDA is indicative of our asset criterion that products satisfy an unmet or underserved medical need. Also, orphan drugs receive market protection along with intellectual property protection.

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Our strong track record of pre-approval Royalty-Related Transactions provides another driver for future growth. Our experience and institutionalized investment process also allow us to evaluate and execute Royalty-Related Transactions involving pre-approval assets and assets with indication expanding potential. Since 2001, members of our senior team have closed transactions related to 14 products that were not approved, in which such product was the primary driver of the acquisition. In each instance, the product was ultimately approved.

Our Competitive Advantages

We believe that we have established a number of significant competitive advantages that will enable us to further advance our leadership position and our status as a partner of choice to emerging biopharmaceutical companies.

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Our highly refined and efficient acquisition and financing process creates a foundation to enable repeatable results and growth. Since 2014, we have refined our operating efficiency by crafting our organizational culture to be process-driven, analytically-focused, and rewarding of collaboration and sharing of intellectual capital. This culture is also focused on continuous improvement, as we work to hone our sourcing, diligence and negotiation processes to increase their effectiveness. We believe the standardization and refinement of these elements have enabled us to consistently produce repeatable results and provide a meaningful competitive advantage. In 2020, we reviewed 160 potential new acquisition or financing opportunities, which resulted in seven closed transactions.

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Our proprietary insights enable a more effective and efficient acquisition and financing process, which we believe drives better results. Our established infrastructure of in-house scientists, regulatory experts and Senior Advisors are essential in directing the organization’s focus on therapeutic areas and products that could be most promising. Once potential Royalty-Related Transactions are under consideration, these teams are also fully integrated into the diligence review process and leverage our long-term investment in scientific expertise and proprietary research.

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Our regional sourcing approach drives differentiated high-quality deal flow across the biopharmaceutical sector. We have established regional offices in Boston, London, the New York metro area and San Francisco that allow us to develop and maintain direct relationships with emerging biopharmaceutical companies and other constituents involved in the biopharmaceutical ecosystem. Our systematic and institutionalized sourcing program generates a robust pipeline of proprietary opportunities that we believe is unrivalled in the royalty space.

(1)

Special designations include Fast Track and/or Breakthrough Therapy, Accelerated Approval Pathway, Priority Review, Orphan Drug, and Qualified Infectious Disease Product designations.

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Our ability to customize solutions for our partners creates high-quality and expanded access to acquisition and financing opportunities. The ability to present a number of creative solutions in a royalty, SYNTHETIC ROYALTY™ financing or debt structure differentiates our company from other industry participants and enables us to address the specific capital needs of potential partners. We believe our flexible mandate provides us with a large opportunity set of transactions to evaluate. Many of our peers generally focus on either royalty purchases or on debt investments.

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Our foundational portfolio provides us with scale and enhances our brand as a top royalty partner in the biopharmaceutical ecosystem. We have amassed a portfolio of 35 assets as of June 30, 2021, diversified across therapeutic categories, treatment modalities, indications and marketers. This portfolio was built deliberately over a more than seven-year period and now produces significant predictable cash flows. Our current portfolio and scale enable us to support our differentiated infrastructure and is a visible indicator of our consistent activity and expertise, reinforcing the HCR brand of being a partner of choice in this sector.

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Our Growth Strategy

Our mission is to facilitate innovation by deploying capital consistently and reliably in products that serve unmet or underserved medical needs. The key components of our growth strategy are summarized below.

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Leverage our regional sourcing infrastructure and differentiated scientific expertise to capitalize on strong industry tailwinds. The biopharmaceutical industry has experienced explosive growth and rapid innovation over the last several years fueled by dramatic acceleration in medical research. The significant ongoing growth and capital needs of the biopharmaceutical market provides a substantial tailwind for our business and expands our pipeline of potential partners. By combining our regional sourcing infrastructure with the expertise of our in-house scientists and Senior Advisors, we believe we are well positioned to take advantage of the favorable long-term industry tailwinds.

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Broaden our Royalty-Related Transaction pipeline with access to increased capacity and attractively priced capital. We believe access to the public equity market as well as the public and private debt markets will provide us access to capital at a meaningfully lower cost than what we have today. We believe this lower cost capital will enable us to acquire or finance high-quality opportunities at competitive prices, deliver favorable returns, and widen our opportunity set.

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Leverage internal expertise and increased operational flexibility to acquire or invest in royalties on attractive late stage pre-approval assets. We believe we have the differentiated ability to assess scientific, commercial and financial merits to identify attractive acquisition opportunities in late-stage, de-risked assets. We believe our new corporate structure will provide

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us enhanced operational flexibility to assess both pre-approval and commercial opportunities, and deploy our disciplined approach to further enhance the pipeline and in turn generate future growth.

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Maintain our disciplined approach and acquisition culture as we grow. Our culture is defined by collaboration, creativity and thought leadership, as well as a commitment to support innovation and life-changing therapies by partnering with the biopharmaceutical industry. We believe our disciplined acquisition approach and refined repeatable process are critical to our success. We are committed to maintaining our culture as we move to the next stage of growth. We will also continue to recruit and expand our team to support our growth plans.

Our Approach

Our approach is to identify attractive products and therapeutic areas of focus and then evaluate how to (i) acquire royalties on, or (ii) finance the marketers of, products we believe fit our asset selection criteria. Our team combines scientific expertise, regional sourcing resources and sophisticated transaction knowledge to target and close on attractive growth biopharmaceutical assets. We actively monitor the evolving treatment landscape and leverage our broad network of relationships with biopharmaceutical firms, physicians, scientists, and other market participants to identify new acquisition or financing candidates. This approach ensures a robust and diversified pipeline of opportunities by product type and therapeutic area.

Our own internal projections with respect to the potential Royalty Receipts from a potential acquisition candidate are typically lower than and may differ substantially from the counterparty’s estimates or Wall Street consensus. For certain products such as Brineura, Gocovri and Xpovio, for which our sales estimates at the time of investment were lower than Wall Street consensus, we have negotiated and structured terms of the investments that have enabled us to generate strong rates of return. We seek to minimize risks related to underperformance of the products in our portfolio through various structural protections, including milestone payments, reverse-tiered royalties, underperformance or catch-up payments, royalty rate “ratchet” provisions or escalating hard caps, or by purchasing a lower portion of sales or structuring the investment as a debt instrument with a guaranteed repayment obligation. Over 70% of our existing portfolio contains one or more of these structural protections. Conversely, our use of our own internal models to generate projections that differ from Wall Street consensus has enabled us to identify potential opportunities for upside, including our investments in Shingrix, Udenyca and Trelegy Ellipta whose sales have outperformed Wall Street estimates.

Key characteristics across our existing portfolio and future acquisition or financing candidates are as follows:

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Clinically validated: therapies that have received regulatory approval or are clinically de-risked, such as having complete Phase 3 data or a filed New Drug Application or a Biologics License Application with the FDA.

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High unmet and/or underserved need: therapies that address areas of significant unmet or underserved medical need, either in smaller patient populations for rare disease indications or larger patient populations for more prevalent indications.

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High value proposition: therapeutic areas and indications with favorable reimbursement dynamics and significant willingness to pay.

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Differentiation within treatment landscape: therapies that disrupt the existing treatment paradigm and are founded on innovation with substantial potential.

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Growth potential: therapies where we see strong long-term potential, based on our in-depth evaluation and in-house scientific expertise.

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Strong marketer: therapies that fit our acquisition and financing model of providing support for emerging biopharmaceutical companies, while deriving most of the portfolio revenue from established marketers.

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Barriers to entry: therapies that are protected with strong IP and/or other barriers including regulatory exclusivity and manufacturing complexity.

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We foster a culture of dissent, accountability and transparency; we believe these firm values create better outcomes for our stockholders. A core element of our culture of accountability is the ongoing review of our existing portfolio as part of our broader portfolio management strategy, providing continued engagement with partners and an important feedback loop post-transaction. Our acquisition and financing platform is designed to serve as a long-term capital resource for our biopharmaceutical partners, offering flexible financing solutions that are directly aligned with their specific business models and objectives. We seek to not only provide capital but to also be a long-term partner to biopharmaceutical companies.

Our Organizational Structure

We are a corporation incorporated in Delaware. Upon the closing of this offering, our principal asset will be our direct or indirect 100% ownership of all of Holdings LP’s Class A limited partnership units (the “Holdings LP Class A Units”). In contemplation of this offering, we reassessed our status as an investment company for accounting purposes under U.S. GAAP. As a result of, among other things, the anticipated changes to our organizational structure, business strategy and capital return policy, we believe that, upon the closing of this offering, we will no longer meet the definition of an investment company under U.S. GAAP as we will not possess the characteristics of an investment company. Therefore, following the closing of this offering, we will prepare our consolidated financial statements as an operating company under the New Methodology.

The diagram below depicts our organizational structure before the Reorganization Transactions, the steps of the Reorganization Transactions, the steps of the post-Reorganization Transactions, and our organizational structure immediately following the Reorganization Transactions, assuming the sale of the number of shares set forth on the cover page of this prospectus and no exercise of the underwriters’ option to purchase additional shares of our Class A common stock. The diagram is provided for illustrative purposes only and does not represent all legal entities affiliated with our organizational structure.

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Pursuant to a reorganization agreement entered into on June 30, 2021, investors in the Legacy HCR Partnerships (as defined below) agreed to merge the Legacy HCR Partnerships with and into Investments LP HoldCo, with Investments LP HoldCo as the surviving limited partnership (collectively, the “Reorganization Merger”). As used in this prospectus, the term “Legacy HCR Partnerships” refers to (i) HealthCare Royalty Partners III, L.P., (ii) HealthCare Royalty Partners III-A, L.P., (iii) HealthCare Royalty Partners IV, L.P., (iv) HealthCare Royalty Partners IV-A, L.P., (v) HCR Canary Fund, L.P., (vi) HCR Molag Fund, L.P., (vii) HCRP Overflow Fund, L.P., (viii) HCR Stafford Fund, L.P., (ix) HCR H.O.P. Fund, L.P., (x) HCR Potomac Fund, L.P. and (xi) PPCF Harris Feeder, L.P.

The Reorganization Merger is expected to be consummated immediately prior to the closing of this offering. In connection with the Reorganization Merger, investors in Legacy HCR Partnerships will receive interests in the Continuing Investor Partnership. As used in this prospectus, “Continuing GP Investors” refers to the legacy general partners of the Legacy HCR Partnerships, “Continuing LP Investors” refers to the limited partners of the Legacy HCR Partnerships, and “Continuing Investors” refers to the Continuing GP Investors and Continuing LP Investors collectively. The Continuing Investor Partnership owns all of the outstanding Holdings LP Class B Units (the “Holdings LP Class B Units”).

Our corporate structure following the completion of the Reorganization Merger, as described above, is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they undertake an initial public offering. We will operate and control the business affairs of Holdings LP through our direct or indirect ownership of 100% of Holdings LP’s Class A Units, conduct our business through Holdings LP and its subsidiaries and include Holdings LP and its subsidiaries in our consolidated financial statements. Our Up-C structure will allow the Continuing Investors to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following this offering. One of these benefits is that future taxable income of Holdings LP that is allocated to such owners in respect of

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their Holdings LP Class B Units will be taxed on a flow-through basis and, therefore, Holdings LP is not expected to be subject to corporate taxes at the entity level. In addition, the Up-C structure provides potential future tax benefits for us when the Continuing Investors ultimately exchange their Holdings LP Class B Units for shares of Class A common stock. Finally, certain of the Continuing Investors may prefer holding Class A common stock because it reduces the possibility of being exposed to Holdings LP income with potentially adverse tax consequences.

Immediately following the closing of this offering, a portion of the Holdings LP Class B Units indirectly held by each Continuing Investor in the Continuing Investor Partnership, including Holdings LP Class B Units indirectly held by our executive officers, will be repurchased on a pro rata basis by Holdings LP at the initial public offering price per share for a total of $1.5 billion. Assuming the sale by us of 31,250,000 shares of Class A common stock and the sale by the selling stockholder of 15,625,000 shares of Class A common stock, in each case at an assumed price per share equal to the midpoint of the price range on the cover page of this prospectus, and the completion of the Debt Financing (as described in “—Debt Financing” below) with an annual interest rate of 4.5% on the Senior Notes and 2.75% on the Term Loan, with no amounts drawn under the New Credit Facility, Holdings LP will repurchase 93,750,000 Holdings LP Class B Units, including 348,790 Holdings LP Class B Units indirectly held by our executive officers. It is intended that the Holdings LP Class B Units indirectly held by our executive officers repurchased in the Reorganization Buyback Transaction will not exceed the number of Holdings LP Class B Units necessary to satisfy applicable tax obligations incurred by our executive officers in connection with the Reorganization Transactions. We refer to this repurchase as the “Reorganization Buyback Transaction”. We intend to finance the Reorganization Buyback Transaction with a portion of the proceeds of this offering and the Debt Financing.

In connection with the closing of this offering, various reorganization transactions will be effected, including:

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the Reorganization Merger;

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the Reorganization Buyback Transaction;

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the Debt Financing described under “—Debt Financing” below; and

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the execution of the Management Agreements with the Manager.

We refer to these transactions collectively as the “Reorganization Transactions”.

Following the closing of this offering, the Continuing Investor Partnership will hold a number of shares of our Class B common stock equal to the number of Holdings LP Class B Units held by it. The Continuing Investor Partnership will, upon the individual instruction of any of its partners from time to time, in accordance with procedures and limitations as set forth in the Holdings LP Agreement, the limited partnership agreement of the Continuing Investor Partnership, and the Exchange Agreement, distribute the Holdings LP Class B Units and corresponding shares of Class B common stock held on behalf of such partner that are subject to such instruction, which will then be exchanged for shares of our Class A common stock (which shares of Class A common stock will be subject to the terms of the underwriters’ “lock-up” agreements in connection with this offering and the additional transfer restrictions described below and, if applicable, will be held in escrow to satisfy obligations to pay additional carried interest to the Continuing GP Investors, as described below). Each Holdings LP Class B Unit will be exchangeable on a one-for-one basis, together with a corresponding share of Class B common stock, for a share of Class A common stock pursuant to the Exchange Agreement. Upon such exchange the Company will retire the corresponding share of Class B common stock. Our Class B common stock will not be publicly traded and holders of Class B common stock only have limited rights to receive a distribution equal to their nominal value upon a liquidation, dissolution or winding up of the Company. However, Holdings LP Class B Units are entitled to dividends and distributions. Our Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of stockholders, except as otherwise required by applicable law, with each share entitled to one vote.

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Class B Units following the Reorganization Transactions. The carried interest formula will be based on that of each Legacy HCR Partnership, if applicable, and will only apply to Continuing LP Investors that were subject to a carried interest or performance fee arrangement with the applicable Continuing GP Investor of the relevant Legacy HCR Partnership. A portion of such carried interest will be crystalized at the time of the Reorganization Buyback Transaction and this offering. Such carried interest crystallization will result in Continuing GP Investors indirectly receiving Holdings LP Class B Units through increased ownership in the Continuing Investor Partnership with a corresponding decrease in the ownership of Holdings LP Class B Units by applicable Continuing LP Investors through decreased ownership in the Continuing Investor Partnership. In addition, the Continuing GP Investors have agreed to crystallize their carried interest or performance fees in the same manner at the time of (i) any registered secondary sales of shares, based on the applicable sale price of such secondary sales and (ii) on a quarterly basis thereafter during the period between the first and the third anniversary of this offering (each of the events in clause (i) and (ii), together with this offering, a “Crystallization Event”).

Continuing LP Investors that are subject to such carry arrangements have agreed that if they exchange their Holdings LP Class B Units for shares of our Class A common stock, a portion of such shares of Class A common stock will be held in escrow until the third anniversary of this offering in order to implement the agreed upon arrangements with the Continuing GP Investors (such shares held in escrow, the “Escrowed Class A Common Stock”). The applicable Continuing GP Investor will receive its additional carried interest through the release of such Escrowed Class A Common Stock (the “Additional Carry Shares”) (or increased ownership of the Continuing Investor Partnership to the extent such Continuing LP Investor has not converted its Holdings LP Class B Units) (x) at the end of each fiscal quarter during the period beginning on the first anniversary of the closing of this offering and ending on the third anniversary of this offering and (y) at the time of and in connection with any secondary sales of shares by Continuing LP Investors. At the end of each such fiscal quarter, a portion of the total shares of Escrowed Class A Common Stock (or Holdings LP Class B Units, as applicable) that remain unsold at the first anniversary of the closing of this offering may be released from escrow to the Continuing GP Investors as additional carried interest on deemed releases of shares by Continuing LP Investors, the amount of which will be based on the then-current price per share of our Class A common stock. Any shares of Escrowed Class A Common Stock Units or Holdings LP Class B Units not released to the Continuing GP Investors following the third anniversary of this offering would be released from escrow back to the applicable Continuing LP Investor.

A portion of the Escrowed Class A Common Stock that is not released as Additional Carry Shares shall be released from escrow to the owners thereof at each Crystallization Event (and any remaining Escrowed Class A Common Stock will be released following the third anniversary or earlier if applicable trading or sales prices described above are less than the price sufficient to earn any Additional Carry Shares).

The additional carried interest arrangement was aimed at aligning the carried interest realization associated with the Legacy HCR Partnerships with the liquidity events or deemed liquidity events of the Continuing LP Investors over a three year period. In addition, it was aimed to incentivize the management team of the Manager to complete an initial public offering and to maximize the trading price performance of the Company subsequent to the initial public offering.

The effect of the additional carried interest arrangement will be to transfer from the Continuing LP Investors to the Continuing GP Investors either limited partnership interests in the Continuing Investor Partnership exchangeable for, or shares of, Escrowed Class A Common Stock, of up to 31,909,702 shares of Class A common stock, or up to 14.8% of the total outstanding shares of Class A common stock of the Company following completion of the offering, calculated on a fully diluted basis.

The additional carried interest arrangements only affect the Continuing Investors, through their ownership in the Continuing Investor Partnership and of Escrowed Class A Common Stock, and do not have a dilutive effect on investors that purchase shares of Class A common stock in this offering. As no additional Class B Units or shares of Class B Common Stock will be issued in connection with such arrangements, a portion of the Escrowed Class A Common Stock that is not released as Additional Carry Shares shall be released from escrow to the owners thereof at each Crystallization Event (and any

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remaining Escrowed Class A Common Stock will be released following the third anniversary or earlier if applicable trading or sales prices described above are less than the price sufficient to earn any Additional Carry Shares).

See “Organizational Structure — Ownership of Holdings LP Class B Units by Continuing Investor Partnership” for more information.

The Manager

HCR was founded in 2006 by three individuals, including our Chairman and Chief Executive Officer, Clarke B. Futch, our Senior Advisor, Gregory B. Brown, M.D., and Todd C. Davis, who ceased serving on Legacy Manager’s transaction review committee in 2016 and was no longer affiliated with HCR following December 31, 2017, who we refer to as “our founders”.

