DRI Healthcare Trust (TSE:DHT.UN) reported record second-quarter financial results, with double-digit growth in total income, cash receipts and adjusted EBITDA, while also monetizing its Ekterly royalty investment and preparing to begin receiving royalties from newly approved thyroid eye disease treatment Lumvoa.
Chief Executive Officer Ali Hedayat said total income rose 13% year over year to $50.1 million, supported by 8% growth in royalty income. Royalty income totaled $48.2 million and included a $450,000 Xenpozyme milestone payment. Excluding milestones, royalty income grew 7% from a year earlier.
Ekterly Monetization Brings $178 Million Repurchase
A central development during and after the quarter was the monetization of DRI’s Ekterly investment. In June, Chiesi Group completed its acquisition of KalVista Pharmaceuticals, which constituted a change of control under DRI’s royalty agreement. DRI subsequently exercised its put option, resulting in a net repurchase price of approximately $178 million.
Hedayat said the transaction generated an immediate realized return of 1.5 times invested capital and a high-20% internal rate of return for unitholders. Although the company initially expected payment around mid-August, Hedayat said during the question-and-answer session that the payment had been received that morning.
The disposition will reduce near-term portfolio receipts, management said, but DRI expects the earlier receipt of capital to create value through redeployment. Hedayat said the company has sufficient liquidity to consider either larger transactions or multiple deals similar in size to its recent investments, and expects deployment activity over the next 12 to 18 months to be higher than usual.
Management maintained its expectation of completing a transaction during the second half of 2026. Hedayat said that for larger transactions, the company would be more constrained by the need for immediate cash flow, while its current liquidity could support more than one transaction comparable to its investment in Viridian.
Portfolio Performance and Lumvoa Approval
Chief Investment Officer Navin Jacob said the portfolio generated more than $46 million in cash receipts during the quarter, an increase of $6.3 million, or 16%, from the second quarter of 2025. The increase included a $3.7 million rise in Ozurdex receipts tied to European sales growth, more than $2 million from Ekterly, and the Xenpozyme milestone payment.
Those gains were partly offset by a $600,000 decline in IMIDUR receipts due to lower sales volumes and a $500,000 decline in Zytiga receipts following generic entry in Europe.
Jacob highlighted continued strength in several assets:
- ORSERDU: Royalty receipts rose 29% year over year to $16.6 million, driven by sales momentum in Europe. Jacob said DRI expects to recoup its initial investment in ORSERDU-2 in the third quarter, ahead of original expectations.
- CASGEVY: The product received FDA approval for patients ages two and older with severe sickle cell disease or transfusion-dependent beta thalassemia. Vertex reported $76 million in second-quarter sales, and Jacob said the product’s launch is progressing one to two years ahead of DRI’s original expectations.
- VONJO: Cash receipts increased 11% year over year, reflecting U.S. stocking activity. Management said results were in line with its revised forecast.
- Xenpozyme: DRI recorded $3.3 million in second-quarter royalty receipts, including milestone income. Sanofi reported worldwide sales of $74 million, ahead of DRI’s expectations.
DRI also discussed Lumvoa, formerly veligrotug, which received FDA approval on June 26. The approval triggered a $75 million payment to Viridian, made in the third quarter and partly funded through DRI’s acquisition credit facility. DRI expects to begin earning royalties in the third quarter, with cash receipts collected on a one-quarter lag.
Jacob said Lumvoa is priced at parity with TEPEZZA on a per-course basis and has clinical and convenience attributes that could differentiate it in the market. He said Viridian expects six to nine months will be required to achieve broad U.S. patient access, with revenue becoming more meaningful in 2027 after a permanent J-code is expected in the first quarter of that year.
Margins Expand as Expenses Decline
Chief Financial Officer Zaheed Mawani said total expenses declined by approximately $2 million from the prior-year quarter to $40.9 million. The decrease reflected internalization synergies, including elimination of performance fees, lower compensation and reduced deal investigation, research and other operating expenses. Those savings were partially offset by higher amortization, interest expense and general and administrative costs.
Adjusted EBITDA rose 40% year over year to $42.6 million, while the adjusted EBITDA margin reached 92%, compared with 76% in the second quarter of 2025. Hedayat said the margin benefited from higher-than-expected cash receipts, which carry a high incremental margin, as well as the timing of planned reinvestments in personnel and technology.
Reported interest expense was $9.3 million, up 2.5% year over year because of transaction costs associated with financing initiatives. Excluding those costs, interest expense would have been $7.9 million, down about 6% from a year earlier, Hedayat said.
Cash receipts were $46.5 million, up 16%, and adjusted cash earnings per unit were $0.56. The trust declared a quarterly distribution of $0.11 per unit, payable Oct. 20 to unitholders of record as of Sept. 30.
Liquidity, Capital Returns and Outlook
As of June 30, DRI had $55.2 million in cash and cash equivalents, $54.7 million in royalty receivables and $520 million available under bank facilities. Mawani said the company remains positioned to meet prospective milestone commitments and invest in new assets.
During the quarter, DRI repurchased and canceled approximately 90,000 units at an average price of $11.65, totaling $1 million. Since initiating its buyback programs, the trust has repurchased and canceled 4.8 million units for $34.6 million, at an average price of $7.23 per unit.
Hedayat said DRI remains on track to deliver toward the high end of its 2026 adjusted EBITDA guidance, even after the removal of Ekterly royalty receipts. He also said the company currently has no Phase III approval risk in its portfolio, as all pre-approval assets it has held have cleared that hurdle.
Jacob said royalty financing activity remained active despite stronger biotech equity markets. DRI tracked at least eight announced royalty deals totaling approximately $1.7 billion during the second quarter, while trailing 12-month announced royalty deal value was at least $5.3 billion.
About DRI Healthcare Trust (TSE:DHT.UN)
DRI Healthcare Trust is managed by DRI Capital Inc DRI a pioneer in global pharmaceutical royalty monetization. We provide uniquely favorable exposure for investors in the biopharma industry managing a diversified portfolio of interests in medicines that have a demonstrable positive impact on the world and aiming to acquire dependable patent-protected cash flow streams derived from the sales of those important drugs while limiting the risks and costs connected to drug development. DRI has developed a disciplined strategy predicated on actively sourcing royalty streams on medically necessary products and proudly work with multiple repeat deal partners.DRI Healthcare Trust is an unincorporated open-ended trust governed by the laws of the Province of Ontario pursuant to a declaration of trust dated October 21 2020 as amended.DRI Healthcare Trusts units are listed and trade on the Toronto Stock Exchange under DHT.UN in Canadian dollars and under DHT.U in U.S.
