Ligand Pharmaceuticals Incorporated (LGND) Q1 2023 Earnings Call Transcript


Thank you for standing by. My name is Kyla Baker and I will be your conference operator today. At this time, I would like to welcome everyone to the Ligand’s First Quarter 2023 Earnings Webcast. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question and answer session. [Operator Instructions]

I would now like to turn the call over to Head of Investor Relations Simon Latimer.

Simon Latimer

Thanks, Kyla. Welcome to Ligand’s first quarter 2023 financial results and business update conference call. Please note that there are slides accompanying today’s call. These can be accessed by going to the Investors section of our corporate website, where you can find the link to the webcast on the IR calendar page.

Today, when discussing our financial results, we will use non-GAAP financial measures and some of our statements will be forward-looking, including those related to our financial condition, results of operations, financial guidance and the impact of the COVID-19 pandemic.

Please review our disclosures about forward-looking statements here on Slide 2. Additional information concerning risk factors and other matters concerning Ligand can also be found in our earnings press release and our periodic filings with the SEC.

We undertake no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. A reconciliation between the non-GAAP financial measures we discuss and the closest GAAP financial measure can be found on our earnings release issued earlier today.

Speaking today for Ligand will be Todd Davis, CEO; Tavo Espinoza, CFO; and Matt Korenberg, President and COO. I would now like to turn the call over to Todd Davis.

Todd Davis

Thank you, Simon, and good afternoon everyone. Thanks for joining our first quarter 2023 earnings call. I’m delighted to have the opportunity to address you all today and share some of my thoughts on the Company’s performance and our future prospects.

I have been in the CEO role for about five months now and as I have immersed myself in the running of the business, I’m more excited than ever about the prospect of advancing Ligand to the next stage of growth.

Our focus is and has been to create a diversified portfolio of high margin royalties, producing superior risk adjusted returns. Ligand has consummated 19 deals over the last 15-years, with a significant and positive track record of achieving this objective.

As you can see in Slide 3, those deals have created our current strong balance sheet and a large portfolio of biopharmaceutical assets, including the seven commercial stage products that are delivering our current growing financial performance. It also includes multiple key late stage assets that will soon feed into the commercial stage asset base to further drive growth.

Beyond that, a farm team of 80 earlier stage assets will contribute to our later stage pipeline. Things like FILSPARI and our Viking NASH programs came from this group. This bolsters our long-term growth. Matt will cover some of these more specifically during our portfolio update.

Also, our current platform technologies, Captisol and Pelican continue to contribute to our business by adding new license deals with new partners. And finally, our current focus on organizational changes and scaling of deal execution is intended to further accelerate the growth of our late stage pipeline. This is a proven strategy that requires differentiated thinking and a premier investment tape.

Turning now to Slide 4. We have had excellent portfolio developments and financial performance to start the year. Total revenues for the first quarter of 2023 were 44 million, driven by 28% growth in royalty revenue.

We finished the quarter with $283 million of cash and cash equivalents. During the first quarter, we sold a portion of our shares held in Viking Therapeutics at a substantial gain, which added nicely to our cash balance. Tavo will give more details on this in his discussion.

As previously described, we have a $77 million convertible note that we will pay down in May, at which point we expect to be debt free with over 200 million of pro forma cash available to invest. Another key feature we are striving to improve as part of our business strategy is to have a very lean operating structure.

We started the year with cash expense budget of 46 million and have executed on its expense reductions to bring that down to 43 million. This was achieved while scaling up the business operation for accelerated growth and expanding the execution capability.

We will continue to look for efficiencies in the business to ensure we are as lean as possible, while retaining core operating and deal capabilities. Meanwhile, we have experienced very positive momentum from our existing product pipeline among our pipeline of late stage royalty products.

The accelerated FDA approval for FILSPARI in February brings our portfolio to a total of seven major commercial royalties that we expect will drive significant growth for years to come. We believe we have an opportunity to further add to this growth from our existing royalty portfolio through multiple tactical approaches as laid out in slide five.