Historically, our business has been managed by the Legacy Manager. In connection with this offering we and Holdings LP will each enter into a management agreement (each a “Management Agreement”, and collectively, the “Management Agreements”) with the Manager pursuant to which the Manager will, among other things, manage the existing assets of our business and source and evaluate new Royalty-Related Transactions, subject to oversight by our board of directors. The Manager will be a newly formed legal entity providing the same services to us that have been provided to HCR by the Legacy Manager. The Manager will be a separate legal entity from us, operating pursuant to the Management Agreements, with its own employees who perform services for us, but are not our employees. The Legacy Manager also has its own employees who provide services for HCR, but are not employees of HCR. The employees of the Legacy Manager will become employees of the Manager in connection with this offering. The Manager will be operated by the same personnel as currently operate the Legacy Manager and certain newly hired individuals engaged as a result of our growth and transition to operating as a public company. The Manager will continue to use the same investment process and criteria currently applied by the Legacy Manager to evaluate potential investment opportunities. The Management Agreements have an initial term of ten years, after which they can be renewed for an additional term of three years, unless either the Company or the Manager provides notice of non-renewal 180 days prior the expiration of the initial term. We and Holdings LP will each pay the Manager a quarterly Operating and Personnel Payment pursuant to the terms of each Management Agreement. The Manager may not be removed during the initial or any renewal term without cause. The Manager is an “investment adviser” registered with the SEC under the U.S. Investment Advisers Act of 1940. For a description of the terms of the Management Agreements, including the Manager’s Operating and Personnel Payment, see “The Manager”, and see “Management” for information regarding the management team of the Manager.

The Manager is owned and controlled indirectly by Mr. Futch. Certain former owners of the Legacy Manager own a minority non-voting economic interest in the Manager, which entitles such persons to a portion of the revenue of the Manager for a period of time, with Mr. Futch having the right to buy out such minority non-voting economic members’ interest ten years after the closing of this offering. The former owner has no rights to control or direct the decision making or actions of the Manager

In addition, the executives and other employees of the Manager, including certain former founders and owners, will be entitled to equity performance awards based on the performance of investments, determined on a portfolio-by-portfolio basis. Investments made during each two-year period will be grouped together as separate portfolios, with the first portfolio commencing on the date of our initial public offering and ending on December 31, 2022. We do not currently expect any material equity performance

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awards to be payable for five to seven years after the closing of this offering. For a description of the terms of such awards, see “The Manager — Equity Performance Awards”.

Debt Financing

On July 29, 2021, Investments LP issued $650 million aggregate principal amount of 4.5% Senior Notes due 2029 (the “Senior Notes”), with the proceeds of the issuance of Senior Notes held in escrow until the completion of this offering. In addition, prior to the completion of this offering, we expect Investments LP to enter into a $850 million Senior Secured Term Loan (the “Term Loan”) and $550 million Senior Secured Revolving Credit Facility (the “New Credit Facility” and together with the Senior Notes and Term Loan, the “Debt Financing”), provided that the completion of this offering will be a condition to our ability to borrow thereunder. See “Description of Indebtedness”.

Summary of the Offering Structure

In connection with the Reorganization Merger, which is expected to be consummated immediately prior to the closing of this offering, investors who invested in HCR through the Legacy HCR Partnerships will exchange their limited partnership interests in the Legacy HCR Partnerships for limited partnership interests in the Continuing Investor Partnership. Upon the closing of this offering, we will own directly or indirectly all of the outstanding Holdings LP Class A Units and the Continuing Investor Partnership will own all of the outstanding Holdings LP Class B Units. As a result of the Reorganization Transactions, Holdings LP and its subsidiaries will own 100% of the assets of HCR.

Pursuant to agreements with the Continuing Investor Partnership, certain Continuing LP Investors, including the selling stockholder, have agreed to exchange, shortly before or upon consummation of this offering, interests in the Continuing Investor Partnership into shares of Class A common stock. Such shares of Class A common stock will be held in escrow as discussed above. See — “Organizational Structure — Additional Carried Interest”.

Upon the closing of this offering and the consummation of the Reorganization Buyback Transaction:

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Our Class A common stock will be held as follows:

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46,875,000 shares (or 53,906,250 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock) by public investors; and

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additional shares by the Continuing Investors upon conversion following this offering (which shares will be held in escrow upon the closing of this offering as described under the section titled “Organizational Structure”)

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Our Class B common stock (together with the same number of Holdings LP Class B Units) will be held as follows:

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168,625,000 shares by the Continuing Investor Partnership.

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The combined voting power in the Company will be as follows:

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21.8% by public investors (and the Continuing Investors through their ownership of Class A common stock) (or 24.2% if the underwriters exercise in full their option to purchase additional shares of Class A common stock); and

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78.2% by the Continuing Investors, including our management team, through the Continuing Investor Partnership (or 75.8% if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

See “Risk Factors — Risks Relating to Our Organization and Structure”, “Organizational Structure” and “Certain Relationships and Related Party Transactions”.

Summary Risk Factors

Before you invest in our Class A common stock, you should carefully consider all the information in this prospectus, including matters set forth under the heading “Risk Factors”. These risks and uncertainties include factors related to:

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sales risks of biopharmaceutical products on which we receive royalties;

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our ability to identify suitable assets for us to acquire or in which to invest;

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uncertainties related to the acquisition of interests or investments in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates and late stage funding opportunities to our product portfolio;

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the assumptions underlying our business model;

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our ability to successfully execute our Royalty-Related Transaction strategy;

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our ability to leverage our competitive strengths;

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actual and potential conflicts of interest with the Manager and its affiliates;

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the ability of the Manager or its affiliates to attract and retain highly talented professionals;

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our change in accounting methodology from that of an investment company to that of an operating company following the closing of this offering, pursuant to which we expect to measure the majority of our financial assets using the amortized cost accounting methodology, which may impair comparability of our financial results following this offering versus our historical results for periods prior to this offering and may cause our prior financial results not to be indicative of our future financial performance under the new accounting methodology;

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our indebtedness, which was $493 million as of March 31, 2021, and which we expect will be approximately $1.5 billion as of the completion of this offering with the ability to draw an additional $550 million under our New Credit Facility, may inhibit our operating flexibility and reduce cash flow available for dividends, as well as limit our ability to respond to changing business conditions;

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the effect of changes to tax legislation and our tax position; and

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the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus and in our filings with the SEC.

Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our most recently completed fiscal year as of the initial filing date of the registration statement of which this prospectus forms a part, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies that are not emerging growth companies. These provisions include:

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presentation of only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations in this prospectus;

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reduced disclosure about our executive compensation arrangements;

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no non-binding stockholder advisory votes on executive compensation or golden parachute arrangements; and

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exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We may take advantage of these exemptions for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of this offering; (ii) the first fiscal year after our annual gross revenues are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934,

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as amended (the “Exchange Act”). We have taken advantage of reduced disclosure regarding the presentation of certain historical financial information in this prospectus, and we may choose to take advantage of some but not all of these reduced disclosure obligations in future filings. If we do, the information that we provide stockholders may be different than you might get from other public companies in which you hold stock.

The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, this election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. When a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that comply with new or revised accounting pronouncements as of public company effective dates.

Corporate Information

We were incorporated in Delaware on April 26, 2021. We are a newly formed company, previously had no material assets and have not engaged in any business or other activities except in connection with the Reorganization Transactions described under “Organizational Structure”. Our principal executive offices are located at 300 Atlantic Street, Suite 600, Stamford, Connecticut 06901, and our telephone number is (203) 487-8300. Our website is www.healthcareroyalty.com. Our website and the information contained therein or connected thereto is not incorporated into this prospectus or the registration statement of which it forms a part.

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OFFERING

Class A common stock offered by us

31,250,000 shares.

Class A common stock offered by the selling stockholder

15,625,000 shares.

Option to purchase additional Class A common stock

We and the selling stockholder have granted the underwriters an option to purchase up to an additional 7,031,250 shares of Class A common stock, including 3,515,625 shares offered by us and 3,515,625 shares offered by the selling stockholder, exercisable for 30 days after the date of this prospectus.

Class A common stock to be outstanding after this
offering

46,875,000 (or 53,906,250 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Class B common stock to be outstanding after this
offering and the Reorganization Transactions

168,625,000 (after giving effect to 93,750,000 shares of Class B common stock repurchased in the Reorganization Buyback Transaction, assuming an initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus).

Voting power held by holders of Class A common stock after giving effect to this
offering and the Reorganization Transactions

21.8% (or 24.2% if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Voting power held by holders of Class B common stock after giving effect to this offering and the Reorganization Transactions

78.2% (or 75.8% if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

Reorganization Buyback Transaction

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Holdings LP Class B Units indirectly held by our executive officers repurchased in the Reorganization Buyback Transaction will not exceed the number of Holdings LP Class B Units necessary to satisfy applicable tax obligations incurred by our executive officers in connection with the Reorganization Transactions.

We intend to finance the Reorganization Buyback Transaction with a portion of the proceeds of this offering and the Debt Financing.

Use of proceeds

We intend to use the net proceeds from the sale of shares of our Class A common stock to purchase newly-issued Holdings LP Class A Units directly from Holdings LP at a purchase price per unit equal to the initial public offering price per share of Class A common stock less underwriting discounts and commissions.

Holdings LP intends to use the proceeds from our purchase of newly issued Holdings LP Class A Units plus a portion of the proceeds from the Debt Financing (approximately $1.5 billion in total) for the Reorganization Buyback Transaction described above.

We intend to cause Holdings LP and its subsidiaries to use any remaining net proceeds of this offering and the Debt Financing, including the net proceeds from the issuance and sale of any of the shares of Class A common stock pursuant to an exercise of the underwriters’ option to purchase additional shares, after deducting underwriting discounts and other offering expenses, to pursue additional Royalty-Related Transactions and for other general corporate purposes, including payment of operating expenses to our Manager and other professional and administrative fees. See “Use of Proceeds”.

Proposed Nasdaq trading
symbol

“HCRX”

Voting rights

Each share of our Class A common stock and Class B common stock entitles its holder to one vote on all matters to be voted on by our stockholders.

Holders of shares of our Class A common stock and Class B common stock will vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law. See “Description of Capital Stock”.

The Continuing Investor Partnership, which own all of our outstanding Class B common stock, will vote such shares as directed by the Continuing Investors.

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Controlled company
exemption ............

As a result, we may be able to avail ourselves of the “controlled company” exemption under Nasdaq’s rules from certain of the corporate governance listing requirements. However, if Continuing LP Investors indirectly owning a substantial portion of our securities through the Continuing Investor Partnership exchange a sufficient amount of their interests in the Continuing Investor Partnership for shares of our Class A common stock or Class B common stock, the Continuing Investor Partnership would beneficially own securities constituting less than a majority of the combined voting power of our outstanding shares of Class A common stock and Class B common stock. Such Continuing LP Investors will have the right to effectuate such exchanges at any time following the completion of this offering, as described under “Organizational Structure.” As a result of the substantial likelihood that we will not remain a “controlled company” in the long term due to future exchanges, we do not intend to rely on such controlled company exemptions.

See “Management — Controlled Company Exemption.”

Operating and personnel
payment

We and Holdings LP will each pay the Manager a quarterly Operating and Personnel Payment pursuant to the terms of each Management Agreement. We have no personnel of our own and the Operating and Personnel Payment is intended to fund operating and personnel costs of the Manager and its affiliates. The Operating and Personnel Payment made by Holdings LP is based on tiers of Royalty Receipts and will not be subject to adjustment based on actual operating and personnel expenses of the Manager. See “The Manager — Management Agreements”.

Reserved Shares Program

At our request, the underwriters have reserved up to 5.0% of the shares of Class A common stock offered by this prospectus for sale, at the initial public offering price, to our directors, officers, Continuing Investors and other individuals associated with us and members of their respective families. The sales will be made by Stifel, Nicolaus & Company, Incorporated, an underwriter of this offering, through a reserved shares program. We do not know if these persons will choose to purchase all or any portion of these reserved shares, but any purchases they do make will reduce the number of shares available to the general public. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same

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terms as the other shares of Class A common stock. Participants in the directed share program who purchase more than $1.0 million of Class A common stock will be subject to a 25-day lock-up restriction with respect to any shares sold to them pursuant to the reserved shares program. This lock-up will have similar restrictions to the 180-day lock-up restrictions described in “Underwriting.” Any shares of Class A common stock sold to our directors, executive officers or Continuing Investors pursuant to the reserved shares program will be subject to the 180-day lock-up restrictions described in “Underwriting.”

Risk Factors

See “Risk Factors” for a discussion of risks you should consider carefully before deciding to invest in our Class A common stock.

Unless we specifically state otherwise, the information in this prospectus (i) does not take into account the issuance of up to 7,031,250 shares of Class A common stock issuable upon exercise of the underwriters’ option to purchase additional shares of Class A common stock, which includes 3,515,625 shares offered by us and 3,515,625 shares offered by the selling stockholder, or (ii) gives effect to the Reorganization Transactions, including the Reorganization Buyback Transaction (based on an assumed repurchase price per share at the midpoint of the price range on the cover page of this prospectus).

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA

The following tables set forth certain summary historical combined financial and other data of HCR as of the dates and for the periods indicated. The business of HCR is the predecessor of Healthcare Royalty, Inc. for financial reporting purposes. The historical financial data as of and for the years ended December 31, 2020 and 2019 were derived from the audited combined financial statements of HCR included elsewhere in this prospectus. The historical financial data as of and for the three months ended March 31, 2021 and 2020 were derived from the unaudited combined financial statements of HCR included elsewhere in this prospectus. The three months ended March 31, 2021 is not representative of the year and the year is not representative of future performance. Healthcare Royalty, Inc. was formed as a Delaware corporation on April 26, 2021 and has not, to date, conducted any activities other than those incidental to its formation and the preparation of this prospectus and the registration statement of which this prospectus forms a part.

The unaudited pro forma information gives effect to (i) the Reorganization Transactions described under “Organizational Structure”, and (ii) the sale of 46,875,000 shares of Class A common stock in this offering, as if each had been completed as of December 31, 2020, in the case of the unaudited pro forma consolidated balance sheet data as of December 31, 2020, and as of January 1, 2020 with respect to the unaudited pro forma consolidated statements of comprehensive income data. See “Unaudited Pro Forma Financial Information” and “Capitalization”.

The summary historical and pro forma financial and other data presented below do not purport to be indicative of the results that can be expected for any future period and should be read together with “Capitalization”, “Unaudited Pro Forma Financial Information”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined historical financial statements and related notes thereto included elsewhere in this prospectus.

	Pro Forma(1)(2)			Years Ended December 31,						Three Months Ended March 31,
	2020			2020			2019			2021			2020
	(in thousands)
Combined Results of Operations Data:
Royalty income		$	166,467		$	166,467		$	130,792		$	65,303		$	32,871
Note interest			50,397			50,397			38,060			15,245			11,422
Paid-in-kind interest			11,953			11,953			8,399			212			1,813
Other Income			10			10			53			—			—
Total investment income			228,827			228,827			177,305			80,760			46,106
Expenses:
Management fees(3)			30,381			26,666			20,538			6,759			6,632
Performance fees(4)			8,531			8,531			4,267			2,574			1,061
Interest expense			63,223			7,294			1,219			2,915			1,218
Net investment income			123,174			183,550			147,627			68,047			36,418
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) on investments			11,102			11,102			(7,706)			(1,284)			2,208
Net change in unrealized gain (loss) on investments			58,599			58,599			32,631			45,009			3,587
Net realized and unrealized gain (loss) on investments			69,701			69,701			24,925			43,725			5,795
Net increase in partners’ capital resulting from operations			192,875			253,252			172,552			111,772			42,213
Less: Income attributable to non-controlling interest			(150,921)			—			—			—			—
Net increase in partners’ capital resulting from operations attributable to controlling interest		$	41,954		$	253,252		$	172,552		$	111,772		$	42,213

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	Years Ended December 31,						Three Months Ended
	2020			2019			March 31, 2021
	(in thousands)
Combined Balance Sheet Data:
Cash and cash equivalents		$	11,733		$	10,145		$	64,629
Investments, at fair value			2,418,499			1,511,328			2,524,325
Interest receivable			3,477			2,982			3,451
Total assets			2,435,273			1,525,506			2,593,601
Revolving credit			493,000			82,642			493,000
Partners’ capital			1,931,953			1,437,932			2,090,945
Cash Flow Data:
Net cash provided by (used in):
Operating activities			(649,540)			(174,248)			5,676
Financing activities			651,128			174,020			47,220

	Pro Forma(1)(2)			Years Ended December 31,						Three Months Ended March 31,
	2020			2020			2019			2021			2020
	(in thousands)
Other Financial Measures:
Cash collections from royalty interests		$	227,440		$	227,440		$	171,500		$	98,701		$	26,179
Cash collections from notes			55,803			55,803			45,836			19,785			12,145
Proceeds from sales of Investments			121,838			121,838			35,616			33,010			49,391
Total Royalty Receipts		$	405,081		$	405,081		$	252,952		$	151,496		$	87,715
Payments for operating costs and professional services			(38,933)			(34,485)			(28,478)			(10,416)			(11,639)
Adjusted EBITDA (non-GAAP)(5)		$	366,148		$	370,596		$	224,474		$	141,080		$	76,076
Interest Paid			(75,368)			(6,456)			(1,073)			(2,904)			(763)
Adjusted Cash Flow (non-GAAP)(5)		$	290,780		$	364,140		$	223,402		$	138,176		$	75,313

(1)

The unaudited pro forma Combined Results of Operations Data for the year ended December 31, 2020 present selected financial data after giving effect to the Reorganization Transactions and the sale of Class A common stock in this offering, as further described in “Unaudited Pro Forma Financial Information.” The assumptions and adjustments to the Combined Results of Operations Data are described in the notes to the unaudited pro forma financial information in “Unaudited Pro Forma Financial Information.”

(2)

The unaudited pro forma Other Financial Measures as of and for the period ended December 31, 2020 present selected non-GAAP financial measures, which are supplemental measures to our GAAP financial measures, after giving effect to the Reorganization Transactions and the sale of Class A common stock in this offering, as further described in “Unaudited Pro Forma Financial Information.” The adjustments and assumptions to the non-GAAP Other Financial Measures are described in “Non-GAAP Financial Measures.”

(3)

Reflects the recognition of incremental Operating and Personnel Payment of $4.4 million on a pro forma basis. Under the terms of the Management Agreements, the Operating and Personnel Payment will be calculated as described in “The Manager — Management Agreements.”

(4)

After giving effect to the Reorganization Transactions and the sale of Class A common stock pursuant to this offering, there will be a change to the amount of performance fees. No adjustment has been made as an amount cannot be quantified at this time.

(5)

Management relies on Adjusted EBITDA and Adjusted Cash Flow as indicators of our cash flow and operating performance. We believe both to be critical to the assessment of our liquidity. Each non-GAAP financial measure functions as a supplemental measure of liquidity and is not required by, or presented in accordance with, GAAP. They are not measurements of our performance or liquidity under GAAP and should not be considered as alternatives to Net cash used in operating activities or Net increase in partners’ capital resulting from operations or any other performance or liquidity measure derived in accordance with GAAP. The adjustments and assumptions to Adjusted EBITDA and Adjusted Cash Flow, together with reconciliations to their most comparable GAAP measures, are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures.” Adjusted EBITDA is intended to show our Royalty Receipts less operating expenses. Our Royalty Receipts represent our total cash inflows from our Royalty-Related Transactions and include repayments of amounts related to acquisitions from prior periods in the current period. Adjusted EBITDA gives effect to investments for new Royalty-Related Transactions for the current period to the extent cash flows are received from such investments during the current period.

