DRI Healthcare Trust Q4 Earnings Call Highlights

DRI Healthcare Trust (TSE:DHT.UN) used its fourth-quarter and full-year 2025 earnings call to highlight record financial performance, continued portfolio growth, and several balance sheet and capital allocation actions taken during a year the company described as one of “exceptional change.” CEO Ali Hedayat, Chief Investment Officer Navin Jacob, and CFO Zaheed Mawani also discussed the trust’s outlook for 2026 and longer-term investment and growth aspirations through 2030.

2025 highlights: deployments, internalization, and capital returns

Hedayat said the trust exceeded its five-year capital deployment goal of $1.25 billion, citing the upfront and committed deployments in the Viridian and Ekterly transactions. He characterized the deals as examples of DRI’s ability to structure “win-win solutions” for counterparties while generating returns for unitholders.

On the operational side, management emphasized the internalization of the manager as a “large and complex step,” intended to better align governance and incentives with unitholders and improve economic returns. Hedayat said early results have shown “significant gains,” and that the company feels better about the “pace and magnitude of benefits” than when the internalization was first announced. He also noted cost structure optimization contributed to the trust’s highest-ever normalized margins, and the company introduced a proprietary, data-driven risk assessment framework to evaluate risks across royalty assets, the broader market, and the balance sheet.

DRI also discussed increased use of artificial intelligence in workflows, with two dedicated team members and internal computing resources aimed at improving speed and quality of execution. The trust added to its team with the hire of Wesley Nurss as SVP and Head of Research in early January, who will lead commercial and pre-commercial diligence within the investment team.

In capital allocation, management said the trust repurchased and canceled roughly 1.4 million units in 2025, reducing unit count by nearly 3%. The trust maintained its regular $0.10 quarterly distribution during 2025 and announced it will increase to $0.11 per quarter starting in the first quarter of 2026. Hedayat said the unit repurchases and distributions together returned more than $36 million to unitholders during the year.

Financial results: record income, margins, and cash receipts

For full-year 2025, management reported total income of $198.6 million, up 6% from 2024, and said disciplined expense management and internalization synergies helped produce an Adjusted EBITDA margin of 84%. Normalized for non-recurring costs, Adjusted EBITDA margin was 88%, which management said was the highest annual margin in the trust’s history as a public company.

Jacob said the portfolio generated more than $196 million of total cash receipts for the full year, increasing by $6.5 million, or 3.4%, versus 2024. He attributed the increase to:

• Strong Orserdu sales and removal of certain deductions previously incurred on the Orserdu II transaction
• Growth from the additional Xenpozyme 2 royalty stream
• Growth in XOLAIR following launch for the food allergy indication
• First receipts in 2025 from CASGEVY and Ekterly

He said these gains were partially offset by the timing of EMPAVELI payments, weaker-than-expected OMIDRIA receipts, a non-recurring $5 million VONJO milestone received in 2024, competition and generic entry affecting Oracea and ZYTIGA, and a step-down in Rydapt’s royalty rate as it nears the end of its royalty term.

Portfolio updates: OMIDRIA impairment, Orserdu strength, and new assets

Management spent significant time on OMIDRIA, which Jacob said has been performing below expectations for several quarters due to the impact of the Merit-based Incentive Payment System (MIPS) on physician reimbursement for cataract surgeries. While management has seen some stabilization, Jacob said growth in the hospital outpatient department setting has not been material despite expectations that new Medicare reimbursement in 2025 would help drive HOPD growth. He said Rayner is taking steps to improve performance, including leveraging the sales force and renegotiating payer contracts, but DRI has taken a conservative stance that now forecasts flat sales over the next few years. That revision resulted in a $9.7 million impairment booked in Q4 2025.

On newer assets, Jacob said Vertex reported Q4 2025 CASGEVY sales of $54 million. DRI is entitled to an annual license fee for which it expects to record $5 million in Q1 2026, and it may become eligible for future annual sales-based performance fees if annual sales exceed $1 billion. Jacob said uptake has been roughly one year faster than DRI anticipated, which could make the trust eligible for one additional sales-based payment than originally modeled.