First, in project finance, Ligand is positioned in a unique and advantageous segment in our ecosystem. We see a significant imbalance between the supply and demand of capital for clinical stage programs.

Biopharma companies are increasingly looking for alternative forms of financing, which is only accelerated due to the continuing challenges in the equity capital markets. This is especially true for smaller public and private companies. We can provide capital to these companies in return for royalty contracts on their pipeline products via project finance.

The second approach is royalty monetization. In addition to providing development capital, we see a significant opportunity to purchase existing royalty rights owned by inventors, universities, or companies, which would further add to our portfolio of royalties. Ligand is ideally positioned to capitalize on these opportunities as well.

The third approach outlined here is M&A. As an operating business, we have a successful track record of acquiring entire businesses, restructuring operations, while we identify companies with undervalued, royalty assets or partnered programs.

Finally, we will also look at acquiring new platform technologies. We have a significant and successful track record of acquiring technology platforms, enjoying the economic benefits of the existing partnered pipeline and royalty assets, and generating new royalties by operating those platforms.

Our Side 5 platform is an example of this approach. In this area, we are focused on mature platforms that have significant products in the clinic and offer high operating margins as an operating business.

Turning to Slide 6. I will cover some of our key goals and progress to ensure we are executing at scale. The first priority relates to scaling our systems for origination and deal making. We are in the process of institutionalizing our deal process on how we originate, negotiate, and execute transactions. The goal here is to increase investment throughput and sophistication.

Reviewing a larger number of opportunities should allow us to be more selective and increase the number of high quality assets in our mid to late stage clinical pipeline ultimately, resulting in higher growth. This requires premier talent and pharmaceutical investing and deal making.

As part of this expansion, we made an important recent addition to our deal team with the appointment of Paul Hadden, a Senior Vice President of Investments in Business Development. Paul is a highly accomplished expert in royalty financing.

As he was previously spent 15-years at Healthcare Royalty Partners where he was instrumental in their growth. We are truly excited to have someone with Paul’s experience join our team and I want to take this opportunity to formally welcome him to Ligand.

Additionally, we are in the process of establishing a physical presence in Boston. This will help raise awareness of Ligand in Boston, a major life sciences hub. We will also have greater access to the academic community, scientific centers of excellence and the associated talent. The Boston office will be a strong compliment to our current presence in California and Kansas.

To summarize, Ligand had a successful and productive first quarter. The company is growing rapidly based on its existing pipeline of products, royalty assets, and the multiple growth catalysts. We expect to sustain and accelerate that growth by creating new pipeline assets through providing capital and technology to promising late stage clinical partners.

Now, Tavo, our CFO, will provide more details on the Q1 financial results, as well as our increased full year 2023 financial guidance. Following Tavo, our president, Matt Korenberg, will review progress in our portfolio operations and growth drivers. Tavo.

Tavo Espinoza

Thanks, Todd. As Todd mentioned, we have kicked off 2023 with a strong first quarter with continued impressive year-over-year royalty revenue growth, and major positive news flow from our partners.

Total revenues for the quarter were $44 million, which represents a 21% increase over the prior year quarter, and a 44% increase when excluding contributions from the COVID Captisol sales in the prior year period. Royalty revenue increased 28% to $17.2 million from $13.4 million a year-ago.

This growth was driven by strength in Amgen’s KYPROLIS, which once again reported record quarterly net sales as well as contributions from Merck’s VAXNEUVANCE and Jazz Pharmaceuticals’ Rylaze, as both products continue successful launches.

Captisol sales were $10.6 million this quarter versus core Captisol sales of $6.2 million in the same quarter of last year with the difference due to the timing of customer orders. Total Captisol sales in the first quarter last year were $12.1 million with $5.9 million of that related to COVID-19. We did not have any COVID-19 related Captisol sales this quarter.