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RISK FACTORS

An investment in our Class A common stock involves risks. You should carefully consider the following information about these risks, together with the other information contained in this prospectus, before investing in our Class A common stock. If any of the adverse events described in the following risk factors, as well as other factors which are beyond our control, actually occurs, our business, results of operations and financial condition may suffer significantly. As a result, the trading price of our Class A common stock could decline, and you may lose all or part of your investment in our Class A common stock. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

Risks Relating to Our Business

Biopharmaceutical products are subject to sales risks.

Biopharmaceutical product sales may be lower than expected due to a number of reasons, including pricing pressures; insufficient demand; product competition; failure of clinical trials; lack of market acceptance; obsolescence; lack of acceptance by Medicare, Medicaid, or private insurance providers; loss of patent protection; the impact of the COVID-19 pandemic or other factors. In addition, development-stage and other product candidates may fail to reach the market. Unexpected side effects, safety or efficacy concerns can arise with respect to a product, including after a product receives regulatory approval for commercialization, leading to product recalls, withdrawals or declining sales. Any of these occurrences could cause our financial performance to be weaker than expected and harm our business, financial condition and results of operations.

The royalty market may not grow at the same rate as it has in the past, or at all, and we may not be able to acquire sufficient royalties or investment in sufficient marketers to sustain the growth of our business.

We have been able to grow our business over time by primarily acquiring royalties and other related instruments with marketers of biopharmaceutical products. However, we may not be able to identify and acquire a sufficient number of royalties, or royalties of sufficient scale, or invest in a sufficient number of marketers, to invest the full amount of capital that may be available to us in the future, or at our targeted amount and rate of deployment, which could prevent us from executing our growth strategy and negatively impact our results of operations. The royalty market may not grow at the same rate as it has in the past, and we rely on counterparties’ willingness to sell their assets. Changes in the royalty market, including its structure and participants, changes in preferred methods of financing and capital raising in the biopharmaceutical industry, or a reduction in the growth of the biopharmaceutical industry, could lead to diminished opportunities for us to acquire royalties, fewer royalties or investment opportunities being available, or increased competition for royalties or other investment opportunities. Even if we continue to acquire royalties or engage in financing transactions with marketers, they may not generate a meaningful return for a period of several years, if at all, due to numerous factors including the structure of the transaction, or circumstances relating to the underlying products. As a result, we may not be able to continue to grow as we have in the past, or at all. Failure to acquire sufficient royalties or investment in sufficient marketers to sustain the growth of our business would adversely affect our ability to obtain royalty income, which would adversely affect our business, financial condition and results of operations.

Biopharmaceutical products are subject to substantial competition, which can affect royalty payments.

The biopharmaceutical industry is a highly competitive and rapidly evolving industry. The length of any product’s commercial life cannot be predicted with certainty. There can be no assurance that one or more products on which we are entitled to a royalty will not be rendered obsolete or non-competitive by new products or improvements on which we are not entitled to a royalty made to existing products, either by the current marketer of such products or by another marketer. Current marketers of products may undertake these development efforts in order to improve their products or to avoid paying our royalty.

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Adverse competition, obsolescence or governmental and regulatory action or healthcare policy changes could significantly affect the revenues, including royalty-related revenues, of the products underlying our Royalty-Related Transactions.

Competitive factors affecting the market position and success of each product include:

•

efficacy;

•

safety and side effect profile;

•

price, including third-party insurance reimbursement policies;

•

timing and introduction of the product;

•

effectiveness of marketing strategy and execution;

•

market acceptance;

•

manufacturing, supply and distribution;

•

governmental regulation;

•

availability of lower-cost generics and/or biosimilars;

•

intellectual property protection and exclusivity;

•

treatment innovations that eliminate or minimize the need for a product; and

•

product liability claims.

Products on which we have a royalty may be rendered obsolete or non-competitive by new products, including generics and/or biosimilars, improvements on existing products, or governmental or regulatory action. In addition, as biopharmaceutical companies increasingly devote significant resources to innovate next-generation products and therapies using gene editing and new curative modalities, such as cell and gene therapy, products on which we have a royalty may become obsolete. Further, any new product candidate within our royalty portfolio that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be successful commercially. Many of these approved drugs are well established therapies and are widely accepted by physicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. These factors and developments could have an adverse effect on the sales of the biopharmaceutical products underlying our Royalty-Related Transactions, and consequently could materially adversely affect our business, financial condition and results of operations.

Our future income depends upon numerous product-specific assumptions, and if these assumptions prove to be inaccurate, we may not achieve our expected rates of returns.

Our business model is based on multiple-year internal and external forecasts regarding product sales and numerous product-specific assumptions in connection with each Royalty-Related Transaction, including where we have limited information regarding the product. There can be no assurance that the assumptions underlying our financial models, including those regarding product sales (such as projected Royalty Receipts) or competition, patent expirations, exclusivity terms or license terminations for the products underlying our portfolio, are accurate. These assumptions involve a significant element of subjective judgment. Despite established internal review processes and procedures, we may inadvertently deprioritize certain negative facts or data in favor of more attractive factors or other considerations, or we may fail to account for or recognize, or may overlook, key facts or data, including due to human error. These assumptions also may be, and in the past have been, adversely affected by post-acquisition changes in market conditions and other factors affecting the underlying product including potential changes in the marketer. The risks relating to these assumptions may be exacerbated for development-stage product candidates due to the uncertainties around their development, labeling, regulatory approval, commercialization timing, manufacturing and supply, competing products and related factors. Our assumptions regarding the financial stability or operational or marketing capabilities of the partner obligated to pay us royalties may also prove, and in the past have proven, to be incorrect. Due to

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these and other factors, the assets in our current portfolio or future assets may not generate their projected Royalty Receipts, expected returns or returns in line with our historical financial performance or in the time periods we expect or at all, which could adversely affect results of operations.

Acquisitions of royalties from or investments in biopharmaceutical development-stage or other product candidates that have not yet received FDA or other regulatory approval are subject to risks and uncertainties.

We intend to acquire more royalties on, or invest in companies with, product candidates, including development-stage product candidates, that have not yet received marketing approval by any regulatory authority. There can be no assurance that the FDA, the Medicines and Healthcare products Regulatory Agency (“MHRA”), the European Medicines Agency (“EMA”), Pharmaceuticals and Medical Devices Agency (“PMDA”) or other regulatory authorities will approve such product candidates or that such product candidates will be brought to market timely or at all, or that the market will be receptive to such products. If the FDA, MHRA, EMA, PMDA or other regulatory authority approves a product candidate that generates royalties for us, the labeling may be more restrictive or limited than we anticipated. In addition, the labeling, packaging, manufacturing, adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. The subsequent discovery of previously unknown problems with the product, including adverse events of unanticipated severity or frequency, may result in restrictions on the marketing of the product, including for certain patient populations, and could include withdrawal of the product from the market. Uncertainty relating to development-stage product candidates also make it more difficult to develop precise and accurate assumptions for our internal models relating to any such product candidate, which can result in reduced royalties compared to estimates.

We may continue, and may increase, this strategy of acquiring royalties in or investment in companies with product candidates that have not yet received marketing approval by any regulatory authority, including development-stage products. We also may seek to further expand our market opportunity by acquiring securities issued by biopharmaceutical companies, or we may provide capital to innovators to co-fund clinical development of a product candidate in exchange for a share of the future revenues of that asset, and when we do so, we will not control its clinical development. Where we may acquire equity securities as all or part of the consideration for business development activities, the value of those securities will fluctuate, and may depreciate in value. We will likely not control the company in which we acquire securities, and as a result, we may have limited ability to determine its management, operational decisions and policies. In addition, as a result of our activities we receive material non-public information about other companies from time to time. Where such information would relate to a company whose equity securities we hold, we may be delayed or prevented from selling such securities when we would otherwise choose to do so, and such delay or prohibition may result in a loss or reduced gain on such securities.

In addition, the developers of these product candidates may not complete activities on schedule or in accordance with our expectations or in compliance with applicable laws and regulations, and they also may not be able to raise additional capital to continue their discovery, development and commercialization activities, which may cause them to delay, reduce the scope of, or eliminate one or more of their clinical trials or research and development programs. If other product developers introduce and market products that are more effective, safer or less expensive than the relevant products underlying our Royalty-Related Transactions, or if such developers introduce their products prior to the competing products underlying our Royalty-Related Transactions, such products may not achieve expected commercial success and thereby result in diminished returns, or potentially reduced royalties for us, harming our results of operations. Developers of these product candidates, or their third-party contractual manufacturers, may also be unable to scale or ramp production of sufficient quantities of drug product to conduct pivotal clinical trials or other trials and studies required for regulatory approval or the desired product label, or for commercialization following regulatory approval. Any such delay or hindrance to manufacturing may result in delays in receipt of our royalties or inability of partners to pay any royalties to us, which would harm our results of operations.

Further, the developers of such products may not have sales, marketing or distribution capabilities. If no sales, marketing or distribution arrangements can be made on acceptable terms, or at all, the

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affected product may not be able to be successfully commercialized, which will result in diminished returns, or potentially a loss for us. Losses from such assets could have an adverse effect on our business, financial condition and results of operations.

While we believe that we can evaluate the likelihood of a development-stage product candidate’s approval and achieving significant sales, there can be no assurance that our assumptions will prove correct, that regulatory authorities will approve such development-stage product candidates, that such development-stage product candidates will be brought to market timely or at all, or that such products will achieve commercial success. While we may seek to mitigate the risks and liabilities of such transactions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are not disclosed to us, or that we inadequately assess.

Information available to us about the biopharmaceutical products underlying our investments may be limited and therefore our ability to analyze each product and its potential future cash flow may be similarly limited.

We may have limited information concerning the products generating the royalties we are evaluating for acquisition or financing, which could prevent us from achieving the expected benefits of our investments. The information we have regarding products following our acquisition or investment may even be limited to the information that is available in the public domain. Therefore, there may be material information that relates to such products that we would like to know but do not have and may not be able to obtain. For example, we do not always know the results of studies conducted by marketers of the products or others or the nature or amount of any complaints from doctors or users of such products. As a result, assets that we acquire or that underlie our investments may under-perform relative to the price paid or the resources committed by us. In addition, the market data that we obtain independently may also prove to be incomplete or incorrect. Due to the information asymmetry, we may also place undue emphasis on certain facts or data over others, which could result in unfavorable terms or a loss of part or all of our investment. As a result of these and other factors, the actual cash flow from a royalty may be significantly lower than our estimates, which could result in increased costs, lowered royalty income, ineffective deployment of capital, exit costs or diminished competitive position or reputation. In addition, our investments involve a number of risks and financial, accounting, strategic, managerial and operational challenges, which could adversely affect our consolidated results of operations and financial condition. While we seek to mitigate these risks through due diligence, among other things, these or other risk-mitigating provisions we put in place may not be sufficient to address these liabilities and contingencies and involve credit and execution risks associated with successfully seeking recourse from a biopharmaceutical company or other third-party.

Our ability to maintain our reputation is critical to the success of our business, and the failure to do so may adversely affect our business and the value of our securities.

We rely, in part, on our reputation to attract new partners and expand our network in the biopharmaceutical industry. Damage to our reputation could undermine the confidence of our current and potential partners in our ability to acquire or investment in desirable assets and therefore harm our ability to effect transactions. Our actual or perceived failure to address various issues could give rise to reputational risk that could cause harm to us and our business prospects. These issues include, but are not limited to, our success in executing transactions with new partners; our ability to collaborate efficiently with new partners in the diligence and execution process; proper handling of confidential information relating to existing and potential partners; partner and other third-party fraud; illegal or fraudulent sales practices by marketers; ethical issues; and appropriately addressing potential conflicts of interest. Maintenance of our reputation depends not only on our success in controlling and mitigating the various risks described in this prospectus, but also on our success in identifying and appropriately addressing issues that may arise in the areas described above. If we fail to maintain our reputation for any reason, our business and the value of our securities could be adversely affected.

Unsuccessful attempts to acquire new royalties or engage in new investments could result in significant costs and negatively affect our reputation and subsequent attempts to locate and acquire or investment in other assets.

The investigation and diligence of each specific target royalty and the negotiation, drafting and execution of relevant agreements, disclosure and other documents requires substantial management

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time and attention and results in substantial costs. If a decision is made not to complete a specific acquisition or financing, the costs incurred for the proposed transaction may not be recoverable from a third party. Furthermore, even if an agreement is reached relating to a specific target asset, we may fail to consummate the acquisition or financing for any number of reasons, including, in the case of an acquisition of a royalty through a business combination with a public company, approval by the target company’s public stockholders. Multiple unsuccessful attempts to acquire new royalties could hurt our reputation, result in significant costs, hinder our ability to raise capital in the future and waste the Manager’s time. The opportunity cost of diverting management and financial resources could negatively affect our ability to locate and acquire or invest in other assets.

Misuse of confidential information relating to our partners, potential partners or other counterparties by employees or advisors could harm our reputation and subject us to liability.

As part of our diligence process for potential acquisitions or financing, we and employees of the Manager receive confidential information regarding biopharmaceutical companies and their products or product candidates. Although we have policies and procedures in place to avoid misuse of such confidential information, there can be no assurance that such policies and procedures will prevent misuse of confidential information. Further, certain of our advisors also receive confidential information for potential acquisitions or financings, and we have limited to no control over their handling and use of such information. Misuse of confidential information by the Manager’s employees or by our advisors could harm our reputation, as well as cause us to violate agreements and expose us to liability, both of which in turn could negatively affect our ability to acquire or investment in assets in the future and continue to grow our business.

We cannot guarantee that we will continue our current deployment strategy or that we will deploy expected amounts of capital during any given period.

We cannot guarantee that we will deploy capital in the amounts we expect or intend during any given period. If we do not identify assets that meet our criteria or we determine that a previously identified target does not meet our diligence requirements, or if we are unable to successfully identify assets or consummate Royalty-Related Transactions with respect to such assets, we may deploy less capital or not deploy any capital at all. Failure to deploy sufficient capital could adversely affect the growth of our business through additional Royalty-Related Transactions, which would adversely affect our business, financial condition and results of operations. In addition, historical capital deployment amounts, rates and targets for existing partners may not be indicative of our actual plan or strategy in the future, and we may shift our deployment strategy, including targeted verticals within the biopharmaceutical industry, at any time. If we deviate from historical deployment amounts, rates, or targets, or shift our deployment strategy, there can be no assurance that we will be able to achieve historical or planned returns, which may harm our business and growth. Although our aggregate returns historically in the biopharmaceutical sector have been in the mid-teens on a gross basis, we have invested in a limited number of assets outside our core focus, which in the aggregate have generated negative returns. These non-core assets were all either medical technology, diagnostics or equity investments. Nevertheless, if we are unable to identify and acquire assets in our core focus, we may encounter difficulty in replicating our success in our core focus with regard to assets outside our core focus in biopharmaceuticals.

Our results of operations have in the past varied from quarter to quarter and may not be indicative of our future results or long-term prospects, including due to our planned change in accounting method following this offering.

Our results of operations are subject to fluctuation and have historically varied from quarter to quarter. We expect our quarterly results to continue to fluctuate due to a number of factors, including sales of products from which we generate royalties, our ability to identify and acquire or investment in new assets, changes in the effective interest rate on our portfolio assets under GAAP and the recognition of provisions and resulting impairment of our royalty assets. In addition, prior results of operations may include assets that we no longer own or from which we are no longer entitled to receive royalties.

Following this offering, we will begin preparing our consolidated financial statements and reporting as an operating company, and expect to measure the majority of our financial assets using the amortized

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cost accounting methodology. Our combined financial statements included elsewhere in this prospectus have been prepared on an investment company basis. This change in accounting method may impair comparability of our financial results following this offering versus our historical results for periods prior to this offering. In particular, our historical method of accounting may result in quarterly unrealized gains or losses based on changes to our projected cash flows and related assumptions for our royalty assets, whereas our new method of accounting following this offering results in provisions to be recognized upon changes in commercial performance of a product and the projected duration. Therefore, our financial results in any one quarter or any other period may not be indicative of our future financial performance.

Following this offering, we will begin preparing our consolidated financial statements and reporting as an operating company. We are currently evaluating each of our financial assets to determine the measurement basis and expect that we will carry the majority of them using amortized cost methodology. As such, we will make assumptions regarding the projected duration for terms that are not contractually fixed. A shortened royalty term could result in a reduction in the effective interest rate, a decline in income from royalties, significant reductions in royalty payments compared to expectations, or a permanent impairment.

Following this offering, in accordance with GAAP, we expect we will classify most royalty assets and notes that we acquire as financial assets that are measured with an effective interest rate using the amortized cost method described in ASC 835-30. The effective interest rate is calculated by forecasting the expected cash flows to be received over the life of the asset relative to the initial invested amount, net of any purchased receivables. A critical component of such forecast is our assumptions regarding duration of the royalty.

The projected duration is important for purposes of accurately measuring interest income over the life of a royalty. In making assumptions around the projected duration for terms that are not contractually fixed, we consider the strength of existing patent protection, expected entry of generics, geographical exclusivity periods and potential patent term extensions tied to the underlying product.

The duration of a royalty usually varies on a country-by-country basis and can be based on a number of factors, such as patent expiration dates, regulatory exclusivity, years from first commercial sale of the patent-protected product, the entry of competing generic or biosimilar products, or other terms set out in the contracts governing the royalty. It is common for royalty durations to expire earlier or later than anticipated due to unforeseen positive or negative developments over time, including with respect to the granting of patents and patent term extensions, the invalidation of patents, litigation between the party controlling the patents and third party challengers of the patents, the ability of third parties to design around or circumvent valid patents, the granting of regulatory exclusivity periods or extensions, timing for the arrival of generic or biosimilar competitor products, changes to legal or regulatory regimes affecting intellectual property rights or the regulation of pharmaceutical products, product life cycles, and industry consolidations.

If an unexpected shortening of a royalty term were to occur, it could result in a reduction in the effective interest rate, a decline in income from royalties, a significant reduction in royalty payments compared to expectations, or a permanent impairment.

In addition, this change in accounting method will affect the comparability of our financial results following this offering versus our historical results for periods prior to this offering, which in turn may also affect the comparability of our financial statements to those of our competitors.

Our reliance on a limited number of products may have an adverse effect on our financial condition and results of operation.

While our current asset portfolio includes royalties relating to 35 marketed therapies, the top 10 products accounted for 86% of Royalty Receipts for the three months ended March 31, 2021 and 81% of our Royalty Receipts in the year ended December 31, 2020. In addition, our asset portfolio may not be fully diversified by geographic region or other criteria. Any significant deterioration in the cash flows

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from the top products in our asset portfolio could have an adverse effect on our business, financial condition and results of operations.

We face competition in acquiring assets and locating suitable assets to acquire or invest in, and as such may not be able to use the net proceeds from this offering or future offerings toward Royalty-Related Transactions.

