DRI Healthcare Trust (TSE:DHT.UN) reported higher first-quarter income and expanded margins as management said the royalty investment company continued to benefit from its post-internalization cost structure and growth across several portfolio assets.
Chief Executive Officer Ali Hedayat said the company generated total income of $50.6 million in the first quarter of 2026, up 15% year over year and a first-quarter record for DRI. Royalty income rose 18%, supported by double-digit growth from assets including EMPAVELI, ORSERDU, XENPOZYME and XOLAIR. That strength was partially offset by softer performance from VONJO, RYDAPT and ORACEA.
Management cautioned that margins may ease slightly beginning in the second quarter as DRI reinvests some of its synergies back into the business to support future growth.
Cash Receipts Decline on Prior-Year Comparison
Chief Investment Officer Navin Jacob said DRI’s portfolio generated approximately $58 million of total cash receipts in the quarter, down $3.6 million, or 6%, from the prior-year period. The decline was largely due to a roughly $17.5 million one-time payment received in the first quarter of 2025 related to ORSERDU 2, as well as lower receipts from EYLEA and ORACEA tied to market share factors and generic competition.
Those headwinds were partially offset by a $5 million ORSERDU 1 milestone payment triggered by strong fourth-quarter 2025 sales, overall ORSERDU royalty performance and approximately $1.8 million in receipts from EKTERLY, which had no receipts in the prior-year quarter.
Jacob said OMIDRIA royalty receipts rose 9% year over year, while first-quarter OMIDRIA sales increased 10% from the prior-year period. DRI continues to expect flat sales or no growth for OMIDRIA over the next several years, citing slower-than-expected uptake in the hospital setting and the impact of the Merit-based Incentive Payment System in 2025.
For CASGEVY, Jacob said DRI receives a $5 million annual license fee in the first quarter and may be eligible for future annual sales-based performance fees if annual sales exceed $1 billion. Vertex reported first-quarter CASGEVY sales of $43 million, and Jacob said the product is running roughly one to one-and-a-half years ahead of DRI’s acquisition expectations.
ORSERDU generated $27 million in first-quarter royalty receipts, down 14% year over year because of the difficult comparison with the prior-year one-time payment. The total included $22 million of royalty receipts and a $5 million milestone payment. Jacob said DRI expects approximately $16 million of ORSERDU royalty receipts in the second quarter.
EKTERLY and Viridian Updates Draw Investor Focus
Hedayat addressed KalVista Pharmaceuticals’ recently announced agreement to be acquired by Chiesi Group, noting that the transaction may constitute a change of control under DRI’s royalty agreement for EKTERLY. He said the company is evaluating its rights and obligations, and that no determination has been made by either party regarding any put or buyback rights.
“We remain excited about what EKTERLY and the KalVista team will do in the HAE market,” Hedayat said. He added that DRI also sees opportunity to redeploy capital into other high-return transactions if change-of-control clauses are exercised.
Jacob said EKTERLY has shown strong performance in the U.S., with KalVista receiving roughly 1,700 patient start forms as of Feb. 28, up about 400 since December. He said the total represents almost 20% of the U.S. patient population and that the asset is tracking at least one year ahead of DRI’s initial expectations.
DRI also discussed its royalty interests tied to Viridian Therapeutics’ thyroid eye disease programs. Hedayat said Viridian’s Phase 3 REVEAL-1 data for elegrobart were statistically significant but did not meet the threshold for DRI to pay $40 million in milestone payments. As a result, DRI’s maximum potential future milestone obligation to Viridian has been reduced to $205 million from $245 million, while royalty rates remain unchanged.
Jacob said Viridian later reported positive top-line results from REVEAL-2 in chronic thyroid eye disease, and that elegrobart is now the only subcutaneous program to demonstrate positive Phase 3 data in both active and chronic TED. Viridian anticipates submitting a biologics license application for elegrobart in the first quarter of 2027. Jacob also noted that veligrotug has a PDUFA date of June 30. In response to an analyst question, he said DRI has a $75 million milestone payment tied to approval of veligrotug and would begin recording royalty income in the first quarter in which sales occur.
Financing Actions Strengthen Balance Sheet
DRI completed several financing initiatives during the quarter. Hedayat said the company closed a $250 million private placement of senior notes in the U.S., consisting of $106 million of 5.35% senior secured notes due in 2031 and $144 million of 5.65% senior secured notes due in 2033. Proceeds were used to repay a portion of the company’s acquisition and working capital credit facilities.
DRI also issued C$108.7 million of 5.75% unsecured subordinated debentures maturing in February 2031, with the purchase price satisfied through the exchange of $79.7 million of existing 7.5% Series C preferred securities. During the quarter, DRI also partially redeemed and canceled $9.9 million of face value of Series C preferred securities for $9.8 million plus interest.
Chief Financial Officer Zaheed Mawani said total expenses fell $3.6 million year over year to $42.2 million, primarily due to internalization synergies, including the elimination of performance fees, lower compensation and lower other expenses. These benefits were partially offset by higher unit-based compensation and incremental transaction costs tied to financing initiatives.
DRI recorded a $9.8 million loss on debt refinancing related to the preferred securities conversion and other refinancing accounting items. Mawani said those adjustments were one-time in nature and do not affect adjusted EBITDA.
Adjusted EBITDA was $52.8 million, up $1.1 million from the first quarter of 2025. Adjusted cash earnings per unit were $0.68. DRI announced a quarterly distribution of $0.11 per unit, payable July 20, 2026, to unitholders of record as of June 30, 2026.
Capital Allocation and Market Outlook
As of March 31, DRI had $52.5 million in cash and cash equivalents, $54.3 million of royalty receivables and $502.7 million of credit availability from bank facilities. The company repaid $263.8 million on its credit facility during the quarter using proceeds from the U.S. private placement and cash on hand.
Mawani said the Toronto Stock Exchange accepted DRI’s notice to renew its normal course issuer bid. From May 20, 2026, through May 19, 2027, DRI may purchase approximately 3.1 million units. During the first quarter, DRI acquired and canceled 76,000 units at an average price of $11.31.
On the deal environment, Jacob said DRI tracked at least three royalty deals totaling about $400 million in announced value during the first quarter, along with more than 50 equity deals across the U.S. and Europe that raised a combined $10 billion for biopharma companies. On a trailing 12-month basis, he said royalty deal volume reached at least $6.6 billion, up nearly 20% from the comparable period a year earlier.
In response to analyst questions, Hedayat said the company’s lower cost of debt makes DRI more competitive for approved, cash-flowing assets and gives it access to a deeper pool of capital for larger potential transactions. Management said DRI continues to evaluate a large pipeline of opportunities but reiterated that investors should not expect a transaction until the second half of the year, potentially later in that period.
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.