Contract revenue in Q1 2023 was $16.2 million versus $10.9 million last year. The increase is driven primarily by the $15.3 million milestone earned upon the FDA’s accelerated approval of Travere’s FILSPARI.

As Todd mentioned, we are focused on maintaining a lean operating structure and managing costs to maximize our operating margins. In Q1, aggregate G&A and R&D operating expenses decreased by 17%, when compared to the prior year quarter.

G&A expenses in the first quarter of 2023 were $10.9 million versus $11.9 million in the first quarter of 2022. The decrease is primarily due to a decrease in headcount related expenses as well as lower legal and accounting costs post the OmniAb spin out.

R&D expenses in the first quarter of 2023 were $6.7 million versus $9.2 million in the first quarter of 2022 with the decrease attributable primarily to decreased headcount related expenses. GAAP net income from continuing operations in the first quarter of 2023 was $43.6 million or $2.43 per diluted share and this compares with a GAAP net loss from continuing operations of $12.9 million or $0.70 per share in the prior year quarter.

The increase in GAAP net income is largely driven by a $12.1 million increase in income from operations, a $20.5 million gain from the sale of Viking Therapeutic stock as well as a $32 million increase in unrealized gains relating to the increase in value of our remaining holdings in Viking stock. Adjusted diluted EPS for the first quarter of 2023 was $2.28, and this compares with $0.64 in the first quarter of 2022.

Turning to the balance sheet. At March 31, 2023, Ligand had cash and investments totaling $283 million and approximately $77 million in outstanding convertible debt, which we intend to repay in cash when it matures later this month. Following the maturity of our notes, we expect to be debt free with over $200 million of cash and liquid investments available to invest.

Turning now to guidance. For 2023, we expect Captisol sales of $21 million, contract revenue of $25 million and today we are raising our royalty revenue guidance by $4 million to be in the range of $78 million to $82 million and therefore now expect total 2023 revenue to be in the range of $124 million to $128 million.

Additionally, today we are increasing our 2023 earnings per share guidance to now be in the range of $4.6 to $4.75, which is an increase of $1.3. The increase in revenue and earnings guidance is attributable to the strength in royalty revenue and the realized gain from sales of Viking Therapeutics common stock.

As a reminder, I would like to direct listeners to our first quarter earnings press issued earlier today, which is available on our website for a reconciliation of our adjusted financial results to the GAAP results I talked about today.

I will turn the call over to Matt to provide an update on the business.

Matthew Korenberg

Thanks, Tavo. Today I’m going to review some of the highlights of our current key revenue drivers that led to the impressive first quarter results, and also provide more details for investors on the way we are viewing the exciting long-term growth prospects for Ligand.

Over the course of the last 15-years, Ligand has aggregated a portfolio of over a hundred partnered programs, some of which are approved in commercialized, while others are in various stages of development or regulatory review.

On slide 11, we list 11 products that are currently approved or in Phase 3 development in a traditional pipeline format. We have focused a lot of the dialogue with investors over the past 12 to 18-months on these programs.

Today, I will frame the way we are thinking about the total portfolio and how it will drive long-term growth for Ligand. Slide 12 is a way to look at the important categories of growth drivers that Todd outlined in his comments.

We see these as the principle ways that Ligand will drive shareholder value. Our current commercial portfolio is over 25 programs, but seven of those are significant enough that investors should focus on them in the near-term.

There are seven key pipeline programs that we see as potential drivers of growth over the medium term, one of which is an expansion of an already approved program and six of which are new approvals.

The farm team is a remainder of our existing portfolio and it is comprised of over 80 programs that will continue to advance as partners move them ahead. We plan to highlight specific programs from this portfolio as they become near-term or more prominent for Ligand.

Our platform technologies will continue to add new programs to the early stage portion of the portfolio as they have been doing for years. And as Todd covered in detail, we will continue to look to add to the portfolio through new deals across a number of different strategies, including M&A, project financing and more.