We intend to use the net proceeds to us from this offering and the Debt Financing to pursue additional Royalty-Related Transactions and for general corporate purposes. However, there are a limited number of suitable and attractive opportunities to acquire high-quality royalties available in the market, and as such, we cannot assure you that the net proceeds from this or other future offerings will be used for Royalty-Related Transactions within a certain period of time or at all. Competition to acquire such royalties is intense and may increase. We compete with other potential acquirers for these opportunities, including companies that market the products on which royalties are paid, financial institutions and others. We have faced in the past, and may continue to face from time to time, competition from companies entering our market or targeting the middle-market royalty space. Any of these competitors may be able to access lower cost capital, may be larger than us with easier access to capital, may have better name recognition, may have relationships that provide them access to opportunities before us, or may be willing to acquire royalties for lower projected returns than we are. We also compete with other forms of financing available to biopharmaceutical companies, such as equity financing and licensing opportunities. If biopharmaceutical companies opt for financing through such other means, we may not be able to acquire additional assets or grow our business. If we fail to compete successfully against competitors or competing forms of financing, our business, results of operations, financial condition and growth could be harmed.

Until we use the net proceeds to us from this offering, we plan to invest them in short-term investments, and these investments may not yield a favorable rate of return. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results. You will not have the opportunity to influence our decisions on how we use our net proceeds from this offering. See “Use of Proceeds” for further information.

Our business relies on third parties to develop, manufacture and market products from which we expect to generate royalties, as well as to comply with applicable laws and regulations, and carry out contractual covenants and terms, the failure of which by any of these third parties may adversely affect our business, financial condition or results of operations.

Our income generation and the growth of our overall business depend on our partners, marketers and other third parties to carry out contractual covenants and terms of their agreements with us and with other parties, including using our provided capital in manners which may be specified, including to fund acquisitions and commercial operations related to certain products. If a counterparty to any of our agreements does not carry out its contractual covenants or enters into an agreement with us in bad faith, we may not derive the intended benefits from such an agreement or transaction, including the generation of Royalty Receipts. We may also be negatively affected if a counterparty defaults on or breaches an agreement with a third party and becomes subject to a contractual dispute, litigation or other proceedings. We also have limited recourse if marketers or other third parties do not comply with their contractual obligations to allocate sufficient resources to the products underlying our Royalty-Related Transactions. We may not be successful if we choose to enforce any contractual obligations through legal disputes, and we would incur legal expenses and divert management’s attention away from managing and operating our business. Our limited control over counterparties could result in reduced royalties and harm our business, financial condition and results of operations. In addition, if any of our counterparties declare bankruptcy or otherwise cease operations or wind up their business, we may be left with little or no recourse to recover any capital deployed in connection with that acquisition or transaction.

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Marketers of products underlying our Royalty-Related Transactions are outside of our control and may have interests that are different from our interests, and there can be no assurance that any such marketer or person with whom the marketer has a working relationship has adequate resources or motivation to continue to produce, market or sell the products underlying our Royalty-Related Transactions.

In the case of our royalty receivables, our cash flow consists primarily of payments supported by royalties paid by marketers, as well as revenue interests from SYNTHETIC ROYALTY™ financings. These marketers may have interests that are different from our interests. For example, these marketers may be motivated to maximize income by allocating resources to other products and, in the future, may decide to focus less attention on the products underlying our Royalty-Related Transactions or by allocating resources to develop products that do not generate royalties to us. There can be no assurance that any marketer or person with whom the marketer has a working relationship has adequate resources, access to capital sources and motivation to continue to produce, market and sell the products underlying our Royalty-Related Transactions. Aside from any limited audit rights relating to the activities of the marketers that we may have in certain circumstances pursuant to the terms of our arrangements with the licensor, we have limited oversight rights with respect to the marketers’ operations and we have limited rights allowing us to direct their operations or strategy and our agreements contain limited performance standards for their operations. Similarly, partners with which we enter into SYNTHETIC ROYALTY™ financings may have interests that are different from our interests and may be motivated to allocate resources to other products that do not generate royalties to us. The market performance of the products underlying our Royalty-Related Transactions may therefore be diminished by any number of factors relating to the marketers, which are outside of our control. Our limited information of and control over marketers could result in reduced royalties and harm our business, financial condition and results of operations.

In addition, the marketers of biopharmaceutical products are, generally, entirely responsible for the ongoing regulatory approval, commercialization, manufacturing and marketing of products. Generally, the holders of royalties on products have granted exclusive regulatory approval, commercialization, manufacturing and marketing rights to the marketers of such products. The marketers have full control over those efforts and sole discretion to determine the extent and priority of the resources they will commit to their program for a product. Accordingly, the successful commercialization of a product depends on the marketer’s efforts and is beyond our control. If a marketer does not devote adequate resources to the ongoing regulatory approval, commercialization and manufacture of a product, or if a marketer engages in illegal or otherwise unauthorized practices, the product’s sales may not generate sufficient royalties, or the product’s sales may be suspended, and consequently, could adversely affect our business, financial condition and results of operations.

The internal computer systems and cloud-based computing services used by our counterparties may fail or suffer security breaches, which could result in a significant disruption of their ability to operate their business effectively, adversely affect the cash flow generated by the related biopharmaceutical products, and adversely affect our business and operating results.

The internal computer systems and cloud-based computing services used by our counterparties and those of their current and any future collaborators and other contractors or consultants are vulnerable to damage or interruption from computer viruses, data corruption, cyber-based attacks, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in a counterparty’s operations, it could result in a disruption of their development and commercialization programs and business operations, whether due to a loss of trade secrets or other proprietary information or other similar disruptions. To the extent that any disruption or security breach were to result in a loss of, or damage to, a partner’s data or applications, or inappropriate disclosure of confidential or proprietary information, our partners’ operations may be harmed and the development and commercialization of their products, development-stage product candidates and technologies could be delayed. Such an event may reduce the amount of cash flow generated by the related biopharmaceutical products and therefore have an adverse effect on our business, financial condition and results of operations.

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License agreements relating to products may be unilaterally terminated in some instances, or disputes may arise that may affect our income.

License agreements relating to the products underlying our Royalty-Related Transactions may be terminated, which may adversely affect sales of such products and therefore the payments we receive. For example, under certain license agreements, marketers retain the right to unilaterally terminate the agreements with the licensors. When the last patent covering a product expires or is otherwise invalidated in a country, a marketer may be economically motivated to terminate its license agreement, either in whole or with respect to such country, in order to terminate its payment and other obligations. In the event of such a termination, a licensor may no longer receive all of the payments it expected to receive from the licensee and may also be unable to find another company to continue developing and commercializing the product on the same or similar terms as those under the license agreement that has been terminated.

In addition, license agreements may fail to provide significant protection for the licensor in case of the licensee’s failure to perform or in the event of disputes. License agreements that relate to the products underlying our Royalty-Related Transactions are complex, and certain provisions in such agreements may be ambiguous. The resolution of any contract interpretation disagreement that may arise could narrow what the licensor believes to be the scope of its rights to the relevant intellectual property or technology, or decrease the licensee’s financial or other obligations under the relevant agreement, any of which could in turn impact the value of our royalties. If a marketer were to default on its obligations under a license agreement, the licensor’s remedy may be limited either to terminating certain licenses related to certain countries or to generally terminate the license agreement with respect to such country. In such cases, we may not have the right to seek to enforce the rights of the licensor and we may be required to rely on the resources and willingness of the licensor to enforce its rights against the licensee.

In any of these situations, if the expected payments under the license agreements do not materialize, this could result in a significant loss to us or otherwise adversely affect our business, financial condition and results of operations.

Our debt financing business exposes us to credit risk and may subject us to restrictions for tax purposes.

We have utilized a variety of structured financing solutions in the form of loans or issuances of debt to partners. The business of lending is inherently risky, including risks that the principal of or interest on any loan will not be repaid in a timely manner or at all or that the value of any collateral supporting the loan will be insufficient to cover our outstanding exposure. Our risk management practices, including our diligence, may not adequately reduce credit risk, and we may have limited to no ability to ensure liquidity or creditworthiness of our partners. We may also have limited to no visibility into a partner’s level of liquidity or credit beyond information in the public domain. Certain of our partners have in the past, and may from time to time in the future, face disputes relating to, or restrictions on, cash amounts owed to them under commercial arrangements with other parties, over which we have no control and which could potentially result in our partners’ inability to service outstanding debt. A failure to measure and limit the credit risk associated with our debt portfolio effectively could lead to unexpected losses and have a material adverse effect on our business, financial condition and results of operations.

In addition, if one of our partners were to go bankrupt, depending on the facts and circumstances and based upon principles of equitable subordination as defined by existing case law, a bankruptcy court could subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such subordinated claim to the bankruptcy estate. The principles of equitable subordination defined by case law have generally indicated that a claim may be subordinated only if its holder is guilty of misconduct, including inappropriate managerial control over the debtor, or where the senior loan is re-characterized as an equity investment. Furthermore, if one of our partners files a bankruptcy petition or an involuntary bankruptcy petition is filed against it and such petition is not dismissed, the collection of amounts owed to us may be delayed, and, in some cases, the claims of creditors in such proceeding may have priority over our claims with the result that the amount that we would otherwise receive in connection with such partner’s liquidation may be reduced.

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Also, certain types of lending activity may create adverse U.S. federal income tax results for certain investors in the Legacy HCR Partnerships and certain Continuing Investors. The Legacy HCR Partnerships agreed to adhere to certain limitations on their lending activities to support the intended position that their activities did not give rise to such adverse tax results, which limitations Holdings LP has agreed to adhere to for a three-year period from the closing of the offering. In the event the Legacy HCR Partnerships or Holdings LP were to breach these obligations, Holdings LP could be liable to certain Continuing Investors. Additionally, these limitations could limit financing opportunities for Holdings LP and its subsidiaries, which could adversely affect our business, financial condition and results of operations.

The insolvency of a marketer could adversely affect our receipt of cash flows on the related royalties that we hold.

If a marketer were to become insolvent and seek to reorganize under Chapter 11 of Title 11 of the U.S. Code, as amended (the “Bankruptcy Code”), or liquidate under Chapter 7 of the Bankruptcy Code (or each of their foreign equivalents), such event could delay or impede the payment of the amounts due under a license agreement, pending a resolution of the insolvency proceeding. Any unpaid royalty payments due for the period prior to the filing of the bankruptcy proceeding would be unsecured claims against the marketer, which might not be paid in full or at all. While royalty payments due for periods after the filing may qualify as administrative expenses entitled to a higher priority, the actual payment of such post-filing royalty payments could be delayed for a substantial period of time and might not be in the full amount due under the license agreement. The licensor would be prevented by the automatic stay from taking any action to enforce its rights without the permission of the bankruptcy court. In addition, the marketer could elect to reject the license agreement, which would require the licensor to undertake a new effort to market the applicable product with another distributor. Such proceedings could adversely affect the ability of a payor to make payments with respect to a royalty, and could consequently adversely affect our business, financial condition and results of operations.

Sales of the products underlying our Royalty-Related Transactions are subject to uncertainty related to healthcare reimbursement policies, managed care considerations and pricing pressures.

In both the U.S. and non-U.S. markets, sales of biopharmaceutical products, and the success of such products, depends in part on the availability and extent of coverage and reimbursement from third-party payors, including government healthcare programs and private insurance plans. The availability of coverage and adequacy of reimbursement for our products by third-party payors is essential for most patients to be able to afford biopharmaceutical products. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a payor-by-payor basis. Even if a third-party payor covers a particular product, the resulting reimbursement payment rates may not be adequate. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor's determination that a procedure is safe, effective and medically necessary; appropriate for the specific patient; cost-effective; supported by peer-reviewed medical journals; included in clinical practice guidelines; and neither cosmetic, experimental, nor investigational. Even if favorable coverage and reimbursement status is attained for a biopharmaceutical product, less favorable coverage policies and reimbursement rates may be implemented for that product in the future.

In the United States, pharmaceutical product pricing is subject to enhanced government regulation, public scrutiny and calls for reforms. Some states have implemented, and other states are considering, pharmaceutical price controls or patient access constraints under their Medicaid program. There have also been recent state legislative efforts that have generally focused on increasing transparency around drug costs or limiting drug prices. In addition, the growth of large managed care organizations and prescription benefit managers, as well as the prevalence of generic substitution, has impacted price increases for prescription drugs. Continued intense public scrutiny of the price of drugs, together with government and payor dynamics, may limit the ability of producers and marketers to set or adjust the price of products based on their value. There can be no assurance that new or proposed products will be

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considered cost-effective or that adequate third-party reimbursement will be available to enable the producer or marketer of such product to maintain price levels sufficient to realize an appropriate return. Outside the United States, numerous major markets, including the EU, Japan and China, have pervasive government involvement in funding healthcare, and, in that regard, fix the pricing and reimbursement of pharmaceutical products. Consequently, in those markets, the products underlying our Royalty-Related Transactions are subject to government decision-making and budgetary actions.

These pricing pressures may have an adverse effect on certain of our current royalties and the attractiveness of future acquisitions of royalties.

Manufacturers of biopharmaceutical products may be subject to applicable fraud and abuse, including anti-kickback and false claims, transparency, health information privacy and security, and other healthcare laws. Failure to comply with such laws, may result in substantial penalties.

Manufacturers of biopharmaceutical products may be subject to broadly applicable healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which they conduct research, market, sell and distribute any product for which marketing approval is obtained. The healthcare laws include: the federal fraud and abuse laws, including the federal anti-kickback, false claims and civil monetary penalties laws; federal data privacy and security laws; and federal transparency laws related to ownership and investment interests and payments and/or other transfers of value made to or held by physicians (including doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals and, beginning in 2022, information regarding payments and transfers of value provided to other healthcare professionals during the previous year. In addition, many states have similar laws and regulations that may differ from each other and federal law in significant ways, thus complicating compliance efforts. Moreover, several states require biopharmaceutical companies to comply with the biopharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Additionally, some state and local laws require the registration of biopharmaceutical sales representatives in the jurisdiction.

If manufacturers of biopharmaceutical products are found to be in violation of any of the healthcare laws described above or any other applicable governmental laws and regulations, such manufacturers may be subject to significant civil, criminal and administrative penalties, damages, disgorgement, fines, imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and/or oversight if a corporate integrity agreement or similar agreement is executed to resolve allegations of non-compliance with these laws and the curtailment or restructuring of operations. In addition, violations of healthcare laws may also result in reputational harm, diminished profits and future earnings of the affected manufacturers of biopharmaceutical products.

The products underlying our Royalty-Related Transactions are subject to uncertainty related to the regulation of the healthcare industry.

The U.S. healthcare industry is highly regulated and subject to frequent and substantial changes. For example, the U.S. Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (the “ACA”) was enacted by Congress in March 2010 and established a major expansion of healthcare coverage, financed in part by a number of new rebates, discounts, and taxes that had a significant effect on the expenses and profitability on the companies that manufacture the products underlying our Royalty-Related Transactions. These companies and their products face uncertainty due to federal, executive, legislative and administrative healthcare reform measures, including unsuccessful attempts to repeal the ACA in its entirety.

Other U.S. federal or state legislative or regulatory action and/or policy efforts could adversely affect the healthcare industry, including, among others, additional transparency and limitations related to product pricing, review the relationship between pricing and manufacturer patient programs, general budget control actions, changes in patent laws, the importation of prescription drugs from outside the United States at prices that are regulated by governments of various foreign countries, revisions to

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reimbursement of biopharmaceutical products under government programs, restrictions on U.S. direct-to-consumer advertising or limitations on interactions with healthcare professionals. No assurances can be provided that these laws and regulations will not have an adverse effect on our business, financial condition and results of operations.

In addition, many of the products in our portfolio benefit from regulatory exclusivity. If, in an effort to regulate pricing, regulatory exclusivity is not maintained, our business, financial condition and results of operations may be adversely impacted.

The biopharmaceutical industry may be negatively affected by federal government deficit reduction policies, which could reduce the potential returns on our Royalty-Related Transactions.

In an effort to contain the U.S. federal deficit, the pharmaceutical industry could be considered a potential source of savings via legislative proposals. Government action to reduce federal spending on entitlement programs, including Medicare, Medicaid or other publicly funded or subsidized health programs, or to lower drug spending, may affect payment for the products underlying our Royalty-Related Transactions. These and any other cost controls and/or any significant additional taxes or fees that may be imposed on the biopharmaceutical industry as part of deficit reduction efforts could reduce cash flows from our Royalty-Related Transactions and therefore have an adverse effect on our business, financial condition and results of operations.

Sales of products underlying our Royalty-Related Transactions are subject to regulatory approvals and actions in the United States and foreign jurisdictions that could harm our business.

The procedures to approve biopharmaceutical products for commercialization vary among countries and can involve additional testing and time. Such procedures may include on-site inspections by regulatory authorities at clinical trial sites or manufacturing facilities, which inspections may be delayed by travel restrictions imposed in response to the COVID-19 pandemic or other pandemics. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval and many include additional risks, such as pricing approval.

There can be no assurance that any of these regulatory approvals will be granted or not be revoked or restricted in a manner that would have an adverse effect on the sales of such products and on the ability of marketers to make payments with respect to such royalties to us.

Product reliability, safety and effectiveness concerns can have significant negative impacts on sales of products underlying our Royalty-Related Transactions.

Concerns about product safety, whether raised by manufacturers, litigants, regulators or consumer advocates, and whether or not based on scientific evidence, can result in safety alerts, product recalls, governmental investigations, regulatory action on the part of the FDA (or its counterpart in other countries), private claims and lawsuits and declining sales. These circumstances can also result in damage to the manufacturer’s brand image and consumer trust in that company’s products. Product recalls could prompt government investigations and inspections, the shutdown of manufacturing facilities, continued product shortages and related sales declines and reputational damage to the manufacturer, all of which could harm royalty generation and in turn adversely affect our business, financial condition, or results of operations.

The manufacture and distribution of a biopharmaceutical product may be interrupted by regulatory agencies or supplier deficiencies.

The manufacture of products underlying our Royalty-Related Transactions is complex and highly regulated. In particular, biopharmaceutical products are manufactured in specialized facilities that require the approval of, and ongoing regulation by, the FDA in the United States and, if manufactured outside of the United States, both the FDA and non-U.S. regulatory agencies, such as the MHRA and the EMA. With respect to a product, to the extent that operational standards set by such agencies are not

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adhered to, manufacturing facilities may be closed or production interrupted until such time as any deficiencies noted by such agencies are remedied. Any such closure or interruption may interrupt, for an indefinite period of time, the manufacture and distribution of a product and therefore the cash flows from the related biopharmaceutical asset may be significantly less than expected.

In addition, manufacturers of a product may rely on third parties for selected aspects of product development, such as packaging or to supply bulk raw material used in the manufacture of such product. Licensees generally rely on a small number of key, highly specialized suppliers, manufacturers and packagers. Any interruptions, however minimal, in the operation of these manufacturing and packaging facilities could have an adverse effect on production and product sales and therefore adversely affect our business, financial condition and results of operations.

Product liability claims may diminish the returns on biopharmaceutical products.

The developer, manufacturer or marketer of a product could become subject to product liability claims. A product liability claim, regardless of its merits, could adversely affect the sales of the product and the amount of any related royalty payments, and consequently, could materially adversely affect the ability of a payor to make payments with respect to a royalty.

Although we believe that we will not bear responsibility in the event of a product liability claim against the developer, manufacturer, marketer or other seller of the product underlying our Royalty-Related Transactions, such claims could materially adversely affect our business, financial condition and results of operations due to the lower than expected cash flows from the royalty or funding arrangement.

We are typically not involved in maintaining, enforcing and defending patent rights on products underlying our Royalty-Related Transactions.