For Ekterly, Jacob said DRI began earning royalties in Q3 2025 and recorded its first cash receipt of $0.8 million in Q4 2025. He said KalVista reported Q4 2025 Ekterly sales of $35 million, translating to expected DRI cash royalties of $1.8 million in Q1 2026. Jacob added that Q4 sales imply an annual run-rate above $140 million, which is above DRI’s acquisition forecast for 2026, and said Ekterly received regulatory approvals outside the U.S. in markets including the UK, EU, Australia, Singapore, and Japan as of February 2026.

Orserdu also remained a key contributor. Jacob said Q4 2025 royalty receipts reached $19 million, up 38% year-over-year, and DRI expects approximately $22 million of Orserdu royalties in Q1 2026. He said strong sales triggered a $5 million milestone payment expected to be received in Q1 2026, bringing anticipated Orserdu cash receipts for Q1 to about $27 million. Despite the outperformance, Jacob reiterated DRI’s view that 2025 is a peak year for Orserdu due to competition from other oral SERDs and other mechanisms. He noted, however, that Menarini is running Phase III studies in settings and combinations similar to those highlighted in industry attention around the oral SERD market.

Fourth quarter details: normalization, higher EBITDA, and liquidity

Mawani reported Q4 2025 total income of $61.7 million, flat year-over-year on a reported basis. He noted Q4 2024 included a one-time $18.2 million back payment related to the Ursodiol asset, of which $15.7 million related to prior quarters; normalized for that $15.7 million item, he said Q4 2025 total income increased 35% year-over-year. Mawani also said Q4 royalty income included a $5 million milestone related to Ursodiol, to be received in Q1.

Total expenses in Q4 were $54 million, about $0.5 million lower year-over-year, driven primarily by internalization synergies including elimination of performance fees and lower compensation, partially offset by higher unit-based compensation from mark-to-market adjustments and higher other expenses. Adjusted EBITDA was $46.2 million, a 25% year-over-year increase, and Adjusted EBITDA margin rose to 91% from 83% in Q4 2024.

For the trailing 12 months ended December 31, 2025, Mawani reported royalty income of $188.9 million and total income of $198.6 million. After adjustments, he said normalized total cash receipts were $196.4 million, Adjusted EBITDA was $165 million (84% margin), and adjusted cash earnings per unit were $2.26.

As of December 31, DRI had $42.4 million of cash and cash equivalents, $59.7 million of royalties receivable, and $239 million of credit availability under its bank facilities. Mawani also detailed unit repurchases, including 1.4 million units acquired and canceled in 2025 at an average price of $9.82, and said the trust expects to renew its normal course issuer bid program into 2026.

Outlook: funded 2030 investment plan and mix shift toward pre-approval deals

Hedayat said DRI surpassed its 2025 royalty income target range of $172 million to $182 million, delivering $188.7 million. He also said the trust’s view now indicates it is tracking “well above” its previously stated objective of high single-digit royalty income growth through 2030 off a 2022 base, with a current view indicating a 12% CAGR.

Looking ahead, Hedayat said the trust expects run-rate EBITDA margins to be roughly 500 basis points higher than the low-to-mid 80s margins of its pre-internalization model, though he cautioned that Q4’s “low nineties” margin is not expected to be a baseline as the company intends to reinvest in its team. He also said reductions in debt amortization and interest costs, combined with preferred share actions and a private placement debt transaction, add more than $25 million to annual cash flow relative to the prior year’s run rate (partially offset by reduced OMIDRIA cash flows tied to the forecast revision).

For 2026 to 2030, Hedayat said DRI aims to invest between $800 million and $1 billion, which he said is “fully funded” with the existing capital structure and cash flows and does not require additional equity. Based on current expectations for deal mix and returns, he said this is expected to support a low-teens CAGR in Adjusted EBITDA through 2030, with growth rates that accelerate through the period.

In the Q&A, management discussed a pipeline described as approximately $3 billion and said it is skewed toward pre-commercial opportunities overall, though nearer-term opportunities (six to eight months) are more weighted toward post-approval drugs. Jacob said the deal size in the pipeline is in line with DRI’s historical “sweet spot” of roughly $50 million to $150 million. Management said it is not currently in exclusivity on a deal. Hedayat also said AI is viewed as an opportunity, and management emphasized that the company’s edge is driven more by relationships, industry expertise, and deal structuring than by data processing alone.

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.