Turning now to Slide 13. This slide provides details about the key commercial programs currently driving our growth. I will touch on a few of the key highlights from the first quarter. As I mentioned on the last call, the biggest news from the first, the first quarter was the FILSPARI approval in February.

Travere received approval for FILSPARI IGA nephropathy and immediately began marketing the drug. We learn a 9% royalty on sales and we expect that this will be a significant driver of long-term growth of our royalties.

IgA nephropathy effects and estimated 150,000 patients in the U.S. and a similar number in Europe, approximately 30,000 to 50,000 of the U.S. patients are expected to be addressable under the indication approved via the accelerated approval. FILSPARI is the first non-immunosuppressive treatment approved for this indication.

Consensus Cell side analyst estimates for FILSPARI peak sales in IgA nephropathy exceed 1 billion by 2030, which if is – if that is achieved, would make FILSPARI Ligand’s most significant royalty generator.

For2023, Travere’s management has continued to point to the existing consensus estimates from the research community of about 35 million. Travere indicated that the initial ramp will be gradual and that the full IgA nephropathy protect trial data which is expected in Q4 of this year, should be a catalyst for a change in the label and a ramp in the sales.

Just before this call started, we got a – look at the press release and Travere reported 3 million in sales for their first six weeks, and they disclosed 146 new patient forms had been received. So a good launch.

Also related to Sparsentan, earlier this week, Travere announced that the pivotal data from the phase three duplex study in FSGS missed the EGFFR endpoint. Secondary and top line exploratory endpoints all trended favorably and a reduction of protein urea was sustained through week through 108 weeks of treatment.

Travere plans to engage with regulators to explore a potential path forward for Sparsentan as a treatment for FSGS in both the US and Europe, and we will keep investors updated as more information becomes available for that indication.

Another highlight from the first quarter was KYPROLIS. KYPROLIS is marketed by Amgen in a majority of the countries around the world, as well as by Ono in Japan and by Beijing and China.

This is an important drug for treating multiple myeloma. In Q1 2023, Amgen reported record quarterly revenue of 358 million, and the product is on track to easily exceed the 1.3 billion of global sales recognized – realized in 2022.

Riley’s marketed by jazz is a recombinant Orwin Asparaginase used as a component of a multi-agent chemotherapeutic regiment for the treatment of children and adults with ALL or LBL. This product continues to do extremely well in a market that was historically constrained by supply issues. In Q4 of 2022, Riley’s also reached a record level with 81 million in sales. We look forward to Jazz’s Q1 commercial report later this quarter.

VAXNEUVANCE is a 15 valent pneumococcal vaccine utilizing Ligand’s CRM197 vaccine carrier protein produced using the pelican expression technology platform. Merck is now marketing VAXNEUVANCE in both the adult population and the pediatric population.

Merck announced 106 million in VAXNEUVANCE sales in Q1 2023 and commented that their strong ongoing pediatric launch with tracking with their expectations. We agree and we see the first quarter results as a strong indication that the product is tracking to exceed the 2023 consensus sales estimates of about 300 million.

Lastly, on this slide, I will just mention that while we report our captive sales on a separate line from our royalties, we internally think of this product line as another of our major drivers of revenue, profitability, and growth at our 2023 current guidance level of 21 million for revenue. The gross profit from KYPROLIS should equate to about 13 million, which would be in line with our largest current royalty other than KYPROLIS.

Slide 14 lists the seven programs that we currently view as key pipeline programs that will drive revenue growth in the way following our currently approved programs. As mentioned, one of the programs is an expansion of a currently approved program. Jazz Pharmaceuticals filed for approval of Riley in Europe in May of 2022, and therefore we would expect to see a decision from the EMA later in 2023.

In terms of new products and product approvals, Verona’s developing SF entry in COPD and announced positive top line from both of its Phase 3 enhanced trials. The company expects to submit their NDA in the first half of 2023. This is a very large market and estimates for the program are in the range of 500 million to 1 billion annually.