Our right to receive royalties generally depends on the existence of valid and enforceable claims of registered and/or issued patents in the United States and elsewhere in the world. The products on which we receive payments are dependent on patent protection and on the fact that the manufacturing, marketing and selling of such products do not infringe, misappropriate or otherwise violate intellectual property rights of third parties. Typically, we have limited ability to control the prosecution, maintenance, enforcement or defense of patent rights, but must rely on the willingness and ability of our partners or their marketers to do so. There can be no assurance that these third parties will vigorously prosecute, maintain, enforce or defend such rights. Even if such third parties seek to prosecute, maintain, enforce or defend such rights, they may not be successful.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has been the subject of much litigation. Furthermore, changes in patent laws or interpretation of patent laws in the United States and in other jurisdictions could increase the uncertainties surrounding the successful prosecution of patent applications and the successful enforcement or defense of issued patents by our partners, all of which could diminish the value of patent protection relating to the biopharmaceutical assets. As a result, the issuance, scope, validity, enforceability and commercial value of the patent rights of our partners and their marketers are uncertain. In addition, such third parties’ pending and future patent applications may not result in patents being issued, which protect their products, development-stage product candidates and technologies or which effectively prevent others from commercializing competitive products, development-stage product candidates and technologies. Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.

Even if the patent applications our partners and their marketers license or own do issue as patents, they may not issue in a form that will provide them with any meaningful protection, prevent competitors or other third parties from competing with them, or otherwise provide them with any competitive advantage. Competitors or other third parties may be able to circumvent patents of our partners and their marketers by developing similar or alternative products in a non-infringing manner. The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit the

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ability of our partners and their marketers from preventing others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of their products, development-stage product candidates and technologies. Typically, we do not conduct our own freedom to operate analysis and rely on marketers or developers for such analysis.

Any loss or reduction in the scope or duration of patent protection for any product underlying our Royalty-Related Transactions, or any failure to successfully prosecute, maintain, enforce or defend any patents that protect any such product may result in a decrease in the sales of such product and any associated royalties payable to us. Any such event would have an adverse effect on the ability of the payor to make payments of royalties to us or may otherwise reduce the value of our royalty interest, and could consequently materially adversely affect our business, financial condition and results of operations. In cases where our contractual arrangements with our partner permit us to do so, we could participate in patent suits brought by third parties but this could result in substantial litigation costs, divert management’s attention from our core business and there can be no assurance that such suits would be successful.

The existence of third-party patents, including claims of infringement by products underlying our Royalty-Related Transactions, may result in additional costs for the marketer and reduce or eliminate the amount of royalties paid to us.

The commercial success of a product depends, in part, on avoiding infringement, misappropriation or other violations of the intellectual property rights and proprietary technologies of others. Third-party issued patents or patent applications claiming subject matter necessary to manufacture and market a product could exist or issue in the future. Such third-party patents or patent applications may include claims directed to the mechanism of action of a product. There can be no assurance that a license would be available to marketers for such subject matter if such infringement were to exist or, if offered, would be offered on reasonable and/or commercially feasible terms. Without such a license, it may be possible for third parties to assert infringement or other intellectual property claims against the marketer of such product based on such patents or other intellectual property rights.

Even if a marketer of a product underlying our Royalty-Related Transactions was able to obtain a license, it could be non-exclusive, thereby giving its competitors and other third parties access to the same technologies. In addition, if the marketer is required to obtain a license from a third party, the marketer may, in some instances, have the right to offset the licensing and royalty payments to such third party against royalties that would be owed to our partner, which may ultimately reduce the value of our royalty interest. An adverse outcome in infringement or other intellectual property-related proceedings could subject a marketer to injunctive relief or significant liabilities to third parties, require disputed rights to be licensed from third parties or require the marketer to cease or modify its manufacturing, marketing and distribution of any affected product, any of which could reduce the amount of cash flow generated by the affected products and any associated royalties payable to us, and therefore have an adverse effect on our business, financial condition and results of operations.

Disclosure of trade secrets of marketers of products could negatively affect the competitive position of the products underlying our biopharmaceutical assets.

The marketers of the products underlying our Royalty-Related Transactions depend, in part, on trade secrets, know-how and technology, which are not protected by patents, to maintain the products’ competitive position. This information is typically protected through confidentiality agreements with parties that have access to such information, such as collaborative partners, licensors, employees and consultants. Any of these parties could breach the agreements and disclose the confidential information or competitors might independently develop or learn of the information in some other way, which could harm the competitive position of the products and therefore reduce the amount of cash flow generated by our royalty interest.

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The ongoing coronavirus (COVID-19) pandemic, or the future outbreak of any other highly infectious or contagious diseases or global public health crisis, could materially and adversely affect our results of business, financial conditions and operations. Further, the spread of COVID-19 and government actions in response thereto have caused severe disruptions in the U.S. and global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration.

The outbreak of COVID-19 has severely affected global economic activity and caused significant volatility and negative pressure in financial markets. The impact of the pandemic has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Many experts predict that the pandemic will lead to a period of global economic slowdown or a global recession. COVID-19 or another pandemic could have material and adverse effects on us due to, among other factors:

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a general decline in business activity;

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the destabilization of the markets could negatively impact our partners in the biopharmaceutical industry and the sales of products underlying our Royalty-Related Transactions;

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difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions which could affect our or our partners’ access to capital necessary to fund business operations or address maturing liabilities on a timely basis;

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the potential negative impact on the health of our Manager’s highly qualified personnel, especially if a significant number of them are impacted;

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a deterioration in our ability to ensure business continuity during a disruption;

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interruptions, shortages, delivery delays and potential discontinuation of supply to our partners, which could (i) delay the clinical trials of the development-stage product candidates underlying our assets and result in a loss of our market share for products or development-stage product candidates underlying our Royalty-Related Transactions, if approved, and (ii) hinder our partners’ ability to timely distribute products underlying our Royalty-Related Transactions and satisfy customer demand;

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travel restrictions, shelter-in-place policies or restrictions and other disruptions, which could cause or continue to cause delays and other direct impacts at our partners’ manufacturing sites, which could impact the ability of our partners to manufacture development-stage product candidates underlying our biopharmaceutical assets and products underlying our Royalty-Related Transactions; and

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potential interruptions to our partners’ clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets, including: (i) the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns; (ii) changes in hospital or research institution policies or government regulations, which could delay or adversely impact our partners’ ability to conduct their clinical trials; and (iii) pauses to or delays of trial procedures (particularly any procedures that may be deemed non-essential), patient dosing, shipment of our partners’ development-stage product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis due to reasons related to the pandemic, each of which could cause or continue to cause a disruption or delay to the development or the approval of development-stage product candidates underlying our biopharmaceutical assets.

The COVID-19 pandemic presents material uncertainty that could adversely affect our business, financial condition, results of operations and cash flows.

We are subject to the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other anti-corruption laws, as well as export control laws, import and customs laws, trade and economic sanctions laws and other laws governing our operations.

Our and our partners’ operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act 2010 (“Bribery Act”), and

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other anti-corruption laws that apply in countries where we do business. The FCPA, the Bribery Act and these other laws generally prohibit us and the Manager’s employees and intermediaries from authorizing, promising, offering, or providing, directly or indirectly, improper or prohibited payments, or anything else of value, to government officials or other persons to obtain or retain business or gain some other business advantage. We, our partners and other counterparties operate in a number of jurisdictions that pose a high risk of potential FCPA or Bribery Act violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the FCPA, the Bribery Act or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the governments of the U.S. and the U.K., and authorities in the European Union, including applicable export control regulations, economic sanctions and embargoes on certain countries and persons, anti-money laundering laws, import and customs requirements and currency exchange regulations, collectively referred to as the “Trade Control laws”.

There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA, the Bribery Act or other legal requirements, including Trade Control laws. If we are not in compliance with the FCPA, the Bribery Act and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition and results of operations. Likewise, any investigation of any potential violations of the FCPA, the Bribery Act, other anti-corruption laws or Trade Control laws by the U.S., the U.K. or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant criminal, civil and administrative sanctions, including monetary penalties, damages, fines, disgorgement, individual imprisonment and exclusion from participation in government-funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we may be required to curtail or restructure our operations, any of which could adversely affect our ability to operate our business and our results of operations.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements.

Legal claims and proceedings could adversely impact our business.

We may be subject to a wide variety of legal claims and proceedings. Regardless of their merit, these claims can require significant time and expense to investigate and defend. Since litigation is inherently uncertain, there is no guarantee that we will be successful in defending ourselves against such claims or proceedings, or that our assessment of the materiality of these matters, including any

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reserves taken in connection therewith, will be consistent with the ultimate outcome of such matters. The resolution of, or increase in the reserves taken in connection with, one or more of these matters could have an adverse effect on our business, financial condition and results of operations.

In addition, our counterparties or their affiliates may be subject to legal claims, proceedings, investigations and other disputes with third parties not related to us. While we may not be directly involved in any such proceedings, investigations, or disputes, any adverse outcomes suffered by our counterparties or their affiliates may harm their ability to make payments on our royalty or other funding arrangements with them. Further, any such outcomes, or even the perception of wrongdoing, could harm our reputation as a party doing business with such counterparty or affiliate. Any of these outcomes could harm our business, financial condition and results of operations.

Our business is subject to a variety of U.S. and foreign laws, all of which are subject to changes that could subject us to claims or otherwise harm our business. Any change in existing regulations or their interpretation, or the regulatory climate applicable to our business or changes in tax rules or regulations or interpretation thereof related to our business, could adversely affect our ability to operate our business as well as our financial condition and results of operations.

We are subject to general business regulations and laws, as well as regulations and laws specifically governing royalties. The laws and regulations to which we are subject vary from one jurisdiction to another, and future legislative and regulatory action, court decisions or other governmental action may have a material impact on our operations and financial results. Changes in existing regulations or their interpretation, or the regulatory climate applicable to our business, the partners with whom we engage in Royalty-Related Transactions, or the products underlying our investments, could adversely affect our ability to operate our business as well as our financial condition and results of operations. Similarly, changes in tax rules or regulations or their interpretation could adversely affect our financial condition or results of operations.

Risks Relating to Our Organization and Structure

We are a holding company with no operations and will rely on Holdings LP and its subsidiaries to provide us with the funds necessary to meet our financial obligations and to pay dividends.

We are a holding company with no material direct operations. Our principal asset is the controlling equity interest in Holdings LP. As a result, we will depend on distributions from Holdings LP to generate the funds necessary to meet our financial obligations and to pay dividends on our Class A common stock. Our subsidiaries are legally distinct from us and may be prohibited or restricted from distributing or otherwise making funds available to us under certain conditions. If the cash we receive from Holdings LP and its subsidiaries pursuant to distributions is insufficient for us to fund our obligations, we may be required to raise cash through the incurrence of debt, the issuance of equity or the sale of assets to fund the payment of the dividends. However, there is no assurance that we would be able to raise cash by these means. If the ability of any of Holdings LP or its subsidiaries to make distributions or payments is materially restricted by regulatory or legal requirements, bankruptcy or insolvency, or our need to maintain our financial strength ratings, or is limited due to operating results or other factors, it could materially adversely affect our ability to pay our operating costs and other corporate expenses and we may be unable to, or our board may exercise its discretion not to, pay dividends.

We anticipate that Holdings LP will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to Holdings LP partners, including us. Accordingly, we will be required to pay income taxes on our allocable share of any net taxable income of Holdings LP. Legislation that is effective for taxable years beginning after December 31, 2017, may impute liability for adjustments to a partnership’s tax return to the partnership itself in certain circumstances, absent an election to the contrary. Holdings LP may be subject to material liabilities pursuant to this legislation and related guidance if, for example, its calculations of taxable income are incorrect. In addition, the income taxes on our allocable share of Holdings LP’s net taxable income will increase over time as

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Holdings LP Class B Units are exchanged for our Class A common stock. Such increase in our tax expenses may have a material adverse effect on our business, results of operations and financial condition.

We could bear U.S. withholding taxes if Holdings LP or its subsidiaries were considered to be engaged in a U.S. trade or business.

The Legacy HCR Partnerships historically took the position their activities were investment activities that did not give rise to income that was effectively connected to the conduct of a U.S. trade or business for U.S. federal income tax purposes, and on the basis of that position did not withhold on allocations or distributions to, or transfers of interests by, their non-U.S. partners. Holdings LP has agreed to continue the Legacy HCR Partnerships’ limitations on certain lending activity for a three-year period from the closing date of this offering in order to preserve this intended tax position. If the U.S. Internal Revenue Service (“IRS”) were to successfully challenge that position, Holdings LP or its subsidiaries could be subject to liability for failure to withhold in respect of their non-U.S. partners. In addition, after the Reorganization Transactions, if non-U.S. persons were to acquire and hold or dispose of interests in Holdings LP (including pursuant to exchanges) and Holdings LP were deemed to be engaged in a U.S. trade or business, we could be liable for failure to withhold applicable withholding taxes.

We have no employees and will be entirely dependent upon the Manager for all the services we require.

Because we are “externally managed”, we will not employ our own personnel, but will instead depend upon the Manager, its executive officers and its employees for virtually all of the services we require. The Manager selects and manages the acquisition of royalties and similar payment streams that meet our investment criteria and provides all of our other administrative services. Accordingly, our success is largely dependent upon the expertise and services of the executive officers and other personnel provided to us through the Manager. The Management Agreements have an initial term of ten years, after which they can be renewed for an additional term of three years, unless either we or the Manager provide notice of non-renewal 180 days prior to the expiration of the initial term or renewal term. The Manager may not be removed during the initial or any renewal term without cause. While our agreements with the Manager require its executives to devote substantially all of their time to managing us and any legacy vehicles related to HCR or Healthcare Royalty, Inc. unless otherwise approved by the Company’s board of directors, such resources may prove to be inadequate to meet our needs.

Our Manager will rely on a services agreement with a third party.

Our Manager is not yet established, and in connection with this offering, it will enter into an agreement for services with one of the owners of the Legacy Manager. Pursuant to such agreement, the counterparty will provide the Manager with services, including information technology, benefits, payroll, office space and accounts payable services, for a specified period of time. We will also have limited recourse if the counterparty does not comply with its contractual obligations under the services agreement. Further, at the end of the term of the services agreement, the Manager will need to perform the functions covered by such agreement or hire third parties to perform these functions on its behalf, and these costs may differ significantly from the comparable expenses the Manager has incurred in the past. We cannot assure you how long we will be reliant upon the services of the counterparty. Failure of the counterparty to carry out its contractual obligations may adversely affect us, the Manager, and our business and results of operations.

The success of our business depends upon key employees and members of the Manager’s management team.

We depend on the expertise, skill and network of business contacts of key employees and members of the Manager’s management team who evaluate, negotiate, structure, execute, monitor and service our assets. Our future success depends to a significant extent on the continued service and coordination of such employees and members of the Manager’s management team, particularly Mr. Futch.

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The departure of any of these individuals or competing demands on their time in the future could affect our ability to achieve our business objectives, which could harm our business, financial condition or results of operations.

Key employees and members of the Manager’s management team have relationships with participants in the biopharmaceutical industry in key biopharmaceutical centers globally, which we rely upon to source potential opportunities. If these individuals fail to maintain such relationships, or to develop new relationships with other sources, or if we or any of these individuals fails to maintain sufficient presence or contacts in any key geographic region, we will not be able to grow our asset portfolio. In addition, we can offer no assurance that these relationships, even if maintained, will generate opportunities for us in the future, which could harm our business and results of operations.

There can be no assurance that the policies and procedures we have established to mitigate conflicts of interest will be effective in doing so.

Pursuant to the Management Agreements, the Manager cannot manage another entity that invests in or acquires royalties other than any legacy vehicle related to HCR or Healthcare Royalty, Inc. Such legacy vehicles consist of two funds with an aggregate net asset value of approximately $121 million as of March 31, 2021. Such funds will not be included in the Reorganization Transactions and will not become part of our business upon completion of this offering primarily because such funds have a large number of limited partners and the inclusion of such limited partners as Continuing LP Investors would subject Holdings LP and the limited partners thereof to adverse tax consequences as a publicly traded partnership. Such legacy vehicles will not make any new investments. Every named executive of our Manager will be subject to non-compete agreements during and following termination of their employment with the Manager for any reason. In addition, executives of the Manager must devote substantially all of their business time to managing us and any legacy vehicle related to HCR or Healthcare Royalty, Inc., unless otherwise approved by the Board. Despite this, the ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreements, may reduce the amount of time our Manager, its officers or other employees spend managing us. In addition, the structure of our Manager’s compensation arrangements may have unintended consequences for us. Holdings LP has agreed to pay our Manager the Operating and Personnel Payment, a portion of which is based on our Royalty Receipts. Consequently, the Manager may be incentivized to have us make investments regardless of our expected gain on such investments, which may not align with our or our stockholders’ long-term interests.

The equity performance awards payable to an affiliate of the Manager may create incentives that are not fully aligned with the interests of our stockholders.

An affiliate of the Manager is entitled to equity performance awards based on our performance as measured by our Net Economic Profit, as discussed in “The Manager — Equity Performance Awards”. The right to equity performance awards may create an incentive for the Manager to make riskier or more speculative asset acquisitions or investments than would be the case absent such equity performance awards. In addition, the Manager may cause us to incur more debt or otherwise use more leverage in connection with asset acquisitions or financings, as generally the use of leverage can increase the rate of return on an investment and therefore our profits. This equity performance awards structure may encourage the Manager to cause us to borrow money to finance additional asset acquisitions or investments or to maintain leverage which poses higher risks for our business when it would otherwise not be appropriate to use such leverage. Under certain circumstances, the use of borrowed money may increase the likelihood of default, which would disfavor our stockholders. In addition, there is no correlation between our profits and the obligation of our board of directors to pay dividends to stockholders. Consequently, you may receive limited or no dividends while an affiliate of the Manager remains entitled to equity performance awards based on our Net Economic Profit. In addition, even though Equity Performance Awards are payable on a portfolio-by-portfolio basis (with portfolios comprised of investments made during sequential two-year periods), Equity Performance Awards may nevertheless be payable to affiliates of the Manager when our overall portfolio of investments is not performing as well as the individual portfolios that are used as the basis for measuring the Equity Performance Awards. See “The Manager — Equity Performance Awards” for further information.

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The Manager may be the subject of a change of control resulting in a disruption in our operations that could adversely affect our business, financial condition and results of operations.

There could be a change of control of the Manager and, in such a case, the new controlling party may have a different philosophy, employ advisory professionals who are less experienced, be unsuccessful in identifying asset acquisition or investment opportunities or have a track record that is not as successful as that of the Manager prior to such a change of control. If the foregoing were to occur, we could experience difficulty in making new asset acquisitions or investments, and the value of our existing assets, our business, results of operations and financial condition could materially suffer.

The Manager’s liability is limited under the Management Agreements, and we have agreed to indemnify the Manager against certain liabilities. As a result, we could experience unfavorable operating results or incur losses for which the Manager would not be liable.

Pursuant to the Management Agreements, the Manager will not assume any responsibility other than to render the services called for thereunder. Under the terms of the Management Agreements, the Manager and its affiliates and their respective officers, directors, stockholders, members, employees, agents and partners, and any other person who is entitled to indemnification (each, an “Indemnitee”) will not be liable to us, any subsidiary of ours, our directors, our stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the Management Agreement, except those resulting from acts constituting fraud, bad faith, willful misconduct, gross negligence (as such concept is interpreted under the laws of the State of Delaware) and a material breach of the Management Agreements that is not cured in accordance with its terms or a violation of applicable securities laws.