Novan has already submitted their NDA for Berdazimer Gel and the PDUFA date – and received a PDUFA date of January 5, 2024. The programs at Palvella, Marinus, Viking, and sermons are all expecting data this year that we think will be validating for the programs and their probability of becoming approved drugs.

Finally, on Slide 15 will cover the drivers of longer term organic growth at Ligand. First, we have a group of programs that we are calling our farm team. This is the 80 plus programs that are in the portfolio already that we don’t highlight for Investors Day to day. Many of these programs are disclosed in our 10-K, but generally, we don’t talk much about them.

Like any biopharma company portfolio, our expectation is that many of these programs will advance to the point, where they join the key pipeline programs that we do regularly highlight and discuss. As we identify programs from this Group that are becoming more promising, we will add them to our key pipeline charts and discussions.

The other driver of long-term organic growth is the Company’s platform technologies. Captisol and the pelican expression technology platform are constantly attracting new partners and signing new license deals.

While some of these programs could quickly transition into key pipeline programs, most of these deals will be for earlier stage programs that take several years to mature into important contributors to the near-term Ligand growth story.

We will continue to announce the new license deals that happen from these platforms, but then the programs will join the farm team and mature as part of the broader portfolio before we highlight them further.

We are excited about the prospects for the overall growth of the portfolio and look forward to updating investors on the progress across all of these growth drivers on future earnings calls and at healthcare conferences.

I will now turn the call back over to the operator for questions. Operator.

Question-And-Answer Session


Thank you. [Operator Instructions] Our first question comes from the line of Larry Solow with CJS Securities. Your line is open.

Unidentified Analyst

Hi, good afternoon. It is actually [Liji Godo] (Ph) for Larry this evening. Just starting with the Viking stock that you sold during the quarter, can you talk to the rationale behind the timing of those sales and then how we should think about your intentions for the rest of your holdings there?

Todd Davis

Sure. A little hard to hear, but I think this was regarding the sale of Viking stock. I would just start off by saying that, this is Todd, sorry. But we are big believers in Viking and we retain a significant shareholding.

For us, equity is an important investment, but it is also an investment tool that enables us to support partners, and enable deals like we did with the original creation of Viking. The key and strategic economics for us are contained within the license agreement in the form of royalties and milestones, which we view as longer-term assets.

So therefore, equity for us is a source of cash, and we will sell it from time-to-time when we own it. This enables our key reinvestment strategy to further drive growth. And this is pretty consistent with what we have done historically. And we continue to hold on to the royalties in key programs like NASH.

Unidentified Analyst

That is very helpful. One more just on capital requirements in general. I think you had mentioned, once you pay down the convert, you will have about $200 million of net cash. And you have also spoken a lot about the various ways to deploy that capital including M&A.

What other liquidity is available got to you all after eliminating the convert and do you foresee needing additional financing beyond the $200 million of cash and whatever you are going to generate to fund all of your goals here?

Todd Davis

I think we have significant access to the debt market still, if we need it. But the $200 million plus capital that we have to invest should I think be more than adequate for our strategy over the next 12 to 18-months, at which point will reassess. We believe we have very good access to the capital markets, even in this environment, given our strong relative financial position.

Unidentified Analyst

Okay, great. I will hop back in and let others ask some questions.


And our next question comes from the line of Scott Henry with ROTH Capital.

Scott Henry

Thank you, good afternoon. I will start out with a big picture question for Todd, then get into a couple specifics. Todd, you have now been CEO going on 150-days, somewhere around there. I know one of your main drivers is to scale up deal making, and you have laid out, how you want to do that. Can you talk about any other kind of near-term to midterm initiatives you have, ways that you want to put your stamp on the business? I know you are on the board before, but any processes that you are looking at differently?

Todd Davis

Yes. I think, that the company historically had an M&A orientation. They have done very well with that and created significant returns. And so, the scaling up of the business development team is really, you are talking about a handful of new hires that are very capable. We have done most of that at the senior ranks, and we have a handful of business analytic, science and clean rig evaluation folks that we are, have open positions on.

And in the medium term, I think we are expanding. Although, we have done almost all of these formats historically, we have not done them consistently. And I think what we want to do is scale the business development and investment side of this so that we can consistently originate novel deals on high value clinical products with a very capable clinical development partners. That is really the objective that takes networks, execution, senior relationships, and capital. And that is what that team is going to be focused on.

We are already executing on that strategy. We have about 700 million in asset opportunities on late-stage pipeline that we are looking at assessing, et cetera. And it is working its way through our pipeline.

So that is where we are. We have a ways to go on the organization, but a lot of it is been achieved and we are executing on the deal front now, looking at several deals that are kind of at the mid stage of the deal process.

Scott Henry

Okay. Great. Thank you for that color. Just a couple specific questions. First, the royalty guidance went up about, I think 4 million. Could you talk about what came in a little better than expected?

Tavo Espinoza

Yes. The key driver there was the Amgen’s KYPROLIS, again reported record sales, and that is the key driver as we look at how that extrapolates over the year.

Scott Henry

Okay. And I know it is not your product, Sparsentan, you are the partner, but you guys are pretty smart guys. So I would be curious to hear what you think of the FSGS data and how that impacts, I mean, really three things. The way I think of it is, one, how does it impact the approval of that second indication? Two, how does it impact if it is not approved off-label prescribing? And three, does it have any impact on the [Indiscernible] indication, I recognize it is not your specialty, but I would be curious what your bullet points are on the topic if you would like to share them.

Matthew Korenberg

Thanks, Scott. I, I appreciate you giving me some credibility for being able to have a view on this, but we will give it our best, but just remind everybody that really what we are doing is facing all of our comments I’m about to make on public information. We don’t have any information from Travere that is not confidential or that is confidential. We only, we only get the public information.

So, with that said, we do have views on all that based on listening to their earnings call – call disclosing the data and then reading their press releases, et cetera and just talking with our own scientists.

I’m not sure I will answer these in the order that you asked them, but I guess first off, the opportunity, as I mentioned in my prepared comments for IG nephropathy is more than a billion on its own without FSGS, I mean, roughly 30 to 50,000 patients at approximately a $100,000 a little bit less.

But that is kind of a $3.5 billion to $5 billion opportunity where they fully penetrate that market, even as currently approved. Obviously, no one expects them to fully penetrate that market, but I think people still see that as a billion dollar opportunity on its own.

In terms of FSGS as a potential approval downstream, and Travere was pretty clear when they announced it, but they’re still planning to discuss a path forward with both the U.S. and European regulators.

Given the significant unmet medical need and the positive trends even in the EGFR data, but also in the other top line data and in the strong signals of efficacy that they saw in, in other in other data points all to us means that we’d expect that hopefully there is a path forward both in the U.S. and in Europe.

And then, and lastly, kind of in terms of read through of the FSGS fully mature EGFR data to the IGA nephropathy data, just to remind investors, both trials were essentially run where they got an interim look at protein UIA data and an interim look at EGFR data. And then, the fully mature data in FSGS was what was reported recently.

So a as characterized by Travere, it is important to remember the diseases are different. FSGS is a relapsing remitting disease versus IgA nephropathy is a continuously progressive disease. When you are talking about EGFR, it is one reason that you might expect different results in IgA nephropathy than you did saw in the FSGS when you are talking about the EGFR endpoint. Also, the study designs were different specifically around the washout period from other medications that was done in the FSGS trial, which wasn’t done in the IgA nephropathy trial.

And then, lastly, the active control arms in both studies in the particularly in the FSGS study, performed much better than they were expecting. So it made the hurdle for statistical significance even higher in the FSGS trial than they expected. So taking all that together the company seems very confident and we are equally confident that the IgA nephropathy rout will be just fine.