In addition, to the fullest extent permitted by law, we will agree to indemnify the Indemnitees from and against any and all claims, liabilities, damages, losses, penalties, actions, judgments, costs and expenses (including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or defending against any claim or alleged claim) of any nature whatsoever, known or unknown, liquidated or unliquidated that are incurred by any Indemnitee or to which such Indemnitee may be subject by reason of its activities on our behalf or any of its subsidiaries to the extent that such Indemnitee’s conduct did not constitute fraud, bad faith, willful misconduct, gross negligence (as such concept is interpreted under the laws of the State of Delaware), material breach of the Management Agreements that is not cured in accordance with the terms of the Management Agreements or a violation of applicable securities laws. As a result, we could experience unfavorable operating results or incur losses for which the Manager would not be liable.

Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as the change of control provisions of the Management Agreements, could make a merger, tender offer or proxy contest difficult, thereby depressing the market price of our Class A common stock.

Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make the acquisition of our company more difficult, including the following:

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our stockholders will only be able to take action at a meeting of stockholders and will not be able to take action by written consent for any matter;

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our certificate of incorporation will not provide for cumulative voting;

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vacancies on our board of directors will be able to be filled only by our board of directors and not by stockholders;

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a special meeting of our stockholders may only be called by the chairperson of our board of directors, our Chief Executive Officer or a majority of our board of directors;

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certain litigation against us can only be brought in Delaware;

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our certificate of incorporation will authorize undesignated preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders; and

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advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

Furthermore, the Manager would no longer be bound by the non-competition covenants in the Management Agreements if there is (i) a sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of the Company’s assets, (ii) a merger or consolidation of the Company with or into any other Person or any other transaction or a series of related transactions, the result of which is that a third party (or a group of third parties) that is not an Affiliate of the Company or its Stockholders immediately prior to such transaction acquires or holds capital stock of the Company representing a majority of the Company’s outstanding voting power immediately following such transaction or (iii) a change in the composition of the Company’s board of directors as a result of which the majority of the members of the Company’s board of directors cease to be Continuing Directors. For more information about the change in control provisions of the Management Agreements, see “The Manager — Management Agreements — Duration and Termination” below. These provisions could deter a third party from seeking to acquire some or all of our shares.

These provisions, alone or together, could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.

We may be considered a “controlled company” within the meaning of Nasdaq’s listing standards and, as a result, may qualify for, and may rely on, exemptions from certain corporate governance requirements.

Upon the completion of this offering, the Continuing Investor Partnership will beneficially own securities constituting approximately 78.2% of the combined voting power of our outstanding shares of Class A common stock and Class B common stock. Because the Continuing Investor Partnership will own a majority of the combined voting power of our outstanding shares of Class A common stock and Class B common stock, we may be considered a “controlled company” within the meaning of Nasdaq’s corporate governance standards. As such, for so long as we remain a controlled company, we may avail ourselves of certain exemptions from certain of Nasdaq’s corporate governance requirements, including (i) the requirement that a majority of the board of directors be independent directors, (ii) the requirement to have director nominations be made, or recommended to the full board of directors, by independent directors or by a nominations committee that is composed entirely of independent directors and (iii) the requirement to have a compensation committee that is composed entirely of independent directors.

We do not intend to rely on such controlled company exemptions following this offering. Nevertheless, in the future, we may rely on some or all of the controlled company exemptions for so long as we are considered a “controlled company” under Nasdaq’s corporate governance standards. If we elect to rely on such exemptions, our stockholders would not have the benefit of and protections associated with our compliance with some or all of Nasdaq’s corporate governance requirements, including those described above. Investors may find our Class A common stock less attractive as a result of our reliance on any of these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

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Risks Relating to Our Capital Structure

Our level of indebtedness, including in connection with the Debt Financing, may increase and reduce our financial flexibility.

Our borrowings, current and future, will require interest payments and need to be repaid or refinanced, which could require us to divert funds identified for other purposes to debt service and could create additional cash demands or impair our liquidity position and add financial risk for us. Diverting funds identified for other purposes for debt service may adversely affect our business and growth prospects. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.

Our level of indebtedness could affect our operations in several ways, including the following:

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a significant portion of our cash flows could be used to service our indebtedness;

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it may be difficult for us to satisfy our obligations with respect to our debt;

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the covenants contained in future agreements governing our outstanding indebtedness may limit our ability to borrow additional funds, dispose of assets and make certain investments, and may require us to maintain certain financial, liquidity or leverage ratios;

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our debt covenants may also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;

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a high level of debt would increase our vulnerability to general adverse economic and industry conditions;

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a high level of debt may place us at a competitive disadvantage compared to our competitors that are less leveraged and therefore may be able to take advantage of opportunities that our indebtedness would prevent us from pursuing; and

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a high level of debt may impair our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions, investments or other purposes.

If we are unable to generate sufficient cash flows to pay the interest on our debt, future working capital, borrowings or equity financing may not be available to pay or refinance such debt. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Sources of Capital — Borrowings” for further information.

Changes in the application of accounting standards issued by the U.S. Financial Accounting Standards Board or other standard-setting bodies may adversely affect our financial statements.

Our financial statements are prepared in accordance with GAAP, which are periodically revised, interpreted and/or expanded. From time to time, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies. It is possible that future accounting standards we are required to adopt may require changes to the current accounting treatment that we apply to our consolidated financial statements and may require us to make significant changes to our systems. Such changes could adversely affect our financial condition and results of operations.

Following this offering, we expect most of our royalties and notes will be classified as financial assets that are measured with an effective interest rate using the amortized cost methodology of accounting, as a result of which our GAAP results of operations can be volatile and unpredictable, which could adversely affect the trading price of our Class A common stock.

Following this offering, in accordance with GAAP, most of the royalty assets we acquire will be treated as investments in cash flow streams and will thus be classified as financial assets. Under this classification, our royalty assets and notes are treated as having a yield component that resembles loans measured at amortized cost under the effective interest accounting methodology. Under this accounting methodology, we calculate the effective interest rate on each royalty asset or note using a forecast of

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the expected cash flows to be received over the life of the royalty asset or note relative to the initial acquisition price. The yield, which is calculated at the end of each reporting period and applied prospectively, is then recognized via accretion into our income at the effective rate of return over the expected life of the royalty asset.

As a result of applying the amortized cost method of accounting, our income statement activity in respect of many of our royalties and notes can be volatile and unpredictable as a result of non-cash charges associated with the provision. Small declines in forecasts over a multi-year period can result in an immediate non-cash income statement expense recognition, even though the applicable cash inflows will not be realized for many years into the future. The financial statement impact caused by the application of the amortized cost accounting methodology could result in a negative perception of our results in a given period, which could cause the price of our Class A common stock to decline.

We may use leverage in connection with our capital deployment, which magnifies the potential for loss if the royalties acquired or the products underlying our investments do not generate sufficient income to us.

We may use borrowed funds to finance a significant portion of our deployed capital. The use of leverage creates an opportunity for an increased return but also increases the risk of loss if our assets do not generate sufficient income to us. The interest expense and other costs incurred in connection with such borrowings may not be covered by the income from our assets. In addition, leverage may inhibit our operating flexibility and reduce cash flow available for dividends to our stockholders. Historically, we have not operated with a significant amount of leverage. Accordingly, we will need to scale our organization and properly manage our growth while servicing our debt. We have limited experience as a company in a leveraged operating model, and our ability to forecast future results of operations and royalties using leverage is limited and subject to uncertainties. As a result, our historical results and growth may not be indicative of those in future periods. In addition, in connection with the Debt Financing, we have agreed not to issue additional debt securities for a period of 180 days following the pricing date of the Senior Notes, or July 15, 2021, subject to limited exceptions.

The level of our indebtedness could limit our ability to respond to changing business conditions. The various agreements relating to our borrowings may impose operating and financial restrictions on us which could affect the number and size of the royalties that we may pursue. Therefore, no assurance can be given that we will be able to take advantage of favorable conditions or opportunities as a result of any restrictive covenants under our indebtedness. There can also be no assurance that additional debt financing, either to replace or increase existing debt financing, will be available when needed or, if available, will be obtainable on terms that are commercially reasonable. Additional risks related to our leverage include:

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our royalties may be used as collateral for our borrowings;

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in the event of a default under any of our secured borrowings, one or more of our creditors or their assignees could obtain control of our royalties and, in the event of a distressed sale, these creditors could dispose of these royalties for significantly less value than we could realize for them;

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we have to comply with various financial covenants in the agreements that govern our debt that may affect our ability to achieve our business objectives;

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our ability to pay dividends to our stockholders may be restricted;

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to the extent that interest rates at which we borrow increase, our borrowing costs will increase, and our leveraging strategy will become more costly, which could lead to diminished net profits; and

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because certain of our debt utilizes LIBOR as a factor in determining the applicable interest rate, the expected discontinuation and transition away from LIBOR may increase the cost of servicing our debt, lead to higher borrowing costs and have an adverse effect on our results of operations and cash flows.

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Certain of our long-term indebtedness and Royalty Notes bear interest at variable interest rates, primarily based on LIBOR, which may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to fluctuate or cause other unanticipated consequences.

The U.K. Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR after 2021. It is unclear whether LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness as well as Royalty Notes or Structured Debt products may be adversely affected.

If we were determined to be an investment company under the U.S. Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have an adverse effect on our business, results of operations and financial condition.

We intend to conduct our business so as not to become regulated as an investment company under the U.S. Investment Company Act. An entity generally will be determined to be an investment company for purposes of the U.S. Investment Company Act and regulated thereunder if, absent an applicable exclusion, (i) it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or (ii) it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

We do not hold ourselves out as being engaged primarily, or propose to engage primarily, in the business of investing, reinvesting or trading in securities, and believe that we are not engaged primarily in the business of investing, reinvesting or trading in securities. We believe that, for U.S. Investment Company Act purposes, we are engaged primarily, through one or more of our subsidiaries, in the business of (i) purchasing or otherwise acquiring certain obligations that represent part or all of the sales price of merchandise, or (ii) making loans to manufacturers, wholesalers, and retailers of specified merchandise. Our subsidiaries that are so engaged rely on Section 3(c)(5) of the U.S. Investment Company Act, which, as according to certain SEC staff interpretations, this provision generally may be available to an issuer who invests at least 55% of its assets in “notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services”, which we refer to as the “ICA Exception Qualifying Assets”.

The Company’s determination that it may rely on Section 3(c)(5) and Section 3(c)(6) is based, in part, on the Company’s interpretation of certain interpretive positions of the SEC staff relating to those exclusions from the definition of investment company. If the SEC or its staff interpret those exclusions in a manner that is contrary to the Company’s interpretation, and in particular interprets royalty interests or certain types of royalty interests as non-ICA Exception Qualifying Assets for purposes of Section 3(c)(5) and Section 3(c)(6), or the SEC or its staff determines that some or all types of royalty receivables relating to biopharmaceutical assets are non-ICA Exception Qualifying Assets, our business will be materially and adversely affected. In particular, we could be required to register as an investment company and requirements imposed by the Investment Company Act, including limitations on our capital structure, our ability to transact business with affiliates and our ability to compensate key employees, could make it impractical for us to continue our business as currently conducted. If we cease to qualify for an exclusion from the definition of investment company, and are required to register under the Investment Company Act, it would materially and adversely affect the value of your Class A common stock and our ability to pay dividends in respect of our Class A common stock.

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Risks Relating to Our Class A Common Stock and this Offering

There may not be an active trading market for our Class A common stock, which may cause shares of our Class A common stock to trade at a discount from the initial offering price and make it difficult to sell the shares of Class A common stock that you purchase.

Prior to this offering, there has not been a public trading market for our Class A common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on Nasdaq or how liquid that market may become. It is possible that after this offering an active trading market will not develop or, if one does develop, it may not be sustained, which would make it difficult for you to sell your shares of Class A common stock at an attractive price or at all. The initial public offering price per share will be determined by agreement among us and the representative of the underwriters of this offering, and may not be indicative of the price at which our Class A common stock will trade in the public market after this offering.

The market price of our Class A common stock may decline due to the large number of shares of Class A common stock eligible for future sale.

The market price of our Class A common stock could decline as a result of sales of a large number of shares of Class A common stock in the market after this offering or the perception that such sales could occur. These sales, or the possibility that these sales could occur, also may make it more difficult for us to sell Class A common stock in the future at a time and at a price that we deem appropriate. See “Shares of Class A Common Stock Eligible for Future Sale” for further information. Subject to the lock-up restrictions described under “Underwriting”, we may issue and sell in the future additional shares of Class A common stock.

Upon the closing of this offering, except as otherwise described herein, all shares that are being offered hereby will be freely tradable without restriction, assuming they are not held by our “affiliates”, as that term is defined in Rule 144 under the Securities Act. In addition, we intend to grant registration rights to the holders of shares of Class A common stock or their transferees (including those holders of Holdings LP Class B Units exchangeable on a one-for-one basis for shares of Class A common stock pursuant to the Exchange Agreement), entitling them to the right to demand that we file a registration statement with the SEC registering the offer and sale of a specified number of shares of Class A common stock. See “Shares of Class A Common Stock Eligible for Future Sale — Registration Rights” for further information. Any shares of Class A common stock registered pursuant to the registration rights agreement will be freely tradable in the public market, subject to applicable lock-up periods, if any. In addition, in connection with this offering, we, all of our directors, our executive officers, the selling stockholder, the Manager, certain employees of the Manager, and the Continuing Investors (which hold all of our Class B common stock and Holdings LP Class B Units exchangeable for Class A common stock) have each agreed, subject to certain exceptions, to be subject to a 180-day lock-up restriction. Goldman Sachs & Co. LLC may waive these restrictions at its discretion. In addition, holders of limited partnership interests in the Continuing Investor Partnership, including Continuing Investors, are prohibited by the terms of the Continuing Investor Partnership limited partnership agreement from transferring their equity securities in us and Holdings LP for a period of one year following the closing of this offering, except with the prior written consent of the general partner of the Continuing Investor Partnership (with respect to limited partnership interests in the Continuing Investor Partnership) and the Company (with respect to our equity securities). Further, the Holdings LP Class B Units held by the Continuing LP Investors and the Continuing GP Investors upon the closing of this offering will be subject to restrictions on transfers and exchanges for periods ranging from three to five years after the closing of this offering, as more fully described in “Organizational Structure.” See “Shares of Class A Common Stock Eligible for Future Sale — Lock-up Agreements” for further information. The market price of our Class A common stock may decline significantly when each of these lock-up restrictions lapses. Notwithstanding these restrictions, between the first and third anniversaries of the closing of this offering, Continuing LP Investors may sell certain shares of Class A common stock exchanged by them, which would also result in the Continuing GP Investors receiving certain shares of Class A common stock previously held in escrow by the Continuing Investor Partnership, as more fully described in “Organizational Structure.” Future sales of our Class A common stock by our Continuing Investors in connection with these

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Crystallization Events and following the release of shares of Class A common stock from escrow may cause the market price of our Class A common stock to decline significantly.

We may be unable to pay dividends in the future.

We have never declared nor paid cash dividends on our capital stock. Holders of our Class A common stock are only entitled to receive such dividends as our board of directors may declare out of funds legally available for such payments. We are not required to declare or pay any dividends and there may be circumstances under which we may be unable to declare and pay dividends under applicable Delaware law or due to the impact of restrictive covenants in our debt agreements. In addition, we may elect not to pay dividends in the future for any reason. Any decision not to pay dividends or any reduction in the amount of our Class A common stock dividend compared to a level of dividends investors may expect could materially and adversely affect the market price of our Class A common stock.

Declarations of any future dividends will be contingent on our ability to earn sufficient profits and to remain well capitalized, including our ability to hold and generate sufficient capital to comply with the covenants in our debt agreements. Any other financing agreements that we enter into in the future may limit our ability to pay cash dividends. In the event that any other financing agreements in the future restrict our ability to pay such dividends, we may be unable to pay dividends unless we can refinance amounts outstanding under those agreements.

The market price of our Class A common stock may be volatile, which could cause the value of your investment to decline.

Even if a trading market develops, the market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our Class A common stock in spite of our operating performance. In addition, our operating results could be below the expectations of public market analysts and investors due to a number of potential factors, including:

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market conditions in the broader stock market in general, or in our industry in particular;

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variations in our quarterly operating results or dividends to stockholders;

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additions or departures of key management personnel at the Manager;

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timing and rate of capital deployment, including relative to estimates;

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changes in our product portfolio mix or acquisition strategy;

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failure to meet analysts’ earnings estimates;

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publication of research reports about our industry;

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third-party healthcare reimbursement policies and practices;

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litigation and government investigations;

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changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business;

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no results, or projected results, from marketers of products underlying our Royalty-Related Transactions;

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results from, and any delays to, the clinical trial programs of development-stage product candidates underlying our biopharmaceutical assets or other issues relating to such products, including regulatory approval or commercialization;

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adverse market reaction to any indebtedness that we may incur or securities we may issue in the future;

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changes in market valuations of similar companies or speculation in the press or investment community;

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announcements by our competitors of significant acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments;

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litigation;

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economic and political conditions or events; and

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adverse publicity about the industries in which we participate or individual scandals.

These and other factors may cause the market price of and demand for our Class A common stock to fluctuate significantly, which may limit or prevent you from reselling your Class A common stock at or above the initial public offering price.

The stock market in general has from time to time experienced extreme price and volume fluctuations, including in recent months. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against public companies. This type of litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

You will suffer dilution in the net tangible book value of the Class A common stock that you purchase.

The initial public offering price of our Class A common stock will be substantially higher than the net tangible book value as further adjusted per share issued and outstanding immediately after this offering. Investors who purchase Class A common stock in this offering will pay a price per share that substantially exceeds the net tangible book value per share of Class A common stock. If you purchase our Class A common stock in this offering, you will experience immediate and substantial dilution of $11.09 in the pro forma as adjusted net tangible book value per share as of March 31, 2021. See “Dilution” for further information.

Future offerings of debt or equity securities by us may adversely affect the market price of our Class A common stock.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of Class A common stock or offering debt or other equity securities, including commercial paper, medium-term notes, senior or subordinated notes, or debt securities convertible into equity. Future acquisitions or other investments could require substantial additional capital in excess of cash from operations. We would expect to finance the capital required for acquisitions through a combination of additional issuances of equity, corporate indebtedness, asset-backed financing and/or cash from operations. In addition, an affiliate of the Manager is entitled to equity performance awards based on our performance as measured by our Net Economic Profit, as discussed in “The Manager — Equity Performance Awards”.

Issuing additional shares of Class A common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our stockholders at the time of such issuance or reduce the market price of our Class A common stock or both. Upon liquidation, holders of debt securities and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our Class A common stock. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. Thus, holders of our Class A common stock bear the risk that our future offerings may reduce the market price of our Class A common stock and dilute their holdings in us. See “Description of Share Capital” for further information.

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Our amended and restated certificate of incorporation will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors or officers or employees of our Manager.

Our amended and restated certificate of incorporation, which will become effective immediately prior to the closing of this offering, will provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers or other employees of our Manager to us or our stockholders, (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.

Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering. However, as Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, there is uncertainty as to whether a court would enforce such provision. The provisions described in this risk factor will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States will be the sole and exclusive forum.

Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. Investors also cannot waive compliance with the federal securities laws and the rules and regulations thereunder. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors or officers or other employees of our Manager, which may discourage lawsuits against us and our directors or officers and other employees of our Manager. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under the Securities Act against us, our directors or officers or other employees of our Manager in a venue other than in the federal district courts of the United States of America. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and we cannot assure you that the provisions will be enforced by a court in those other jurisdictions. If a court were to find either exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.

General Risk Factors

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public entity, we will be subject to the reporting requirements of the Exchange Act, and of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”). The requirements of these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. After the closing

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of this offering, we will be obligated to file with the SEC annual and quarterly information and other reports that are specified in the Exchange Act, and therefore will need to have the ability to prepare financial statements that are compliant with all SEC reporting requirements on a timely basis. In addition, we will be subject to other reporting and corporate governance requirements, including certain requirements of Nasdaq and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which will impose significant compliance obligations upon us. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required, and management’s attention may be diverted from other business concerns.

We expect our compliance with the requirements under the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations thereunder to increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect these rules and regulations may make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

We are an “emerging growth company”, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. We will remain an “emerging growth company” until the earliest to occur of:

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the last day of the fiscal year during which our total annual revenue equals or exceeds $1.07 billion (subject to adjustment for inflation);

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the last day of the fiscal year following the fifth anniversary of this offering;

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the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; or

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the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

We may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

In addition, the JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. Accordingly, this election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies. When a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard, unless early adoption is permitted by the standard. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that comply with new or revised accounting pronouncements as of public company effective dates.

Investors may find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less

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active trading market for our Class A common stock and our per share trading price may be materially adversely affected and more volatile.

We have broad discretion in the use of our cash and cash equivalents, including the net proceeds from this offering, and may not use them effectively.

We will have broad discretion in the application of our cash, cash equivalents and investments, including the net proceeds from this offering, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Class A common stock. The failure by management to apply these funds effectively could result in financial losses that could have an adverse effect on our business, cause the price of our Class A common stock to decline, and interfere with our ability to acquire royalty assets or make other investments. Pending their use, we may invest our cash and cash equivalents, including the net proceeds from this offering, in a manner that does not produce income or that loses value. See the section titled “Use of Proceeds” appearing elsewhere in this prospectus.

Cyber-attacks or other failures in telecommunications or information technology systems could result in information theft, data corruption and significant disruption of our business operations.

We utilize information technology systems and networks to process, transmit and store electronic information in connection with our business activities. As use of digital technologies has increased, cyber incidents, including deliberate attacks and attempts to gain unauthorized access to computer systems and networks, have increased in frequency and sophistication. These threats pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. There can be no assurance that we will be successful in preventing cyber-attacks or mitigating their effects. Any cyber-attack or destruction or loss of data could have an adverse effect on our business. In addition, we may suffer reputational harm or face litigation as a result of cyber-attacks or other data security breaches and may incur significant additional expense to implement further data protection measures.

Operational risks may disrupt our businesses, result in losses or limit our growth.

We and the Manager rely heavily on our respective financial, accounting, information and other data processing systems and cloud computing services, as well as those of our current and future collaborators, contractors or consultants. Such systems are vulnerable to damage or interruption from computer viruses, data corruption, cyber-based attacks, unauthorized access, natural disasters, pandemics, such as the current COVID-19 pandemic, terrorism, war and telecommunication and electrical failures. If any of these events occur and such systems do not operate properly or are disabled or if there is any unauthorized disclosure of data, whether as a result of tampering, a breach of network security systems, a cyber-incident or attack or otherwise, we could suffer substantial financial loss, increased costs, a disruption of our business, loss of trade secrets or other proprietary information, liability to us, regulatory intervention or reputational damage.

Furthermore, federal, state and international laws and regulations relating to data privacy and protection, such as the European Union’s General Data Protection Regulation (“GDPR”), which took effect in May 2018, and the California Consumer Privacy Act (“CCPA”), which took effect in January 2020, can expose us to enforcement actions and investigations by regulatory authorities, and potentially result in regulatory penalties and significant legal liability, if our information technology security efforts or data privacy and protection compliance efforts fail. In addition, we operate a business that is dependent on information systems and technology. Our information systems and technology and that of the Manager may not continue to be able to accommodate our growth, and the cost of maintaining such systems may increase from its current level. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have an adverse effect on our business, financial condition and results of operations.

A disaster or a disruption in the public infrastructure that supports our business, including a disruption involving electronic communications or other services used by us or third parties with whom we conduct business, could affect our ability to continue to operate our business without interruption. Our

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disaster recovery programs and those of the Manager may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.

In addition, sustaining our growth may require us or the Manager to commit additional management, operational and financial resources to identify new professionals to join the team and to maintain appropriate operational and financial systems to adequately support expansion. Due to the fact that the market for hiring talented professionals is competitive, we may not be able to grow at the pace we desire.

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our Class A common stock, the trading price and trading volume of our Class A common stock could decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrades our Class A common stock or publishes inaccurate or unfavorable research about our business, the market price of our Class A common stock may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price or trading volume of our Class A common stock to decline and our Class A common stock to be less liquid.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties, some of which cannot be predicted or quantified. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may”, “might”, “will”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue”, or the negative of these words or other similar terms or expressions. In particular, information appearing under “Business”, “Risk Factors”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” includes forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

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the ability of the Manager to identify suitable candidates for us to acquire or finance that meet our asset selection criteria;

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uncertainties related to the acquisition of interests in development-stage biopharmaceutical product candidates and our strategy to add development-stage product candidates and late stage funding opportunities to our product portfolio;

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demand by the biopharmaceutical industry for royalty financing;

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the assumptions underlying our business model;

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our ability to successfully execute our Royalty-Related Transaction strategy;

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our ability to deploy capital at our projected rates and amounts;

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our ability to leverage our competitive strengths;

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our ability to compete effectively with existing competitors and new market entrants;

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our ability to effectively manage our growth;

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the growth rates of the biopharmaceutical industry;

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actual and potential conflicts of interest with the Manager and its affiliates;

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the ability of the Manager or its affiliates, as well as our ability, to attract and retain highly talented professionals;

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the effect of changes to tax legislation and our tax position; and

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our expected use of proceeds from this offering.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus. Actual events or results may differ from those expressed in forward-looking statements. Each of our forward-looking statements are subject to the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this prospectus. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

Although we believe the expectations reflected in the forward-looking statements are reasonable, any of those expectations could prove to be inaccurate, and as a result, the forward-looking statements based on those expectations also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus should not be regarded as a representation by us that our plans and business objectives will be achieved. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the

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ORGANIZATIONAL STRUCTURE

Overview

This offering is being conducted through what is commonly referred to as an “Up-C” structure, which is often used by partnerships and limited liability companies when they decide to undertake an initial public offering. We are a holding company, and upon the closing of this offering, our principal asset will be a direct or indirect 100% interest in the Class A Units of Holdings LP, a limited partnership organized under the laws of the State of Delaware.

In connection with the Reorganization Merger, which is expected to be consummated immediately prior to the closing of this offering, investors who invested in HCR through the Legacy HCR Partnerships will exchange their limited partnership interests in the Legacy HCR Partnerships for limited partnership interests in the Continuing Investor Partnership. Upon the closing of this offering, we will own all of the outstanding Holdings LP Class A Units and the Continuing Investor Partnership will own, all of the outstanding Holdings LP Class B Units. As a result of the Reorganization Transactions, Holdings LP and its subsidiaries will own 100% of the assets of HCR.

Ownership Structure

The diagram below depicts our organizational structure immediately following this offering and the consummation of the Reorganization Transactions. The diagram is provided for illustrative purposes only and does not represent all legal entities affiliated with our organizational structure.

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Upon the closing of this offering and the Reorganization Buyback Transaction:

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Our Class A common stock will be held as follows:

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46,875,000 shares (or 53,906,250 shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock) by public investors; and

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additional shares by the Continuing Investors upon conversion following this offering (which shares will be held in escrow upon the closing of this offering as described in this section).

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Our Class B common stock (together with the same number of Holdings LP Class B Units) will be held as follows:

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168,625,000 shares by the Continuing Investor Partnership.

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The combined voting power in the Company will be as follows:

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Capitalization of Holdings LP

Class A Units

Upon the closing of this offering, we will own directly or indirectly all of the Class A Units in Holdings LP, which will entitle us to 100% of the voting power (subject to certain exceptions as described below) in Holdings LP, we will have the right to appoint the general partner and control the business and affairs of Holdings LP, and through Holdings LP and its subsidiaries, conduct our business.

Class B Units

Upon the closing of this offering, the Continuing Investor Partnership will own, all of the outstanding Holdings LP Class B Units. Each Class B Unit will be paired with a corresponding share of Class B common stock, which share will contain voting rights with respect to the Company, but will have no economic rights. See “Description of Capital Stock” for a more complete description of the rights of shares of Class B common stock.

Class C Special Interest

EPA Holdings, which is an affiliate of the Manager and the general partner of the Continuing Investor Partnership, will hold the Class C Special Interest in Holdings LP. The Class C Special Interest will entitle EPA Holdings to the Equity Performance Awards. EPA Holdings is owned indirectly by an affiliate of Mr. Futch, as well as certain former founders, owners, and employees of the Manager, who will be entitled to equity performance awards based on the performance of investments, determined on a portfolio-by-portfolio basis. Investments made during each two-year period will be grouped together as separate portfolios, with the first portfolio commencing on the date of this offering and ending on December 31, 2022. See “The Manager — Equity Performance Awards”.

Consolidation, Non-Controlling Interest and Distributions

We expect to include Holdings LP in our consolidated financial statements and report a non-controlling interest related to the Holdings LP Class B Units held by the Continuing Investor Partnership and the Class C Special Interest in Holdings LP.

Holders of the Holdings LP Class A Units and Holdings LP Class B Units have the right to receive ratably on a pari passu basis such dividends, if any, as may be approved from time to time as we instruct the general partner thereof out of funds legally available therefor.

Exchangeability

Each Holdings LP Class B Unit, together with a corresponding share of Class B common stock, will be exchangeable on a one-for-one basis for shares of Class A common stock pursuant to the Exchange Agreement. Upon the exchange, each such Class B Unit shall automatically be cancelled, Holdings LP shall automatically issue a Class A Unit to the Company, and the Class B Units so exchanged shall thereby cease to exist.

The Continuing Investor Partnership will, upon the individual instruction of any of its partners from time to time, distribute the Holdings LP Class B Units held on behalf of such partner that are subject to such instruction which may then be exchanged for shares of our Class A common stock. Any Class A common stock received by limited partners of the Continuing Investor Partnership will be subject to restrictions on sale pursuant to the underwriters’ “lock-up” agreements and as further described under “— Ownership of Holdings LP Class B Units by Continuing Investor Partnership — Additional Transfer Restrictions” below.

These exchanges are expected to result in increases in the Company’s share of the tax basis (for U.S. federal income tax purposes) of the assets of Holdings LP. Increases in the Company’s share of the tax basis of the assets of Holdings LP may increase (for tax purposes) the depreciation and amortization deductions available to the Company, and, therefore, may reduce the amount of tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the validity of that tax basis, and a court could sustain such a challenge. This increase in tax basis

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may also decrease gains (or increase losses) on future dispositions of certain assets to the extent the increase in tax basis is allocated to those assets.

Voting Rights

While the Holdings LP Class B Units and the Holdings Class C Special Interest are generally non-voting, the Holdings LP partnership agreement provides that the amendment of certain provisions of the Holdings LP partnership agreement that would alter or change the powers, preferences or special rights of the Holdings LP Class B Units or the Holdings LP Class C Special Interest so as to affect them adversely must be approved by a majority of the votes entitled to be cast by the holders of the shares affected by the amendment, voting as a single class, or as otherwise required by applicable law.

Ownership of Holdings LP Class B Units by Continuing Investor Partnership

The Holdings LP Class B Units will initially be owned by the Continuing Investor Partnership.

The relative allocation of Holdings LP Class B Units to the Continuing GP Investors and the Continuing LP Investors will be determined based on their respective ownership of the Legacy HCR Partnerships as of immediately prior to the closing of this offering plus an allocation to the Continuing GP Investors in respect of carried interest and performance fees in the Legacy HCR Partnerships determined based on the number of shares sold by the selling stockholder in this offering and in the Reorganization Buyback Transaction and the firm value determined based upon such sales. In addition, the Continuing GP Investors shall be entitled to additional Holdings LP Class B Units as described below under “— Additional Carried Interest”.

Based on (i) our firm value using an assumed initial public offering price per share of $16.00, the midpoint of the price range set forth on the cover page of this prospectus and (ii) the number of shares offered by the selling stockholder in this offering and expected to be repurchased in the Reorganization Buyback Transaction, upon the completion of this offering, the Continuing LP Investors would be allocated 156,527,953 shares of Class B common stock and corresponding Holdings LP Class B Units (including Holdings LP Class B Units to be held in escrow as described below) and the Continuing GP Investors would be allocated 12,097,047 shares and corresponding units. The allocation information above is for illustrative purposes only. The actual allocation of Class B common stock and Holdings LP Class B Units upon the completion of this offering will depend on the actual initial public offering price and other terms of the Reorganization Transactions and this offering determined at pricing.

Additional Carried Interest

The Continuing GP Investors have agreed with the Continuing LP Investors to realize any carried interest or performance fees, as the case may be, in respect of Legacy HCR Partnership arrangements, in the form of carried interest in the Continuing Investor Partnership, which will own the Holdings LP Class B Units following the Reorganization Transactions. The carried interest formula will be based on that of each Legacy HCR Partnership, if applicable, and will only apply to Continuing LP Investors that were subject to a carried interest or performance fee arrangement with the applicable Continuing GP Investor of the relevant Legacy HCR Partnership. A portion of such carried interest will be crystalized at the time of the Reorganization Buyback Transaction and this offering, as discussed above. Such carried interest crystalization will result in Continuing GP Investors indirectly receiving Holdings LP Class B Units through increased ownership in the Continuing Investor Partnership with a corresponding decrease in the ownership of Holdings LP Class B Units by applicable Continuing LP Investors through decreased ownership in the Continuing Investor Partnership. In addition, the Continuing GP Investors have agreed to crystallize their carried interest or performance fees at the time of each Crystallization Event. However, the Continuing GP Investors may indirectly derive economic value from each Crystallization Event through their control over or ownership of certain of the Continuing LP Investors.

As discussed above, Continuing LP Investors that are subject to such carry arrangements have agreed that if they exchange their Holdings LP Class B Units for shares of our Class A common stock, a portion of such shares of Class A common stock will be held in escrow until the third anniversary of the completion of this offering in order to implement the agreed upon arrangements with the Continuing

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GP Investors. In such event, rather than receiving its additional carried interest through increased ownership of the Continuing Investor Partnership, the applicable Continuing GP Investor will receive its additional carried interest through the release of such Escrowed Class A Common Stock.

Such releases of Escrowed Class A Common Stock (or Holdings LP Class B Units to the extent such Continuing LP Investor has not converted such Holdings LP Class B Units) shall occur (x) at the end of each fiscal quarter during the period beginning on the first anniversary of the closing of this offering and ending on the third anniversary of this offering (the “Quarterly Carry Period”) and (y) at the time of and in connection with any secondary sales of shares by Continuing LP Investors following this offering. The number of Holdings LP Class B Units or Escrowed Class A Common Stock released from escrow to the Continuing GP Investors (the “Additional Carry Shares”) shall be determined during each Quarterly Carry Period based upon the volume weighted average price of our Class A common stock during such period (the “Quarterly VWAP”) and at the net price of shares in any such secondary offering prior to the first anniversary of this offering.

If you assume that all of the Continuing Investors exchanged their Holdings LP Class B Units for shares of our Class A common stock, the total number of Escrowed Class A Common Stock to satisfy the additional carried interest arrangements is 31,909,702 which represents the maximum carried interest that could be earned by the Continuing GP Investors based on a firm value determined with reference to a share price of our Class A common stock that is 1.5 times the initial public offering price (and assuming the share price in connection with any secondary sales of shares by Continuing LP Investors following this offering is 1.5 times the initial public offering price, which is the cap on the price per share used to calculate the firm value). The effect of the additional carried interest arrangement will be to transfer from the Continuing LP Investors to the Continuing GP Investors either limited partnership interests in the Continuing Investor Partnership exchangeable for, or shares of, Escrowed Class A Common Stock, of up to 31,909,702 shares of Class A common stock, or up to 14.8% of the total outstanding shares of Class A common stock of the Company following completion of the offering, calculated on a fully diluted basis (based on the assumptions in the foregoing sentence).

The additional carried interest arrangements only affect the Continuing Investors, through their ownership in the Continuing Investor Partnership or of Escrowed Class A Common Stock, and does not affect the number of outstanding shares of Class A common stock (including Class A common stock underlying outstanding Class B Units held by the Continuing Investor Partnership upon the closing of this offering) or have a dilutive effect on investors that purchase shares of Class A common stock in this offering. The timing of release of Class A common stock from escrow to the Continuing Investors in connection with crystallization events, or the amount of Class A common stock that may be released per event or at the end of each Quarterly Period, or that may be exchanged by Continuing Investors from time to time, will fluctuate and depend in part on the amount of secondary sales made by the Continuing LP Investors during the Quarterly Periods and the price per share in such sales or the volume-weighted average price during such Quarterly Period.

Based on the midpoint of the price range set forth on the cover page of this prospectus, and assuming that all of the Continuing Investors exchanged their Holdings LP Class B Units for shares of our Class A common stock to satisfy the additional carried interest obligations described above were converted to shares of Class A common stock, upon the closing of this offering, there would be 168,625,000 shares of Escrowed Class A Common Stock. The table below sets forth the number of shares of Class A common stock (assuming all of the Continuing GP Investors exchange their Holdings LP Class B Units at the time of the offering) issuable to the Continuing GP Investors at the time of closing of this offering (based on the number of shares of Class A common stock offered by the selling stockholder and the Reorganization Buyback Transaction). In addition, the table sets forth the number of Additional Carry Shares that would be released from escrow to the Continuing GP Investors upon any secondary offerings of shares by the Continuing LP Investors and upon any deemed quarterly sales

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during the Quarterly Carry Period if the Quarterly VWAP (or sale price in such secondary offering) is (i) equal to the initial public offering price or (ii) 150% of the initial public offering price (the “Maximum Carry Price”). The Escrowed Class A Common Stock consist of additional shares that may be earned by the Continuing GP Investors as the Continuing LP Investors conduct secondary sales or secondary offerings. In no event will any Holdings LP Class B Units issued to the Continuing GP Investors at the time of the closing of this offering be forfeited or otherwise reduced if the Quarterly VWAP or sale price in a secondary offering is below a certain amount. The maximum number of Additional Carry Shares in a particular quarter will be released from escrow to the Continuing GP Investors if the Quarterly VWAP is at or above the Maximum Carry Price; no additional Escrowed Class A Common Stock will be released if the Quarterly VWAP exceeds the Maximum Carry Price. Any portion of the Escrowed Class A Common Stock that is not released as Additional Carry Shares shall be released from escrow to the applicable Continuing LP Investors at each Crystallization Event (and any remaining Escrowed Class A Common Stock will be released following the third anniversary or earlier if applicable trading or sales prices described above are less than the price sufficient to earn any Additional Carry Shares).