Scott Henry

Okay, that was great. I appreciate that color on that topic. Final question, and it is a quick one with regards to the Viking gain. First, congratulations, it is nice when it works out that way. The question is if I want to pull that out of the quarter, I have to assume a tax rate. How should I think about it if I want to get a kind of a comparable number going forward and looking backward?

Tavo Espinoza

Yes. The tax rate on the Viking gains is going to be a little bit higher than the non-GAAP rate we have been applying to operating income. You can apply 22% to that, Scott.

Scott Henry

Okay, great. Thank you for taking the questions.


And our next question comes from the line of Matt Hewitt with Craig Hallum. Your line is open.

Matt Hewitt

Good afternoon. Thank you for taking the questions and congratulations to the strong start to the year. Maybe first one, kept us all hang. Very strong quarter. If I’m hearing you correctly, it sounds like there was maybe some orders that came in a little earlier than you had anticipated for the year.

Is that the case and that is why you have elected to leave the $21 million number for the year. And then I guess the follow-up to that is, how should we be thinking about cadence for the a remainder of the year for the other call it $10 million, $10.5 million?

Todd Davis

Yes. Hey, Matt. Thanks for the question. Yes, exactly right. The first quarter was quite strong compared to the guidance for the year. And you hit the nail on the head. One of our larger customers ordered a significant amount of their expected orders for the year in the first quarter.

As we always say on almost every quarter, these orders are lumpy. Customers frequently will move their order pattern around like this. We do think there is potential for some strengths later in the year, but for the same reason that some folks accelerated orders this quarter.

We don’t want to raise the guidance before we are pretty certain that folks are going to finish off with stronger demand than expected for the rest of the year. So there may be some strength, but for now, we think it is most appropriate to leave it at the current guidance.

Matt Hewitt

Got it. And then as far as the deal pipeline is concerned, you gave us a couple data points or ways to look at that. Given the environment that we are seeing right now, particularly with small pharma and biotech company funding essentially drying up. Is that creating a lot of opportunities and given the size of your team, how are you finding or structuring projects to dig into those opportunities and how should we be about the cadence of you signing some of these new agreements over the next couple of quarters? Not only in signing the agreements, but then will you be looking at the opportunities themselves as far as, okay, well this one is going to have a Phase 3 trial this year, this one will have a Phase through trial next year. So you are kind of staggering the goalposts, if you will, on the other side?

Todd Davis

Yes. That is a good question, Matt. This is Todd. And I think in terms of the pipeline, I would just emphasize this is a strategy that works in a strong capital market environment. But you are right.

In a challenging capital market environment, where you have the issues with SVB, people having – that have debt having to refinance it at significantly higher rates and then there is the normal need for access capital in biopharmaceutical industry with fewer debt and equity alternatives available.

It is an especially robust and opportune time for us, and there is a pretty big void that we can fill right now. So I like the position that we are in as a result of that. I can tell you that, although we are still building the team, as mentioned, we have several capable people here, and it is a bit of a fire hose right now. So the key is to be very selective on what you work on, which means, high quality screen upfront.

So we are really looking at assets with very high clinical value, things that are within about at least four-years of approval that is typically Phase 2-ish or beyond. And that have significant evidence of safety and efficacy, where we think we can obviously price these not only above our own cost of capital, but where we can price them in excess of the risk we are buying so that there is significant alpha that we are creating on a product to product basis.

So this is a great environment for this, the cadence is I wouldn’t want to commit to anything, because when you are investing, you want to do it right, not fast, but there is a lot on our plates right now, and in inevitably some of this will start to come to fruition over the next several months.

The volume pretty high in terms of what we are looking at, and there is a lot of very good assets out there. But importantly, you need a really good team on the other side. We are not in the clinical development business, so when we partner with somebody, we are also assessing the team, their ability to execute, et cetera. That is really important.

Matt Hewitt

That is really helpful. Maybe minor one, and then I will hop back into queue. As far as the Riley’s opportunity, does the EMA approval, would that trigger another milestone later this year?

Todd Davis

I don’t think we have disclosed specifically whether there is a milestone or not on the EMA around that contract. But there is typically very low milestones for this program outside the U.S. that may be triggered around that.

Matt Hewitt

Alright, thank you.


And our next question comes from the line of Balaji Prasad with Barclays. Your line is open.

Unidentified Analyst

This is [Michelle] (Ph) on for Balaji. Thanks for taking our question. Just a quick one on KYPROLIS, and you have in the street currently, modelled annual revenue of around like 1.3 billion to 1.4 billion for 2023, which will translate to around 40 million royalty revenue for Ligand. Do you think this is range within the ballpark of your estimate? Thank you.

Matthew Korenberg

Yes. Thanks for the question. This is Matt. I agree that is the contained consensus we see for the KYPROLIS revenues in that 13 to 14 level. Just a reminder, I mentioned in my prepared comments as well, but folks should aggregate both the Amgen sales, the Ono sales, and then Beijing sales in China.

So all three contribute, and we get paid the, a royalty on the aggregate sales across that. And in terms of the math, I don’t know the exact number, but it is exact royalties are disclosed in the Ks and Qs we present.

So it is 1.5% on the 250 million, and then it is 2% for the next 250, 2.5 next 250, and then 3% for everything over 750 million. Your math sounds about right, but and there are a few adjustments from what they report to what we actually get paid on through currency changes and things like that. But for estimation purposes, it sounds like your math is pretty close.

Unidentified Analyst

Got it. That is helpful. Thank you so much.

Todd Davis

Thank you.


And our next question comes from the line of Joe Pantginis with HC Wayne Wright. Your line is open.

Joseph Pantginis

Hey guys good afternoon. Thanks for taking the question Todd, I wanted to ask about the evolution of your thinking around strategy here especially since you took over, but of course you have been with the company for a while. Your initial comments had some nice breakout of how you are thinking about things and the Q&A has touched upon it, but I guess I want to approach it from this way.

Login obviously has a long history, so curious based on all the different kinds of deals that you have done previously what do you think some of the best performing deals have been with regard to structure, the fundamentals, the science, or what have you and how are you looking to apply those learnings to the new deals going forward?

Todd Davis

The company historically has executed on almost every deal format I have mentioned royalty acquisition, project finance, M&A, and platform acquisition. But it has been predominantly M&A that they have executed on. So M&A has created the majority of our returns. The Company’s very good at this.

But I would just say that even in the M&A deals, really the lens that we look through is it is the products that drive value. So you are really selecting the right products in these situations. We are very product and team focused.

We look at platforms opportunistically, of course, but structure is a tool. And so M&A is one approach and really one structural approach as is project finance, as is royalty acquisition, et cetera.

And the more tools you have, the more opportunities you will have to get to high quality teams and high quality assets, which means you will get more high quality deals done and have greater growth. So that is the way we are looking at it and approaching it.

Joseph Pantginis

I appreciate it. Thanks a lot.

Todd Davis

Thank you.


And there are no further questions at this time. Todd Davis, I will turn the call back to you.

Todd Davis

Thank you. I want to thank everyone for joining our first quarter earnings conference call. What we are offering investors is high growth in the biopharmaceutical segment, but with a broad portfolio that mitigates the typical volatility and binary risk nature of drug development that is inherent in narrower portfolios.

Instead, we are making these product by product investment decisions with the benefit of confidential information shared from our drug development partners. This gives us a significant information advantage in the aggregation of a broad portfolio of royalty cash flows where no single asset determines our fate.

And with that, I will turn it back to the operator and thank everybody for joining us today. Thank you.


And this concludes today’s conference call. You may now disconnect.