	Additional Carry Shares at IPO Price		Additional Carry Shares at Maximum Carry Price
At this offering (based on secondary offering and the Reorganization Buyback Transaction)		10,740,832		10,740,832
First Secondary Offering		2,825,408		2,388,419
Second Secondary Offering		2,825,408		2,388,419
Quarterly Period Deemed Sales		10,559,424		16,392,032
Total (assuming same Quarterly VWAP for each of the eight Quarterly Carry Periods)		26,951,072		31,909,702

Of the Additional Carry Shares set forth in the table above, current employees of the Legacy Manager (who will become employees of the Manager upon the completion of this offering) will beneficially own an aggregate of 16,554,019 or 19,776,375 shares, constituting 7.7% or 9.2% of the combined voting power of our outstanding shares of Class A common stock and Class B common stock, respectively, if the Quarterly VWAP is equal to the IPO Price or is at or above the Maximum Carry Price.

Additional Transfer Restrictions

Except for sales by the selling stockholder in this offering, the shares of our Class A common stock issuable upon exchange of Holdings LP Class B Units (the “Underlying Shares”) will not be able to be sold for one year following the closing of this offering, subject to limited exceptions. The Underlying Shares will also be subject to lock-up agreements with the underwriters for this offering for a period of 180 days following the date of this prospectus. Following the first anniversary of this offering, one-eighth of the Underlying Shares that remain unsold at the first anniversary of the closing of this offering will become freely tradeable (subject to any other lock-up agreements that remain in place and compliance with federal and state securities laws) at the beginning of each Quarterly Carry Period. In addition to the quarterly limitations described above, each of our executive officers will be permitted to transfer a maximum of 20% of the sum of the shares underlying the Additional Carry Shares and the Underlying Shares owned thereby as of the closing of this offering until the fifth anniversary of the closing of this offering, subject to the terms of the underwriters’ “lock-up” agreements entered into in connection with this offering. In addition to the quarterly limitations described above, each of the other employees of our Manager, as well as certain founders of the Existing Manager, will also only be permitted to transfer a maximum of 20% of the sum of the shares underlying the Additional Carry Shares and the Underlying Shares owned thereby as of the closing of this offering subject to the terms of the underwriters’ “lock-up” agreements entered into in connection with this offering, with such 20% limitation applying to the period ending on the third anniversary of the closing of this offering.

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of shares of our Class A common stock in this offering will be approximately $468.5 million, or approximately $522.0 million if the underwriters exercise their option to purchase additional shares of Class A common stock in full, assuming an initial public offering price of $16.00 per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the public offering price per share would increase (decrease) our net proceeds, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $29.7 million (assuming no exercise of the underwriters’ option to purchase additional shares of Class A common stock). Each 1,000,000 increase or decrease in the number of shares of Class A common stock offered in this offering would increase or decrease the net proceeds to us from this offering by approximately $15.2 million, assuming that the initial public offering price per share for the offering remains at $16.00 (the midpoint of the range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds from our sale of shares of Class A common stock to purchase newly-issued Holdings LP Class A Units directly from Holdings LP at a purchase price per unit equal to the initial public offering price per share of Class A common stock less underwriting discounts and commissions.

On July 29, 2021, Investments LP issued $650 million aggregate principal amount of the Senior Notes, with the proceeds of the issuance of Senior Notes held in escrow until the completion of this offering. In addition, prior to the completion of this offering, we expect Investments LP to enter into the $850 million Term Loan and $550 million New Credit Facility, provided that the completion of this offering will be a condition to our ability to borrow thereunder. See “Description of Indebtedness”.

Immediately following the closing of this offering, a portion of the Holdings LP Class B Units indirectly held by Continuing Investors in the Continuing Investor Partnership will be repurchased on a pro rata basis by Holdings LP at the initial public offering price per share for a total of $1.5 billion, using the proceeds from our purchase of newly issued Holdings LP Class A Units plus a portion of the proceeds from the Debt Financing. Assuming the sale by us of 31,250,000 shares of Class A common stock and the sale by the selling stockholder of 15,625,000 shares of Class A common stock, in each case at a price per share equal to the midpoint of the price range on the cover page of this prospectus, and the completion of the Debt Financing, with no amounts drawn under the New Credit Facility, Holdings LP will repurchase 93,750,000 Holdings LP Class B Units, including 348,790 Holdings LP Class B Units indirectly held by our executive officers, and 32,614,173 Holdings LP Class B Units indirectly held by other affiliates, including owners of 10% or more of outstanding shares upon completion of this offering and current equity owners of the Legacy Manager with a portion of the proceeds of the Debt Financing this offering. A $1.00 increase in the public offering price per share would decrease the number of Holdings LP Class B Units we repurchase by 5,514,706 Class B Units. A $1.00 decrease in the public offering price per share would increase the number of Holdings LP Class B Units we repurchase by 6,250,000 Class B Units. The Holdings LP Class B Units indirectly held by our executive officers repurchased in the Reorganization Buyback Transaction will not exceed the number of Holdings LP Class B Units necessary to satisfy applicable tax obligations incurred by our executive officers in connection with the Reorganization Transactions.

We intend to cause Holdings LP and its subsidiaries to use any remaining net proceeds of this offering and the Debt Financing, including the net proceeds from the issuance and sale of any of the shares of Class A common stock pursuant to an exercise of the underwriters’ option, after deducting underwriting discounts and other offering expenses, to pursue additional Royalty-Related Transactions and for other general corporate purposes, including payment of operating expenses to our Manager and other professional and administrative fees.

Pending the identification of attractive Royalty-Related Transactions in accordance with our business objectives and policies, we plan to cause Holdings LP and its subsidiaries to invest any such net proceeds from this offering primarily in cash, cash equivalents, U.S. government securities and other

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DIVIDEND POLICY

You should read the following discussion of our dividend policy in conjunction with the factors and assumptions included in this section. In addition, please read “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our business.

As a public company, we anticipate paying a quarterly dividend in an amount to be determined by our board of directors. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our financial condition and operating results, including our cash position, contractual restrictions (including under our debt arrangements), restrictions imposed by applicable laws and other factors that our board of directors may deem relevant. Immediately following this offering, we will be a holding company, and our principal asset will be our 100% ownership of Holdings LP’s Class A Units. If we decide to pay a dividend, to the extent permitted by applicable law, we will need to cause Holdings LP to make distributions to us in an amount sufficient to cover such dividend. If Holdings LP makes such distributions to us, the holders of Holdings LP Class B Units will be entitled to receive pro rata distributions.

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and capitalization as of March 31, 2021:

•

on a historical basis,

•

on a pro forma basis to give effect to the Reorganization Transactions described under “Organizational Structure” and the June 28, 2021 repayment in full of our existing credit facility; and

•

on a pro forma as adjusted basis to give further effect to the sale by us of 31,250,000 shares of Class A common stock in this offering and the sale by the selling stockholder of 15,625,000 shares of Class A common stock in this offering, in each case at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, representing the receipt of approximately $468.5 million in net proceeds to us, after deducting estimated underwriting discounts and commissions and the estimated offering expenses payable by us and giving effect to the use of such proceeds by Holdings LP for a portion of the Reorganization Buyback Transaction.

This table should be read in conjunction with “Organizational Structure”, “Use of Proceeds”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Unaudited Pro Forma Financial Information” and the historical consolidated financial statements and related notes included elsewhere in this prospectus. Cash and cash equivalents are not components of our total capitalization.

	As of March 31, 2021
	(in thousands)
	Historical			Pro Forma for the Reorganization Transactions and Debt Repayment			Pro Forma As Adjusted for the Reorganization Transactions and This Offering
Cash and cash equivalents		$	64,629		$	518,142		$	518,142
Revolving credit			493,000			493,000			493,000
Debt obligations			—			1,485,000			1,485,000
Partners’ capital			2,090,945			—			—
Class A common stock, par value $0.01 per share, 0 shares authorized; no shares issued and outstanding, on an actual basis; 500,000,000 shares authorized, no shares issued and outstanding, on a pro forma basis; 500,000,000 shares authorized; 46,875,000 shares issued and outstanding, on a pro forma as adjusted basis			—			—			469
Class B common stock, par value $0.01 per share, 0 shares authorized; no shares issued and outstanding, on an actual basis; 400,000,000 shares authorized; 215,500,000 shares issued and outstanding, on a pro forma basis; 400,000,000 shares authorized; 168,625,000 shares issued and outstanding, on a pro forma as adjusted basis			—			2,155			1,686
Additional paid-in capital			—			—			229,982
Retained earnings			—			—			—
Non-controlling interest			—			1,057,303			827,321
Total stockholders’ equity			—			1,059,458			1,059,458
Total capitalization		$	2,583,945		$	3,037,458		$	3,037,458

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Each $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share of our Class A common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $29.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by $15.2 million, assuming no change in the assumed initial public offering price of $16.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

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DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of Class A common stock and the pro forma net as adjusted tangible book value per share of Class A common stock after this offering. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the pro forma as adjusted net tangible book value per share attributable to our existing owners. Pro forma calculations account for the occurrence of the Reorganization Transactions.

Our pro forma net tangible book value as of March 31, 2021 was $1,058.4 million, or $4.91 per share. Pro forma net tangible book value represents the amount of total tangible assets less total liabilities after giving effect to the Reorganization Transactions and the proceeds from the capital call issued to the continuing partners that was used for the June 28, 2021 repayment in full of our existing credit facility, and pro forma net tangible book value per share represents pro forma net tangible book value divided by the number of shares of Class A common stock outstanding, assuming all Holdings LP Class B Units are exchanged for an equal number of shares of Class A common stock. Our pro forma as adjusted net tangible book value as of March 31, 2021 was $1,058.4 million, or $4.91 per share. Pro forma as adjusted net tangible book value equals pro forma net tangible book value as $0 additional proceeds will be received as a result of our sale of Class A common stock by us in this offering, assuming that all such net proceeds will be used by Holdings LP for a portion of the Reorganization Buyback Transaction.

The following table illustrates this dilution on a per share basis:

Assumed initial public offering price per share			$	16.00
Pro forma net tangible book value per share as of March 31, 2021	$	4.91
Increase in pro forma net tangible book value per share attributable to investors in this offering		0.00
Pro forma as adjusted net tangible book value per share after this offering				4.91
Dilution in pro forma as adjusted net tangible book value per share to investors in this offering			$	11.09

A $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share of our Class A common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, additional paid-in capital, total stockholders’ equity and total capitalization by $29.7 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares in the number of shares offered by us as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, additional paid-in capital, total stockholders’ equity and total capitalization by $15.2 million, assuming no change in the assumed initial public offering price of $16.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The following table sets forth, on a pro forma basis, as of March 31, 2021, the number of shares of Class A common stock that we will issue and the total consideration paid, or to be paid, by the purchasers of Class A common stock in this offering, and the average price per share paid, or to be paid, by existing stockholders and by the new investors, assuming all Holdings LP Class B Units are exchanged for an equal number of shares of Class A common stock, at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and offering expenses payable by us, and after giving effect to the Reorganization Buyback Transaction:

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma combined balance sheet as of March 31, 2021 and the unaudited pro forma consolidated statements of comprehensive income for the year ended December 31, 2020 and for the three months ended March 31, 2021 present our consolidated financial position and results of operations after giving effect to:

•

the Reorganization Transactions; and

•

the sale by us of 31,250,000 and the sale by selling stockholders of 15,625,000 shares of Class A common stock in this offering at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, representing the receipt of $468,512,900 in net proceeds to us after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us and giving effect to the use of such proceeds by Holdings LP for a portion of the Reorganization Buyback Transaction.

The Reorganization Transactions have been reflected in the unaudited pro forma balance sheet as of March 31, 2021. The following pro forma balance sheet as of March 31, 2021 gives pro forma effect to all other transactions identified above as if such events had occurred as of March 31, 2021. The statements of comprehensive income for the year ended December 31, 2020 and for the three months ended March 31, 2021 present consolidated results of operations to give pro forma effect to all transactions identified above as if all such events had been completed as of January 1, 2020.

The unaudited pro forma consolidated financial information has been prepared by management and is based on the historical financial statements of HCR, and its successor for financial reporting purposes, Healthcare Royalty, Inc., and their respective consolidated subsidiaries and the assumptions and adjustments described in the notes to the unaudited pro forma financial information below. The presentation of the unaudited pro forma financial information is prepared in conformity with Article 11 of Regulation S-X.

The historical financial information of HCR, Healthcare Royalty, Inc. and their respective consolidated subsidiaries has been derived from the combined financial statements and accompanying notes included elsewhere in this prospectus.

We based the pro forma adjustments on available information and on assumptions that we believe are reasonable under the circumstances in order to reflect, on a pro forma basis, the impact of the relevant transactions on the historical financial information of HCR, Healthcare Royalty, Inc. and their respective consolidated subsidiaries. Refer to the notes to the unaudited pro forma financial information below for a discussion of assumptions applied. The pro forma adjustments represent only those transactions that are directly attributable to this offering, factually supportable, and expected to have a continuing impact on our results of operations. The unaudited pro forma financial information does not purport to be indicative of our results of operations or financial position had the relevant transactions occurred on the dates assumed and does not project our results of operations or financial position for any future period or date.

For purposes of the unaudited pro forma financial information, we have assumed that we will issue 31,250,000 shares of Class A common stock and the selling stockholders will sell 15,625,000 shares of Class A common stock at a price per share equal to the midpoint of the range set forth on the cover page of this prospectus, and as a result, immediately following the closing of this offering, the ownership percentage of Healthcare Royalty, Inc. in Holdings LP will be 21.8%, the ownership percentage of the selling stockholder in Healthcare Royalty, Inc. will be 78.2%, and the net income attributable to holders of our Class A common stock will accordingly represent 21.8% of our net income, with the remainder of our net income attributable to a non-controlling interest in Holdings LP. If the underwriters’ option to purchase additional shares of Class A common stock is exercised in full, the ownership percentage represented by Holdings LP Class B Units will be 24.2%, and the net income attributable to holders of our Class A common stock will accordingly represent 24.2% of our net income. The unaudited pro forma consolidated financial information presented assumes no exercise by the

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underwriters of the option to purchase up to an additional 7,031,250 shares of Class A common stock, including 3,515,625 shares offered by us and 3,515,625 shares offered by the selling stockholder.

We will incur certain one-time costs in connection with this offering and the related Reorganization Transactions, such as accounting, tax, legal and other professional service costs, of approximately $6,487,100. Additionally, following the offering, we will incur costs associated with being a U.S. publicly traded company. Such costs will include new or increased expenses for such items as insurance, directors’ fees, accounting work, legal advice and compliance with applicable U.S. regulatory and stock exchange requirements, including costs associated with compliance with the Sarbanes-Oxley Act and periodic or current reporting obligations under the Exchange Act. No pro forma adjustments have been made to reflect such costs because they are not currently objectively determinable.

The unaudited pro forma consolidated financial statements and related notes should be read in conjunction with the information contained in “Organizational Structure”, “Use of Proceeds”, “Capitalization”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of HCR, Healthcare Royalty, Inc. and their respective consolidated subsidiaries and related notes thereto included elsewhere in this prospectus.

The amount shown for the issuance of Class A common stock in this offering is at an assumed initial public offering price of $16.00 per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

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HealthCare Royalty, Inc.

Unaudited Pro Forma Consolidated Statement of Comprehensive Income

	Three Months Ended March 31, 2021
	Historical			Pro Forma (unaudited)
	HealthCare Royalty Partners			Reorganization Transactions			Offering			HealthCare Royalty, Inc.
	($ thousands, except share-related amounts)
Investment income
Royalty income		$	65,303								$	65,303
Note interest			15,245									15,245
Paid-in-kind interest			212									212
Total investment income			80,760									80,760
Expenses
Management fees			6,759			4,603(a)						11,362
Interest expense			2,915			13,862(c)						16,777
Performance fees			2,575			—(b)						2,575
Professional fees			348									348
Investment research and other expenses			299									299
Organizational expenses			—									—
Total expenses			12,896			18,465						31,361
Management fees waived			(183)			183(a)						—
Net expenses			12,713			18,648						31,361
Net investment income			68,047			(18,648)						49,399
Net realized and unrealized gain (loss) on investments
Net realized gain (loss) on investments			(1,285)									(1,285)
Net change in unrealized gain (loss) on investments			45,010									45,010
Net realized and unrealized gain (loss) on investments			43,725									43,725
Net increase in partners’ capital resulting from operations			111,772			(18,648)						93,124
Less: Income attributable to non-controlling interest			—			(93,124)			20,256			(72,868)
Net increase in partners’ capital resulting from operations attributable to controlling interest		$	111,772		$	(111,772)		$	20,256		$	20,256
Pro forma earnings per share:
Basic											$	0.43(d)
Diluted											$	0.43(d)
Pro forma number of shares used in computing earnings per share:
Basic												46,875,000(d)
Diluted												215,500,000(d)

	Shares of Class A COMMON STOCK Purchased				Total Consideration					Average price per share
	Number		Percentage		Amount			Percentage		Average price per share

Existing stockholders		168,625,000		78.2%		$	2,090,945,233		73.6%		12.40
New investors		46,875,000		21.8%			750,000,000		26.4%		16.00
Total		215,500,000		100.0%		$	2,840,945,233		100.0%		14.20

	Page
BASIS OF PRESENTATION		ii
MARKET AND INDUSTRY DATA		iii
TRADEMARKS AND TRADE NAMES		iii
NON-GAAP FINANCIAL MEASURES		iii
PROSPECTUS SUMMARY		1
OFFERING		19
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA		23
RISK FACTORS		25
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		56
ORGANIZATIONAL STRUCTURE		58
USE OF PROCEEDS		67
DIVIDEND POLICY		69
CAPITALIZATION		70
DILUTION		72
UNAUDITED PRO FORMA FINANCIAL INFORMATION		74
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		80
BUSINESS		104
THE MANAGER		127
MANAGEMENT		131
DIRECTOR AND EXECUTIVE COMPENSATION		140
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		142
PRINCIPAL AND SELLING STOCKHOLDERS		144
DESCRIPTION OF CAPITAL STOCK		149
SHARES OF CLASS A COMMON STOCK ELIGIBLE FOR FUTURE SALE		156
MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS		158
UNDERWRITING		161
LEGAL MATTERS		169
EXPERTS		169
WHERE YOU CAN FIND MORE INFORMATION		169
INDEX TO COMBINED FINANCIAL STATEMENTS		F-1

	Year Ended December 31, 2020
	Historical			Pro Forma (unaudited)
	HealthCare Royalty Partners			Reorganization Transactions		Offering	HealthCare Royalty, Inc.
	($ thousands, except share-related amounts)
Investment income
Royalty income		$	166,467					$	166,467
Note interest			50,397						50,397
Paid-in-kind interest			11,953						11,953
Other Income			10						10
Total investment income			228,827						228,827
Expenses
Management fees			26,666		3,715(a)				30,381
Performance fees			8,531		—(b)				8,531
Interest expense			7,294		55,929(c)				63,223
Investment research and other expenses			1,767						1,767
Professional fees			1,632						1,632
Organizational expenses			119						119
Total expenses			46,010